Vertex Ventures still on lookout for early-stage founders

*This article is adapted from * Deal Street Asia

Amid the lacklustre appetite for venture and startup investments in Southeast Asia, early-stage investor Vertex Ventures continues to look for opportunities across sectors ranging from consumer tech to enterprise solutions, fintech, health, and climate tech. 

The sector-agnostic firm is keeping an open mind and taking a founder-first approach, Leung Puiyan, partner, Investments, at Vertex Ventures Southeast Asia and India (VVSEAI), told DealStreetAsia in an interview. 

“We would still want to listen to the founder’s story. For early-stage companies, regardless of what the [sector] is, the founder profile remains quite key,” Leung said. “We will still be looking for startups [and] founders who are able to make a big difference to the community and generate outsized returns for our investors.”

In addition, the firm is ready to back the founder in repeat funding rounds.

“Once we decide to work with a founder, we expect to be able to work with them for a long time to come.”

VVSEAI is one of the six major funds in the Vertex global network of funds, anchored by Vertex Holdings, the wholly-owned subsidiary of Singapore state investor Temasek. Its affiliates include late-stage funder Vertex Growth, healthcare-focused Vertex Ventures HC, Vertex US, and Vertex China.  

VVSEAI is currently deploying out of Vertex Ventures SEA Fund V, which closed in 2023 at $541 million, having exceeded its target of $450 million. The fund corpus includes a dedicated co-investment envelope of $50 million for co-investments in women-led startups.

The fund’s recent investments include participating in existing Vietnamese portfolio company Coolmate’s Series C fundraising led by affiliate Vertex Growth, and leading a Series A fundraise in Singapore-based deeptech company Quantified Energy.

Quantified Energy, a spin-off from the National University of Singapore’s Solar Energy Research Institute in 2021, specialises in using artificial intelligence and analytics to help manage solar installations. 

“The thesis there is that the market is rapidly moving from just the rapid installation [of solar energy generators] to a data-driven way to manage [those] assets,” Leung said. “Insurers and banks and asset owners find it is interesting because it adds bankability to the solar assets.”

“Climate tech as a sector has much potential, as the overall venture market evolves to present different opportunities.”

Leung added: “Just like fintech, it is operating at the intersection of innovation and regulation. Once the regulatory landscape becomes more favourable and certain, it [will be] quite a huge determinant on the near-term market size and also the pace of growth for the sector.”

Indeed, Southeast Asia’s booming manufacturing industries, as well as burgeoning data centres, would need climate-related tech to meet their growing energy demand and resource and waste management needs.

However, Leung pointed out, such solutions need to be bankable and be adopted at scale, without the need for the market to pay a high premium, as the region is somewhat unable, and unwilling, to stump up for the so-called ‘green premium’ in such cases.

According to DealStreetAsia’s research, funding for startups in the climate-tech sector has been the second highest, after fintech, in Southeast Asia so far this year. Together with health tech, these three sectors can be seen as structurally-resilient themes even in the current environment.

Overall, the levels of capital flowing to startups in the region remain low, as investors stay on the sidelines amid lower tolerances for risk in a more uncertain environment, and with many having been burnt from earlier ventures. 

Startup funding as a whole was the weakest in over six years, and there was a pullback in early-stage funding in particular.

“The challenge for us is to at least take the first meeting to understand why the founder must think that they are different, or there’s something that they’re doing differently that’s worth exploring,” Leung said. 

“It’s a long journey for any founder,” she added, noting that for early-stage companies in particular, the founder’s profile is key. “Regardless of [sector], we are looking for founders who we feel have a certain vision, tenacity, grit, leadership qualities, and fire in the belly.”

Ultimately, as DealStreetAsia’s report also noted, the current environment could offer both fund managers and founders the opportunity to build deeper relationships and focus on business models that are rooted in operational resilience and monetisation strategies.

In early-stage investing, Leung said: “It has to be a right balance between doing enough groundwork to know that you are underwriting opportunity thoroughly, versus analysis-paralysis.”

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