Invent the Category - E703
episode
BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)
12 min
1 speaker
5 chapters
transcribed 17 days ago
Transcript
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Transcript generated automatically by AI and may contain errors.
Why does Jeremy Au frame startups as the “David” in a David‑vs‑Goliath story?
Why are Chinese VC funds splitting the US arm from the Chinese arm? Why did Sequoia split? If you look at the public news of Sequoia, they felt like they had to split because of the US-China geopolitical tensions. Sequoia did make money in both the US startups as well as in Chinese startups, and both were doing well. Sequoia was a name brand that was a US dollar denominated. It was an ally of the Chinese tech ecosystem in the early days, depending on who you say, whether it's the Chinese or the Americans, but the crux of it is there's the divorce. And that divorce basically means that many American limited partners and the US government under the first Trump administration as well as the Biden administration now views American capital going into Chinese technology companies as a national security risk.
They don't want American capital to go into China.
And there's an interesting rule called CFIUS. It's an investigating committee that allows America to veto investment deals by China into America. But they have now implemented under the last year of the Biden administration, which Trump has allowed to execute, it's called the River Ciphers. But basically, what that rule means is that if an American limited partner or an American fund invests in a Chinese national led or Chinese startup, it must be declared. To the US government and the US government holds the right to veto. In other words, American funds will find it very hard to comply to invest in Chinese startups in the knowledge that anytime their transactions can be unwound. So effectively, that caused that bifurcation into Chinese-only funds versus American-only funds.
LPs are not able to, under this new regulatory regime, may not be comfortable taking on the geopolitical risk, and also the general partners of those funds may not feel comfortable with that risk. So I think Sequoia, Chinese partners. Decided that it's better to split from the American side, and then they went their separate ways. And they both agree that Southeast Asia and India can go a separate way as well. At the end of the day, partners and teams that all work in their teams, right? So I think the Chinese team felt comfortable with a single market, clear ecosystem, Americans feel comfortable with American and the European deals. And then I think they felt like Southeast Asia was an independent ecosystem with its own different set of return profile for Southeast Asia and India.
One thing to note is that the amount of capital that Southeast Asia VC funds have been able to successfully raise. What this clearly shows is that there's a hump between 2018 to 2019, which was also driven by the Singapore ecosystem and the government support to drive increased venture capital flows. There was a dip in the 2020 piece because of pandemic, so everybody didn't know what to do, and so people didn't stop writing checks into VC funds. And then during the zero interest rate era that got accelerated by Trump and Biden administrations, a lot of money flowed out from America. Capital went into the US technology ecosystem, zero interest rates, but also went into the Southeast Asia funds ecosystem between 2021 and 2023.
And then since then it has dropped quite a bit because now there are very high interest rates to control for inflation that happened after pandemic, supply chain, tariffs, the inflation reduction act by Biden, where there's a huge stimulus in America, whatever it is, but very high interest rates have caused a strong dip in this. This is important to know because the capital that is raised by All these funds, they normally have a mandate to deploy that within two to three years. So the capital that was raised in 2022 are supposed to be finished deployed by 2025 effectively. So the fact that we have very little capital being raised in 2024 to 25 indicates that Southeast Asia deployments of capital will probably be low between 2026 to 2027.
But there's some cyclical component of it. This is a leading indicator that we will probably see more bad news or we'll continue seeing us.
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Chapters
5 chapters
1
Why does Jeremy Au frame startups as the “David” in a David‑vs‑Goliath story?
0:00–3:34
2
How does the slingshot‑vs‑pistol analogy change the way we view startup advantage?
3:34–5:29
3
What lessons does the Oatly case teach about building a billion‑dollar category from scratch?
5:29–8:13
4
How did Hon Lik’s personal experiment lead to the creation of the modern vape market?
8:13–10:32
5
What is Jeffrey Bussgang’s Jungle‑Dirt‑Road‑Highway framework for startup growth?
10:32–12:25
Speakers
1 identifiedMore from BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)
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