Series A specialists are rising in Southeast Asia. NSI Ventures is one of them

L-R: Shane Chesson, Hian Goh

Hian Goh and Shane Chesson, founding partners at Singapore-based NSI Ventures, are creatures of two worlds. Sometimes they’ll work out of startup accelerator JFDI wearing T-shirts and jeans, flanked by Star Wars memorabilia, frog plushies, and fresh-faced entrepreneurs. Other times – as was the case when I met them – they’ll sit in a board room overlooking Singapore’s central business district.

The partners are in some ways polar opposites too. Goh was down in the trenches as an entrepreneur, starting a call center in China and then going into broadcast with the Asian Food Channel. He ran the latter for eight years and sold it for US$66 million in an all-cash deal. Meanwhile, Chesson was an associate at Bain and then an investment banker at Merrill Lynch and Citigroup.

What brought them together to start NSI Ventures was a singular vision: to fix the so-called series A void in Southeast Asia and professionalize venture capital. NSI is the venture capital arm of private equity firm Northstar Group that industry sources say is over US$50 million in size.

“A few years ago there couldn’t be series A and series B specialists in Southeast Asia. There just wasn’t the quality and quantity of companies coming through,” says Chesson.

“But Singapore’s ecosystem has successfully fostered those, beginning three, four, five years ago. And now I think people like us who prefer making post-seed investments are seeing high-quality companies, great management teams, very diverse ideas focusing on broad types of market opportunities, and seeing real traction in the markets. This is the change.”

Chesson attributes this to shifting consumer behavior in Southeast Asia. People and businesses are starting to use internet products, creating a customer base that was non-existent a few years ago. Startups are benefiting from this mass migration from pen-and-paper to bits and bytes.

More money than ever

Another tailwind pushing the series A boulder was the surge of money in what Chesson calls the “early stage universe,” which created a batch of startups ready for series A-sized rounds.

The Singapore government has played a key role with its investment-friendly tax schemes. It also launched programs like iJAM and TIS that are designed to de-risk seed and early stage investments. While Goh says that tax dollars paved the way, it created a continuous stream of private money going into startups, coming from sources as diverse as JFDI, Crystal Horse, East Ventures, and 500 Startups.

The money is moving upstream though. Philippine fund Kickstart Ventures got an extra US$50 million to back startups that are more mature than those it previously backed. Not to be outdone, Singapore fund Hatcher wants to put in US$7.5 million per deal into fintech and B2B companies. Even Singapore’s National Research Foundation (NRF is responsible for TIS) is shifting its focus by launching ESVF to co-invest with venture capitalists in series A deals.

But a drought isn’t exactly imminent for seed startups. Dave McClure and gang launched the US$10 million 500 TukTuks fund in Thailand, Y Combinator is looking more closely at Asia, and Startupbootcamp will start a fintech accelerator in Singapore (Disclosure: East Ventures and Y Combinator are investors in Tech in Asia. See our ethics page for more info).

So the soil is more fertile than ever north of seed funding. “The NRF did very well to seed the ground. The rest of it was just a groundswell. We started collating companies, we got to about 450, this was almost two years ago. And we figured that about 75 percent of these companies will be in the sweet spot for series A in the next two to three years,” says Goh.

He adds that the field has exceeded his expectations, as the industry saw huge rounds from Garena, Tokopedia, and GrabTaxi. This is just the beginning; he expects momentum to continue due to China’s strong valuations, India’s large check sizes as a prerequisite to success, and the aggressiveness of Japanese investors.