Investor’s network is crucial in Asia

Investor’s network is crucial in Asia

Text Matti Remes    Photo Tomi Parkkonen

In person

Johanna Lindroos, a partner at Dasos Capital, has a front-row seat in Singapore to South-east Asia’s venture capital and private equity market. The work requires a close presence and active networking.

In person

Johanna Lindroos, a partner at Dasos Capital, has a front-row seat in Singapore to South-east Asia’s venture capital and private equity market. The work requires a close presence and active networking.

With a long career in the private equity sector, Johanna Lindroos has been stationed in Singapore since 2011. As a partner at Dasos Capital, which specialises in investment advice for timberland funds, she is responsible for investments in South-east Asian plantations.

According to Lindroos, a private equity investor’s work in Asia is similar to that in Finland. Workdays are spent on developing portfolio companies and finding new investment targets.

“The biggest difference can be seen in the dynamics of the economy. The profit expectations of investments on the Asian growth markets are based primarily on business growth. In the more mature European markets, the aim is to increase the value of portfolio companies by other means, for example through M&As or by optimising financial structures,” Lindroos compares.

Creating a network takes time

Despite the slight slowdown in China’s economic growth, South-east Asia’s growth expectations remain high.

“Investors are looking for potential growth companies that are able to capitalise on the megatrends that are underway. Among them, urbanisation and the strengthening purchasing power of the growing middle class.”

Lindroos notes that both in Finland and Asia investors find the best companies through their networks.

“Creating networks in Asia takes time and requires a close physical presence. And building personal relationships and trust is even more important than in Finland.”

Markets in their infancy

Asia’s venture capital and private equity markets are still young, compared to Europe’s and North America’s. The funds’ performance histories are short, which makes it more difficult to set profit targets and assess risks.

“There are many GP’s in South-east Asia that have raised only their very first fund. As such, there is always a bigger investment risk than when an investor is able to show past performance figures of previous funds.”

A special characteristic of the South-east Asian markets is that public funds in the region play a big role in venture capital and private equity.

“For example, the Republic of Singapore invests also in foreign companies. However, the investment might be conditional on the company bringing jobs and, e.g., shifting important functions, like their head office or product development, to Singapore.”

According to Lindroos, there are also big international mega funds active in South-east Asia.

“Local wealthy families are also major investors, and their way of decision making can seem a bit exotic to a Finnish investor.”

Singapore of interest to growth companies

Companies that own forests and are committed to environmentally and socially responsible operations are what Johanna Lindroos is looking for. In South-East Asia, Dasos Capital has invested in a tree plantation in Sabah, Malaysia.

She also looks for potential companies in, e.g., Indonesia, Thailand, Vietnam and Laos.

“Singapore is an excellent location for an investor operating in South-east Asia. It is a functional and safe city-state with good international flight connections. Plus, English is the country’s official language.”

Finland’s Ministry of Foreign Affairs estimates that there are more than 70 Finnish companies or companies with Finnish roots operating in Singapore.

“In addition to big companies, also Finnish growth companies have been establishing themselves in Singapore in recent years. Along with IT companies, there are also companies developing technology for the health and wellness industry, for example.”

In September, Slush  had its first event in Singapore and attracted 215 growth companies, 150 investors, and more than 2,000 other visitors.

Making Singapore a base for international companies

Singapore is an advanced and business-friendly city-state, which Johanna Lindroos believes is a very suitable location for a company interested in South-east Asian markets.

  • It is easy for foreign companies to become established in Singapore. The bureaucracy is minimal and there is zero tolerance for corruption.
  • Local financing is also available. However, it is often conditional on establishing the company’s head office or other significant function in Singapore.
  • Being active, a close presence, and networking are crucial for success.

Johanna Lindroos

  • Partner at Dasos Capital since 2010. Dasos is a Finnish company specialising in investment advice in timberland funds as well as in fund management.
  • Has been responsible for Dasos Capital’s timberland investment management and development in South-east Asia since 2011.
  • Member of FII’s Board of Directors since 2014.
  • Education: M.Sc. Econ.
  • Previous employment: CapMan 1999–2004 and 2005–2009, Sentera 2004–2005.
  • Hobbies: Yoga.