K.O. Chia, executive vice president of venture capitalist firm Walden International, used to work on the other side of the fence as the founder of a start-up technology company. Today, he manages more than $2 billion worth of funds, and the firm has just secured $1 billion in fresh funds. Here, he talks about the outlook for investment in Asian start-ups.
Q: Having worked for four years with Walden International, you must have seen the highs and lows of the technology sector. How have your investment strategies changed, if at all?
A: At Walden International we look at three things: firstly, the management team; secondly the technology - does it have a sustainable competitive advantage?; and thirdly, the ability and scale to go global and cross borders. Today, it is very much like it was in the early 90s when I was working at a start-up. There was no crazy euphoria, it was a matter of building a slow sustainable model for a company. Which is what Walden is all about - investing in early stage companies, building the company towards higher revenue, putting teams together and finding customers before delivering into the marketplace. Our strategies have not changed.
Q: What was it like raising funds, like you did recently with Pacvent V, compared to the last round of funds which Walden received in 1997?
A: Obviously the downturn has made a lot of investors nervous. However, at the same time, they are still looking at companies like Walden that have a track record with long term growth. This is our fifth fund and we have retained a lot of our investors from previous funds, and in fact have doubled or tripled their contributions.
Q: Are you still bullish on the tech sector?
A: Absolutely. If you look the people in Walden, most of us are from an operating or industry background. As a result, when we look at technology, be it from biotech to communications, we have specialists that will understand whether things that are presented to us are beyond the law of physics, or beyond the law of chemistry. We look forward, when it comes to the venture industry - we are not looking at today, we are looking at the future. We have $1 billion to spend over the next four to five years. Our typical investments are between $5 million and $25 million.
Q: Is it hard to find solid companies to invest in Asia nowadays?
A: The reverse is true. We are seeing companies now that are better quality than ever before, because the ones that have a good and sustainable business are coming back for financing and looking a lot more reasonable in terms of valuation. They are looking a lot more attractive and we are having a second look at these companies. There is a very interesting fusion happening between bio-science and information technology.
Q: Last year, 20 companies in Walden International's portfolio listed or were bought over despite the pessimism. How did you manage that?
A: Actually, last year was our best year ever, despite the downturn. Those companies were ones that we invested in two or three years ago and then brought to market or were taken over. There is no secret to it. It is all about venture nurturing and building companies from very little. When you build companies that are sustainable, the market will reward it.