Asian Venture Capital Journal, April 2001, FOCUS: 2001 AVF/Silicon Valley

Opportunity in adversity

Strengthening the Asia - Silicon Valley VC bridge

Tech markets are in meltdown worldwide. But despite the pounding taken by Internet-related stocks over recent months, and a welter of battered portfolios, some VCs are thriving. There remain a number of well capitalized funds in the market and profitable options keep opening up in spaces such as optical networking. Synergies between Asia and Silicon Valley continue to develop. The 2001 Asian Venture Forum/Silicon Valley, scheduled for next month, will examine the pitfalls and potential in the post tech wreck universe. AVCJ's David Porter and Brian McLeod interview selected panelists on the key issues they want to see raised at the conference.

Q: So how do things look from your perspective now?

A: The downturn has simply multiplied the investment opportunities from my point of view. I am a venture capitalist in the sense that I am in the value creation and building business; and building it is by nature a long-term, hands-on process.

Q: Where do you see some of the best of these opportunities?

A: In a lot of areas. Valuations in the technology sector in the public markets are off 80-90%. And valuations in private companies are likewise sharply down. Sector by sector, we see promise in Internet infrastructure software, vertical web-based applications, optical components, communication ICs, life sciences and wireless.

More broadly, we've also noted that a lot of VCs are so busy fixing their portfolios that they haven't got the time to really look for new deals. Similarly, now is a very good time to recruit top talent from established companies.

Q: What's your current strategy?

A: Today going forward, we've made early stage technology investments in life sciences, communications, Internet infrastructure software, implementation services, electronics and semiconductors our exclusive focus. We take the same basic approach to our US and Asian investments. We invest in best-of-breed in all six sectors across a global platform.

Q: What of, what might be called 'special factors' as regards Asian investments?

A: Well, political and currency risks are simply extras investors have to get used to when investing in Asia. And a lack of stock market exits and experienced executives are and will continue to be major factors facing VCs in this region.

Q: What's your investment style?

A: Most of my partners have operating experience. And in most, in fact all, of our investments we have at least one board seat. We get involved in all aspects of building our investee companies, including recruitment, product planning and strategic direction all the way out to marketing and sales plans. I don't see any need to change this approach.

Q: Your focus on life science opportunities is interesting...

A: We've invested in a few life science deals to date, such as Asia Renal Care and Elitra. And we've decided to expand in this area. We see life sciences as counter-cyclical to IT. As well, opportunities in the life sciences area will expand as the population ages. Initially, we'll focus on healthcare services and medical product manufacturing. But longer term I think there will be great research coming out of China/Hong Kong, Taiwan, Singapore and Japan.

Q: How do you see returns at this stage?

A: I manage all of our funds with the expectation of delivering a three-to-five times cash-on-cash return.