More than half of the world’s 7-billion-strong population sits directly above Australia on the map. Although we’re uniquely positioned to tap into the Asian markets, most Australian startups head straight to the US to pursue growth opportunities. Perhaps the US is more comfortable from a cultural perspective, but the potential in Asia shouldn’t go unrecognised.
Alex Turnbull, son of Federal Minister for Communications Malcolm Turnbull, may be setting an example of how Australians can work with their Asian counterparts. The Sydney Morning Herald reported today that Alex Turnbull is planning to launch a Singapore-based hedge fund, Keshik Capital, which will be “focused on Asia with the flexibility to invest globally”.
According to Turnbull’s LinkedIn profile, he became Keshik Capital’s Chief Investment Officer this month, so it doesn’t seem all that secret at the moment. That said, Turnbull hasn’t spoken publicly about his association with Keshik Capital.
For the past four and a half years, Turnbull held the title of Executive Director of Goldman Sachs Group’s special situations group. Having worked at one of the world’s largest investment banking firms, Turnbull would certainly be bringing a wealth of knowledge to Keshik Capital.
The ‘rise of the hedge fund startup’ has been discussed in a number of technology and finance publications – including TechCrunch, Forbes and CNN Money. The news of San Francisco-based hedge fund Coatue Management being the backer behind Snapchat’s $50 million Series C round in December 2013, spurred a discussion around the future of investing in startups. It is clear that Coatue Management has a history in investing in tech companies; they participated in online storage and collaboration company Box’s $150 million fundraising round early 2013.
Though they prefer the liquidity of public markets, plenty of examples suggest that hedge funds are increasingly placing their bets on late-stage tech startups. According to the Wall Street Journal, online survey company Survey Monkey tapped hedge funder, Chase Coleman from Tiger Global Management, during its $800 million funding round in March 2013. This eventuated in over $400 million in equity investment.
In November 2012, The Next Web reported that online marketing software firm Hubspot raised $30 million from hedge fund Altimeter Capital and other institutional investors. Note-taking and storage app company Evernote raised $85 million towards the end of 2012 from AGC Equity Partners/m8 Capital and Valiant Capital Management.
In an article published on Forbes, investor and founder of OurCrowd Zack Miller, writes that these investments have less to do with the changing nature of hedge funds and more to do with the changing nature of startup investments.
“The face of startup investing is changing. It’s becoming more transparent and open. The era of clubby deals – of some old guys sitting in a well-upholstered living room smoking cigars and drinking brandy out of snifter glasses – is quickly fading away,” Miller writes in the article, Snapchat, Hedge Funds, and the Future of Investing in Startups.
He expands further, crediting the increased transparency to sites like AngelList and his own firm OurCrowd: “generalized dealflow is becoming commoditized”.
“If you plug into the right social networks, an investor can get access to many of the same deals being poured over by institutional investors. It’s almost like an investor can become an armchair venture capitalist: take equity crowdfunding with some strategic connecting on LinkedIn, and you’re good to go with at least some semblance of dealflow,” Miller writes.
He makes another point about why the nature of startup investments is changing. There is less risk for investors today because people are already validating their ideas on crowdfunding platforms like Kickstarter. Miller says he’s hearing of “more venture capitalists creating term sheets dependent on successful crowdfunding campaigns”.
Although it isn’t being discussed much in Australia, there are plenty of opportunities for late-stage startups to tap into hedge funds, and for hedge funds to make side pocket investments. It’s very interesting that Turnbull is staying atop the hedge fund trend and leveraging promising markets.
According to SMH, Keshik Capital will be at least the third hedge fund startup that is pursuing Asian opportunities in recent years and may launch as early as January next year.