In Vietnam the public markets are weak, inflation is high, GDP growth is slowing. How has that bleak macro picture impacted on IDG Ventures' exits?
It's pretty much trade sales and private transactions for now. We’ve had nine exits [out of 40 investments]. In terms of multiples, we had one deal that was about 2x, and we had one deal that was about 55x return – that was the VNG Corporation [exit to Tencent and Goldman Sachs]. And yes, the capital markets, like China’s in the late 90s, are still relatively immature and shallow. But what’s important from an exit perspective is that we are a bit more specialised in terms of our internet, media and tech portfolio. So there will always be interest in these areas, particularly from other Asian and East Asian countries. Whether it’s companies like Rakuten in ecommerce from Japan or Tencent from China or NHN from Korea, there are obviously companies from abroad that are going to have interest in the consumer technology market here. And those are what I’d call `naturally set up exits' for us.
The other activity that’s occurring now is that a lot of the local large companies – whether it’s the telecom companies or even some of our ex-portfolio companies like VNG Corporation – are interested in acquiring big aspects of our portfolio, simply because they’re trying to build more digital services.
What questions are your LPs abroad asking your firm about investments, and how do you reassure them?
They ask, for sure, about the effect of the general economy. That’s still one of the largest factors in terms of outcomes of our investments. The big question really is exits. People want to see a more robust capital market and we’re very frank. We say, `Yes, that’s probably one of the biggest uncertainties when you come into Vietnam.' But if you go into other developing markets, you probably face something similar. In Southeast Asia, there hasn’t really been a local domestic stock market that’s truly robust yet. That’s still the biggest risk because you’re investing potentially into a cul-de-sac if you don’t believe in the exits. But if you believe in the trajectory of Vietnam, then there is probably no better time to enter than now. About half our portfolio investments were within the last 3 ½ years.
There's a perception that Vietnam has a relatively high level of corruption. As a private equity firm, how do you address questions along those lines?
It actually helps that we are an American firm – people understand what that means, whether it’s formally in terms of [the Foreign Corrupt Practices Act], but also just in terms of our business practices. We’re not blind, and I’m not here to tell you that there aren’t certain aspects and levels of corruption that occur here that are frankly detrimental to business in the long term.
But we’re focused on sectors where there’s a lot of value creation going on instead of concessions that are trying to be won. We’re not trying to get banking licenses or insurance licenses or the right to mine some area in Vietnam. What we’re trying to do is build the next generation of media companies in Vietnam. And because of that, we don’t have to deal with situations [more prone to corruption]. The perception exists because there’s some truth to it. But in my 12 plus years of being in Vietnam, I’ve seen it improve significantly.