Driving Impact through Investments

Puiyan LEUNG | 04 May 2023

We are proud to share our fund's Impact Framework and publish the quantitative impactive contributions of our portfolio companies, as of December 2022.

Read more on our Impact page

View the transcript for the video interview between Pui Yan Leung, partner at VVSEAI and Kah Kheng Gan, investment analyst.

Kah Kheng Gan:

Hi, I'm Kah Keng. And with me today, we have Pui Yan, partner at Vertex Ventures, Southeast Asia and India. How are you today, Pui Yan?

Pui Yan Leung:

Feeling great.

Kah Kheng Gan:

So, Pui Yan, Vertex has just released our annual impact report. What was the idea behind this impact report and how does Vertex think about impact as a mainstream investor?

Pui Yan Leung:

Okay. So I think, first of all, it is important to recognize that Vertex Ventures Southeast Asia and India is a mainstream financially-focused investor. So financial return is still our utmost priority, but it is also important to recognize that we are focused on opportunities in Southeast Asia and India, which exhibit very strong emerging market characteristics. So a large part of our investment thesis is anchored around the rising middle class, the rising consumer class, empowerment of micro and small SMEs and more inclusiveness across the board.

Pui Yan Leung:

So taking a step back, when we examine our active portfolio companies, a lot of them are addressing a lot of pain points and they actually have the opportunity to contribute positively to society and the stakeholders. For example, including economic empowerment in terms of job creation and improved incomes for individuals, enabling and empowering small enterprises, whether it is providing them with better access to goods and services or providing them with more income generation opportunity.

Pui Yan Leung:

We also believe in the opportunity to provide more inclusiveness, whether it is from a gender perspective or from a financial inclusion perspective, and also more recently, we find that some of our portfolio companies are also very climate conscious where directly or indirectly. So therefore, you know, to answer your question, even though we are a general mainstream investor, many of our portfolio companies are inherently impactful.

Pui Yan Leung:

And the reason why we decided to formalize and publish a report is simply to put a structure and recognize that this is the case and we have the opportunity to be a catalyst of change- a positive change in our ecosystem.

Kah Kheng Gan:

That's a great way to think about impact. Let us delve deeper into each of the impact pillars that you have mentioned of economic empowerment and MSME enablement, inclusion and climate action. Let's start with economic empowerment. How does Vertex and our portfolio companies help to contribute to economic empowerment?

Pui Yan Leung:

I think I can think of two ways. The most tangible way would be in relation to job creation. Typically, when we get first get involved with our portfolio companies, they're still relatively small in size. Over time, they naturally employ more people and create more job opportunities. In fact, cumulatively, our portfolio companies have created almost 75,000 new jobs since we get involved with them.

Pui Yan Leung:

The other dimension will be in relation to income generation. And I like to give a perhaps an interesting and heartwarming case study. Aruna is our Indonesia based portfolio company. It is a tech enabled integrated fishery commerce platform and it generates more income and improve the livelihood of fishermen through education and knowhow, access to capital and also access to market.

Pui Yan Leung:

In fact, the impact of Aruna is felt by not only the fishermen themselves, but also the family. And one of the families felt so inspired with their experience with the company that they named their child after Aruna. The company? Yes.

Kah Kheng Gan:

Well, that's such a great story. And it must be really validating for founders when they get these kinds of experiences where the people they have made an impact on show them how much it meant to them. Other than economic empowerment, we have MSME enablement. So actually, in this region, in Southeast Asia, and India, MSMEs account for up to 99% of enterprises in some cities in the region.

Kah Kheng Gan:

So clearly MSMEs are the backbone of our economy. How does Vertex and our portfolio companies help these MSMEs to achieve more?

Pui Yan Leung:

So actually, cumulatively, our portfolio companies have reached more than 30 million MSMEs since our involvement. And I think one of the most tangible way they contribute to empowering MSMEs is through better market linkages. So with better access to information, better supply chain efficiency and better information transparency, we are allowing and empowering MSMEs the opportunity to access more affordable goods and services, which they may otherwise have found difficult to gain access to.

Kah Kheng Gan:

That's great that our portfolio companies are really helping MSMEs go further to really create more of an impact on the rest of Southeast Asian & India. Vertex is also one of the most active lead investors into female led companies in this region. How does Vertex think about inclusion?

Pui Yan Leung:

Well, from a general perspective, we actually don't have a quota, right? Actually, many people have asked this question because we actually have a very strong representation, of female co-founders in our portfolios. But we have no quota. We simply pick the companies that we feel are the best in their category and have the best chance of success. And they happen to be helmed by female co-founders.

Pui Yan Leung:

So but having said that, I think the fact that our own investment team is very diverse definitely is a plus. It helps us diversify the type of deal flow that we get it helps us get past certain blind spot about what type of founder we want to back and consequently it shows in a significant percentage of our companies are held by at least one female co-founder.

Pui Yan Leung:

So yeah, and beyond gender, perhaps I can highlight Pintanya, our Indonesia based portfolio company. It is a digital platform that improves the employability of mass market workers and consequently gives them the opportunity to gain access to a wider range of financial products and services in future.

Kah Kheng Gan:

Thanks for sharing about how Vertex and our portfolio companies contribute to inclusion on both the gender and employment front. Let's move on to the fourth pillar of Climate Action. Vertex has just invested in our first climate tech company last year, Fairatmos. And you were the lead of that deal as well. So how does Vertex think about impact for investments in this climate space?

Pui Yan Leung:

Okay. Yeah. So I think traditionally when we think about climate tech or even clean tech, in the good old days, the first reaction would probably to talk about the latest frontier tech in relation to hydrogen technology, carbon capture technology, battery technology. Now our deep tech ecosystem in Southeast Asia and India, is developing fast, but it is probably not as well developed as other innovation hotspots globally.

Pui Yan Leung:

So that does not mean that we have no role to play in our region. I mean, maybe perhaps I will highlight two examples. Beepkart is our India-based portfolio company. It focuses on trading pre-loved secondhand two-wheelers. Oh okay. And Returnkeys is our Indonesia based portfolio company it is a re-commerce platform that handles excess inventory from e-commerce businesses which otherwise would have been wasted and disposed of.

Pui Yan Leung:

So by focusing on reducing waste, it is in their own unique way contributing to climate action. Yeah. And on the other hand, Fairatmos is taking advantage of the fact that Southeast Asia is home to a lot of the world’s biodiversity. Yep. And by working farmers to change the way they handle land-use it is not only helping to slow down climate change, but indirectly.

Pui Yan Leung:

The company is also leveraging tech workflow and market access to provide better income for the farmers.

Kah Kheng Gan:

Thanks so much for sharing more about each of the individual impact pillars and for bringing them to life with all these case studies. So what does Vertex do for our portfolio companies to help them along their impact journeys?

Pui Yan Leung:

Yeah. So there are a few ways I can think of. Firstly, we have implemented our ESG framework for a while now. So for all our portfolio companies, regardless of whether they're inherently impactful or not, we encourage them to incorporate and embed environmental, social and governance considerations into operations. Yeah, yeah. And we do that at a point of investment and on an ongoing basis.

Pui Yan Leung:

Secondly, for companies that are inherently impactful beyond the usual financial and business metrics that we monitor, we work with our companies to develop KPIs and metrics that not only reflect their business success, but also reflect their positive contribution to the ecosystem. Stakeholders. And last but not least, we remain a very hands on early stage investors. What does that mean?

Pui Yan Leung:

It means that we work very closely with our founders along their entrepreneurial journey, helping them with business development, hiring, business strategy and planning, and ultimately support them in delivering outsized return.

Kah Kheng Gan:

It's great to hear that a mainstream investor like Vertex has such a thoughtful approach to helping our portfolio companies scale sustainably. Thank you so much for your time and speaking about the impact framework with me today, Pui Yan.

Pui Yan Leung:

Thanks for having me.