Getting Ready for Asia

ISSUE #59 – Hera Capital is a Singapore-based private equity firm and registered fund management company regulated by the Monetary Authority of Singapore. Hera Capital invests in fast-growing small and mid-cap  consumer/ retail, digital and media-related companies across South East Asia. We provide our portfolio companies with capital and a combination of strategic advice, hands-on business development services, as well as access to our extended network of partners.

Sguillaud

Although South East Asia is home to 600 million people that represent 8% of the world population, only 0.7% of French SMEs are involved in some form of business in the region.

In comparison, the US attracts around 18% of French SMEs. That’s 26 times South East Asia’s share for a country that has a little over half of the region’s population. Sure, at USD17 trillion, the US GDP dwarfs that of South East Asia.

Still, with an accumulated USD2.5 trillion in GDP and an expected 6% growth trajectory for 2016, South East Asia should start to look appealing enough for French SMEs looking for growth. Does this gap indicate of a lack of appetite? Or perhaps the difficulties in operating and expanding in South East Asia are just too big a hurdle for French medium-sized companies to consider entering this market?

Here’s the simple truth: South East Asia is not for all French SMEs. After 12 years based in Singapore and having helped multiple SMEs expand in the region, I can say that venturing in this part of the world should actually remain limited to certain companies; not all French SMEs are Asia-ready! Basically, even after product/market fit is validated or seems blaringly obvious, we see being Asia-ready coming down to two basic things: having the “right” CEO and being properly funded.

The hunt for talent and the complexity of the region require serious funding.

THE RIGHT CEO

The right CEO is an entrepreneurial leader who is genuinely eager to confront the challenges posed by Asian expansion and who understands that South East Asia is not one, but 11 different countries.

He or she is convinced that the key to success lies in recruiting and retaining talent, and that working for the subsidiary of a small French company is not on the dream list of most local talents! The Asia-ready French CEO respects cultural diversity, understands that there is no free lunch and that turning potential into revenue and profi ts will require hard work, patience, resilience and significant capital.

FUNDING

Adding a nice little red dot representing Singapore on the world map of a corporate website is “okay” marketing but it is not enough to really build a presence in the region. The hunt for talent and the complexity of the region require serious funding. French SMEs that are not financially strong enough or not ready or willing to raise more capital to expand here should think twice before venturing into South East Asia, as it will drain resources that would be better spent somewhere else.

French SMEs venturing into Asia need to have enough cash to afford to make wrong decisions, to not necessarily recruit the perfect staff the very first time… and enough cash to accelerate when teams, products offerings and partnerships are  built and hungry for expansion.

The good news for Asia-ready CEOs who are in search of funding is that companies like my own are ready to provide that cash. Not only does Hera Capital invest directly in South East Asia, but it also provides funding in Europe and France if the given capital is dedicated to accelerating the growth of a company in South East Asia. We invest US$1 to US$10 million per company. Hera Capital currently has two French companies in its portfolio: Reworld Media and Linkfluence. We are looking at deploying more capital to French companies this year as we are convinced that a number of superb French SMEs are now ripe for growth in South East Asia.

 

By Sébastien Guillaud, Co-Founder & Managing Partner, Hera Capital

Article published in the FOCUS Magazine “The Enterprising Spirit” – Issue #1 2016