Accelerate Asia 2020 session 'Impact Investing in Asia'

Hey Ben, g'day, adéu, lovely to see you.

You know, it's, it's, uh, we, for everyone who's gonna streaming in, um, and, and, uh, you can turn your video on if you have questions for Ben and I. Hopefully Tanya will join us. Uh, uh, we, you know, we had a little snafu because We maybe it was a limit of the platform, but we expected to have more people on stage 1 minute ago. But hey, you know, that's life. Good to see you. OK, so we're at a number of more and more people entering the room. Yeah, let's let Tanya know while we wait for people. To come in. You have a great view on this first issue. Where do you think Asia stands in comparison to impact investing and maybe even investing in general to America, Europe, and other places? And the reason why I think you're great on this particular point, Ben, is you travel around the world very regularly. So you've seen all these other ecosystems firsthand. And I'd love to hear your view on that. And I'll try and find Tanya. For sure.

I would suggest that there are two ways, there are two ways to consider this. On one hand, there are a bunch of investors in Asia who, that I've been in touch with, and they have been very interested in returns, returns, and returns. So in some ways, that's the more traditional school. And at the same time, because we are in a more connected world, a more informed world, a more educated world, there have been another group of investors and possibly more founders who certainly shared with me the desire to do good. With whatever they're working on. And I would suggest that impact investing is a, is a very broad umbrella. Impact investing doesn't necessarily mean you are compromising financial returns, but it is a recognition that this ESG movement, which is talking about the environmental concerns, the social concerns, and governance concerns, are thought of as part of whatever you're building. And as an investor, and I can tell you, Adeo, and tell the friends who are on this call, as an investor, we think about that with the companies that we invest in. One of our, one of our, one of the public things we say to founders is that we want to back bold and visionary founders who are going to be building industry-defining companies, of course, that are making the world better. Like, why would we want to be investing in companies that are making the world worse?

Well, good question. Seems like a lot of people have done it. So, Tanya, right when you came on, Ben was talking about how a lot of Asian investors have historically focused on financial returns pretty much exclusively. And Ben saying, as he just said, like, why not? To make the world better. What have you been seeing in Asia? And Sari, thank you so much for volunteering to let Ben come on stage before. So let's give you a little bit of stage time right now. What's your view on how Asia fares compared to Europe, America, and other places in the world?

Yeah, so obviously I'm from Europe. And I noticed a difference when I arrived in Singapore 4 years ago, and from speaking to LPs here and also founders and the businesses that have been built over the last few years, I can see that there is definitely a traditional view on philanthropy and returns-based investments and never shall the two meet. However, I've noticed over the last 4 years that actually that is changing. And particularly when you speak to younger, the younger generations in charge of, you know, second generation family offices, et cetera, that, that, that mindset is definitely shifting. And so, and, and I see a lot of very young Asian females and males who are very, very conscious of social impact and environmental impact. And obviously the interest that I've seen since launching HerCapital, which is of course, you know, our impact is purely on gender and addressing SDG 5, but it's overwhelming. We are seeing a huge amount, you know, we're being offered free interns left, right, and center, way more than we can take on. And because this matters to them. And so I'm very, very positive positive about the change, but definitely there is some catching up to do.

Yes, I think what's fascinating is that 2 weeks ago, a country very close to Australia, New Zealand, had a general election and the female prime minister there, Jacinda Ardern, was returned to power with a stunning majority. This is the first time there's been a majority, an absolute majority in the New Zealand Parliament for some years. And New Zealand in 2019 ditched GDP as the sole measure of progress, and they wanted to include a happiness and well-being index. And that in many ways— and Adele, we've spoken about this— there's different mindsets, and that in some ways is a growth mindset, right? It's a recognition that maybe if we go on the GDP growth for too long, there might not be much for us to go on with.

Yeah. Amen. You know, it can be scary at these times. I mean, okay, so Brendan's got a question in the chat: when you make an investment in companies that make an impact, how do you look at their return on investment? Investment? And are your exit strategies different than a pure financial play? And that's a really a great question because it goes to the heart of what you see a lot of LPs worried about. It does, I think, I forget if you said it, Tanya or Ben, it's like, do-gooders, you know, what is that? So who wants to take that first?

I am happy to answer that. We, we, We see— so we're a very unique fund in that we're pure female-focused, and so in terms of impact, it's— we're not expecting to reduce our returns for investors because we're investing in women. In fact, statistics will show that actually quite the opposite. We should expect higher returns based on the data. So our returns are definitely not being impacted. I think our model looks a little different to traditional venture because there is this portion of our fund that is— that we're targeting, you know, we're not unicorn chasing for the entirety of the fund. There's a part where we're looking for moderate growth and profitability, sustained profitability and revenue-based models. So there is— tweaks to the model, but overall, we were anticipating industry standard returns for our fund. And I believe that our fund is very impactful.

Well, if the world careens off a cliff and with fires and other sort of natural disasters that we're seeing in Indonesia, California, wherever, it doesn't matter what you're investing in. That's not going to be great. Fernando, do you have a question that you'd like to ask?

Hi, hello from Mexico City, actually. It's kind of early for me here as well. I just, I was invited by Gerard Scaller, who is part of the institute, the Funders Institute in Manila, and he's my partner also. We just invested and opened our office in Asia, actually, to do some investigations and compliance work. But in my— I was listening to you guys and thank you. It's my first time joining Hopin and joining you guys and I really enjoy a lot. And for these startups and the concerns of building capital to expand or to grow in the business, one of the things that from a compliance perspective Asian companies are looking into, we have seen a lot of investment. We have offices, 8 offices around the world. And we have seen a lot of flow coming from Asia, but within Asia, what are the main concerns that you see from a compliance perspective that is going to be challenging now and the ongoing basis as well?

Good question. So like what compliance issues that, you know, people need to think about with respect to impact? I certainly don't know the details of that as well as you two.

Fernando, I would suggest it depends on the industry that you're operating in, and it depends on the country. So countries like Singapore will tend to have less regulation than if you were to operate in a country like Manila— oh, sorry, in the Philippines. And, and if you were to operate in, in a country like the Philippines, the process by which you need to get permits and authorizations is more manual paperwork and less digital. So it's difficult for me to say as a rule what one should do because Asia is multiple countries. In the same way the Americas is lots of countries. But it will depend a lot on the industry and the particular country.

There's another question coming in from a shock about, in some ways, impact investments are seen as, you know, government jobs and often fear of like getting in the government space. You know, what's your experience on that. And yeah, there's a lot of misconceptions about impact, so who wants to take that one?

I'm happy to take that, and it depends again. So I would suggest my experience in countries like Australia, in New Zealand, that I've seen in Singapore, and that is governments are very happy for NGOs, for social enterprises to play a role in society and to play a larger role in society. So to give you an example, in Singapore, for instance, the government tax rate is around 15 to 17% of GDP. In a country like Australia or New Zealand, it's between 20% and 25%, which means that in countries like Singapore, there is a lot less state-funded welfare, and therefore there is opportunities for social enterprise or businesses with a strong impact to make a difference. On the flip side, In countries that have a greater spend on welfare, we have found that the more enlightened governments are wanting to partner and work with NGOs and social enterprises in order to affect social impact. And sometimes that social impact can be subsidized by way of government, So government can provide a subsidy or some kind of funding for that. So not only can there be a commercial return, there can be a government contribution to that commercial return. And what I would suggest, it depends what the space you are working in. So social housing, for instance, there are government initiatives that I'm aware of where the where the government's prepared to guarantee a certain rate, and then beyond that, a commercial operator is able to charge a gap so that the government contribution plus that gap adds up to a more commercial rate of return.

Tania, you want to comment?

Yeah, please. There's also a very important point that I think that, particularly in Asia, is that You know, many of the countries here are, you know, still developing. And so let's talk about things like mental health and recycling and those things. They haven't— they're not on the government's agenda enough, right? So we can't— and as a European, I appreciate I've got a very different perspective than perhaps I would have if I was from one of these countries. And, you know, So I accept it a little less. And so I think that I don't see this as the government's job because it's not being done in all these places. And so when someone comes to me with a fantastic business idea in this region because they care about it and I see that this has got legs and people are interested and they're passionate about it, particularly the younger generations, like, That's our space. That's the future. So let's invest in it.

Right.

So in some ways you're actually— and this is actually a question in the chat from one of the participants. So you coming from Europe have seen that Asia in some ways is behind and in, let's say, recycling or whatever, what you might see in Europe, because Europe's in many ways very progressive with impact in certain things. And, and Ivan was asking, hey, if I'm outside of Asia and I want to bring my, in this case, recycling technology, ironically enough, into Asia, you know, what advice can you give founders looking to bring their impact technologies to the region? Maybe, Tania, you take that first and then Ben second. We're going to run over a few minutes, everybody.

Yeah, I mean, that's super challenging because if it's It's not something that is currently on the agenda of the government. You know, you really do need them on side. But for me, and I feel like this is— it's different, it's gender, but it's a similar scenario in that gender has not been on the radar here, on the agenda here for, you know, forever. And so— but people care about it. If you get enough people and make a movement, you know, we've got a huge following here because people actually are passionate about this. And recycling is another area too, like people care about this stuff. And so it's like a, it's not a bypass, but you know, I see that we've got a huge following. And then only last week, I reached out to some of the senior ministers here who had made some noises about gender equality, and here's what we're doing and here's why you should care and here's all the following and what— here are the people that care about it. And it's a very compelling case.

Okay, so top-down, or if that doesn't work, you can go bottom-up. Ben, do you want to add anything? I think you're— Ben, I think you might be muted. Muted.

But it was really good.

I think the opportunity is where government has not been so active is to build a grassroots movement.

Yes.

And if there are enough of us who are clamoring and saying we do want to recycle, we do want to see more females in senior positions, we do want to see more female ministers, of the state. That's a wonderful thing. Governments and people in power should be responsive to that, especially if we're not asking them to do a lot but support.

I want to also get to the question from Ashok, you know, how far is India away from your cross-border investments around impact, in his case circular economy, recycle, upcycle? Yeah, I mean, it goes back to this question, like, Asia isn't like Asia. You've got like really, really different places. So who wants to take that one? I mean, I guess it's kind of between you two or close to you two.

I get asked all the time and we're approached by huge amounts of female founders in India and also lots of ecosystem builders companies in India that want us to partner with them, but we're very SEA-focused with small carve-out for Australia and North America. But we— India is a huge, obviously, area to target on its own. So for us, we're— not because I don't see the opportunity, I actually think there's huge opportunity, not just on the gender, but on the impact in its entirety. But for us, it's probably a few funds away, I would say.

Right, you might need it. But Ben, what's your— I mean, have you done any deals in India?

We have not. And most funds will have a geographic mandate, or at the very least, a geographic preference. So if you're got an outstanding opportunity, there is the possibility that you might be the 5% or the 10% of the fund which is allowed to receive investment outside of the mandate. But most funds will have a geographic/business type/stage of business mandate. And they will want, the fund manager will want 80, 90 plus percent of investments to be in that. And maybe they'll allow for 5 or 10% outside. But you'll, my advice is to find investors who have invested in your geographic area as well as in your space.

And I'll add something as someone who's started 1,000 venture funds around the world and a bunch in Asia, including working with Tanya and having worked with Ben for many, many years. You know, what you see is that India in particular has currency restrictions, unique bureaucracy. So funds really need to operate and you see this across Asia. Now there's some more open societies like Hong Kong and Singapore, to a lesser extent Malaysia, and to even lesser extent further Indonesia. But, and then there's some more closed societies of which India falls in. And so I think back to what Ben is saying, you really need to know where those funds are focused. In order to see what they're going to, to invest in. So with that said, everyone, thank you so much. I think we're gonna wrap it because, uh, we've crossed the time barrier here. Don't be shy to follow up and, uh, learn more about the Founder Institute. So thanks everyone for your time today. Thank you everyone.

Have a fantastic day.

Thank you.

Bye guys.