Big money buys young tech: KKR (USA) invests US $145 Million in Singapore

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| The European | 5th November 2018
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There is a growing consensus among business analysts that we are passing through a time in which unique business models evolve but in a short span of time these business models lose their appeal and are replaced by new ones. The underlying cause of this phenomenon is the fast pace of innovation in the world of technology.

 

Over the period, two distinct business models have emerged. All other types of business models are sub-models of these two main types.

 

Pipe business model (Traditional Businesses)

 

In this model, the companies create products and simply sell them to their customers (or deliver services to their customers). Value is produced upstream and consumed downstream. There is a linear flow.

 

This model was named as Pipe because the flow of business resembles flow of water in a pipe; from up to down.

 

All traditional businesses are based on Pipe business model. eCommerce stores also fit into this category because they too really push their inventory to their customers. However, dropshipping business is categorised as a platform business.

 

Platform business model

 

Sangeet Paul Choudary, Founder and CEO of Platform Thinking Labs, in an interview with “croudsourcingweek.com”, gave a comprehensive version of the Platform business model. He said:

 

“A platform business model is a business model that connects two or more participating sides and allows them to interact with each other. Instead of creating value and pushing it out, it acts as an infrastructure on which producers and consumers can connect and interact with each other and sets the conditions that govern, how the interactions should happen, what kinds of interactions are ‘high quality’ and which kinds of interactions are ‘not high quality’”.

 

Companies like Uber, Airbnb and YouTube serve as a Platform to connect two sides of the business. Thousands of companies; small, medium and large exist in all business segments that are carrying on their business activities using Platform business models.

 

It is important to note that many companies use a Hybrid (a mix of Pipe and Platform) business model. PropertyGuru, a real estate firm based in Singapore, conducts business using a Hybrid business model.

 

Business of PropertyGuru

 

PropertyGuru is an online property portal, which serves every player of real estate industry. It was founded in 2006. The company has offices in Singapore, Malaysia, Thailand, Indonesia and Vietnam.

Core activities

 

  • Buying and selling of residential and commercial properties
  • Property Letting
  • Partnering with property developers (for marketing and selling their projects)
  • Partnering with real estate agents

Value-Added Services

 

  • Property Market Outlook Reports
  • Consumer Sentiment Surveys
  • Project Reviews (for existing and ongoing projects)
  • Property Market Index (based on PropertyGuru Big Data and regional property market demand-supply)
  • Customised marketing and advertising solutions for Property Developers and Real Estate Agents

 

PropertyGuru–in Figures

 

Number of registered property seekers:                                                  25 Million plus

 

Number of properties listed on the portal:                                            2 Million plus

 

Southeast Asia Consumer Market Share:                                                     55 percent

 

Number of Estate Agent partners:                                                    over 50 thousand

 

Average number of deals closed (monthly):                              0.5 Million plus

(For real estate agents)

 

Number of Employees:                                                                                1000 plus

 

 

PropertyGuru is accessible via the company’s website. The company also has an App for both, Apple and Android.

 

Latest News:

 

Bloomberg (31 October 2018) reports:

 

“PropertyGuru Pte has pulled in Singapore $200 million (US $145 million) from KKR & Co., raising funds for the first time in three years as Southeast Asia’s largest real estate portal prepares to delve into new business areas”.

 

The KKR press release stating details of this investment provides insight into why the big money is pursuing young tech.

 

Relevant extracts from the press release are given below.

 

Ashish Shastry (Member & Head of Southeast Asia, KKR & Co.) said:

 

“We are thrilled to be investing in PropertyGuru, one of the most exciting tech-enabled businesses in Southeast Asia. With rapid online migration well underway across many industries, the PropertyGuru team, led by Hari V. Krishnan, has clearly established itself as the Southeast Asian champion in the online property space. We look forward to partnering with them to help take them to the next level”.

 

“It’s actually not easy to find a tech company in Southeast Asia that has established some form of leadership in their space with the runway to keep growing in the next five to ten years. PropertyGuru is one of those rare companies.”

 

“Southeast Asia is still a new investing landscape for major strategics. We hope to have a chance to ride the wave up and catch some of the really exciting companies early”.

 

Key Takeaways

 

  • KKR & Co. is bullish on Southeast Asia’s business growth potential. The investment firm is “long” on tech companies using Hybrid business model.

 

  • Investment in PropertyGuru has been made from KKR Asian Fund III. This fund is reserved for investment in companies operating in “high growth Asian markets”.

 

KKR’s other (tech) investments in Southeast Asia market

 

Voyager Innovations (Philippines)

 

A one-stop digital company offering money transfers, marketing solutions, eCommerce, loans, etc.

 

GO-JEK (Indonesia)

 

An online platform providing services like ride-hailing, food delivery, mobile payments, auto care, etc.

 

 

PropertyGuru and Mortgage Financing

 

Currently, PropertyGuru offers its customers option of mortgage financing through its partner banks. However, the Chief Executive Officer (PropertyGuru), Hari V. Krishnan has voiced his plans “to explore businesses such as mortgage financing”. He is optimistic that in the coming 12 to 18 months PropertyGuru might tap different business opportunities in the real estate industry by using investment made by KKR & Co.

 

The future of investment in Southeast Asia

 

The Organisation for Economic Cooperation and Development (OECD) in its 2018 “Economic Outlook for Southeast Asia, China and India 2018: Fostering Growth Through Digitalisation” report states:

 

“In Emerging Asia, the increased use of ICT in manufacturing and services is affecting business activities, trade and productivity. It has led to the expansion of existing industries and the emergence of new ones in the region”.

The OECD observation and analysis reflects the investment vision of KKR & Co.

 

The investment potential in Southeast Asia business market is huge. Now is the right time to cherry-pick growing tech businesses.

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