Examining SEEDS Capital's Approach to Co-Investing in Impact Startups

Report Intellecap titled "Impact Investing in Southeast Asia 2020-2022" summarizes investment activities in impact sectors in the region. From the data collected, the value of successful investments was recorded as follows:

For PII, the largest funding value was given to the financial sector, while the largest transactions were in the information technology sector. Then for DFI, the majority is channeled to the financial sector -- including some within it fintech operating in Indonesia.

Impact investment is aimed at not only helping a business to accelerate, but also providing the widest possible social impact for the targeted market segment.

A number of startups in Indonesia have received this investment – ​​one of which is from institutions such as International Finance Corporation—providing funding support (in the form of equity and debt) to GoTo (ride hailing and e-commerce), Amartha (fintech lending), AnterAja (logistics), Evermos (social commerce), We can (crowdfunding)and PasarPolis (insurtech).

Seeing the positive impact that continues to be achieved, funding in impact businesses continues to be expanded through more diverse investment units. One of them SEEDS Capital, one of the venture arms under Enterprise Singapore (part of an initiative of the Singapore Ministry of Trade and Industry).

DailySocial.id had the opportunity to chat virtually with General Manager of SEEDS Capital Kaixin Tan, discussing how the hypotheses underlying venture capitalists in the sector have an impact.

Investment hypothesis

Starting the conversation, Tan said that SEEDS Capital's mandate is to encourage smart investment into innovative startups (based) in Singapore that have strong intellectual content and the potential to penetrate the global market. The main approach is by doing co-investments with VC and CVC in regional areas.

"By giving leverage investing and taking risks together private investors, we provide startups with the capital they need to close their seed rounds and continue their growth. We tend to invest earlier in the round seed to series A, when the startup is still conducting research and development or in the early commercialization stage," said Tan.

The following are a number of SEEDS portfolio startups that currently have a presence in Indonesia and/or are also being invested by venture capitalists based in Indonesia:

Tan continued, “We exit with investor partners when appropriate opportunities arise. However, we can also act as a more 'patient' financier if some startups require a longer development period to commercialize the technology," said Tan.

More than 40 investment partners

Currently SEEDS has collaborated with more than 40 VC partners across all business verticals in the investment domain. There are more than 150 startups that have been invested in, which have served the market in Singapore and a number of other Southeast Asian countries. Some startups like ION Mobility and CROWDO has a focus on the Indonesian market in its debut -- even though they have their head office in Singapore.

"We work with investment partners who we believe are able to add strong strategic value to startups, not only in terms of funding, but also able to help startups to develop with their experience, expertise and networks in key markets of interest," added Tan.

She gave the example of SEEDS' partnership with Real Tech Holdings (RTH), a VC deep tech from Japan, allowing their startup to utilize the extensive green open space network in Sakura Country, including through their company and LP. In particular, RTH helps startups deep tech SEEDS portfolio accesses the Japanese market through strategic partnerships or pilot projects.

In the healthcare space, SEEDS partners with Coronet Ventures, an investment arm of Cedars-Sinai Medical Center, one of the leading private hospital groups in the United States. This partnership allows their portfolio to leverage the medical center's clinical resources. such as exposure to research infrastructure and clinical trial resources.

"This partnership will also enable startups to benefit from opportunities mentoring from leading doctors, researchers and other global healthcare entrepreneurs," said Tan.

More portions for deep tech

Investment into the sector deep tech is indeed moving around the world. According to BCG report, this year around 20% of VC funds are invested in this sector. In total, in H1 2023 at least $40 billion has been distributed to startups deep tech global.

In the last 5 years, SEEDS has invested heavily in startups deep tech especially fields biotech, climate-tech, and advanced manufacturing. According to Tan, this is caused by the increasing visibility of the ecosystem deep tech in this region, including in terms of talent, accelerator programs, and investors entering this segment. "And of course there is an increase in 'bilingual' entrepreneurs who are able to combine strong scientific abilities with a commercial mindset in setting up these businesses," he said.

Tan continued, "More importantly, the biggest driver is the demand for breakthrough solutions and technologies that can meet some of Southeast Asia's needs in serving the needs of its population, such as healthcare and urbanization."

For example, SEEDS has invested in AMILI, a precision gut microbiome startup, which is conducting studies to understand the specifics of the Asian gut microbiome to find insights and develop health interventions tailored to the needs and challenges of Asian populations. This year investors East Ventures also funded the startup.

Another in the portfolio is Transcelestial, a wireless laser communications startup, working with telecommunications companies, ISPs and enterprise partners to deploy the Centauri system. The system provides better 4G connectivity in homes and offices without underground cables or radio frequency-based devices that require expensive infrastructure investments.

Bring startups go-global

When investing, SEEDS also looks at the potential for its potential portfolio to develop globally. Tan said that Southeast Asia is now an important part of the growth plans of many companies in their portfolio, given the rapidly growing middle class and demand for more effective, affordable or sustainable solutions or products.

Apart from ION Mobility in Indonesia, several other fast-growing startups outside Singapore are services agritech Singrow in Malaysia and Thailand.

As part of a government agency that supports business development, SEEDS wants to bring added value from Enterprise Singapore's network, which currently has 37 global offices, including in major countries in Southeast Asia. Enterprise Singapore itself also has a mandate to bridge startups with investors, partners and market share in its network.

"Another key initiative is the Global Innovation Alliance (GIA) program run by Enterprise Singapore in key innovation centers, including 4 cities in Southeast Asia. The GIA accelerator program aims to accelerate the entry of startups into the market with the help of local partners such as Plug and Play (Jakarta & Manila), Quest Ventures (Ho Chi Minh City), and RISE (Bangkok)," explained Tan.

Closing the conversation, Tan said that although SEEDS' main focus is investing in startups based in Singapore with core activities there (headquarters, R&D and manufacturing), it is certain that the founders come from various countries and backgrounds. "We welcome startups from Indonesia and other Southeast Asian countries to set up base in Singapore and collaborate with us," he concluded.