Lomotif, the $125m exit that Singapore’s VCs missed?

Paul Yang has tried his hands at many things, but he never thought he would one day sit at the helm of a social media company, much less one that’s going up against a billion-dollar company like ByteDance.

Last week, Yang, the CEO and founder of Singapore-based short-video sharing app Lomotif, sold 80% of the company to Zash Global Media and Entertainment Corporation, the US-based entertainment company co-founded by former MoviePass chairman Ted Farnsworth, early Musical.ly (the app that became TikTok) and investor Jaeson Ma, and business acceleration specialist Vincent Butta.

The deal is worth a reported US$125 million, according to Bloomberg.

A source familiar with the acquisition tells Tech in Asia that 80% of the company was cashed out for US$100 million. In an interview, Zash’s Farnsworth declined to comment on the value of the acquisition, but tells us that the deal was an all-cash one. The transaction, which is advised by law firms DLA Piper and Cooley, is expected to close in the next 60 to 90 days.

While many herald Lomotif’s exit as a win for Singapore startups, the deal has also raised eyebrows.

Farnsworth is somewhat an enigma who has run dozens of businesses, from a digital crime-mapping platform to an energy drink venture. Over the years, the financier had also been hit with a string of lawsuits, from breaches of contracts stemming from unpaid bills or settlements to an alleged “unlawful misappropriation” of funds into his business ventures, The Miami Herald reported in 2018.

Farnsworth tells Tech in Asia that “there is no existing lawsuit.”

Yang declines to comment on the financier’s past proceedings, adding that he believes Farnsworth, whom he describes as a “prolific businessman,” and Zash’s other co-founders “have a credible list of skills, networks, and achievements” to achieve Lomotif’s mission.

Another reason for the skepticism over the deal is that only a few in Singapore – a market where TikTok is widely popular – have heard of Lomotif, despite its local origins.

The lukewarm reception in the city-state has persisted since Lomotif’s early days. With the exception of a handful of local investors, including prominent local investor Koh Boon Hwee’s Credence Partners and TNF Ventures, most of its backers from series A on have been from abroad, from markets such as China where “there were people wanting to give us capital,” Yang says.

Credence, the firm’s first investor, did so despite not being familiar with the space – an exception rather than the norm, Yang says. Investing in the startup had required a “leap of faith” that only a few investors in Singapore were willing to take.

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“We probably underpaid” for Lomotif

The future of Lomotif

Why Yang hardly sought money in Singapore