Hong Kong-headquartered single family office Tsangs Group sees 2023 as a good year to increase resources in venture capital in Southeast Asia via its newly opened Singapore office.
The new location will help the family tap into growth opportunities in Indonesia, Vietnam, and the Philippines in the technology and clean energy sectors.
“We believe that the Southeast Asia region has a huge potential for growth and is less affected by geopolitical tensions between the US and China,” said Patrick Tsang, chairman of Tsangs Group.
As a family office specialising in technology investment, Tsang said they will stay opportunistic and look at a wide range of early-stage companies, including in e-commerce related fintech, artificial intelligence (AI), biotech, clean energy technology, as well as food and agriculture technology in the three Southeast Asian countries.
“All three countries have a large population, young, unbanked, and most people are under 30, which is the opposite to all the developed economies like Japan, China, Europe. So huge opportunity for growth,” Tsang told AsianInvestor.
CLOSER TO THE PULSE
Previously, Tsangs Group sourced deals in Southeast Asia through its home office in Hong Kong.
As more deals entered Singapore from China and other places in the past few years, especially during the period of Covid restriction in mainland China and Hong Kong, Tsang noted that more investors have been open to looking at Southeast Asia.
The firm’s new Singapore office will be a base for them to source deals more locally and let the market and potential partners know that it is very serious about investing in the region’s growth and diversifying its portfolio across Southeast Asia.
Although the new office has been open only since late January, it is already trying to close two deals – one in fintech and one in cleantech – within the coming month.
Tsang hopes to complete a few smaller deals first to understand the market before eyeing something bigger in the first year of establishment. The sweet spot for ticket size is around $2 million to $5 million for early-stage venture capital in Southeast Asia, he said.
“We want to meet more like-minded family offices in the region to try to co-invest with them,” Tsang said, adding that ideal partners may be other family offices, venture capital funds, and high-net-worth individuals.
For private equity investments, the firm’s appetite rises to $20 to $30 million. Currently, the family’s private equity investments are mainly focused on the US market.
Currently, Tsangs Group has about 30 staff globally, including 20 in Hong Kong, and the rest are spread across Shenzhen, London, Singapore, and Dubai. The Dubai office was opened in early 2022 to tap into venture capital opportunities in the Middle East.
The new Singapore office is currently run by chief executive officer Daisy Ha and a business development officer. If things go well in Singapore, Tsang said the firm would add more staff in business development, analysis, and administration.
Tsang believes 2023 is a good year for venture capital and private equity investment as valuations came down significantly in 2022.
Although Silicon Valley Bank’s sudden collapse dealt a heavy blow to startups, he believes “2023 will still be the best vintage year for making private equity and venture capital investments for long-term investors”.
“There is no doubt that the SVB debacle and its rippling effects on the banking system and private equity and venture capital communities will be continuing in the next few months.
“The valuation of private equity and venture capital will be further depressed. But for those side-lined and cash-rich private equity and venture capital investors, this might be the perfect storm for making long-term investments during or after the clean-up process,” he said.
Tsang thinks the valuation drop will enable long-term investors to get better deals at lower prices, and gives them more options to pick what they want to invest in.
“In a few years from now the values will climb back up, and that's when it's a good time to exit,” he said.
As they are looking at medium-to-long-term projects, Tsang is not so worried about a potential recession and its impact on companies as long as companies have the “right fundamentals in the right space solving the right problem”.
“The recession and inflation will go away at some point, no matter six, 12 months, or two years. But ventures always have a three- to seven-year timeline anyway. So, by the time it gets there the price will be fine,” he said.
AsianInvestor will be hosting its Family Office Briefing on March 28 in Hong Kong, which will bring together a select group of family offices. For more details, click here.