How Singapore Wealth Fund GIC Invests in Tech Companies: Q&A

(Bloomberg) -- Singapore’s sovereign wealth fund GIC Pte spoke to Bloomberg News about its technology investment strategy. Here are edited excerpts from the interview on Tuesday with Chief Executive Officer Lim Chow Kiat and head of the company’s technology investment group, Jeremy Kranz.

The relationship GIC seeks with companies it invests in

KRANZ: Our objective is to have lifetime relationships with the most important companies that are emerging in every business cycle.

The way we are designed is we are multi-geography, but one team. And we are multi-strategy, meaning we invest in public equities as well as in funds and companies on the private side. And the reason to do that is it keeps you connected to the life cycle of any one company. So in an ideal world, the founder would be able to say that when he is pitching for venture capital and he met someone from GIC, it’s the same group that he will be dealing with when it’s time for the roadshow or lockup expiry.

How GIC invests in startups

KRANZ: For us, it starts when a company is born. We don’t often invest directly at the early stage. One of the reasons is we have a long history of being limited partners in venture funds in Silicon Valley as well as in Asia.

Investing directly at later stages

KRANZ: We invest directly in companies at the growth stage. Over the past few years, we invested several billion dollars in minority tech growth deals. My team has over 50 companies in eight countries. The check sizes per company, they range on one extreme single-digit millions and on the other extreme, single-digit billions.

Whether to exit at an IPO

KRANZ: Companies will transition to the public markets. And at that stage, we have been very different from a typical VC or private-equity fund. We think that post-IPO the returns continue to compound. We have the flexibility to hold the stock long-term.

What sets GIC apart as a tech investor

KRANZ: Most institutions that look like us will define specific departments that have severe limits on stage or geography or sector. And in some cases, the really big institutions will tell founders, ‘You should only call us if the check size is really, really big.’ We don’t think that way. The reason is if we can have this life-cycle engagement with the company it can lead to things beyond investment in that specific asset.

What GIC looks for in a company

KRANZ: The heuristic we have in our team is that one day we want them to be standalone, enduring, public, profitable companies that are category creators, category leaders, founder-led. That’s kind of the checklist of what you want the end-result to look like. And it’s actually ideal if they end up standalone public companies because we can keep holding it and watch returns compound year after year.

LIM: If you invest in these early-stage companies, potential disrupters, you may gain some knowledge about what will happen to other parts of the universe. That is not the one and only reason you invest. We want to make money.

Areas of interest

KRANZ: Interactions. If there’s bike sharing, ride sharing, what’s the interactions of those trends with other things? Would you design your restaurant, would you locate your restaurant differently?

The advances of transportation networks, where consumers want to go, what it means for other types of enterprises.

What we try to do is we say, well, where is that change happening first? It may not be San Francisco. It may not be Beijing.

We’re looking around the world to see where this topic unfolds and creates interactions, and we hope from that, we may have a list of things that we can do in anticipation.

How GIC researches companies

KRANZ: Just as an extreme, one of the members of my team went and registered as an employee at an online grocery delivery company. And through her work, we were able to understand how fast you can possibly run around at a grocery store and pick products and bring them into a car and deliver them to a house.

We talk to customers, not through a blind survey, but actually by calling them.

We’ll be employees of some of our companies; whatever it takes to truly understand what’s ticking and what’s working.

What worries GIC

LIM: There is this general theme about restrictions of all forms. In today’s world, the supply chain is very tight. Every time you have frictions, or restrictions, it makes it harder for businesses. Generally, that would be a negative.

Whether GIC cooperates with Temasek

LIM: We are independent. Temasek (Singapore’s other state-owned investment firm) is a fellow investor that we sometimes work with. We also work with other long-term investors. We don’t coordinate (with Temasek).

I would say from our point of view, it is good that Singapore has two managers who hopefully can look at the best opportunities.

©2018 Bloomberg L.P.