Recession Run: B Capital’s $2.1b plan for the downturn

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this Q&A series, we talk to Southeast Asia’s investors to suss out what opportunities they see, what strategies they’re implementing, and what areas of investment they’re looking at in the next few months.

Rising interest rates saw the sky-high valuations of startups hit a ceiling. Last year, global funding dipped by 35% to US$445 billion.

While startups face a cash crunch amid the funding winter, VCs continue to raise more money, adding to the dry powder that waits on the sidelines. Just last week, B Capital Group announced the final close of its record US$2.1 billion third growth fund.

This is one of several funds that different VC firms have managed to raise amid the current downturn, which begs the question: When will all this dry powder be invested into the startup ecosystem?

B Capital Group co-founder and partner Raj Ganguly / Photo credit: Raj Ganguly

B Capital’s Fund III will focus on financing companies in their series B funding stage and above.

“Series B risk-adjusted returns have historically outperformed earlier and later stages of venture by 2x to 3x,” B Capital co-founder and managing partner Raj Ganguly tells Tech in Asia in an email interview.

Ganguly established the Singapore- and US-headquartered firm alongside Facebook co-founder Eduardo Saverin in 2015. In addition, Ganguly is a senior advisor at Boston Consulting Group, and B Capital works with the global advisory company to support its portfolio startups.

The VC firm counts Southeast Asian unicorns Kopi Kenangan, Carro, and Ninja Van among its over 125 portfolio companies. It has amassed a total of US$6.3 billion in assets under management.

Ganguly says the new fund will be allocated to firms in the US, Southeast Asia, and India, noting that the two Asian markets “present significant opportunities. We will continue to invest in enterprise, fintech, and healthcare tech throughout Southeast Asia and India.” B Capital plans to invest in 25 to 35 core portfolio companies over 10 to 12 quarters.

Here are more insights from Ganguly on B Capital’s plans for its latest fund, his outlook on Southeast Asia’s startup ecosystem, and his advice to founders during this tough time.

What is B Capital’s outlook for Southeast Asia’s startup ecosystem for 2023 and beyond?

Ganguly: While many high-valued startups faced headwinds in 2022, the new year might be even tougher with the three biggest economies – the US, the European Union, and China – slowing down. We believe fundraising will be difficult for startups as fund managers take a more cautious stance till leading indicators turn positive. However, we continue to remain optimistic about Southeast Asia’s long-term growth prospects despite current headwinds. The secular tailwinds that have driven growth in the region’s tech sector will continue despite temporary hiccups.

How much of your latest fund will be allocated toward Southeast Asia and India?