STRATEGY IN DEPTH

At Tin Men, our strategy is based on three key market gaps that the team has identified through observation of investment trends in Southeast Asia, and the opportunities that these trends present.

1

ENTERPRISE TECH COMPANIES WITH REASONABLE LIKELIHOOD OF GOOD OUTCOMES ARE UNDERSERVED

Investors are currently focused on B2C companies taking a probability-based portfolio approach to invest in these companies that present a small likelihood of a large exit outcome.

OUR BELIEF

Good businesses that do not have the appearance of Unicorns continue to be ignored, yet the right market drivers are in place for fundamentally strong B2B technology companies to flourish.

Enterprise technology companies in Southeast Asia do not have access to sufficient growth capital and remain under-served. In 2007-2017, Southeast Asia saw $8.97 billion deployed in 764 venture funding rounds, of which the 10 largest rounds provided $5.8 billion to just six large B2C firms.

Yet, such enterprise technology firms can start easily as cloud services and have made capex irrelevant. Customers have also shown that they are comfortable with trying SaaS and are eager to make their large and established asset basis more productive and capital-efficient.

2

OPERATIONAL GROWTH AND EXIT PROSPECTS ARE NATURALLY LIMITED

Founders need more than just financial capital and advice. They need investors who can bring hands-on operational capabilities.

OUR BELIEF

SEA founders we have engaged with increasingly emphasise long-term considerations – such as evaluating their prospective investors on how they can enlarge the pie for everyone by bringing work and value beyond just financial capital – versus only looking at short-term prizes (such as current valuation)

At the same time, the support ecosystem for B2B tech entrepreneurship in Southeast Asia is still in its early stages unlike highly mature markets, such as the US, where many founders and start-up executives may have worked on three or even more ventures. Most startup executives here have experienced at most one exit at a high-growth startup. As such, a lot of work is needed in terms of hands-on work alongside founders on sales, channel partnerships, hiring and employee incentivisation, financial structuring and governance, and experiencing the rigours of growth fund-raising and eventually exits.

3

FOUNDERS CONSTANTLY DISTRACTED BY WORRIES ABOUT FINANCING

There is sufficient Seed and Series A capital in Southeast Asia but a significant gap in growth capital.

OUR BELIEF

Traditional VC approach of specialising by series leads to sub-optimal results for both founders and investors, while founders want to focus on growing their business and would rather avoid the repeated distractions of fundraising and worrying about providing exits to investors.

Early investors seldom have the capital or knowledge to provide late-stage financing, while conversely, there are few experienced post Series-A capital to provide growth capital in Southeast Asia. As a result, founders and their early investors face enormous risk due to financing uncertainty as startups grow.

Even founders who can access growth capital are not experts at achieving optimal terms and may end up expending a lot of time managing a large cap table and addressing the differing return objectives and holding periods of multiple investors – being pulled in several directions by several constituencies really is stressful.

Tin Men’s investment strategy is based on mining these market gaps. Do you think like us? Send us a note.

Sources:

  1. Preqin
  2. CB Insights

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