Venturing beyond the dotcom universe
Vnet's pre-millennial wade into the world wide web proved to be a knotty ordeal for the pioneering Thai firm, which ultimately found success by casting a wider investment net. By Suchit Leesa-nguansuk
The startup trend continues to pick up steam. For every entrepreneurial venture, one primary mission is to find an investor confident enough in its potential to provide funding.
Narong Intanate, founder and chairman of Vnet Capital Co, a venture capital firm, is certainly no stranger to accomplishing that goal.
The Bangkok Post talked with Mr Narong, now 60, about his long and varied investment experience and the many lessons he has learned along the way.
Since its inception in 1999, Vnet has primarily focused on investing in the IT sphere and dotcom industry.
In the early days, those who could understand how the world wide web information space actually worked were few and far between.
"I was focusing only on tech startups at that time, which was almost 20 years ago," Mr Narong says.
In the beginning, things ran far from smoothly; it took him almost four years before realising that his investment policy itself was the main problem.
During that period, Mr Narong spent 500 million baht investing in 12 tech startups, only one of which is still up and running: AME Technology.
"We invested in startups way too early," he says. "Before the millennium, the IT and internet infrastructure was not yet ready and still lacked government support."
In 2003, Mr Narong shifted from investing only in technology firms to the auto industry. This transition was done through the establishment of a joint venture whose strategy entailed focusing on firms dealing in auto parts.
That venture proved to be the first milestone on his path to success, with some of those auto parts makers like T. Krungthai Plc and Yarnapund Plc later listing on the Stock Exchange of Thailand.
"That was a big lesson; our strategy entirely changed towards being flexible and open," Mr Narong says.
He says Vnet is now ready to invest in companies ranging from startups still in their infancy to small and medium-sized enterprises (SMEs) seeking funds for expansion. As it stands, Vnet will not invest more than 100 million baht in each company.
Also, while Mr Narong prefers getting a majority stake in any investment, as that will allow Vnet much coveted managerial power, any companies that are brimming with potential are still worth acquiring a minority shareholder position in.
"Now we are open to good opportunities," he says. "We have expanded from focusing on tech startups to SMEs in any industry, and we can have everything from a tiny slice to 100% acquisition. The point is that whatever we are investing in, it must have potential."
Mr Narong has also set a time frame to evaluate the performance of each investment.
"The aim of every investment is to make money in five years, through dividends or capital gains from listing on the stock market," he says.
Mr Narong has been in the IT industry for 34 years. He started off as an employee at an IT firm in 1988 until he founded an IT products distributor, VST ECS Thailand, formerly known as The Value Systems Co.
The first company he established earned 34 million baht in revenue during its first year of operation, all through the sweat and toil of seven staff members. That business later grew to a 350-strong staff generating 20 billion baht annually.
But today he no longer holds any share in VST ECS, having retired from all of his positions at the company earlier this year.
Like most companies, VST ECS has been through thick and thin. The company's first major challenge came during the financial crisis in 1997. Due to the fallout from the crisis, Mr Narong was forced to sell off 50% of his shares to foreign partners so that the company could stay above water.
Later, in 2009, he sold his remaining stake in VST to a Singapore-based venture fund. But he still kept his position as executive chairman until February this year.
Since retiring from VST ECS at the end of February 2017, Mr Narong has had more time to focus on Vnet.
In 2017, Vnet's investment strategy will entail focusing on lifestyle-related businesses, which are increasingly popular and provide high returns.
Among those investments are a maker of whey protein, which is particularly popular among fitness addicts, as well as a European firm involved in food (particularly pastries) and drinks.
Vnet is also looking at opportunities in the service industry, especially those businesses that would have a lot to gain by using IT systems to boost their efficiency, especially with regard to logistics and document management services.
And when it comes to investing in tech startups, Vnet is being decidedly more selective, only focusing on those firms that are inventing disruptive technologies or otherwise making big waves in the industry.
"For those SMEs and local startups that we choose to invest in, their management must show strong leadership and managerial skills, a clear vision, discipline, and an agile mindset capable of turning crises into opportunities," Mr Narong says.
Vnet now has a total of 15 firms in its portfolio, three of which have high potential to list on the SET in the future.
"At least three companies we have plan to list on the stock market by 2022," Mr Narong says. "One of them happens to be AME Technology, the only survivor from Vnet's early days."
Another is Vintcom Technology Co, a provider of consulting services and information technology for enterprise distributors, which is seeking to list on the Market for Alternative Investment (MAI) by the second or third quarter of this year.
Vintcom has invested 51% in vServe Plus Co, a new joint venture formed with VST ECS.
That venture was set up to support the parent firm by focusing on servicing Vnet's IT system clients, including repair and maintenance services, cybersecurity consultations and the implementation of cybersecurity systems.
Mr Narong says the venture is a part of a strategy to create synergy among firms Vnet has invested in.
The subsidiary is expected to boost Vintcom's revenue to 2 billion baht in 2018 from 1.2 billion at the end of 2016.
"The IT service business in Thailand has grown strongly at 16-18% annually over the past three years, while the wholesaling and distribution of IT products, which is Vintcom and VST ECS's core business, has grown at a single-digit pace due to the maturity of the IT market," Mr Narong says. "While their clients may not need to buy new systems or upgrades any time soon, after-sales and cybersecurity services have continued to grow."
AME Technology Co also plans to list on the MAI this year.
Meanwhile, Copperwired Co, a leader in gadget lifestyle products, is now preparing to list on the stock market at some point over the next several years.