Is funding really all a B2B startup needs?

Singapore, 9 March 2000 – With the increased reliability, speed and security of Internet-based networking in recent years, more businesses have connected to the Internet for e-commerce and information exchange with customers, suppliers and distributors. International Data Corporation (IDC) estimates that the B2B e-commerce market will grow from US$35 billion (1998) in goods and services to over US$1.1 trillion by 2003 worldwide.

B2B e-commerce is expected to grow at 97.4 percent a year across the Asia Pacific region, and at 103.5 percent a year between 1999 and 2003 in Singapore alone, according to Dataquest-GartnerGroup Asia Pacific. Last year, Singapore’s e-spending was reported at US$484 million and is expected to hit US$8.3 billion by 2003.

Which is why startups in Singapore and around the region are jumping on the B2B bandwagon. And the biggest issue for these startups will be related to funding and management.

A unique funding model for Asia
Internet investment holding company Active Capital Asia Ltd, which made its debut at Internet World Asia @ Singapore last week, has worked out a unique funding model in Asia. It offers entrepreneurs and business-to-business (B2B) Internet startups not only the initial funding needed, but also the knowledge, expertise, commitment and long-term partnership offered by its management team, supporting partners and board of advisors.

"In today’s rapidly evolving Internet environment, companies need much more than just funding," says Managing Director of Active Capital Asia, Dominique Pommier. "Getting funding alone does not guarantee success. In many ways money itself has become a commodity. What is most important is getting the fundamentals right from the start, accessing the experienced people and leveraging relationships with the right business partners."

"We aim at helping accelerate the growth of the B2B e-commerce companies we invest in by acting as a mentor, providing management expertise in key areas and the commitment of a dedicated partner. We are fundamentally different from many Internet investors today who have very specific investment horizon terms; Active Capital Asia is not an incubator providing start-up services and in some cases an initial cash investment, nor a venture capital firm focused on investing larger amounts in line with the requirements in terms of size and performance of the close-end funds they manage. Active Capital Asia wants to help build successful companies and be their long term partner."

More than just funding
Active Capital Asia takes an active role in the companies it invests in by providing guidance and operational support in the areas of strategy, financial planning, technology assessment, marketing & public relations, organization & human resources and legal support, as well as helping to secure strategic partnerships. These resources act as a 'virtual management team', mentoring the companies towards a successful merger or sale or IPO and beyond.

Says Mr. Pommier: "Active Capital Asia is looking for the best ideas and entrepreneurs with a vision, providing them the initial funding, then fine-tuning their strategies, assessing the necessary resources and working hand-in-hand with them through the implementation.

"After we have delivered the initial funding, we embark immediately on a value-creation programme, developing with the company we invest in short- and long-term development plans and focusing on how these are to be implemented. We remain operationally involved throughout the process as a virtual management team.

"This is all about growth acceleration. By tapping into the experience of our management team, support partners (human resources, legal, PR, technology) and strategic relationships, we can guide a B2B e-commerce start-up through a very sharp learning curve, moving faster and further in a short period of time."

To IPO and beyond
Active Capital Asia is committed to help build successful companies and be a long-term partner. Explains Mr. Pommier: "Because of their very nature, B2B e-commerce companies will require access to additional funding very soon after start-up. We will remain committed to our partner companies, helping them secure the right pools of capital (whether through venture capital or strategic investors) – that is, the smart money adding the most value to our partner companies."

Active Capital Asia will offer its partner companies assistance in evaluating, structuring and negotiating joint ventures, strategic alliances and joint-marketing agreements, acquisitions and other transactions. Partner companies can make the most of synergies with Active Capital Asia’s other partner companies, forming a web of strategic alliances.

He adds: "Even as we guide the partner company to IPO stage, Active Capital Asia will continue to participate in operations and fund-raising. And even after the company lists, Active Capital Asia will maintain its own involvement in the company. IPOs are only events of liquidity, not the end of our partnerships."

Focus on B2B e-commerce
Active Capital Asia believes that the business-to-business e-commerce sector is the one that holds the most promise in Asia yet remains largely untapped.

Says Mr. Pommier: "The most successful B2B e-commerce companies in Asia will be the ones who can, very early on, identify the demands of the market, build critical mass and federate an industry community. But despite the opportunities, there is still a large gap in expertise in Asia. Active Capital Asia’s team of seasoned management team and supporting partners will enable these B2B entrepreneurs to seize opportunities and capitalize on them."

Active Capital Asia believes that its own growth can be achieved through all these companies it will partner with. "Their success will be our success," he said.

Hamilton Capital partners Active Capital
Meanwhile, in San Francisco, Hamilton Capital (HCL) announced that they have partnered Active Capital Asia Ltd to form a new Internet holding company focusing on the Asia Pacific region.

"The opportunities across Asia are unparalleled," says Hamilton Capital Managing Director Gregory Tolaram. "You can look at the e-commerce investment landscape in the U.S. over the past few years and apply most of it to Asia today. Hopefully we’ve learned a thing or two about the economies of this industry category. It is an entirely new paradigm, the success of which we feel can be duplicated very efficiently in the Pacific Rim. The size of the existing markets and the potential for growth make this region an exceptional investment opportunity."

Says Dominique Pommier: "Their support will give Active Capital Asia and the B2B companies we invest and partner with access to large pools of capital – something critically needed especially by B2B e-commerce companies very soon after start-up because of the very nature of their business."

Mr Tolaram adds: "Dominique and I have known each other for over 10 years and have done deals together. I am very impressed with his the depth and breadth of knowledge in the technology sector of Dominique and the team Active Capital Asia is putting together. He and his team have the experience and are very well-positioned to nurture and guide companies in the region into large, dynamic and profitable entities. We have several years' experience in the funding and maturing of Silicon Valley startups and considered the idea of launching our own Asian investment arm. Ultimately, we chose to partner with Active Capital Asia to leverage on their experience and regional knowledge. I think this is a wise strategy, as not all Silicon Valley VC’s will find the competitive landscape in Asia as easy as it is at home."

Hamilton Capital Limited provides all stages of financing for high growth companies in the IT and healthcare industries. Based in Bermuda, Hamilton Capital works with an investor base, which spans the globe and consists of large institutions, venture funds, hedge funds and private family entities. From biotech to B2B e-commerce, the firm has a range of experience in analyzing and funding venture opportunities. In the past few years the firm has raised over US$300 million for its portfolio client companies, which include Health Hero Network, Authoriszor, Career Experience, Rosetta and Tularik (recently public and has a market capitalization in excess of US$3 billion).