Cocoon is bringing ‘unsexy’ startups back with new $50m fund

In this volatile funding environment, Singapore-based VC firm Cocoon Capital, is not keen on reinventing the wheel.

“We’re a non-thematic fund. If you’re a VC going after all the buzzwords like AI, then you would have hundreds of companies trying to solve the same problem, which means they’re eating each other’s meals. That’s not us,” Michael Blakey, managing partner at Cocoon Capital, tells Tech in Asia

So for its new fund – which aims to raise a total of US$50 million, making it the VC’s largest fund to date – it wants to continue to practice its investment ethos: shying away from “hype” startups and focusing on firms solving “real, unsexy problems” that present huge opportunities, he says.

(From left) Cocoon Capital partners Carol Cheung and Michael Blakey together with investment director Sia Zong Xi / Photo credit: Cocoon Capital

The VC has secured US$30 million in commitments from limited partners for the first close of its third fund. It aims to raise the remaining US$20 million before the year ends.

Founded in 2016, Cocoon Capital invests in seed-stage startups in the enterprise and deeptech sectors. Its initial check sizes range between US$500,000 and US$1.5 million.

The company raised its first fund in 2016, which was worth US$7 million and focused on B2B startups. Its second fund, which launched in 2018 and was valued at US$21 million, expanded the VC’s interests to deeptech firms.

The third fund will invest in Southeast Asian seed-stage startups in the areas of advanced manufacturing, enterprise solutions, robotics, and healthcare.

It has previously invested in Aprisium, a Singapore-based deeptech and SaaS startup using proprietary equipment to detect and monitor water contamination in industrial sites. After testing, clients are able to access and track contamination data in real time through a digital platform.

Other startups in Cocoon Capital’s portfolio include Singapore-based Augmentus, a no-code robotics reprogramming platform, and Vietnam-based BuyMed, a B2B marketplace for the pharmaceutical industry. So far, it has invested in 32 startups.

The more returns, the more LPs return

Blakey says that Cocoon Capital will stay patient, sticking to its pace of investing in up to six startups a year. It aims to back a total of 20 startups in the next five years, which includes participation in series A rounds.

This strategy seems to have worked in its favor.

The VC firm says it has reached a distributed paid-in (DPI) capital – which is the money that actually goes back to the investors – of 1x for its first fund. This means that Cocoon Capital returned the exact amount of money investors have poured into the fund.

The 1x DPI of the first fund from the 2016 vintage is higher than the average rate recorded by VCs in Southeast Asia that launched a fund between 2016 and 2018, which stood at 0.04x, according to the e-Conomy SEA 2023 report.

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