Mon, Dec 16, 2019 - Page 15 News List

INTERVIEW: KYMCO Capital turning to start-ups in SE Asia

Venture capital fund KYMCO Capital is turning its gaze to thriving start-ups in Southeast Asia, after spending the past decade in China investing in automobile supply chain companies and building its strength. KYMCO Capital managing partner Gary Ting talked about the fund’s investment strategies and his vision in an interview with ‘Taipei Times’ staff reporter Lisa Wang on Dec. 6 in Taipei

KYMCO Capital managing partner Gary Ting poses for a photograph after an interview with the Taipei Times on Dec. 6 in Taipei.

Photo courtesy of KYMCO Capital

Taipei Times: Why did you and your partners want to start KYMCO Capital (金庫資本) a decade ago?

Gary Ting (丁學文): The fund was started 10 years ago to help Taiwanese companies tap into the Chinese market. A large number of Taiwanese firms found it difficult to break into the Chinese market because they did not know how to cater to Chinese tastes.

Kwang Yang Motor Co (光陽工業) set an example. About 24 years after entering the market, Kwang Yang maintained a marginal market position with annual sales of 10,000 KYMCO-brand motorcycles in China back in 2009, while the market was estimated to have annual sales topping 28 million vehicles.

At that time, Kwang Yang’s 400 component suppliers all faced the same problem of breaking into China’s automobile market, which was a relatively “closed and protected” market compared with the US or Europe. That was when KYMCO Capital came in and decided to serve as a platform, helping those companies to build partnerships and leverage each other’s strengths.

TT: What did you do to help Taiwanese firms overcome that bottleneck?

Ting: We truly believed that it would create the biggest value by integrating Taiwanese firms’ technologies with the wisdom of Chinese companies.

We thought equity investment was an appropriate way to facilitate such integration, so we came to the conclusion that we could provide technology and know-how by acquiring stakes from 6 to 30 percent in any company.

The Shanghai City Government was the first supporter of the fund, and Shanghai was the place where the fund started. Now we also have offices in Taipei, Singapore and New Delhi.

TT: What was the fund’s first investment project?

Ting: In 2012, the fund invested 60 million yuan (US$8.6 million) in Luyuan Electric Vehicle Co (綠源電動車), China’s second-largest electric scooter brand, as we wanted to know how to sell electric scooters in China’s second-tier and third-tier cities.

We also wanted to know how to build an electric scooter with retail prices as low as 2,000 yuan.

A year later, the fund and Luyuan created a joint venture called Luyuan Kwang Yang (綠源光陽) in Hangzhou, Zhejiang Province, which is one of China’s automobile hubs, with initial capital of 10 million yuan. The investment proved a good bargain.

With less than 100 million yuan, we built our distribution channel, established our brand and obtained a share of the local market.

TT: How big is the fund and who are its investors?

Ting: KYMCO Capital now manages seven funds with a combined capital of US$370 million. The fund operates independently from Kwang Yang. The motorcycle maker is an important investor in the fund, and we have been focusing on investing in motorcycle and automobile supply chains since day one.

The number of investors in the fund has grown to 37 from 11 in the initial stages. Most of them are from the automobile industry, including battery maker Simplo Technology Co (新普科技), electronic components maker Cheng Uei Precision Industry Co (正崴精密) and automobile bearings supplier Hengtong Machinery Co (亨通機械). Break and rear mirror makers also invested in the fund.

TT: What are the fund’s next investment targets? Are there any ongoing projects?

Ting: We concentrate on four major markets — Taiwan, China, India and Southeast Asia. We like start-ups because we believe that they are going to impact to human life in the next decade, just like the iPhone has totally changed daily life and retailers’ business models and consumer behavior. Electric vehicles and their supply chains are among our favorites.

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