Corporate venture capital funds offer Gojek and Didi Chuxing to secondary market investors.
Asia’s biggest companies are selling down their stakes in the region’s most promising tech start-ups, including Indonesia’s Gojek and China’s Didi Chuxing, as they refocus their resources to weather the coronavirus crisis.
The venture capital arm of one large Asian company has approached secondary market investors about selling a slice of Gojek worth between $50m to $100m, two people with direct knowledge of the offer said. Mitsubishi, Rakuten, Samsung and Tencent are all investors in Gojek, along with several other corporate venture capital funds. The start-up is Indonesia’s most valuable, providing a range of services including ride-hailing, food delivery and financial services. Gojek declined to comment.
“We have had a number of approaches from companies we spoke to in December about buying their assets who are now saying: ‘Oh it looks like my board would now consider the transaction you were looking to do’,” said Michael Joseph, founding partner of Ion Pacific, a Hong Kong-based asset manager focused on the venture capital secondary market. He declined to comment on specific start-ups up for sale but other secondary market investors said a stake in Didi has also recently been offered.
South Korea’s Samsung Ventures and Kakao Ventures as well as Japan’s SBI Investment and Mitsubishi UFJ last year were among the 10 most active corporate venture players globally. Japan’s NTT and Aviva’s Singapore unit have also been active in recent years. The share of corporate venture capital-backed deals in Asia has been on the rise since 2014, and in 2019 the region surpassed the US for the first time in terms of share of overall corporate venture deals, according to data from CB Insights.
But many corporate investors and their venture arms have little experience in how to handle these investments in a serious downturn, noted Mr Joseph. Instead, the willingness to sell down stakes — often at a discount — has become a reflection of the rapid change in outlook.
The largest corporate venture-backed deal in 2019 was the $1.25bn Series D round to satellite communications company OneWeb led by Airbus and Qualcomm Ventures. OneWeb last week filed for bankruptcy after failing to secure new funding from investors including its biggest backer SoftBank. Darren Massara, managing partner of NewQuest Capital Partners, a private equity firm, said the secondary market was providing a useful exit for investors with the future trajectory of many businesses now in doubt, including their ability to come to public markets.
Mr Massara added that investors who sell may have been expecting an imminent traditional exit route such as an IPO or another fundraising “but due to the coronavirus, such an event is now delayed. It’s in times like this that the secondary market can fill the void”.
“Many of the new corporate venture capital funds in Asia in 2020 are reminiscent of the hedge funds that set up between 2001 and 2007 ahead of the global financial crisis,” said Mr Joseph. “They will probably underperform managers that have been tried through cycles. I expect that over the coming months there will be many that shutter their doors and go home.”
