John Kim, Managing Partner, Amasia
When it comes to investing in the climate tech and sustainability sectors, Amasia decided to take a different approach than other venture capital (VC) firms in the scene. Instead of focusing on deep tech innovations, the Singapore- and US-based firm focuses on capital-efficient software solutions.
In an interview with e27, Amasia Managing Partner John Kim gives the example of solutions such as carbon capture –and why it is not the direction that Amasia is taking.
“It is a very capital intensive technology … that could be part of the solutions. But there are still lots of question marks with this technology, such as the fact that you have to use a lot of power to get the carbon out of the atmosphere. And this costs a lot of money,” he says over a video call. “At some scale, it should be able to help us. But at what cost? And what are the ramifications of that?”
Another point that sets the firm apart from its peers is its focus on shifting behaviour as a solution to mitigate the risks of climate change.
It has built a framework of behavioural change that helps the firm in deciding their investment direction: Review (how to help consumers, corporations, and government make better data-driven decisions about climate), Renew (or shift focus towards reuse and recycling), Rethink (how to rebuild infrastructure to enable expansion to remote places), and Rebuild (a less wasteful supply chain).
“Climate change is obviously a big issue; perhaps the biggest issue of our generation. A lot of people who are trying to solve this problem are trying to do it with some sort of breakthrough technology. But if you look at history, from the 1800s until now, our emissions have gone up by around 1,000 times. The overwhelming majority of it actually has to do with per capita emissions,” Kim says.
“As time goes on with new breakthrough technology, we are able to produce [whatever we have been manufacturing] more efficiently with fewer emissions. But the issue is that when something gets cheaper, people tend to buy a lot more of it,” he stresses, explaining why the change in behaviour should be the starting point in the mission.
Also Read: How consumers are prioritising sustainability beyond the single lens of eco-friendly products
Mindset shift
When asked about the climate tech startups scene in the Southeast Asian region, and the challenges that they are facing in scaling their business and securing investments, Kim says that the “classic” hurdles faced by other verticals are also relevant to these startups.
The sheer size and diversity of the region have always been known to possess unique challenges to startups when they intend to expand their business, but with climate tech startups it is especially relevant considering the different climate policies that each country is implementing.
Then there is also the challenge with local investors’ perspective, particularly the patriarchs of family offices that venture capital tends to team up with.
“If we compare to the US or Europe, it doesn’t matter how old you’re, what industry you’re in … everybody just knows that this is the thing that we got to get on board, we just have to do this. In SEA, we are catching up quickly, but I still it’s a little behind from that perspective,” he says.
“They call it the noise-to-signal ratio; there just tends to be a lot more noise in emerging markets than there is in developed markets. And I think that’s just because the data is more trustable in a sense,” he continues.
This is why there is a greater urgency for Amasia to convince investors that a balance between profits and impact is possible.
“[When we first began], the idea of impact investing was very, very nascent. There was still this idea in people’s minds that if you’re going to make a positive impact on the world, you’re going to get fewer returns,” Kim explains.
“As time goes on, there’s a lot of data, a number of academic studies that are demonstrating that, not only that you can make money and create an impact, but these two things are kind of mutually reinforcing … People used to think that these things are mutually exclusive, but they tend to see it as mutually reinforcing now.”
This is also the reason why Amasia focuses on capital-efficient software companies instead of deep tech companies.
“If you look at venture returns in general … historically, the funds that performed the best have a little bit more focus on software. The world of bits versus the world of atoms. There are some funds that do very well, for instance, in biotech devices, but in general, if you look at the averages, software-focused funds tend to do better,” Kim elaborates.
Also Read: COVID-19, the environment, and the tech ecosystem: what opportunity is available out there for us?
“The intersection and the Venn diagram of capital-efficient software companies –which has historically returned better within venture and investing in general– with the sustainability-focused solutions, that is where we’re going to actually make an impact. The fact that there are not that many other people doing this, just made blindingly obvious sense to us that there needs to be a firm at the intersection of these two things.”
Making an impact
Amasia supports companies at the seed to Series B across the US, SEA, India, Europe, and Latin America. They are putting emphasis on founders who aim to foster behaviour change through their solutions –they also need to have global ambitions.
The history of Amasia began with Kim and US Partner Ramanan Raghavendran having dinner one time in Singapore –and the conversation developed into impact investing.
They began by doing angel investing before eventually securing “millions of US dollars” through two funds.
Recently, the firm announced a lead investment in a US$7.5 million Series A for Living Food (a farm-to-fork e-commerce platform that aims to promote responsible and sustainable consumption) and participation in ClimateTrade’s pre-Series A funding round.
In the near future, Amasia aims to continue supporting its portfolio companies and is now considering raising new funds. But Kim says that the firm is not in a rush.
“We’ll probably start having conversations towards the end of this year,” he closes.
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Image Credit: Amasia
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