LC Ideas: Views & Insights
The private markets boom in Asia is bringing in new trends
Table of Contents
Part III of the conversation with Shilpi Chowdhary- Group Chief Executive Officer, Lighthouse Canton
The Asian market has seen significant growth in private market maturity and limited partner (“LP”) interest in this area, and Lighthouse Canton anticipates this trend will continue.
“The venture ecosystem is crucial for us, aligning with our business strategy. While we aim to grow in both public and private markets, it's clear that private markets are growing faster”, shared Shilpi Chowdhary group CEO at Lighthouse Canton.
The numbers tell the story. As per EY Knowledge analysis private markets in Asia-Pacific have grown from USD 1.3 trillion in 2012 to around USD 4.7 trillion in 2023.
Lighthouse Canton has adopted a co-investment strategy in venture capital and venture debt space. This means that the company invests alongside its clients in specific opportunities, rather than simply advising or managing investments on their behalf. This ensures that the company and its clients have aligned interests. It also collaborates closely with subject matter experts from both its client and non-client networks to research and evaluate investments, ensuring clarity and confidence in the rigor of its diligence processes.
Simultaneously, Lighthouse Canton assists companies seeking funding by leveraging this same network to provide industry expertise, valuable connections, and strategic advice to drive value.
“Though smaller, private markets represent new wealth, in contrast to legacy wealth. Being in both asset and wealth management, we saw an opportunity to channel our resources and expertise to benefit from both worlds,” noted Chowdhary explaining the motivation for them to be active in the private market space,” noted Chowdhary.
AREAS OF INTEREST
Venture Capital involves equity investments in startups and early-stage companies, providing funding in exchange for ownership stakes. It typically aims for high returns through growth and eventual exits. Despite a challenging external environment, generative AI (GenAI) garnered strong interest from investors in 2023 in the venture capital space.
Venture Debt refers to loans provided to companies, usually as a complement to equity financing. It offers capital with fixed repayment terms, often secured by company assets or equity warrants. Venture debt is particularly useful for companies that have already raised equity financing and are seeking additional capital to support their growth, bridge financing gaps, or extend their runway.
Lighthouse Canton is focusing on four broad ecosystems in the startup venture investing space’ China, India, Southeast Asia and the US.
“Currently, India is getting attention due to its growth potential, but we cannot ignore China despite geopolitical challenges. We keep an eye on China for future opportunities, shared Chowdhary.
The startup landscape in Southeast Asia is also thriving and set for significant growth as macroeconomic conditions improve. Lighthouse Canton is seeing increasing interest from investors across Asia and the Middle East, in this region and it remains one big area of its focus for the asset and wealth manager.
The projections reveal the trend. As of recent estimates, India and Southeast Asia are expected to host approximately 250 unicorns by 2030. This number reflects the growing strength and potential of the startup ecosystems in these regions. With the increasing number of unicorns, the overall market size is expanding, driven by both the growth in the number of high-value startups and the broader economic development of the regions.
As for the sectors of focus, Chowdhary shared that Lighthouse Canton is predominantly focused on tech-enabled startups, as opposed to those in manufacturing or industrial sectors.
“Our interest lies in areas where technology is driving new user experiences, journeys, or use cases.”
Read More: India's Ascendency: The Nation's Meteoric Rise as an Attractive Investment Destination
Read More: Unlocking Asia's Private Credit Potential - Opportunities, Growth and Challenges
ASIAN FAMILY OFFICE INTEREST IN US-BASED STARTUPS
According to Deloitte’s Family Office Insights Series – Global Edition 2024 report released in May this year family offices are placing their bets on North America and Asia Pacific—two destinations they hope will produce strong returns.
“The US is crucial, as its startup culture influences global trends. By connecting US and Asian markets, we are looking to access early-stage US startups, offering opportunities before they reach Asia, noted Chowdhary.
The company is pioneering efforts to bridge the US market access gap in Asia by providing Asian investors with early access to promising US startups, through various channels, before they become widely recognised.
Here having direct access is crucial to Lighthouse Canton.
”We will aim to avoid intermediaries and establish direct connections with potential investments,” said Chowdhary.
Ultra-high-net-worth individuals and single-family offices are interested in investing in U.S. companies but often lack the necessary knowledge and connections. The fragmented market can make navigation challenging, leading many to prefer late-stage investments in the U.S., where they feel more comfortable with visible investments.
Chowdhary noted a shift in mindset:
“As these investors become more familiar with less visible opportunities, investing through established and regulated managers is becoming increasingly attractive compared to direct investments in individual companies. These managers offer greater diversification and help reduce the risk of concentration. This trend mirrors the behavior of U.S. investors, who also prefer to invest in U.S. companies through managers rather than directly at the early stage,” he shared.
A 360-DEGREE APPROACH
Lighthouse Canton’s approach to venture capital investing is a 360-degree one.
Chowdhary explained. “By investing in venture capital, we offer our investors the chance to participate in some of the fastest-growing companies. While risks are inherent, expert managers can help mitigate these risks better.”
Also the approach to venture investing is more than just capitalising on fast-growing companies; it’s about being part of the entire journey with founders.
“By being present early in the ecosystem, we build credibility with founders,” said Chowdhary.
This long-term relationship positions them as the go-to choice for wealth management when founders eventually realize their gains.
Overall the motivation is to offer a 360-degree service—starting from providing capital, guiding them through structuring their holdings, to managing their wealth post-exit. It’s not just about opportunistically managing wealth, but being there from the beginning, according to Chowdhary.
