BlueRun Ventures, a consumer technology-focused venture capital firm, is raising its second Asia-dedicated fund, BRV Lotus Fund II, with a target of $500 million and hard cap of $750 million, as reported. It doubled its headcount to 40 in 2015 and plans to add another 10 by the end of this year.
AsianInvestor spoke to general partner Kwan Yoon about the environment for raising funds and exiting deals.
AsianInvestor: Is it more difficult to raise funds than in the past? What are investors’ main concerns?
Kwan Yoon: There are a lot of macro challenges now, such as the China slowdown, uncertainty over Japan, political risk around North and South Korea, the US election. There are lot of uncertain macro factors affecting bigger institutional investors such as sovereign funds. So they are more reserved than in the past. A lot of the big guys are pulling back a bit and monitoring what’s happening and not taking quick action. They are also looking for alternative asset classes to diversify risk.
But family offices are sitting on a lot of assets and don’t have access to the information they need. For example, when I was in Dubai meeting $1 billion-plus family offices, it was eye-opening for many of them. “Wow, Korea, we didn’t even think of looking there.” Now they all want to visit and learn more.
And they feel more comfortable hitting China through proven technologies and a more bottom-up, scientific approach that we have taken than just saying “I’ll put some money in China” and taking macro risk.
What’s the make-up of your client base?
Our current investors include [Singapore state fund] Temasek, Texas Permanent School Fund and [US asset manager] Neuberger Berman, as well as strategic family offices – mostly bigger, well known ones from Silicon Valley, China, Singapore, Hong Kong and Japan. Our clients are split about 50/50 between institutional and private wealth.
We are in discussions about BRV Lotus Fund II with investors from China, Japan, the Middle East and the US.
What’s the market been like for exits?
It’s been straightforward. Our main exit route has been IPOs through the Kosdaq, Korea’s equivalent to Nasdaq in the US. It has over $3 billion a day trading volume, so it’s highly liquid, and it offers tax-free transactions for going from private to IPO. And it’s a very transparent market.
Fund I has already had four liquidity events, with three complete divestments at 5.3x, 7.3x and 8.8x, and one IPO last December which we recently had our first partial exit from at 3.4x. Overall these will return over 1.0 DPI [distributions to paid-in capital] with meaningful visibility on at least seven exits expected in the next 12 months. The fund's current IRR is at 69% and expected MOIC [multiple of invested capital] is 5x plus.
We’ve also tried [doing IPOs on] the Nasdaq a couple of times and M&A in China with Hong Kong- or China-listed portfolio companies.
Can you give examples of the deals you’ve done?
We were the first institutional investor in [US payment systems provider] PayPal. We’ve backed a number of iconic companies in China like Meilishuo, the dominant social and fashion e-commerce platform for women. We also backed Ganji, the biggest classified ad provider in China – it’s the equivalent of Craig’s List in the US, and has now merged with 58.com. And [we've invested in] PPTV, the dominant online media distribution platform which was sold to Suning, BestBuy of China.
On the healthcare side, we have Chunyu, a kind of remote hospital with 95 million patients and 450,000 doctors on the network. The doctors offer remote diagnosis and prescription management etcetera.