Southeast Asia through a Global Lens
Conversation with Ishan Sinha of Point72 Ventures
Southeast Asia’s internet economy hit $100 billion in 2019, more than tripling in size since 2015. This unprecedented growth has put the region on the tech innovation map in the last few years. Most recently Facebook and PayPal invested in the regional ride hailing giant Gojek, only solidifying Southeast Asia’s position as a tech hub, and further driving interest from investors in the US towards the region.
But one of the leading global funds that was looking at this region even before the Gojek deal is Point72 Ventures. Point72 Ventures is the dedicated early stage venture capital arm of Point72 Asset Management run by Steve Cohen. The fund entered the region last year with an investment in Sprout (HR tech startup) and most recently invested in TONIK (digital banking startup), both in the Philippines.
I had the opportunity to speak to Ishan Sinha who leads the Ex-US investments at Point72 Ventures. Ishan joined the fund when the team consisted of three people and has scaled it to thirty people now. He has invested in 20+ companies across the US, South America, Middle East and Southeast Asia.
So what’s been your path to Point72 Ventures?
My dad is a serial entrepreneur, so I was born into a family that always leaned towards taking risks. We moved around a lot because of my dad’s work, and I spent my early years between Japan, Germany, the Philippines and Vietnam before moving to the US. I went to Yale and worked at Goldman Sachs right after in a group that focused on derivatives structuring. After Goldman, I was working at Point72 as an equity analyst when Steve had the idea to set up a venture fund. Coming from an entrepreneurial family, I was immediately drawn to the opportunity, so I raised my hand when they were looking to set up the initial venture team.
In many ways, I kind of stumbled into this role without really knowing what I was getting myself into. Coming from the public markets, where decisions are based on crunching numbers, I had to learn the qualitative things that are very important in this world — such as truly understanding the pros and cons of a startup’s founding team.
What is Point72 Ventures’ core focus?
Stage-wise, we focus on companies between Seed and Series B. We look at a few different sectors as a team, though my particular focus is financial services.
And how did you first start looking at Southeast Asia?
In the last couple of years I’ve spent most of my time in Latin America, where we have portfolio companies across Mexico, Argentina and Brazil. I got to know that particular ecosystem really well. About a year ago, I started to think about the next frontier that I wanted to explore. I saw some interesting dynamics play out in Southeast Asia that were similar to what I’d seen in my initial research in Latin America when I first started looking at it. Southeast Asia has increasing mobile penetration and a very engaged base of young people that are spending a lot of time with technology. Specifically in financial services, you’re seeing similar bank penetration rates and a similar stagnant culture within the incumbent banking system.
Culturally there are certainly some differences, but there are a lot of parallels as well. Latin America has one really massive country, which is Brazil. Southeast Asia also has one really massive country, Indonesia. These two big countries are culturally very distinct from the other countries in their respective regions. While Brazil is Portuguese-speaking, Indonesia is largely Muslim making the two countries (and their ecosystems) different from the countries surrounding them. Over the course of a couple of trips to Southeast Asia, I immersed myself in the ecosystem and was very inspired by what I learned. This interest ultimately led to our two investments in the region.
What was it about your first investment in the region (Sprout) that made it such an exciting opportunity for you?
We’re very thematic in our approach to investing. When we were initially designing the fund at its inception, the approach we decided to take was to do a lot of research and think very critically about the world as well as, the themes that we see emerging globally. There are obviously varying demographics, regulations, and cultures in the different ecosystems but in general you start to see similarities when you look close enough. One of the themes that we became excited about was low-touch, low-tech HR.
If you think about SMEs anywhere in the world, they have to manage processes like time-in, time-out, employee attendance, vacation time, and payroll. For many SMEs, all of this is managed on pen and paper or via Excel. In all honesty, this was something that we heard was a huge pain point as we talked to small business owners in every geography that we travelled to, not just in Southeast Asia.
There’s a second layer to this thesis that was particularly interesting to us as fintech investors. With HR tech you have access to people’s payroll and if you know how much someone earns as well as the schedule of when they need cash, there is an opportunity to build a lending product off the back of that data. Similarly, when you begin employment at a company you typically sign up for some kind of benefits or retirement account, which creates another opportunity for financial services to be built or sold. There are many more examples I could think of on why HR is an incredible inroad into financial services distribution. And so, upon doing all this thematic research, we sought the best HR tech companies that we could find in different geographies. Over the years, we’ve invested in companies in Australia and the UAE that reflect this thesis. Through this thematic work, we heard about a company in the Philippines that fit what we were looking for — we got the intro to Sprout, and the rest is history.
What are some important value-adds that Point72 Ventures brings to its international portfolio companies, compared to what regional investors bring?
What we bring is a very global lens. For one, we see companies across the world pursuing solutions to similar problems (like the SME HR theme I described earlier). We also have the benefit of being in the US, which in most cases is a little ahead in terms of business model innovation relative to countries in, say, Latin America or Southeast Asia. We’ve studied companies that have succeeded — and failed — and can pass on those learnings to our international portfolio companies.
For example, we were a seed investor in a company called Ualá, which is the largest digital bank in Spanish-speaking Latin America. Ualá started in Argentina and scaled across Colombia and Mexico, and just announced a large financing round led by SoftBank and Tencent. We saw them scale incredibly successfully and learned lessons around customer growth and product/market fit that we can apply to TONIK, a digital bank based in the Philippines whose round we just co-led with Sequoia. That’s the unique perspective that only a truly global investor can bring in.
The other big value-add that we bring to our portfolio are our team’s operating partners. They have different experiences throughout their careers that we think could be particularly additive to our companies in areas like business development, sales, go-to market strategy and tech product. For example, we recently hired Dave Matter who was the Chief Product Officer at Marqeta, a large payments infrastructure company here in the U.S. and one of the examples of a truly successful B2B fintech business. Dave scaled their architecture and helped build out the product and technology teams. He brings a very unique lens on how to really scale an organization’s technology roadmap. That’s an asset that any CTO would be excited to have advising them.
Currently, how much of your focus is on Southeast Asia in proportion to other geographies and what are some trends that you’re excited about or companies you’re looking at in the region?
I balance my time between all the geographies I mentioned, but a pretty significant amount of my time is spent on Asia nowadays. I’m meeting a lot of companies there and getting to know the local investor ecosystem. And even though our first two investments in the region have been in the Philippines, that was not necessarily by design. I spent some years of my life in the Philippines so I have an emotional connection to the country but I am very closely monitoring India and other Southeast Asian countries like Singapore, Indonesia, Vietnam.
There are a number of trends generally across emerging markets that you’re seeing — in particular, I’m excited about the accelerated digital transformation of financial services. Across the board, every fintech investor could see the writing on the wall that the physical branch-focused business model that banks had was going to die at some point. We thought the move to digital banking would take years but with COVID-19, it’s been accelerated to months. It’s a unique crisis where even the common person understands what’s going on and understands the danger of using cash. Even in heavily cash-dependent economies, this has caused a rapid shift to cashless transactions.
What I’m really interested in is different ways to play that shift. And so, a digital bank like TONIK is one way. But there are other ways, too! For example, one could look for infrastructure-level solutions that allow non-financial companies to quickly integrate into the financial services ecosystem. It’s deeply complex because these technologies have a lot of moving parts with a customer base that’s beholden to a complicated legacy value chain. It’s a lot to learn but I’m excited to be a part of this digital revolution and back founders looking to solve these problems.
