- Global venture capital firm GGV Capital has offices in China, Singapore, and Silicon Valley has seen its 200-plus portfolio companies through the fallout of the pandemic.
- Jenny Lee, a Singaporean managing partner at the firm, says short-term impact for startups is unavoidable but long-term outlook can be positive.
- The Southeast Asian bloc of countries, of which Singapore is currently seen as the leader in investment activity, will see accelerations in 5G, communication technology and fintech, while online education and health could experience a boost.
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To Jenny Lee, a managing partner at private equity firm GGV Capital (GGV), there's no 'post-COVID-19'; only a new normal to reckon with.
"The new normal is one where the population accepts the reality that this virus is here to stay, and we have to adapt accordingly," Lee said. It requires a redefinition of how people approach the concept of travel, communication, and accommodation — sectors that have become the hardest hit as a result of the global pandemic.
"Technology is going to play a huge role in redefining these sectors as they undergo transformation," Lee said.
The Silicon-Valley headquartered GGV where Lee has been a managing partner for 20 years has over 200 portfolio companies under its belt. It ranges from Wish, a popular online e-commerce platform to Grab, a Singapore-headquartered multinational ride-hailing company. It prides itself on investing in local founders and champions, and applying global learning to local markets.
But how has it weathered the crisis?
Having a global presence with offices in Singapore, China, and Silicon Valley meant that the firm had what she calls 'front-row seats' to how the pandemic unfolded. "As a venture [capital] firm that's been around for over 20 years, we've gone through so many cycles: The dot-com boom and bust, Asian financial crisis, global financial crisis and of course, the SARS coronavirus crisis," Lee said.
To deal with the COVID-19 crisis, she said the firm took the diagnostic approach for their portfolio companies in China, the US, and Southeast Asia. "First, we assess their cash runway. We tell them to load up on cash, or if you're closing a financing round, to get it done. Second, we analyze their business model — is it net positive or negative?" she said.
If sales happen predominantly offline, the advice might be to develop products that could have more online onboarding, such as video tutorials. If supply chain was going to be an issue, ensure that alternative sources are sought out, says Lee.
The key to diagnosing the health of the company is also in taking a hard look at each companies' organization and expense structure. Hard decisions will have to be considered, such as pay cuts or headcount optimization.
"As TMT (technology, media, and telecom) investors, we have invested in various sectors around social internet, enterprise, and smart tech," Lee explained. "So fortunately for us, a lot of our sectors are positive. In the short term, they may be negatively impacted as factories and businesses are closed. But in the long term, sectors like online education, online fitness, and online health [will see] healthy growth."
From a venture capital perspective, what does she think will get accelerated in the 'new normal'?
"5G will have a big impact on the acceleration of infrastructure in the emerging economies of Southeast Asia," Lee said. E-commerce and communication technology will get a "boost" as consumer habits adapt to the new normal, she pointed out.
Over the past decade, the entire region of Southeast Asia has gained interest to investors. Since 2012, 10 "unicorns" have emerged, creating a combined market value of $34 billion, placing the region in third place, just behind China and India. Singapore is currently seen as the leader in investment activity, but the rest of the region is catching up quickly.
"Our belief is that the next billion internet users will power the next phase of global growth. And these users will be found mainly in Southeast Asia and India," she said. Lee, a Singaporean herself, played a key role in the re-opening of their Singapore office in 2019, as the firm looked to the city-state as a gateway for the rest of Southeast Asia and India.
"If you're a global brand looking to reach out to Asia, Singapore is a great place to have headquarters because the processes are standardized. Second, the quality of human capital is very high, and it's a very educated workforce," Lee said.
Ultimately, the bigger picture for her would be the impact that these investments can make. "It's not always about how big the return is. It's about impact. It's also about the value that they are creating for society," she said.
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