500 Startups‘ organization in Southeast Asia — 500 Durians — is back with a new $50 million fund to press on with early-stage startup dealmaking in the emerging region, which counts over 600 million consumers.
Although it typically sits in the shadow of India and China, Southeast Asia is poised to see major tech growth. A recent report co-authored by Google predicted that Southeast Asia’s digital economy will reach $200 billion by 2025. With 260 million users now and an estimated 480 million by 2020, it is the world’s fastest growing internet market — bringing 3.8 million people online for the first time each month.
The original 500 Durians fund launched in 2013 to explore those possibilities. Originally it was $10 million, but it was subsequently increased to over $20 million in size and it counts Uber rival Grab, social commerce app Carousell and Indonesia’s Bukalapak among its portfolio. Now 500 Startups, which is led by Khailee Ng in Southeast Asia, is doubling down with a target of $50 million for the second Durians fund.
A first close is expected to come over the next month or two, with a final close likely next year. Ng, who is working with co-partner Vishal Harnal on the fund and backed by a team of eight, said 500 Durians II was “kickstarted” and supported by investors in the original, first fund. Malaysia’s MAVCAP is among the LPs, with others coming from China, Korea, the Middle East and Singapore among other places, Ng said.
Sticking to seed
While a number of funds in the region that started out at seed stage have matured into Series A, and potentially beyond, Ng told TechCrunch that Durians will maintain an early-stage focus, albeit with more cash.
“What we’ve done works and we don’t want to get greedy about it,” he said in an interview. “Pre-Series A, Series A and Series B is where all the new money is coming in, no-one is really charging into seed stage and those guys will need a pipeline of new deals. We’ll continue to feed the ecosystem.”
“Raising a fund is easier now because we’ve got a track record and people are excited,” Ng added. “Our first 20 deals have matured well, and the next 20 are following a similar pattern.”
Ng said the fund will be used to cut checks that are typically up to $100,000 as part of seed rounds with other investors, although it could creep up to $250,000 “if we see great stuff.” The aim is to fund 100-200 deals and use the remaining funds for follow-on deals.
“We will be pretty cautious with follow-ons,” Ng clarified. “We’ll do them, but larger than before.”
Targeting non-traditional investments
It’s hard to remember a time when 500 Startups wasn’t a prolific investor in Southeast Asia. It has invested in 119 startups in the region to date which, according to CB Insights, means it has been involved in one-quarter of all seed-stage deals in Southeast Asia.
That’s a staggering statistic, even if some deals go unreported and skew the numbers, and Ng said that one of his goals is to go beyond the “startup echo chamber” and reach entrepreneurs who are less familiar with venture capital but are already busy building companies that could benefit from it.
More generally, Ng said his sights are set on business models that are proven overseas but yet to enter the region. He’s also bullish on enterprise — and in particular systems that tap into adoption of mobile, messaging, etc — and see Saas business models developing in sophistication, too.
500 Startups has $10 million micro-funds in Thailand and Vietnam, and Ng said that there is some interest in arranging a similar setup in Philippines. The Durians fund will mainly look at other markets in Southeast Asia — principally Indonesia, Southeast Asia’s largest economy, and Singapore — but may overlap co-invest with local funds in certain deals.
Generally, the organization has backed over 1,500 startups worldwide, and it has funds in countries like Mexico, India, the Nordics and more. The firm’s global fund closed with $85 million in commitments last year, its LPs include Yahoo Japan, Tokyo-based Dentsu and MAVCAP.