The Business Times, MON, DEC 28, 2020 – 5:56 PM, OLIVIA POH
SINGAPORE-BASED Heritas Capital Management is planning to launch a US$30 million “impact investing” fund, focused on early-stage technology startups in the healthcare, education and food industries which can bring social and environmental benefits as well as financial returns.
It is targeting a first close by the first half of 2021, said chief executive and executive director Chik Wai Chiew, He added that the fund – Heritas Venture Fund II – plans to invest up to US$3 million for a “significant minority stake” in each selected startup that is in the seed or Series A stage.
Heritas Capital next will also launch a private equity fund – called Heritas Growth Fund III – with a targeted war chest of US$150 million, to invest in growth stage startups in the same sectors. Ticket sizes range from US$5 million to US$20 million.
Impact investing aims to look beyond only financial metrics when assessing a company. Besides commercial growth, these funds tend to focus on investments that can also benefit society too.
A key indicator the firm looks at is the number of beneficiaries the startup can serve, said Mr Chik. For example, in digital health companies, the impact created could be measured by the number of active users that have benefitted from the service, as well as how it can reach those who might not otherwise have access to such services.
“We would also want to make sure that these indicators are also collinear to growth, such that if the number of beneficiaries grow, the startup would grow too,” said Mr Chik.
The firm has long been conscious of the social impacts of its investments, noted Mr Chik. Its first private equity fund in 2013 had first singled out the healthcare space to focus on, as a step forward into “responsible investing”, he said.
Along the years, it then expanded the sectors to include education and technology, while integrating environmental, social and governance (ESG) considerations into its investments, added Mr Chik.
“The decision for an impact fund comes as more investors are increasingly conscious towards executing responsible investments… they now are also more comfortable with having both commercial as well as social factors drive investment decisions,” he noted
Additionally, companies are increasingly more open to take on some of these forms of measurements as growth metrics. Some founders are also looking to be more socially aware when growing their companies, in part to do some good for society, Mr Chik added.
“We are seeing a strong pipeline of attractive deal flows which are also impactful in terms of enhancing access to affordable quality healthcare and education, and contributing to sustainable growth,” he said.
This second fund comes as its US$15 million first venture fund, which was launched in 2017, has nearly reached full deployment, said Mr Chik. He added that Fund I has currently made ten investments in startups across healthcare, edtech and foodtech sectors. Several more investments are scheduled for completion early next year.
Portfolio companies include digital health startup Holmusk, biotech startup Hummingbird Bioscience, and foodtech startup Alchemy Foodtech. Many of its portfolio companies have raised “substantial follow-on funding from renowned investors” amidst the Covid-19 pandemic, said Mr Chik.
Heritas Capital is also a co-investor with SEEDS Capital in several Singapore-based startups, including SilverConnect, a medical nutrition startup creating specialised food solutions for people with dysphasia.