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Formal and informal venture capital investing in emerging economies in Southeast Asia

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Abstract

This paper assesses the development of formal and informal venture capital investing in the emerging Southeast Asian economies of Thailand, the Philippines, and Vietnam. We study the investment strategies of both venture capitalists (formal investors) and business angels (informal investors) who face significant challenges when investing in emerging economies lacking the legal and financial institutions needed to support effective private equity investing. To do so, we synthesize previous research and more closely analyze data from seven previously-published papers that reported separately on venture capital research in three emerging economies in Southeast Asia. We developed summary tables for this paper based on our analysis of the data in each of the seven papers. All seven studies used a mixed-methods research methodology based on face-to-face semi-structured interviews. Based on our synthesis of the papers, we propose an investment strategy for both venture capitalists and business angels who are investing in emerging economies. This investment strategy is based on significant networking, in-depth due diligence and hands-on post-investment monitoring. The research provides several contributions. First, emerging economies in Southeast Asia represent some of the fastest-growing markets globally and accordingly need to receive increasing attention with respect to venture investing and private equity. Second, this paper applies institutional theory and examines the investment strategies of formal and informal venture capital investors, including business angels in Southeast Asia. Finally, our proposed investment strategy could be helpful as a model for venture investing in emerging economies and to suggest research on this key topic.

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Notes

  1. Thailand’s GDP growth figure was recently downgraded somewhat because of political uncertainty there.

  2. See Scheela et al., (2012, 2013) for more details on the development of the rankings.

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Compliance with ethical standards

We acknowledge technical support from the Thai Venture Capital Association (Bangkok, Thailand) and Philippine Venture Capital Investment Group (Manila, Philippines) and partial research funding from the Office of Small- and Medium-Enterprise Promotion (OSMEP, Bangkok, Thailand) and numerous Professional Improvement Grants from Bemidji State University (US).

Author information

Authors and Affiliations

  1. College of Business, Technology & Communications, Bemidji State University, Bemidj, MN, USA

    William Scheela

  2. Philippine Venture Capital Investment Group, Manila, Philippines

    Edmundo Isidro

  3. National Broadcasting & Telecommunication Commission, Bangkok, Thailand

    Thawatchai Jittrapanun

  4. NEU Business School, National Economics University, Hanoi, Vietnam

    Nguyen Thi Thu Trang

Authors
  1. William Scheela
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  2. Edmundo Isidro
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  3. Thawatchai Jittrapanun
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  4. Nguyen Thi Thu Trang
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Corresponding author

Correspondence to William Scheela.

Appendix 1. Venture Capitalist’s/business Angel’s questions (partial list)

Appendix 1. Venture Capitalist’s/business Angel’s questions (partial list)

  1. 1.

    What is the strategy of your company (include exit strategy)?

  2. 2.

    How old is your company?

  3. 3.

    How much venture capital does your company manage? (in millions of US dollars)

  4. 4.

    How many investment funds does this amount represent?

  5. 5.

    How much venture capital do you personally manage for your company?

  6. 6.

    How many years have you been with this company?

  7. 7.

    How many years have you been involved in the venture capital industry?

  8. 8.

    What was your work experience before becoming a venture capitalists?

  9. 9.

    What is your educational level?

  10. 10.

    How many partners (or similar positions) in your company have portfolio investment management responsibilities?

  11. 11.

    What are the total number of investments (portfolio/investee companies) for your company?

  12. 12.

    How long are these investments typically held?

  13. 13.

    How many investments (portfolio companies) are you personally responsible for?

  14. 14.

    How many boards of directors are you serving on as a representative of your venture capital company?

  15. 15.

    What are the major characteristics and problems for private investors in your country?

  16. 16.

    What would you like to see in the future for the private equity investing industry in your country?

  17. 17.

    How would you evaluate the overall performance of your private equity investing fund to date (Below, Average, or Above expectations)?

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Scheela, W., Isidro, E., Jittrapanun, T. et al. Formal and informal venture capital investing in emerging economies in Southeast Asia. Asia Pac J Manag 32, 597–617 (2015). https://doi.org/10.1007/s10490-015-9420-5

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