KUALA LUMPUR - The Carlyle Group plans to spend a major chunk of its US$750 million war-chest in Asia on the "railroads" of the New Economy in the region, rather than dot-com plays.
"We want to help build and reinforce the communications 'railroads' and solutions needed to deliver e-commerce," said Tony Jansz, a Carlyle managing director who heads the firm's new Asian fund.
The Washington, D.C-based investment firm is targeting companies deploying wireless and telecommunications infrastructure in the region, and applications that relate directly to B2B e-commerce.
Jansz said Carlyle is less focused on pure-play content players, but hedged that it would not exclude them totally.
"Our investments do not focus on dot-coms, but rather the Internet and communications infrastructure and environment that will hopefully help stimulate and encourage dot-com initiatives," he said.
The strategy reflects current global market sentiment, given that investor fascination with dot-coms has waned and several Internet-centric IPOs have flopped or been delayed.
The Carlyle Group joins a band of US-based venture capital funds and investment powerhouses that have forayed into Europe, Latin America and Asia this year. Most are looking to internationalize their operations and capitalize on scarce venture funding and management expertise outside the US.
"Entering Asia has less to do with buying 'companies on the cheap' as it does with the tremendous potential the markets offer with very large population bases and very speedy adoption of the Internet," said Jansz.
Jansz conceded, however, that the dip in technology stocks has made valuations "more realistic" and the "over-valuation of the last 12 months is seen to be settling down".
"The recent realignments in the technology markets in Asia means there will be better focus on the business fundamentals of Internet initiatives. This applies to US companies delivering technology into Asia as much as it does to Asia's homegrown industry," he said.
Jansz said e-commerce also offers traditional Asian industries "opportunities like never before" to open their services to international audiences. "The Internet is very much a global entity. And Asia is a particularly diverse market with very varied stages of Internet development. Companies that will do well are those that have the capability to blend local language and culture with an international perspective and approach."
On recent IPOs of Chinese portals Sohu.com and Netease.com that met with lukewarm investor reception, Jansz said, "A listing on Nasdaq is not a business model in itself - it just provides the means to raise capital to finance business expansion."
Jansz is upbeat, however, that Asia is still "full of potential" for B2B, B2C, and any other Internet-related models to work, but stressed that "business fundamentals must still apply".
Carlyle's Technology Venture Fund Asia will spread US$750 million over three years on companies in China, India, Hong Kong, Taiwan, South Korea, Singapore and Australia. The firm has a separate fund for Japan.
The fund's high-powered 14-man Hong Kong-based team is headed by Jansz and includes four other Intel Corp alumni - Eric Levin, Sean He, K. Chandrasekar and Balaji Srinivas - who were instrumental in building up the chip-maker's strategic venture capital business in the Asia Pacific region, and also Stephen Wu, who oversaw Asian Internet investments at Microsoft Corp.
The team has indicated a bias for Greater China and India, and expects to achieve about a 35% return rate on its portfolio. Since March, the team has already made nine investments worth over US$40 million - six in India, two in China and one in Singapore.
AsiaEC.com is a B2B e-procurement service provider and vendor of wide range of office supplies with over 2,000 corporate customers including Chinese subsidiaries of General Motors, Lucent Technologies, Arthur Andersen, Intel and Nokia.
LinkAir has developed and patented a technology called Large Area Synchronized CDMA (LAS-CDMA) which is applicable to 3G wireless telecom systems and dramatically improves network capacity, quality and coverage.
The six Indian investments are, high-end telecom solutions provider Convergent Software Ltd, online education service provider Educomp Datamatics Pte Ltd, e-commerce portal ITNation.com Ltd, ultrasound and medical imaging software provider Manmar Technologies Ltd, online/offline recruitment agency Placements.com Pte Ltd and stock trading solutions provider RiteChoice Technologies Pte Ltd.
The remaining investment was for Bex.com Pte Ltd, a Singapore-based holding company providing supply chain management solutions and Internet trading centers with several regional banks as clients.
Formed in 1987, The Carlyle Group is one of the world's largest private global investment firms and has invested over US$4.5 billion of equity in 146 corporate and real estate transactions. These transactions have an aggregate acquisition value of over US$13.9 billion.
The firm has more than US$10 billion of capital under management by separate teams dedicated to management-led buyouts and strategic minority investments, venture capital, real estate and European investment opportunities.