Ant Financial-backed BAce Capital plans to deploy more than 60% of its $150-million India-Southeast Asia corpus in early-stage companies in India. Managing partner Benny Chen, who spoke to Fortune India on the sidelines of the TiE Global Summit in New Delhi on Friday, said the venture fund will be looking at small-ticket investments ranging from $1 million to $15 million in seed and Series B funding.
Chen, who used to be the managing director of Ant Financial India and director of Strategic Alliance India & SEA, says BAce will have about 9-10 companies in its portfolio from India and Indonesia by the end of the year. Edited excerpts:
You have been a part of Alibaba’s big investments in India in companies like Paytm and Zomato. What have some of your learnings been from these investments?
KK (Kshitij Karundia, managing partner, BAce Capital) and I started in this market with Alibaba and Ant Financial as early as 2015. We saw it as a big opportunity, with 1.3 billion people, increasing mobile internet penetration, and lots of new users. We saw that there was a lack of fintech infrastructure or food/restaurant aggregators... and therefore an opportunity for companies like Zomato and Paytm. It was also aligned with investment strategies of Alibaba and Ant Financial in the country. It’s been a great journey, not just in terms of capital but also in terms of using our knowledge and knowhow from China to actually work together with these entrepreneurs and companies to build the business out here.
At that time Alibaba’s and Ant Financial’s global expansion teams were also fairly new. For them, starting in 2015 was an adventure. The philosophy and strategy was very clear; we enabled the local team to grow the business there but we were sitting in the back seat to give them the support and sharing our experience in China: what we saw, what was the thought process we had, and what were the learnings we had over the years.
What is BAce Capital’s strategy in India?
BAce’s mandate is to do early-stage investments in this country. KK and I realised that alongside the bigger opportunities we should grab the early-stage, small opportunities. For those companies, our validation would mean even more... to work together with them during a very early stage. The mandate of BAce is to do Series A and Series B investments, but using the very similar thesis that we learnt from our days in Alibaba and Ant Financial: add value, try to connect them from India to China, try to bring them to meet with companies and Chinese founder teams with a similar business model.
Your investment choices in India have been very interesting as well. There is Rapido and Healofy—one is a bike-sharing company and the other is a parenting platform. What was the investment thesis behind these? What kind of companies or sectors are you looking at in the future?
We are doing sector-agnostic investments. If you look at Rapido or Healofy, both of them have a mobile-first approach. Rapido is using mobile technology to connect riders with users more efficiently. Whereas Healofy... In India, women, especially in the expectant and parenting stage, they don’t have access to the right information. Healofy has mobile technology, that can give that information accessibility to women users easily.
We believe in all kinds of the mobile-first approach. We believe the change in behaviour by adopting more smartphones, with people using smartphones more often, will add a lot of value. We are just building the investment around that area.
What are some of the changes you have seen in the Internet economy in India?
The good thing is more companies are starting up with mobile technology. It’s not just e-commerce, food delivery, and the so-called big sectors. We are happy to see that even sectors like healthcare and pharma are adopting mobile technology to serve patients better. In education as well, more and more people are using mobile phones as the main channel to obtain educational information.
We also see that Indian entrepreneurs are changing; they are becoming a little bit more mature. The first generation of Internet entrepreneurs, most of them were from consultancy and big firm backgrounds. Now we see people starting up from a matured Internet company. Their understanding towards the way of building an Internet company is more sophisticated compared to the first generation of startup entrepreneurs.
Of the $150-million India-Southeast Asia fund, how much have you earmarked for India and where are you deploying it?
We have closed more than $100 million already. The mandate is India plus Southeast Asia. Our thesis is very clear. We want to capture the emerging market opportunity, especially India and Southeast Asia. More than 60% of the fund (about $90 million) will be deployed in India, a market that we are familiar with. We see the opportunity is much deeper and much wider [here].
What is the number of companies you have invested in India?
We have Qyuki, they are the largest key opinion leader (KOL)-management company, in my view. They do KOL management for YouTube, Instagram, and TikTok; they are the backbone of the mobile-first and mobile-led content. We are also taking them to China to see the so-called KOL-led economy. Today, with the penetration of new content platforms like Instagram and TikToK, consumer behaviour is also changing, so there is a big opportunity for the KOL-led economy to grow.
We have announced three investments. We are going to announce one more next week and are pursuing two more very actively. So I guess by the end of this year we will have six-seven investee companies here. At the same time, we will have three in Indonesia.
What is the range of investments you are looking at?
We are mandated to do up to Series B round investments. We will focus on Series A, A+, and B. From time to time, we can do before that also. We can do as low as $1 million and as high as $10 million. By exceptional basis, we can do $15 million also. So, it’s quite a wide range.