Wealthy Asian families piling into tech start-ups

In Hong Kong, 35-year-old Matthew Tai has been shifting part of his family's fortune, built  by his father and uncles in real estate, into a string of digital start-ups.

Mr Tai has invested in crowd-funding platform FundHive, a producer of ultra-thin LCD screens called Organo-Circuit and recruitment website Freeboh.

About 15 per cent of his US$70 million (S$95 million) family office is in technology investments, compared with nothing two years ago.

"My family's traditional business was about development of land," Mr Tai said. "But that's history. The new world is in the cyber world."

The rising ranks of Asian millionaires have pushed assets managed by wealthy clans in the region to more than US$17 trillion, according to consultancy Capgemini.

A chunk of that cash is flowing into technology start-ups in the region and overseas as more digitally savvy heirs take control of family fortunes. Their hope is that these new investments will generate higher returns and modernise empires that are decades old.

The fresh flood of Asian money promises to inflate already lofty valuations for the most promising firms in the red-hot tech sector.

The US$93 billion SoftBank Vision Fund and state-owned Chinese entities are also on the prowl for new businesses, as are investors from around the world.

Amid the formidable competition, many Asian families are investing in start-ups at the earliest stages, a contrast with the more conventional approach of older generations, who focused on areas like real estate and manufacturing.

"Convincing the older generation to invest in tech often isn't an easy sell," said Singapore-based Mr Ozi Amanat, who raised US$183 million to help wealthy families invest in technology through his K2 Global venture capital fund.

"Convincing the young is like preaching to the converted. They know that no line of business can survive today without online customer relationships."

In Malaysia, Ms Jo Jo Kong's father became one of the country's richest men by setting up a funeral services business in the 1980s and then expanding into real estate. Now the 26-year-old is venturing into technology.

Ms Kong, who is a director of the family's real estate development company, in August became a partner in RHL Ventures, an investment firm founded by children of other prominent Malaysian business families. RHL's investments include Los Angeles-based Sidestep, which has an app that allows fans to buy concert memorabilia online, and San Francisco-based GameOn, a sports conversation app.

"We need to understand the tech space," Ms Kong said. "We need to know how to utilise it to our advantage to keep it relevant, whether it's real estate or funeral services."

Her family has begun adopting technology in its business, using drones to survey oil palm plantations, instead of helicopters.

Asian families are looking further afield after an eight-year rally in the United States pushed stocks to new highs, while the MSCI Asia Pacific Index has more than doubled from its 2009 lows.

Meanwhile, ultra-low yields suggest there's little room for bond price gains. Even within technology, Asian investors are hunting for untapped areas.

For instance, in terms of valuations, "there are still opportunities to have in the start-up space at reasonable prices in South-east Asia," said Mr Chua Kee Lock, chief executive officer of Vertex Venture Holdings, an arm of investment firm Temasek Holdings.

Still, putting money into early-stage businesses is a notoriously dicey proposition because only a small fraction will succeed. Also, newcomers can boost already hefty valuations in start-ups where investors are expecting outsized returns, said Mr Han Kim, a general partner at venture capital firm Altos Ventures.

"Whenever there's more money going in for limited opportunities, prices will go up and people who are investing in high prices will probably get hurt," he said.

Those start-ups that do succeed, surge in valuation, making it vital to pick a potential winner early.

"To pick the right investments, you need a lot of expertise on board," Vertex's Mr Chua said. "It's not about knowing a lot of people. You need to know the right people."

In Singapore, Mr Satveer Singh Thakral is pushing his 112-year-old family business into tech. Started in Thailand as a textile trading operation in 1905, the business is now a conglomerate spanning retail, real estate, logistics and hospitality.

Mr Thakral started the Singapore Angel Network with his father through which the family has invested in about 100 tech start-ups.

"The first generation usually starts investing in what is considered safer asset classes - bonds, equities, real estate, gold," Mr Thakral said. "Later generations start looking for returns that complement the returns from safer assets."

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A version of this article appeared in the print edition of The Straits Times on October 19, 2017, with the headline 'Wealthy Asian families piling into tech start-ups'. Print Edition | Subscribe