Hong Kong-based single family office Tsangs group, which focuses on technology venture capital (VC) investments, has turned to more opportunistic plays in recent years amid rapidly changing market conditions.
Previously, when the group made venture capital investments, it used to look at investment horizons of five to seven years, Chairman Patrick Tsang said at a fireside chat at AsianInvestor’s Family Office Briefing held in Hong Kong on March 28.
“Now we want to exit basically in about one to three years,” said Tsang. “We are looking at more opportunistic situations… because the world is changing too fast.”
Diversification remains important, especially in volatile times, he said. “You have to spread the risks across different areas."
Tsang said the family office's investing style had to evolve because of the pandemic as well.
“Before Covid-19, we never invested in any funds, but during Covid-19, we started to invest in them,” he said. “We have now invested in maybe eight or nine funds, mainly in life sciences, blockchain, etc.”
“These are areas where we don’t have in-house experience and we just wanted to spread our bets and play it a bit safer. So far, it has been a pretty good strategy,” he added.
Like several other investors, he believes that valuations in the venture capital space had climbed rapidly amid high optimism in the past few years.
“Now I think valuations are more realistic and it’s the time for venture capital, especially in areas such as life sciences, which are basically recession-proof,” he said.
With economic headwinds increasing in 2022, venture capital investors in Asia prioritised investments in companies able to generate revenue or show positive cash flows, while pulling back from higher risk companies and those with unproven business models, according to KPMG.
Fundraising activity across most of Asia was 'incredibly sluggish' until September 2022, with all indications that annual fundraising in the region would hit an eight-year low at the end of 2022, KPMG said.
However, Tsang noted that crises often present good investment opportunities because prices are much lower.
The family office recently outlined its venture capital plans from its Singapore office to AsianInvestor.
The new location is expected to help the family office 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,” Tsang told AsianInvestor previously.
The family office is currently looking at a range of investment ideas both inside and outside of Asia, including alternative food protein in Israel and robotics companies. “[These are things] which I believe will be able to push through, whether it’s boom times or recession,” said Tsang.
Israeli alternative protein companies rank second in the world after the US for investments, accounting for about 15% of total investments, according to a February report by the Good Food Institute.
The alternative protein industry has sprung up as a possible solution to conventional meat, egg, and dairy production, which are considered unsustainable and drivers of climate change and environmental degradation.
HONG KONG VENTURE
Hong Kong is also trying to build up its credentials as a VC and private equity hub.
The Hong Kong Exchange recently announced a new listing regime for specialist technology companies in a bid to attract pre-revenue innovative tech start-ups to raise capital in the stock market.
The rules, which come into effect on March 31, will let companies with at least HK$10 billion ($1.3 billion) in valuation sell shares in initial public offerings, even if they have no revenue.
“While the idea is a very good one, I think the Hong Kong venture capital and tech startup scene unfortunately has a long way to go before we can compete with the likes of say, Silicon Valley or Europe or even Singapore,” said Tsang.
Still, it’s a good move by the stock exchange, he said. “I applaud the initiative because the market is still very equity-focused rather than start-up or technology-centric,” he added.