Tech can enable social impact, especially with capital funding. Joan Yao, VP of Investment of Kickstart Ventures, the corporate VC affiliated to Philippines' Globe Telecom, brought her story alive by sharing how tech enables social impact and her experience as an impact investor at Women in Venture XIII fireside chats with the host and curator of the event, Elisa Chiu, Anchor Taiwan founder, and CEO.
Yao was born and grew up in the Philippines. She got a scholarship to go to Ateneo de Manila University, which has totally changed the trajectory of her life. And from then on, she felt her career has been a journey of passing that luck and opening doors and opportunities for others.
Below are the excerpts of her insights on impact investments, Southeast Asia startups, and the strategic investment interests of Kickstart Ventures:
Q: For someone who is not familiar with this space, how would you define "impact investing"?
A: To put it very succinctly, impact investing to me is "investing with a mission to achieve positive social impact." When you see a problem in the world, for example, unequal access to healthcare, education, or housing, you try to deploy capital in companies to alleviate or solve those problems.
Investors and companies sit along a spectrum of being "financial (profit) first" or "impact first." When I worked at LGT Venture Philanthropy, an impact-investment institution, we were looking for companies that are improving the quality of life of less advantageous people. And we looked for opportunities in Africa, India, Latin America, Southeast Asia where I was based, and China, in the space of education, healthcare, agriculture, ICT, and a few others.
Traditional philanthropy does not expect to get money back, but philanthropy venture capitalists and some impact investors would be concessionary, which means, they expect some of their investments in the form of grants, or as working capital loans, and do not expect to get a huge return. Concessionary investors are likely to bridge the gap for startups before their business model or proof of concept attracts market-oriented investors to fund.
Q: You mentioned a story in our earlier conversation that impressed me, and you said, "not every business is built to scale." Why not every business should be chasing venture-backed capital?
A: That is something I have always been passionate about. I worked at LGT Venture Philanthropy, where people really want to make a change in people's lives. However, in the past, impact investors sometimes make mistakes by giving capital to some small and beautiful enterprises to try to get the scale-up in a big way. But not every business is built to do that. For instance, there is a social enterprise in the Philippines, which is called "InvestEd." They provide loans to college students in their third or fourth year but have difficulties paying for their tuition or buy a laptop, probably because their parents have lost their jobs. When the students completed their studies, they can pay their loans back when they graduated. To date, they have already assisted 1,000 students so far to graduate from college, the two founders know every student they helped, and it is a wonderful business.
But if you were to build a tech-enabled lending company, you would take a very different approach. You would probably raise $10 million and lend to 10,000 students. You would expect some percentage of those 10,000 students wouldn't pay you back. But that is alright, because that feeds into your algorithm, and will help you scale and lend more later. But in the business of InvestEd, if one of those 1,000 students didn't repay, they probably would call them up and ask, "Hey what's up? How can we help?" Those are two different approaches addressing the same problem. Therefore, the expectations would be different for the capitals which invest with different approaches.
Q: What is your view in terms of the current investing landscape in Southeast Asia? Impact investment has been in discussions a lot, but the world is changing slower than expected. What is your evolution from there till now?
A: Back in 2010, 2012, you would probably think impact investment would take over the world. What has happened was the convergence with the tech space. Technology has been a great enabler on the impact side. Also, because of an emerging middle class in the developing regions, we have seen the entrance of market-based capital. Impact investment gets the business model up to a point that market-based capital is ready to fund them. Some people might think impact investment wasn't successful, but perhaps it is because we take a too short-term view on that. But maybe what that impact investment enabled was the entrance of market-based capital.
It is a positive development that market-based capital's entry is to solve some of the social problems that social capital or impact capital is trying to solve.
I would also like to share how tech has enabled impact. In 2012, I was in Indonesia for an accelerator program. My friend told me that there is a social enterprise trying to help Ojek drivers (independent motorcycle drivers for hire) in Indonesia by building a digital platform to book jobs. That social enterprise my friend was talking about was Gojek. They raised funds from market-based capital and now is a unicorn many times over. But they started as a social enterprise.
There were social problems many social entrepreneurs were trying to solve back in 2009-2012, such as access to the market, access to education, and access to healthcare. Before technology, mobile phones, and ubiquitous startup activities arrived, building a social enterprise is a painstaking effort. You had to go down to the communities, to take their names, but now is like, everybody signs up for the app! So there has been some blurring of impact and market-based investment to some extent.
Q: After a brief stint in the government, you took your learning from LGT and joined Kickstart Ventures at their second fund. What made you decide to join Kickstart? Would you like to give a brief introduction about Kickstart Ventures to people who are not familiar with it?
A: I thought I was going back to school after quitting the government job. But one day I got a call from Minette Navarrette, our president at Kickstart Ventures. She asked if it is ok to drop by my house and have a chat. She came one day and asked if I could come to help for a while? She said, "We just raised our second fund, and we need extra manpower to screen the investments, etc." Then, I said sure. I didn't have a venture background, so she was also taking a chance on me. I started in March 2016, and have been "helping out" ever since.
Kickstart Ventures is a corporate venture capital firm affiliated with Globe Telecom, a leading telco in the Philippines. We started in 2012, to "kickstart" the Philippines startup ecosystem. We started by investing in early-stage startups in the country because, at the time, we did not have a mature startup ecosystem. So, our investment was in the company, but also as tuition for the founders themselves to learn how to build up a company. Then in 2015, we pivoted and expanded our mandate to do more corporate venture capital, started deploying larger cheques into mature companies and also in companies abroad. We have investments across Southeast Asia, the US, Israel, and Canada.
In 2020, the mother company of Globe Telecom, Ayala Corporation, saw what we have done at Kickstart and Globe, and tapped us to manage Ayala Corporate Venture Initiative, which is called "the ACTIVE Fund." So today we manage US$180 million ACTIVE Fund, in addition to roughly $60 million in capital from Globe, a total of close to $250 million to deploy into companies that show a future we want to create for the Philippines. We try to seek the platform of resources of the Ayala Group, to help the startups enter a market, reach consumers, and improve the quality of life in the long run.
Q: The Filipino market has become very B2C driven. Do you think the domestic market is big for the startups in your portfolio? Or do they need to be a regional player? Ayala Group has very diversified businesses including real estate, banking, telco, consumer, energy, etc. When you do investments, do you also do deals with deep-tech ones?
A: Statistics from the Google-Temasek eConomy SEA Study show that there are 400 million Internet users out of the population of 583 million across Southeast Asia. Now with $100 billion in gross merchandise value (GMV), it is expected to reach $300 billion in 2025. There are 108 million people in the Philippines. We are the second-most populous country in ASEAN, after Indonesia. As more and more digital consumers come online, the views on the Philippines market have changed significantly since two years ago. It is now big enough to sustain a company that is worth hundreds of millions or even billions of dollars on just the Philippine market alone.
It is super exciting for me to learn, this first half of 2021, three of our portfolio companies -- Kumu, Great Deals, and Growsari raised series B rounds all at the same time. It was the first time we had 3 companies raised series B rounds all at the same time. The Philippines is not a very hectic venture market. So apparently there is a big enough opportunity.
The data from the Google-Temasek study shows because of COVID, 36% of consumers in Southeast Asia used digital services for the first time, among which 94% will stay. I think it is a big enough opportunity.
On your other question for Ayala Group, certain content, e-commerce, logistics, fintech, are areas we are keen to invest in. We are also looking for technologies that support and enhance the other businesses of the group. For example, we have a growing healthcare platform called ACHealth, which has a network of clinics, pharmacies, hospitals, and the telehealth layer we are designing on top of that. Heath-tech that makes healthcare more affordable and accessible, such as portable X-ray machines, that bring healthcare closer to the last mile, is super interesting to us. We have AC Industrial, which produces semiconductors for automotive. So we are keen to pursue opportunities in that space, too. For automotive, we are looking for ADAS or autonomous driving solutions. We have the goal of becoming the largest renewable energy producer in Southeast Asia through AC Energy. And towards that, it would be great to find more solutions in energy storage. We definitely would love to speak to anyone here who are looking at those spaces. We would love to co-invest.
(Editor's note: DIGITIMES is a media partner for Anchor Taiwan's Women in Venture Roundtable, a network of 100+ female investors featuring world-class guest speakers. A powerful conduit to connect the world with Asia, Anchor Taiwan works with corporates, startups, and investors with ecosystem building and venture capital for cross-border innovation. Recap of the Roundtable is available on Facebook and Youtube.)
Joan Yao, VP of Investment of Kickstart Ventures
