Turn Capital in undervalued asset hunt after Flash Coffee buyout

Turn Capital, a turnaround fund established by the co-founder of livestreaming operator 17Live, has raised its maiden fund to invest in business turnarounds in the consumer and technology sectors.

The fund’s first deal is a total buyout of the Thai unit of Flash Coffee, the venture-backed coffee chain now undergoing consolidation across its markets. The deal size was undisclosed.

Turn Capital partners (from left) Shang Koo, Ho Kheng Lian, and Joseph Phua are targeting deals in the consumer and technology sectors. / Photo credit: Business Times

Turn Capital, founded in 2020 by Joseph Phua as a single family office investing in distressed assets, is looking to take controlling stakes in Asian companies and to turn them around towards profitability within a year.

The firm is investing in opportunistic deals just as private valuations across Asia are tumbling, squeezed by rising interest rates and high inflation.

“Usually, these companies would have been overinvested into by venture capitalists, and would have plateaued to the extent that they’re not VC-investable anymore,” says Ho Kheng Lian, general partner (GP) at Turn Capital.

Consequently, these companies “hit a point when they’re running out of money, and that’s where we come in and turn them around, with the expertise that we have in the space,” adds Ho, who has known Phua for about 20 years.

A former restructuring and litigation lawyer, Ho has also made tech investments through her own firm Kollective Group and advised Vertex Ventures and other companies on fundraising.

Turn Capital is targeting a final close of its five-year fund by year-end, but Ho declined to reveal the firm’s fundraising target. The fund will have a GP commitment of at least US$10 million, which is at least 20% of the entire fund, she said.

It will invest in three to five companies that are in their series B to D stages and have around US$10 million in revenue. Turn Capital aims to find strategic investors within the first 18 months of an acquisition to realize some of its initial investment.

The firm’s limited partners include family offices, business operators, and venture capital GPs. They include Twitch co-founder Kevin Lin, Taiwan Mobile president Jamie Lin, and former AC Milan footballer Keisuke Honda, who has his own venture fund and earlier this year said he was eyeing Southeast Asian startups.

Turn Capital had been tracking Flash Coffee’s business since April, before its Taiwan operations closed down. The partners decided not to invest then, but when news of the Singapore liquidation emerged, they restarted discussions with management to evaluate the coffee chain’s other markets.

Turn Capital was attracted to Thailand’s rising consumer middle class and Flash Coffee’s brand value. The country’s cheaper rental market, relative to the Singapore and Taiwan markets, also makes it easier for operators to manage costs.