Recession Run: Valuation cuts don’t affect Monk’s Hill Ventures’ plans

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.

Amid the macroeconomic turmoil, staying the course can be challenging for both startups and VCs.

Monk’s Hill Ventures, however, hasn’t slowed down – nor ramped up – its bets. A strong conviction in its thesis and a “steady-paced” approach have kept the firm’s investments going strong, says managing partner Lim Kuo-Yi.

Lim offers the same advice to founders: be sharp and have a clearly defined value proposition. To dominate their sectors, focus is non-negotiable.

Monk’s Hill Ventures managing partner Lim Kuo-Yi / Photo Credit: Monk’s Hill Ventures

Here are more insights from Lim on which sectors he believes will thrive amid the macroeconomic headwinds and how founders can overcome the challenges and leverage the opportunities that come with a market downturn.

Which sectors will be least affected by the current economic headwinds in Southeast Asia?

Lim: Travel is seeing growth and quick recovery since the global reopening, especially in Southeast Asia, where tourism is such a big part of the gross domestic product. In addition, sectors that cater to fundamental needs won’t go away.

Ecommerce will still be in the picture, given that current penetration is relatively low. To be sure, we will see lower discretionary spending, and things may not be as fast as they used to be, but the shift to online is inevitable. People are driven to get a wider variety of better deals more conveniently online.

On the other hand, products which offer delayed or less relevant utility may see difficult times. Software-as-a-service products that fail to grow revenue or reduce costs for users, for example, may fall out of favor as buyers start asking harder questions about value propositions.

Will Monk’s Hill Ventures increase or decrease its investments during this period?

I don’t think our investment philosophy will change during this time.

We have stayed disciplined throughout, during the high and the low cycles. We’ve just raised a new fund and have dry powder to deploy, but we’ve always maintained our high conviction, steady-paced approach toward building a concentrated portfolio of about 15 to 20 companies per fund.

Where valuations are concerned, we’re still coming in at levels that we feel are sustainable for companies and founders.