Finian Tan, chairman of Vickers Venture Partners. Photo: Bloomberg
Finian Tan will be remembered as the man who backed China’s Baidu in 2000 when nobody else would. Five years later, Baidu’s listing on Nasdaq would go down as one of the best IPOs in the history of the US-based stock exchange. Today, Baidu, referred to as China’s equivalent of search engine giant Google, is worth over $80 billion in market value.
Over the years, Singaporean investor Tan has acquired a reputation for his unique ability to spot trends and make decisive bets. Now 55, Tan has set his sights on India and his venture capital firm Singapore-based Vickers Venture Partners is all set to drop anchor in the country.
Vickers, the VC firm Tan co-founded in 2005, has so far invested over $360 million,including co-investments, in 34 ventures across countries such as China, Singapore, Indonesia and the US. It recently raised its fifth—and largest—fund, which has closed commitments worth roughly $220 million. Since his investment in Baidu, Tan has overseen at least 15 exits from his portfolio of start-ups—half of which came in at Vickers.
In an interview, Tan explains his rationale for investing in India now, how he picks and backs start-ups, how Vickers will build up a team in India and the sectors he would be bullish on in India. Edited excerpts:
Tell us about Vickers Ventures and your journey so far.
I started investing in 2000. My first investment was Baidu when it was just 15 people. In 2005, we listed it on NASDAQ and till today it is the best performing IPO. Since then, I hit many other hits—more than 15 exits today. I started my own fund in 2005, with four partners. We have five funds under management today and our fund four is currently the best performing VC fund in the world. The total value of all our investments is $2.2 billion. We invest in TMT (technology, media and telecom) and also in financial services, consumer businesses, life sciences; through our five offices worldwide.
What do you look for while investing?
We look for three things: The first one is the space. It needs to be a very sexy space and fast-growing because the rising tide lifts everybody. Number two, we look at competitive edge of that business in its space and number three is the team.
You have a large exposure in China, and often investors like to compare it with India. How does India compare with China?
Both are billion plus people, both developing, both fast growing. Both are in need of a lot of capital to achieve their targets. For exporters of capital they are fantastic places to invest. Both can be Palo Alto’s of the world. Both are in Asia, but that is kind of where the similarities stop, and the differences appear. Our cultures are very different. One has many religions and one doesn’t have any at all, except money. One has one language, you have many. One used to be a communist country and one is the largest democracy in the world. Their journeys are very different.
Being a dictatorship, the government (in China) owns all the businesses and all the land so it is very rich. It could bring infrastructure like that and it didn’t have to go for elections, so it has a very long term view. It started out with very healthy balance books, because they have trade surpluses, they are the manufacturing hub of the world.
You have been an investor for over two decades, what took you so long to enter India?
Venture capital has a time, a sweet spot to come in. Ten years ago, in my view it was too early. I have been an investor for over 20 years but I didn’t heavily invest in India. I invested in China because I thought the time was right. I was there earlier than everyone. When China grew, everyone fired into India and I felt it was not ready, because it was still going through teething pangs of a young economy. But people saw China and saw India as totally the same. Actually India is not 10 years behind China, it is more than 10 years. I think a good comparison of where the country is at is its per capital income. China was at India’s per capita income decades ago. In India, the rush was too early. So I had to wait till the bubble kind of burst, which I think already has. Look at how much Freecharge was acquired for and Flipkart’s valuation. It went up and then came down. It is a bit more rational now. Some people got burnt. People are no longer blindly investing. It is a good time. Having said that, there is still a lot of capital in India. Softbank launched this huge Vision Fund—they just invested in OYO.
There is still a lot of money in the companies that are showing promise but in the early stage there is no money. We are very good at early stage, that is what do so we will look at early stage investment- $1 million to $5 million.
What sectors and technologies would you look to invest in India?
In the global leadership, we invest in deep-tech—AR, VR, robotics and AI. In the more developing countries we invest in problem solving. You need to leapfrog using technology. Artificial Intelligence, as a term is almost not used anymore, because it is in everything we use. Narrow intelligence is actually quite easy to do, general intelligence is difficult. Playing chess is narrow intelligence, where there are set rules, and even self-drive cars. So anything that is using the intelligence but only within six rules is over. That job is over. Driverless cars is so big that every company is into it—from Uber to Ford, to Tesla, to Apple and Google and Amazon, everybody is in that space, because it is so big and untouched. There are many such low hanging fruits that if you solve you can be worth hundreds of billions. The problem with that business is that it is too big and low and too low that I can’t invest. On the other hand, there are low-hanging fruits in life sciences, that can you only solve with a single breakthrough. You must find a drug to kill cancer. All the technologies are existing and anybody can do it. It is pure execution.
Another thing that we don’t look is, for example, cab hailing. It is a red ocean. Whoever has more money wins. That is not our strength. We don’t invest in red oceans.
How are you building your team in India?
We want people from India to work for us. We have allocated a third of our fund to South-East Asia and India. Depending on the quality of deals, we will invest accordingly. We raised $220 million over the last 12 months. That is fresh money. We don’t have a specific allocation country by country. It all depends on the quality of deals we get. We may put the entire one-third in India. For now, investments in India will be managed out of Singapore, but we can always have Indian people working with us, it can be in India or in Singapore.