SINGAPORE, Oct. 28 - Asia could finally be looked upon favorably by private equity investors, who are starting to see the region as a requisite complement to their existing portfolio of investment in the United States and Europe. Venture capitalists and investors are setting up outposts in Singapore from which to invest in the rest of the region, taking advantage of the country's political stability, highly educated workforce and strategic location in the region. Only a few years back, Asia was at best perhaps only considered a place to raise funds to invest in U.S. deals and following the Asian financial crisis of 1997-1998 was certainly not regarded as a place where investment could really be made.
But the wind is turning and U.S. venture capitalists are now casting their eyes in that direction, auguring well for Asia as venture capital is the lifeblood of business creation and growth, says Teo Ming Kian, Chairman of Singapore Economic Development Board.
"What venture capital has done for the U.S. economy, it can do for Asia as well," Teo says, pointing that the U.S. National Venture Capital Association reported that venture capital invested over the last three decades had created 7.6 million jobs and more than $1.3 trillion in revenue as of the end of 2000.
Singapore has been attracting its fair share of this new money with now nearly $9 billion of venture capital managed here by 150 venture capital firms from diverse nationalities.
The latest to join the fray is Chicago-based Apex Venture Partners, which has invested more than $510 million mostly in North American companies involved in the technology sector since it was establish in 1987.
Apex Venture's general partner Babu Ranganathan points out many companies now recognize the growing importance of globalization for the private equity and technology industry, and his firm wants to capitalize on the rapidly emerging opportunities in the region.
"Presently a vast majority of Apex's portfolio companies are headquartered in North America. Many of our companies realize that they need to have a global perspective to succeed. The tremendous resources, markets and human capital offered by the Asia-Pacific region can enhance the rapid growth of our portfolio companies," he says.
Two of Apex portfolio companies, Pittsburgh-based CombineNet and San Jose-based Nayna Networks are already actively pursuing strategic alliance and business opportunities in Asia Pacific.
"The opportunities in the Asia Pacific market are tremendous and Singapore has established itself as a high technology hub for this region," Ranganathan adds. "We see Singapore as an excellent launch pad into the region and look forward to expanding our strategic partnerships with technology companies and institutions in Singapore and the Asia Pacific region."
Like other venture capitalists based here, Ranganathan believes the Singapore government has adopted policies that have fuelled growth in the local venture capital industry, presenting many opportunities to overseas venture capital funds.
"It is common knowledge that Singapore is in an overdrive mode to promote entrepreneurship and the growth of small and medium enterprises," adds Benjamin Yeo, managing director of Rothschild Ventures Asia, the Singapore-based Asian private equity arm of leading U.K. investment bank Rothschild Group.
This is an essential strategy given the country needs to broaden its economic base and reduce reliance on multinationals as a major growth driver.
"The government is making every effort to create an environment and an enterprise ecosystem where drive, innovation and risk taking are encouraged and rewarded. Venture capital will clearly play a vital role in this endeavor to build a strong middle economy, given the start-up and expansion funding that would be required," Yeo adds.
It is not just fund managers that are coming to Singapore, their investors are also following suit. "Fund of funds or gatekeepers, as some of them are called, the people who invest into this asset class, realize that they too cannot ignore Asia," notes EDB's Teo.
Philadelphia-based private equity adviser Hamilton Lane also announced Tuesday it would be setting up an office in the city-states. The firm, established in 1991, has more than $26 billion in private equity investments, of which only 5 percent are committed to Asian based private equity fund opportunities.
Wayne Harber, managing director for Hamilton Lane, believes this amount will rise given the investment opportunities in the region. "We chose Singapore because we were impressed by the workforce education level and motivation, the entrepreneurship drive promoted by the government, as well as the very favorable tax rate, the legal foundation and the accounting transparency," he says.
Harber adds he was very bullish on private equity investments in general, because valuations have declined since the technology bubble burst in 2000 and are now attractive. |
