Top-tier venture capital firm Lightspeed Venture Partners has become the latest marquee investor to say it will set up operations for the Southeast Asian region and establish its headquarters in Singapore, which has become the favoured destination for an increasing number of investors.
Lightspeed, which manages over $10 billion of committed capital, is also setting up a dedicated investment team for the region, which includes two India partners – Bejul Somaia and Akshay Bhushan.
In fact, it has already backed a number of prominent startups from the region, such as regional super-app Grab, social commerce platform Chilibeli, B2B marketplace app Ula and shipping gateway company Shipper.
“We’ve been actually investing in the region since 2018, and that’s generally been our model when we look at a market, we start investing out of our existing fund and when we feel that an ecosystem is starting to pick up, that’s when start thinking of having a local office and local presence,” Bhushan told ET.
Bhushan, who will be relocating to Singapore, said the Menlo Park, California-based firm will invest from the three global funds it launched in April for which it garnered fresh capital commitments of $4.2 billion, as well as from its $275-million India-focused fund, depending on the investment opportunity.
“We’ll be investing out of our global funds… (The investments) will be out of both funds,” Bhushan said.
“For early-stage opportunities, the India fund also comes into play. From an entrepreneur perspective, this is the same team they’re working with in Singapore, but the nice thing is, they have access to India, US and our global networks, when they partner with us,” he explained.
Lightspeed’s move to Singapore follows that of another blue-chip venture capital firm, Sequoia Capital, which began investing in Singapore in late 2013, led by managing director Shailendra Singh, who had also relocated to the city in 2015 to drive the fund’s investment strategy in the region.
It has counted consumer internet unicorns Tokopedia, Gojek and Traveloka among its portfolio in the region since then and is believed to have deployed 20%-25% of its funds in Southeast Asia.
Singapore has emerged as an increasingly popular destination for venture capital investors over the last few years, largely due to its investor-friendly regulatory and legislative policies.
Last year, ET reported that a number of new fund managers, including Flipkart cofounder Binny Bansal had relocated to the island nation, and was also reportedly planning to launch his own $300-$400 million fund.
The city state’s Singapore Variable Capital Companies (SVCC) legislation, introduced in 2018, has also acted as a major incentive for fund managers.
VCC is a new legal entity form or structure for all types of investment funds in Singapore.
It can be formed as a single standalone fund, or as an umbrella fund with two or more sub-funds, each holding different assets.
Additionally, markets such as Indonesia and the broader Association of Southeast Asian Nations (Asean) region are seen as extremely attractive for venture capital investors, what with their GDP per capita being almost double that of India and those markets getting stronger with greater mobile reach over the last few years.
“Funds that move to or operate out of Singapore are largely driven by their desire to create a regional hub to evaluate investments in jurisdictions in east Asia and India rather than purely India focused funds. For some this may also work well with requirements that they may need to comply with in terms of the India Singapore tax treaty. Active India focused funds would continue to operate on the ground in India in most cases,” Ravindra Bandhakavi, partner and head of the private equity practice at law firm Cyril Amarchand Mangaldas, said.
Providing low corporate tax rates and having the highest number of double taxation avoidance treaties have also helped, according to Nicholas Cator, managing partner at Venturi Partners, a mid-stage investment firm that invests across Asia’s third-largest economy and the broader Asean region.
“Southeast Asia is generally the first port of call for Indian companies looking to expand overseas. So, we are able to open a lot of doors for our Indian companies in Southeast Asia. The most efficient way to do this is from Singapore,” Ben Mathias, managing partner at Vertex Ventures South East Asia and India, told ET.
“We also see many cross-border companies that are headquartered in Singapore but have the majority of operations in India, and the founding team split between the two countries,” Mathias added.
Vertex Ventures, the venture capital arm of Temasek, the Singapore government-owned investment giant, was the first venture capital investment firm to combine Southeast Asia and India into a single fund. In 2017, the firm announced the final close of its third fund at $210 million.