In June, with no end in sight for the pandemic, Singapore-based early-stage VC firm Beenext raised USD 110 million for its third fund to back tech startups in India and Southeast Asia. The five-year-old firm said it will invest around half of the corpus in Indian startups.
Out of over 200 companies that it has backed in Vietnam, Indonesia, Malaysia, Singapore, and elsewhere, Beenext has over 70 portfolio companies in India, making startups from the country the largest portion in its portfolio.
Speaking to KrASIA, Nao Ito, operating partner at Beenext, talked about how the fund dealt with the pandemic, raising its new fund, and sectors where the firm may write checks for startups in 2021.
The following interview is edited for brevity and clarity.
KrASIA (Kr): When you started investing in India and Southeast Asia, the main focus was on e-commerce and fintech. Is it correct to say Beenext’s focus will change after the pandemic?
Nao Ito (NI): Yes, definitely.
Before starting Beenext in 2015, I, along with my co-founder Teruhide Sato, was running an e-commerce firm Beenos, which we successfully took public in 2004. This made us look beyond our domestic market and get international access. To begin with, we had a joint venture with eBay to connect sellers and buyers between US, Europe, and Japan. Similarly, while running Beenos, we partnered with Alibaba Group to bridge Japanese brands and merchants with Chinese customers. This led us to emerging markets like India and Southeast Asia.
Since we had decent exposure in e-commerce, we first backed similar firms, along with a few fintech companies in India and Indonesia. We invested in Tokopedia, Citrus Pay (now a part of PayU), Shopclues (acquired by Singaporean e-commerce firm Qoo10), and Nobroker, among many others.
Now with the pandemic affecting demand in different spheres of life, we are expanding our portfolio to edtech, agritech, healthtech, digital entertainment, and HR tech. We have already invested in medtech and healthtech startups in India, such as MFine and Healthians. We look forward to having more opportunities with founders in this sector.
We have invested in over 200 companies so far. In the last eight months or so, after lockdown in March, we did 20-plus investments in various regions. As investors, we have to put more effort into understanding new digital products in 2021.
We have been fortunate to have more participation from our LPs. We raised USD 110 million in June—our third fund for early-stage investments in India and Southeast Asia. Our first fundraise was five years ago, the second fundraise was USD 95 million in 2017. We have raised a dedicated USD 50 million fund to invest in Japan.
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Kr: How did Beenext deal with the pandemic to make sure your portfolio companies are in good health?
NI: It was surreal for us as we have never experienced a lockdown. At the time, we had around 180 portfolio companies. We talked with the founders and understood their challenges such as working with teams remotely, organizing business procedures in sectors like logistics and e-commerce, and most importantly raising the next round of funds.
We continuously shared insights from founders from one region with other founders who we thought could learn from it. After a few months, we found that fundraising was slowly bouncing back, so we realized we can manage. We connected founders with investors in our network who were willing to make bold bets.
Kr: Is the worst over for businesses?
NI: It’s not an optimistic environment yet, but we can expect things to get better with vaccines coming out. After going through zero transactions in March and April, GMV for e-commerce companies is coming back. I also see a lot of companies posting expanded sale volumes after September. It has just started to show, but I won’t say it has recovered.
In the post-pandemic world, companies will have to think of new ways to engage customers.
In 2021, as the situation related to COVID-19 gets better, I think the business side of things will straighten out over 2021 and 2022. Even though companies are posting better numbers than before the pandemic, we see that the momentum has just started and the real positive change in businesses will be visible in Q1 or Q2 of 2021.
We have to be very modest since we have lost a lot of people. This is a good time to remind ourselves and founders of the purpose of building a company, which is to serve the society. We have to learn how to do it better as we enter a new normal.
Kr: Since Beenext’s latest fund is for India and Southeast Asia, which market will have more investments?
NI: Most certainly India. We are fascinated by how fast it’s evolving, and we certainly think that for the next five to ten years, our major focus is going to be in India. We want to have deeper partnerships with local investors, founders, as well as collaborate with government regulators. We also want to bring our extra value in regional networking in Japan and the US. We see a lot of enquiries from Japanese enterprises that are looking to invest in new ideas in emerging markets like India.
The founder network in India is more opportunistic than in other Southeast Asian nations. This lesson from India is beneficial for founder communities in Singapore, Thailand, the Philippines, Vietnam, and Indonesia.
Kr: Tech adoption in smaller towns in India is increasing. Does Beenext plan to capitalize on this trend in 2021?
NI: This is one of the reasons we are so bullish in India. In Japan, most of the tech activity is limited to bigger cities—Tokyo, Osaka, and Fukuoka. That’s it. But in India, you have lot of tech adoption at the town level as well as village level.
Thanks to mobile internet providers in India, internet connections in the country are quite deep and cheap. In the coming years, as more people from these smaller cities start transacting online, there will be many insights about consumer behavior. Consumers will start transacting with companies that are in sectors like e-commerce, fintech, agritech, and healthcare. We also plan to take this knowledge from India to markets like Vietnam, Thailand, and Indonesia, so that founders in our portfolio companies can help each other.