Banking on entrepreneurs
Narra Ventures is a Manila-based company that invests in private high-technology firms with potential for accelerated growth. Inside Investor sat down with Dr. Paco Sandejas, managing partner of NarraVC, to hear more..
A: Narra Venture Capital was founded in 2002 by two investment partners, Dado Banatao, Managing Partner of US-based Tallwood Venture Capital, and Ayala Corporation, led by Jaime Augusto Zobel de Ayala and myself. Tallwood at that time was successfully investing in semiconductor-related startups. NarraVC was founded after Dado and I thought about how we could really jumpstart high-tech companies in the Philippines – companies that need fresh capital to grow. Before 2002, I was investing in the US, Korea, Hong Kong, Taiwan and China, but I wanted to focus more on investing in companies in the Philippines and try to find a bridge for technology transfer to Asia, to bring in technology and management expertise. Today, we invest in and manage a group of high-tech companies.
Q: Is there a big appetite from the US to invest in the Philippines tech sector?
A: I wouldn’t say it’s big. The Philippines was known for contract manufacturing and non-call center types of business process outsourcing since the 1970s, starting with US firms such as Raytheon. Software development as an industry was present since the mid-1990s. At that time, we saw that the Philippine knowledge workers were very talented, for example, in animation work for firms such as Hanna-Barbera and nowadays for Disney and EA. Today, in the software sector, the Philippines creates its own products. There is also a lot of excitement with new small startups, and lots of events and conferences where the industry gathers. The good thing is that the new software startups don’t need much infrastructure today since cloud computing is readily available and affordable. We do not need to buy large servers and the like to help start their business.
Q: So, how are you bridging the gap between the US and Asia? What kind of companies are you looking for?
A: We are always looking for a pain point, for which a startup has a differentiated solution or product that is supposed to create a big market. In the startups we like to invest in, there is always a bankable team of entrepreneurs. These people need to be experienced, expert professionals that find their way in the market and respect their investors.
Q: What is the average investment into a company?
A: There is a wide range, from $250,000 to a couple of million dollars. Even if there is a potentially big company ahead, we may come in early with some seed funding and then plan to later work with the entrepreneurs to raise more money, once certain business and engineering milestones are met. A good example is Jybe, which we started with around a million dollars, but it was later acquired by Yahoo, before we got the chance to put in the larger funds.
Q: Do you also partner with other investors?
A: Yes, as in the Jybe case. Whenever there is a big deal, we would partner with other investment firms.
Q: And what is your time horizon?
A: Ideally it would be 4 to 7 years, but the past decade, unfortunately, has been sometimes very rough for the venture capital sector – with the 2000 and 2001 crises in the Internet and communication sectors, the 2004 slowdown and definitely the 2008 crisis. In some of our investments the company did decently with its product engineering, but because of the circumstances of the market the venture capitalists with diminishing funds had to choose which companies to support. And many times, we had to support the companies with a small insider investor base in order to keep the company alive and survive the lean times. This is not a healthy environment in which a startup company can grow. For our two successful semiconductor IPOs, it took each 9 years. Some companies never made it. Others, we are still working on.
Q: Is there a company that really went through the roof?
A: Unfortunately, we haven’t found a Facebook case yet, and until 2005, Narra didn’t focus on the mobile and Internet space. Today, with our success with Jybe and Stratpoint, we are focused more on development services for our Silicon Valley hot companies and our own software products. Nonetheless, one company I am proudest about is Inphi, which is based in Silicon Valley and produces the highest performance semiconductor components in the world. We invested enthusiastically in 2002 with Tallwood and a group of investors, but then the company went through very troublesome market conditions and some investors started to doubt backing the company further. Alongside Tallwood, the group had to scramble to raise more money, and they got more because we believed in their vision. Today Inphi is very well established with a healthy family of high-speed chips for cloud computing, optical communications and others. And we made money for our investors.
Q: In what stage of a company’s life cycle are you investing?
A: We used to do a lot of early stage investing, and we still do today for software. We are focused more now on the Philippines because the local market is growing. In addition, companies here, especially engineering startups, do not only need money at the beginning, but also partners with a lot of management experience. One example of such startup that went through this business process is Stratpoint, a software outsourcing company here in Manila.
Q: Where would you want to see NarraVC in 3 years’ time?
A: I’d like to see us more like a venture group with bigger projects, especially in the information infrastructure and technology-related sectors in the Philippines. We are working together with the government, for example, to improve Internet access for the underprivileged students, to provide them better access to education and opportunities. We will support more Filipino companies with software products and innovative information services. There are many good entrepreneurs and hard-working Filipinos here… even expats and returning Filipino-Americans. There is so much to be done in the Philippines, and for some, there are probably more exciting opportunities here than in the US. We already have companies with very good products in our portfolio, and we are planning to bring these products to other markets in the region. Our vision is for Narra Ventures to be the most trusted and most innovative IT company in the Philippines in three years.
[caption id="attachment_15453" align="alignleft" width="180"] Dr. Paco Sandejas, managing partner of NarraVC[/caption] Narra Ventures is a Manila-based company that invests in private high-technology firms with potential for accelerated growth. Inside Investor sat down with Dr. Paco Sandejas, managing partner of NarraVC, to hear more.. Q: Can you give a brief overview on the history of NarraVC? A: Narra Venture Capital was founded in 2002 by two investment partners, Dado Banatao, Managing Partner of US-based Tallwood Venture Capital, and Ayala Corporation, led by Jaime Augusto Zobel de Ayala and myself. Tallwood at that time was successfully investing in semiconductor-related startups. NarraVC was...
Narra Ventures is a Manila-based company that invests in private high-technology firms with potential for accelerated growth. Inside Investor sat down with Dr. Paco Sandejas, managing partner of NarraVC, to hear more..
A: Narra Venture Capital was founded in 2002 by two investment partners, Dado Banatao, Managing Partner of US-based Tallwood Venture Capital, and Ayala Corporation, led by Jaime Augusto Zobel de Ayala and myself. Tallwood at that time was successfully investing in semiconductor-related startups. NarraVC was founded after Dado and I thought about how we could really jumpstart high-tech companies in the Philippines – companies that need fresh capital to grow. Before 2002, I was investing in the US, Korea, Hong Kong, Taiwan and China, but I wanted to focus more on investing in companies in the Philippines and try to find a bridge for technology transfer to Asia, to bring in technology and management expertise. Today, we invest in and manage a group of high-tech companies.
Q: Is there a big appetite from the US to invest in the Philippines tech sector?
A: I wouldn’t say it’s big. The Philippines was known for contract manufacturing and non-call center types of business process outsourcing since the 1970s, starting with US firms such as Raytheon. Software development as an industry was present since the mid-1990s. At that time, we saw that the Philippine knowledge workers were very talented, for example, in animation work for firms such as Hanna-Barbera and nowadays for Disney and EA. Today, in the software sector, the Philippines creates its own products. There is also a lot of excitement with new small startups, and lots of events and conferences where the industry gathers. The good thing is that the new software startups don’t need much infrastructure today since cloud computing is readily available and affordable. We do not need to buy large servers and the like to help start their business.
Q: So, how are you bridging the gap between the US and Asia? What kind of companies are you looking for?
A: We are always looking for a pain point, for which a startup has a differentiated solution or product that is supposed to create a big market. In the startups we like to invest in, there is always a bankable team of entrepreneurs. These people need to be experienced, expert professionals that find their way in the market and respect their investors.
Q: What is the average investment into a company?
A: There is a wide range, from $250,000 to a couple of million dollars. Even if there is a potentially big company ahead, we may come in early with some seed funding and then plan to later work with the entrepreneurs to raise more money, once certain business and engineering milestones are met. A good example is Jybe, which we started with around a million dollars, but it was later acquired by Yahoo, before we got the chance to put in the larger funds.
Q: Do you also partner with other investors?
A: Yes, as in the Jybe case. Whenever there is a big deal, we would partner with other investment firms.
Q: And what is your time horizon?
A: Ideally it would be 4 to 7 years, but the past decade, unfortunately, has been sometimes very rough for the venture capital sector – with the 2000 and 2001 crises in the Internet and communication sectors, the 2004 slowdown and definitely the 2008 crisis. In some of our investments the company did decently with its product engineering, but because of the circumstances of the market the venture capitalists with diminishing funds had to choose which companies to support. And many times, we had to support the companies with a small insider investor base in order to keep the company alive and survive the lean times. This is not a healthy environment in which a startup company can grow. For our two successful semiconductor IPOs, it took each 9 years. Some companies never made it. Others, we are still working on.
Q: Is there a company that really went through the roof?
A: Unfortunately, we haven’t found a Facebook case yet, and until 2005, Narra didn’t focus on the mobile and Internet space. Today, with our success with Jybe and Stratpoint, we are focused more on development services for our Silicon Valley hot companies and our own software products. Nonetheless, one company I am proudest about is Inphi, which is based in Silicon Valley and produces the highest performance semiconductor components in the world. We invested enthusiastically in 2002 with Tallwood and a group of investors, but then the company went through very troublesome market conditions and some investors started to doubt backing the company further. Alongside Tallwood, the group had to scramble to raise more money, and they got more because we believed in their vision. Today Inphi is very well established with a healthy family of high-speed chips for cloud computing, optical communications and others. And we made money for our investors.
Q: In what stage of a company’s life cycle are you investing?
A: We used to do a lot of early stage investing, and we still do today for software. We are focused more now on the Philippines because the local market is growing. In addition, companies here, especially engineering startups, do not only need money at the beginning, but also partners with a lot of management experience. One example of such startup that went through this business process is Stratpoint, a software outsourcing company here in Manila.
Q: Where would you want to see NarraVC in 3 years’ time?
A: I’d like to see us more like a venture group with bigger projects, especially in the information infrastructure and technology-related sectors in the Philippines. We are working together with the government, for example, to improve Internet access for the underprivileged students, to provide them better access to education and opportunities. We will support more Filipino companies with software products and innovative information services. There are many good entrepreneurs and hard-working Filipinos here… even expats and returning Filipino-Americans. There is so much to be done in the Philippines, and for some, there are probably more exciting opportunities here than in the US. We already have companies with very good products in our portfolio, and we are planning to bring these products to other markets in the region. Our vision is for Narra Ventures to be the most trusted and most innovative IT company in the Philippines in three years.
