2023 Southeast Asia's Winners (Region vs. Singapore), Losers (Overcapitalized vs. Middle-Stage) & Contrarian Beliefs (Tech-First Innovation vs. Green & ESG Startups) - E234

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“When you have more money, it just basically means that the marginal decision-making gets worse. You end up doing way more things, some of which are not actually strategic. You have to hire way more people and all those people are running around trying to add value and prove that they belong somewhere. Six months pass, and you look at this array of stuff and you're like, wait what happened with that project? It actually delivered the thing that it wanted. There is something as too much money and there is raising the right amount of money for the stage that you're at.” - Shiyan Koh

In this episode of BRAVE, Shiyan Koh and Jeremy Au debate their 2023 predictions for Southeast Asia’s winners, losers, and contrarian beliefs. Shiyan states that the winner will be Southeast Asia due to its political stability, internet penetration, and e-commerce growth, while losers will be overcapitalized companies because too much money can lead to poor decision-making and a lack of focus on strategic projects. Jeremy believes that Singapore disproportionately benefits more and that the losers will be middle-stage companies seeking to raise capital and uncertain whether to grow or be profitable. In terms of contrarian beliefs, Shiyan predicts an increase in technical innovation in Southeast Asia, while Jeremy believes that green and ESG companies will focus on their business objectives.

Jeremy Au: (00:50)
Hey, Shiyan, another brilliant Monday for us to have this conversation.
Shiyan Koh: (00:55)
Hey Jeremy. How's it going?
Jeremy Au: (00:57)
Yeah, it's so tough to like disconnect from the internet, right? And all the Slack and WhatsApp, all that stuff. It's like you and I at the first like 10 minutes was like, let's disconnect and focus on this conversation.
Shiyan Koh: (01:08)
Stop typing. Yeah, let's talk to each other.

Jeremy Au: (01:11)
We'll get there. We'll have this zen moment one day. We had this fun debate and we were definitely inspired actually by the previous episode, which was talking about predictions for 2023, right?
And we said, hey, you know, it'd be nice to also talk about Southeasts Asia tech who will be the winners, who are going to be the losers and our one contrarian belief for 2023. We had a nice little debate over WhatsApp and mini one, and then we were like, oh no, we gotta hold our fight for our in-person squabbling over, recorded for everybody. So Shiyan, how you're feeling about that?
Shiyan Koh: (01:44)
I mean, you don't have to ask me to squabble, right? Like this, this is fun arguing. But I mean, also predictions are generally a fool's errand, right? Like who knows the future? We can make some guesses. We'll probably be wrong on half of them, so let's see what happens.
But I think winners, in 2023, I mean I think Southeast Asia as a region is the winner, right? So I think across a couple of things. So one is I think with the conflicts that are happening in the world and all the things that were happening in 2022 in China, there has been a real flood of like people and capital into the region.
So whether it is entrepreneurs being like, hey, we're kind of getting shut down by Xi Jinping. We need to go find other markets. It's people saying, I got to get my capital out of here, I don't wanna live in a lockdown of Shanghai. Whatever it is, there's people moving out and into the region. I think there is the diversification of supply chains, so I think there are beneficiaries there in Vietnam and in Indonesia, as people wanna not have sole source dependencies there.
Strategically, I think this region between the big US-China conflict has just become more important kind of sitting in between these two giant powers and people trying to figure out like, okay, where else should we be? And it's a demographically young region.
It's a region that has relative political stability and now I just sound like that Google Tamasik report high internet penetration growth of e-commerce, blah, blah, blah. But in general, I think 2023 is a relatively better year and a winner in some of the shakeouts that have been happening. I mean, I think if the US really goes into a deep recession, there will be a whiplash, right? And there will, capital flows, will tighten. So we'll have to kind of see how that goes. But that's my winner prediction. My loser prediction is over-capitalized companies.
Jeremy Au: (03:36)
Whoa. Wait, wait, wait, wait.
Shiyan Koh: (03:36)
Wait. No? We're gonna debate now.
Jeremy Au: (03:38)
I gotta go of my, I got to respond to that. Well, okay. I'll be, I'll talk. I'll be the nice guy here. Right. So I agree with you about that Southeast Asia economy report and that's added a couple more positive things, right? Like people are using more internet, people are shopping more online. I would also add inflation has been less of an issue, right? We don't have our gas being cut off. We still have energy. Southeast Asia is buying gas from everywhere, nothing stopped there, so energy is still okay.
Food prices, obviously Southeast Asia continues to produce a lot of its own food. So food prices are relatively okay. As consumers shift their vascular foods, obviously, there's inflation in some countries and more than others in Southeast Asia, but less of an issue compared to, for example, the US or Europe. Like you said, there's a lot of excitement where I would say I think a lot of the entrepreneurial and educational reforms over the past 20 years are starting to bear fruit, right? So I think Southeast Asia talent, it's also starting to rise up and say.
Shiyan Koh: (04:34)
And a lot of people came home during the pandemic, yourself included? So I think that's another thing, right? People who had not just been educated, but who've been working abroad and who have those different experiences coming back to start businesses. I think those are all great things for the region.
Jeremy Au: (04:51)
Yeah, definitely. And on that note, that's where I'm gonna be contrarian, right? I'm gonna say, well, Southeast Asia is a region benefit, but I think some regions are benefited more than others. And I think for me, I think that the winner here at risk of sounding like a total tool is Singapore, right? For all those benefits they talk about, Singapore actually has a disproportionate share of this, right?
So in terms of, for example, returning talents, right? Singapore had a huge diaspora of folks that were working in the US and everywhere, and they came back during the pandemic. And so I think it benefits them, whereas I think the amount of talent that went back to, for example, I think the Philippines, for example, is a lower percentage, right? Compared to other regional countries.
Shiyan Koh: (05:31)
Yeah, but I mean that's cause we're a good tiny country and even those people that come back, they're not starting companies in Singapore only. It's not big enough. So even if they start the business here, it's gonna be addressing the region. They're gonna want bigger markets to attack. I'm not gonna let you get off so easily. Okay. I'm gonna fight back.
Jeremy Au: (05:50)
Yeah, we can fight each other. No, I agree. There's obviously Asia benefits. I don't disagree with you, but then when you talk about companies, they came back and where they're living, they're living, a lot of them wanna live in Singapore and both-
Shiyan Koh: (05:59)
Driving our home prices up.
Jeremy Au: (06:02)
Yeah. And also they're registering the companies in Singapore, right? So they are domiciling the companies in Singapore which is becoming a little bit of a Delaware kind of like situation, which is really interesting. So as a result, the finance-
Shiyan Koh: (06:15)
Who gave you this talk track, is the government paying you? What's happening here?

Jeremy Au: (06:19)
No, I think I have negative downsides as well. So well, let's just keep going. I think you talked about, for example you mentioned like flight of capital and flight of talent from China. Well, where they're going disproportionately to Singapore. And this is not a new thing.

I was walking around at Sun Yat-Sen Memorial Museum, his old villa. I'm thinking to myself, yeah. My great-grandparents were one wave of Chinese immigration at the end of the Qing dynasty. And then there was another wave of immigration around obviously the civil War and so, so forth.
It is interesting to some extent, like all of us are looking at this wave of Chinese immigration to the rest of the world, the US and to the UK and to Singapore, as if it's like a new thing. And I think to myself It's happened a couple of times now.
Shiyan Koh: (06:59)
Who do you think built those railroads? Right? Chinese immigrants.
Jeremy Au: (07:03)
You gotta, I think not everyone knows which railroads those are. You wanna define those railroads? Which railroads you're referring to?
Shiyan Koh: (07:09)
The American railroads. A lot of Chinese labor built the railroads in the west. A lot of the western China towns are from that era. And a lot of the food even is from that era. People are like, oh, there's no good Chinese food in America, or whatever. It's, it's cause it's like the people who went over, they needed like really hardy foods, they like big plates of fried rice, it's not like, oh, let's have some sharks fin soup, or whatever. What's that Hamilton song? It's like immigrants, right? We got the job done.
Jeremy Au: (07:36)
I agree with you about that. Yeah, so I'm saying like a lot of those things that you're mentioning in terms of a tech ecosystem benefit, it feels Singapore's, I think a disproportionate winner, right? Within the Southeast Asia story. So I think there'll be an interesting dynamic.

Obviously, there's like downsides you mentioned, right? You're talking about rising asset inflation like houses and cars and fancy things in Singapore, right? I think relative wealth or, the perception of the relative wealth gap is gonna get worse in Singapore. So there's gonna be some issues there about managing that honestly. So lots of downsides that are the shadow of this relative boom for 2023. And oh, one last thing is you mentioned supply chain, right? Is logistics and shift. Singapore is the hub for logistics within Southeast Asia, right? So I think, again, Singapore disproportionately benefits this year.
I think that may change in the future years but in this current time, Oil and gas prices are still good. Singapore benefits from the oil and gas side as well. So I think Singapore disproportionately benefits this year in a year of really bad macroeconomic news and suffering for the rest of the world. So I agree with you. Obviously, Southeast Asia benefits, but I'll say Singapore benefits the most currently for this year. That's my prediction, at least. We'll see where it ends up in a year. You never know things can go wrong, right? So let's talk about losers. Losers for 2023. Who goes first?
Shiyan Koh: (08:51)
People who raise too much money overcapitalized companies.
Jeremy Au: (08:59)
Define overcapitalized. Is there such a thing as too much money?
Shiyan Koh: (09:02)
Yes. Yes. There is such a thing as too much money. So the story I always tell is at my old startup, I was in charge of the annual planning process, and the year before I left, I probably managed an annual planning process for about a hundred million dollars worth of spend.
And there's a process, right? You prioritize your project, you think about what the ROI is, blah, blah, blah. If the CFO had come to me and was like, Shiyan, by some miracle we have found 20% extra budget. Okay, now you have 120 million to do in your planning process versus a hundred million, I could probably spend that, right?
I had a good, like pretty decent list of hijacks. But let's say the CFO made friends with SoftBank and SoftBank was like, Shiyan, you now have 500 million to spend. It's actually
pretty hard to think about what the productive projects are. And now you can make some of this argument like, oh, you can do some more moonshot projects, right? Like, things are not gonna pay off immediately. Plus you can do everything else, but that's not actually how most companies work.
Like when you have more money, it just basically means that the marginal decision- making gets worse. And because of it, it feels less painful. You don't have to trade as many things off. And so what happens is you end up doing like way more things, some of which are not actually strategic. So then what happens? You have to hire like way more people and then all those people are running around trying to like add value and prove that they belong somewhere. And six months pass, you like, look at this array of stuff and you're like, wait what happened with that project, it actually delivered the thing that it wanted. And so there is something as too much money and there is raising the right amount of money for the stage that you're at. And so I think in 2021 and early 22 when money was so plentiful and it was so easy to raise, there's always like, hey, why not? I thought I was gonna raise 10, but, hey, they wanna give me 30, why not?
And so then the question is, what did they do with that money and did they put themselves out over their skis such that next round is not gonna come so easily and you raised a bunch of money at some high valuation, but your operating metrics are not there. So, and then we talked a little about this last week, but like people started to make cuts. I think more is gonna come. I think 2023 is gonna be the year of the markdown, the year of the layoff. And we have not felt the full pain of that debt yet. And I think the people who are impacted most by this are over-capitalized companies.
Jeremy Au: (11:17)
Within the dynamic. I have to ask this right, within these over-capitalized companies who are the winners and the losers? So I would say that once our losers obviously are employees, right? So you have a bunch of options and you're going to get crushed by this. Either because you've got laid off and now you've gotta enter a pretty bad job market.
Obviously, all your options are gonna be marked down because you're pretty much underwater. You're not gonna see the value of that. I also can imagine that if you are an
executive you also have a lot of options for performance. So I don't know, who else do you think wins or loses in that dynamic of over-capitalized companies?
Shiyan Koh: (11:52)
I think the winners are the people who cut earlier and they bought themselves enough time, right? The people who like got to reality faster, they're gonna win because they had more money in the bank than anybody else, and they can ride it out. The losers are the people who still have their head in the sand and think that this thing is gonna turn around faster than it actually could is, or who think they have product market fit when they don't. I mean, I think employees are definitely the big losers here.
Jeremy Au: (12:13)
I say winners are consumers who got free money or a lot of extra service for not as much. I see the IRO coming in, don't you remember the good old days where we could like get subsidized car rides because there was like a true way fight in every market for the right healing.
Shiyan Koh: (12:31)
Yes, yes, yes. And, and many other things, right? I used to live in San Francisco and I would get free groceries when all the grocery delivery companies started up really cheap transit. There was this great startup where they would park your car for you.
So it's like you would drive to your office and then the moment you left your house, you press the button in the app and then this guy would meet you and he would hop into your car and he would drive it offsite for like cheaper parking and then when you wanted to leave. Yeah, it was the best thing ever.
I was pregnant, so like I didn't have to walk from the really far away cheaper garage. I could like drive straight up to my office. This guy would pick it up and then 30 minutes before I wanna leave the office, I would press a button in the app and then the guy would bring the car back, and it was amazing. Yeah, it was an amazing, amazing service. Obviously not economic, cause you have this guy basically driving cars from like downtown San Francisco where you know, they wanna charge you like 50 bucks a day for parking or whatever. It costs me like $10. Okay. Totally worth it. And he's on a little scooter, so that's how he gets around. So you, you press that all these little guys in blue jackets come on a scooter. Fantastic. Not a great business, but fantastic service.
Jeremy Au: (13:36)
How much do you think the startup and in fact the VC was paying you for every transaction you did there?
Shiyan Koh: (13:43)
I don't know. I don't know, but I think they raised a burn, probably like 10+ million bucks. So, yeah.
Jeremy Au: (13:50)
So they must have been like subsidizing you maybe like 10 bucks or 20 bucks per transaction.
Shiyan Koh: (3:55)
At least. At least. But, you know, saw, saw me through my pregnancy, so I'm eternally grateful.
Jeremy Au: (14:02)
So winners are, no eventually reminds me of this TikTok I saw. It was like this person was like, oh, this is how I live for free every day. And she was basically just screaming off every startup freebie, and that was happening every day, but it’s been pretty viral and I was thinking to myself like this is a consumer. I was just looking at the consumer. I was like, this is like the dark times. So winners are I think companies who figure out reality because if you're over-capitalized, I think you're right, capital is an advantage. If you have a lot of it, you cut relatively early and deeply, then you can just ride out this whole storm for the next two years or three years or four.
Shiyan Koh: (14:35)
But reality's really hard, right? And no one ever cuts enough. I mean, like Coinbase did two 20% cuts like six months apart or whatever it was, right? It's hard, the evil word, zero base budgeting. That's what people need to do. Everyone's least favorite thing.
Jeremy Au: (14:53)
Wait, now we've gotta do a site quick side tangent then. But Twitter is like zero base budgeting now, right? Yeah, pretty much zero. They threw out everything. They just had an auction. I think they auction off a couple of million dollars worth of Twitter bird signs and neon lights and sculptures and-
Shiyan Koh: (15:08)
I mean, but the bigger driver is that revenue's down, right? So like, yeah, you can cut your revenue down by 40%. That's like a pretty big hole. The interest payment is coming due. Right. On that, on that deal.
Jeremy Au: (15:20)
Ooh. So what do you think's gonna happen for Twitter? And Twitter Singapore office slash Southeast Asia.
Shiyan Koh: (15:25)
This whole thing just seems like very perplexing to me. I hope Twitter doesn't die. I think it is actually a really great product that has done a lot of interesting things. It's done a lot of bad things too, right? But in terms of exposure to ideas, distribution of ideas, I think it's been really amazing and so I hope that they can get it into a format where it's an ongoing concern, which to be fair, I think if they had managed to retain the advertisers and then he had cut headcount and burn, I think actually the numbers would work out. But the cut plus the drop in revenue, I think is like a double whammy.
Jeremy Au: (16:07)
Yeah, I agree. I mean, my prediction is that Twitter as a product will survive. I think that a social network and a social graph are, I don't know, strong enough to have some sort of network effects to keep going for quite a while. Heck, look at Facebook, right? As a product. We're still using it at least old, stodgy millennials, and gen Z folks who have to hang out with millennials are still using the product. I would say yeah, but I think the revenue dropped, I just think that fundamentally, obviously everybody knows this, but Elon Musk. Overpaid. I mean, massively overpaid.
Shiyan Koh: (16:39)
He tried really hard to get out of the deal, right? He did all the stuff to get out of the deal, and he-
Jeremy Au: (16:42)
He could have just done the settlement. I think a settlement would've been the cheaper option. I mean, considering the opportunity cost of managing Tesla line, SpaceX. I mean, in hindsight's 2020, right? But I think if the sum cost was like what you want to make me do, pay you a settlement for breaking up with you?
No, I'm just gonna go into it anyway and see how, what a terrible marriage is gonna be for both of us. I don't know. It's gonna be a, I don't know. So I think Twitter survives a product. That's my prediction. I think that Twitter's price is overpaid massively. I think, like you said, interest payments are gonna be huge. I think there's a, I don’t know what's word come to Jesus moment coming up for Twitter, I would say. I don't think Elon Musk is gonna keep running it. I think he's just got too much stuff to do.
Shiyan Koh: (17:27)
Well, he had a poll. He did a poll on Twitter. Should I stay on as CEO? And everyone's like, no, you should not.
Jeremy Au: (17:34)
Well, I'm sure he has his own point of view, but I think the bankers also have their own point of view. It's like-
Shiyan Koh: (17:39)
I mean, they've already marked down the debt. Yeah. They know they're gonna take a hit. Yeah.
Jeremy Au: (17:43)
So now the question is, I think, who's gonna buy Twitter again? I guess at half the price. I guess that's what I'm thinking. Yeah.
Shiyan Koh: (17:51)
That's like a tough, that's a tough business. I think all this, content moderation is just a really hard problem. But there were a lot of really interesting ideas on Twitter, right? Which is to like, say, can you make it more of an API?
Let people build different front ends to it, and then they can filter what they want. They can set the algorithm right. And it takes a little bit out of your hands, like saying should we have hate speech or not? Does this constitute hate speech? What is this? But you haven't come up with your loser yet. Who's your loser, Jeremy?
Jeremy Au: (18:23)
Yeah. I would say that losers are middle-stage companies, so I think late-stage companies that'll overcapitalize obviously they're a huge benefit, but they do have some level of incumbency. They're the capital advantage, and if they cut, which I think they eventually will do, I think they'll slowly figure things out. But I think if you're a middle- stage company, you're like totally hammered in Southeast Asia, right? Because like, first of all, you don't have enough capital, right? Like you were an early stage. You were in growth mode, obviously, you're a little bit nimble, you're obviously still but you're still in a relatively high burn rate, right? And you definitely don't have the benefits of incumbency. You don't have the market leader position and you're fighting incumbents. I think you're in a really tough strategic spot about whether to grow or become profitable, right?
You're not large enough to grow profitable for people to care about, but you're not profitable enough for you to grow quickly on your own capital. And the problem from there would just be that it's hard to raise the next stage of capital as well, right? Which is for late-stage capital, all these US funds or regional funds are looking at these stage guys and looking, adding the main same judgment as you did about late-stage companies and saying like, these are overvalued. But I think just people just gonna stay out of middle stage. And that series B series C gap that we know exists in Southeast Asia is this, I think, getting worse, right? I think from my perspective, so yeah.
Shiyan Koh: (19:39)
Yeah, I would actually agree with that. And also to the extent that international funds were dipping their toes into the region before I think as the economy cools, they'll pull back, right?

So separate from the regional funds that. Pull back the international capital that was there before, I think we'll also pull back. So as I would agree with you, I think that's also gonna be pretty challenging for these businesses.
Jeremy Au: (0:04)
Yeah. And I think a mid-stage company, what is there to cut? Your revenue base is focused on growth. You don't have that much to cut. Compared to at least stage company.
Shiyan Koh: (20:11)
How badly do you wanna survive? You're gonna have to cut.
Jeremy Au: (20:14)
Yeah. I mean, you still have to cut still, I think the middle estate company still has the focus on growth and revenue. Versus late stage, you probably have a big enough revenue base and they probably just have to cut. And keep the revenue, that's the way to survive. So I don't know. It's, I think trying to figure out growth in this over, like you said the market is still relatively soft, right? So, it is a tough time to be a founder. For sure. I guess before we contrarian, any advice on reality?
Shiyan Koh: (20:37)
I mean, I think you just have to think about optionality, right? Of course we always wanna hope for the best, right? But you gotta make a couple of plans, right? Everything goes right plan, somethings go right to plan, nothing goes right plan. And look at what your cash and burn scenarios are in either of those plans, and act accordingly.
You cannot plan for everything going right. That just never happens. Rarely, okay? Not never. Very, very, very rarely happens. Something generally goes wrong. Something will take longer than you think it will be. And you just gotta get into reality. And I think sometimes people are like, oh, my investors are so negative.
And it's like maybe, or maybe they also see a lot of other companies going through the same thing and they're just trying to help you get to reality faster. Survival is a prerequisite for success, so make sure you survive. And part of that is, is taking the difficult actions sooner rather than later.

Jeremy Au: (21:30)
Yeah, I mean, it kind of goes back to the, I always talk about this like the asymmetric outcomes, right? For a VC you know, sometimes the outcomes are out of this portfolio 20, one makes it superstar and then the rest chug along. In that sense, right? Or close down.
But for a founder, like you said, survival, right? It's like one scenario is you keep growing and other scenarios you run off cash and hit a brick wall, right? It's totally different in terms of, I don't know, but it's a tough conversation. Do, do people think you're like overly negative Shiyan, do people not like you for saying this stuff? So since we're in such a contrary mode with each other right now, we should obviously talk about the contrarian belief for Southeast Asia tech 2023. So, what's yours?
Shiyan Koh: (22:11)
I think that the sort of prevailing wisdom is that the startups that we see in Southeast Asia are basically adapting successful models for the west for this market. And we shouldn't hold our breath on true technical innovation. And so my contrarian belief is that we will start to see technical innovation come out of Southeast Asia. And there's two things that I am bullish or excited about. One is Vietnam becoming more of a manufacturing base. Japanese and Korean consumer electronics businesses have invested a lot over the last 20 years and building up that capability.
Vietnam actually has a really great, talented pool of electrical engineers. It's often probably overshadowed by more software, business process, outsourcing types of things. And I think with the shift of Chinese manufacturing to second source in Vietnam you're gonna see more of that.
And so that kind of cuts down on the cycle. So they're gonna be on the cutting edge and they're gonna also start innovating there. So that's sort of one trend that I'm excited about. And the other is, I think you're starting to see more push towards figuring out ways to commercialize research out of the universities here in Singapore and elsewhere.
And I think that's always been a big gap, right? The big gap between research and commerce. Met some folks starting up pre-seed and seed healthcare funds. You don't see those a lot in this region. Aimed at trying to find some of this research and, and bring it to market. So that's my contrarian view is we're gonna start to see real technological innovation come out of Southeast Asia.
Jeremy Au: (23:43)
Like what kind of technological innovation? Like new confusion?
Shiyan Koh: (23:49)
I think there's drug discovery, bioinformatics machine learning or AI statistical approaches to drugs. Even sort of therapeutics, so cancer, drugs, things like that. You know, There's a lot of work on healthcare as it relates to Asian populations because a lot of RND in the west has been done on Western populations and disease actually presents differently in, in Asian people. It follows that you can also find therapies that work differential across populations. Don't be so skeptical Jeremy, this is a classic Singaporean problem. Everyone always thinks everything outside is better. They don't like respect what happens at home.
Jeremy Au: (24:23)
Wait. Hey. I feel just the attack here. I was, just impressed that, the technology you pick was probably, yeah, one bound further. If you had asked me, I'd say like that technology innovation, I was gonna say was like I think that there's a lot of e-vehicles starting to come out. Yes. So I was gonna say manufacturing assembly integration. There was just probably one, honestly, one knowledge bound lower than bioinformatics, for example.
So it'd probably be like one bound lower if I was say, that's emerging green shoots, but bioinformatics and I don't know, genetics feels like, I know it feels. That could be winner, yeah. Okay. I guess it was contrarian, right? It's fine. I'm not disagreeing with you.
Shiyan Koh: (25:07)
And then one more piece of data that I will offer, I don’t know if it's data. One more anecdotal thought I will offer is I am meeting more young people with crazy ideas. And that gives me hope because that means they're actually trying to allow themselves to dream bigger. And I think that is a prerequisite for actually trying to do bigger and harder things.
Jeremy Au: (25:27)
Oh yeah, I do like that actually. It's always heartwarming. And then you're like, and then you're like the cranky old uncle or auntie who tells them, well, that's a steward of capital. Startups are really hard and you have to face reality. And yeah.
Shiyan Koh: (25:44)
Both can be true. Both can be true. I do think like if you wanna do big things, you actually have to believe that it is possible and obviously belief is not enough, right? You need to have skills, you need to have capital, you gotta get all the resources together, whatever. But belief is a big part of it. Otherwise starting a company is a negative expected value proposition in general, right? So you have to be a little bit delusional, right?
Then the question is like, how delusional are you? And so it heartens me to meet more young people. SMU has an incubator and I sometimes jump in to judge for them which projects can join their incubator. And I definitely met some wacky people and I was like, oh, I like this. I like that there's some weirdos.
Jeremy Au: (26:24)
Aw, this is heartwarming. I wanna frame that manifesto. Startups is a negative expected value venture enterprise, but I really like weirdos. That's the manifesto here. I mean, you're right. I mean, tech is all about weirdos who want to build a future, right?
We're all weirdos, right? We're talking about the future and we're not, yeah, present in the moment. On that note, I wanna share about my belief. I think my concert and belief is, I think obviously there is a lot of interest in green technology, climate and so forth. Obviously, I wanna first say that I do believe that climate change is real.
Shiyan Koh: (27:00)
I can't be on a podcast with a climate change denier. That would be too much a bridge too far.
Jeremy Au: (27:06)
And I also believe that I think that there should be more government action. I remember actually like over a dozen years ago, I mean, I was in a class and and I was just looking at this climate change. There was so much hope a dozen years ago and everyone was debating and then I kind of laughed, right? And then the professor was like, Jeremy, I noticed that you're, you're laughing. And I was like, why are you laughing? And I said, well, these predictions for, to save the world depend on like China and India to taper back the energy usage, which is like not gonna happen.
Shiyan Koh: (27:35)
I mean, to take that view, why should they, right? The climate change problem was created by the west. They've been industrialized for 200 years before India and China. And they can get off their high horse. On a per capita basis, the west emits way more than India and China.
And it's not reasonable to say, hey, you need to, yeah, for the good of the world, you need to go do this. And okay, great. You do it yourself first, lah. Right? I mean I'll let you finish yours before I come be disagreeable.
Jeremy Au: (28:00)
Yeah. Yeah. I think the tricky part that we have here is that we zoom into Southeast Asia, right? Then obviously there's the two dynamics, right? Which is, like I said, there's climate change, which is an issue that all of us should care about in aggregate over the medium, the long term and obviously has some impacts in the short term, but in the short term, there's massive energy poverty, right?
Which is about folks just can't get enough energy, right? Because energy is about powers your phone, your lights to be able to study at night or be more productive to do your sewing. The cost of energy is still actually really high in Southeast Asia, right? And so, it's not available.
It's not reliable. And so I think the argument for Southeast Asia is it needs more energy. Okay, so I'm just talking about why energy is great and I think obviously there's energy poverty on one side and we can also solve for climate change, right? I'm not saying don't do both. I think a tricky part is obviously there's this huge, I think, interest and I've been meeting a lot of people, for example, in Singapore who are really passionate about green. About climate change, et cetera.
And then I think they have this dynamic where they're trying to build for Southeast Asia, and I, I think it reminded me at some different level, right? Which was like, is this, early. And what I mean by that is I think the talent is interesting in climate change in obviously across the region, in different pockets. And obviously, a lot in Singapore, which is honestly, Singapore is closer to a tier one markets in terms of GDP per capita, right? So the affinity of climate change is much higher than you would see, for example in KL for example, right? Or Manila, right? So in terms of the affinity to this cause, but the market is not there, right?
Because the levers for you to change, or improve, for example, is to convince, for example, local, medium and large enterprises to lower carbon emissions. Well, I don't think local, medium and large enterprises, obviously, I think Singapore's a little bit ahead. For better or for worse in this dynamic. But I think if you go one level deeper into like mom-and-pop shops and everyone else, I think the level of awareness, let alone interest in this compared to the real-life issues of surviving inflation, surviving the economic crisis and recession, right? Growing the company are like number one, number two, number three, problems, right?

And this is like number six, number seven at best. So I think there's a little bit like the talent for, I have a soft heart and I'm working to work with ESG and climate tech folks in Southeast Asia. And I also feel like the local markets are not thick enough, or perhaps it's a little bit too early to be a really fertile ground for everybody. So I think that's gonna be interesting.
Shiyan Koh: (30:27)
I'm actually gonna disagree with you on this, right? I don't think people are gonna do things against their own economic interests, out of the goodness of their heart. I think that's, no, not gonna happen.
However, I do think that some of this pressure is actually economic. So suppliers who are selling into the US and EU are getting requests from their end customers to show, Hey, are you doing anything for the climate? Like, how green is your operation? And that trickles down into their supply chain.
And so they are actually then forcing their own supply chain to also report on their carbon emissions. And so the carrot is right, I need to continue selling into these markets, right? Otherwise, I don't get certified. It's like what happened with the shoe companies and child labor, if you remember, in the nineties, right?

Which is like, hey, Nike, Adidas, whatever. They don't wanna pay you if you're using child labor in some of these markets. So it's a similar dynamic. It is actually driven by an economic imperative. We have a portfolio company in this space, which is why I do know a little bit about this. Governments are offering low-cost financing as a way to help these companies, these SMEs who are little subcontractors in these bigger supply chains to adopt this software to become compliant.
And therefore grow their business. So, so I think that's how it happens. No one's gonna do something out of the goodness of their heart. They do it because, hey, I'm gonna get access to a cheaper loan. Or I can no longer sell to this customer because I didn't implement the carbon software. But I mean, honestly, you know what we could do? We could just not air condition all offices in Singapore to an arctic temperature. That's something everyone can do that's very easy. Just make it two degrees warmer. Okay. And then we don't all have to wear sweatshirts and long pants and just embrace the fact we live in a travel climate and maybe we can like, use less energy.
Jeremy Au: (32:19)
Yeah. I think that's like you said, I'm sympathetic and empathetic. I have a soft spot, right? I also care about this issue. I just think that 2023 will just be a really tough year because I think the rhetoric and bullishness, at least on the category versus I think the actual market reality.

And actually, I think you're right, by the way, thank you for reminding me. I agree with you that there's a pull factor from the developed markets to care about this more. And actually, I think all I would say, I think if I had to be bullish, it would be on energy cost-saving companies. Or energy efficiency companies.
But I think anything that explicitly labels itself as green or ESG and saying that this is gonna be the thing or value proposition that's going to give me venture capital, all customer capital is probably gonna find that it's not the most interesting path they about a proposition. So I agree with you and energy savings, and efficiency. Productivity improvements. I think that's the way I, I suspect that any ESG or climate change company is gonna like relabel themselves to be really focusing themselves on the business objectives.
Shiyan Koh: (33:24)
Yeah. I would just say, Jeremy, while we have this podium, and I mean, who knows how big our audience is, right? Like, hey, climate change is real. There is a CO2 budget if we want to keep temperature rise within the envelope of one and a half to two degrees. And essentially the math is if we don't do anything, we're gonna hit that in 20 years. And that is gonna leave vast swaths of this planet uninhabitable.
And so plant some trees, man, get your government to plant more freaking trees. But yeah, it's a real, big problem. And, and the collective action, right? It's very, very hard.
Jeremy Au: (34:01)
Yeah. On that note, yeah, I mean we're both parents. We both have children and potentially grandchildren in the future, and they're gonna inherit this earth that we leave behind. Hopefully, well, we already know we're gonna trash this environment for-
Shiyan Koh: (34:12)
I mean, human ingenuity can hopefully come through, but like, if you haven't read, there's this great book, Ministry of the Future. It's a novel, but, but about climate change. I mean, I think it's very, very, it's an excellent book. But yeah, we gotta fix it, right?
Jeremy Au: (34:28)
Yeah and I want to clarify. I'm not saying that if you're doing ESG or green, I'm not saying that you'd stop doing it. You should do it for the sake of us. I'm just saying that just watch out in 2023. Do not get caught between a trap of all the social media stuff that everyone is doing, thumbs up and saying we're really interested in supporting you versus I think the colder reality of, business objectives in Southeast Asia. So, and I do believe in 20, 30 years timeframe over that patience, I think green ESG will have that long-term horizon.
Shiyan Koh: (34:59)
We don't have 30 years, I'm telling you, 20 years, which means we need to act now.
Jeremy Au: (35:03)
You mean 40 years? I mean, we can do this in 50 years, right? Oh, I mean 60 years. I mean, that's okay. Our grandkids can inherit, right? Shiyan is just shaking her head. Come on. This is the way we don't deny the problem. We just postpone it and procrastinate. On that note, let's kind of recap. I think the three big winners and losers. Can you recap, your winner, loser, and contrarian?
Shiyan Koh: (35:29)
Winner, Southeast Asia, loser overcapitalized startups and contrarian, I think we're gonna see more technical innovation, not just business model innovation, come out of Southeast Asia.
Jeremy Au: (35:38)
And for myself would be winners, Singapore, disproportionately more while Southeast Asia still benefits. Loser would be middle-stage companies that are looking to raise capital and can't figure out whether to grow or be profitable. And contrarian belief is that green and ESG companies will be focusing on their business objectives this year and I think we'll see where it goes from there. And we will revisit this in one year's time, Shiyan. Wouldn't that be exciting? We'll be like we're gonna see whether right or wrong, it'll be the metric question, right?
Shiyan Koh: (36:07)
That'll be fun. It's always, what is it? Humbling, right? Hold yourself accountable, be intellectually honest about what you are right and wrong about.
Jeremy Au: (36:14)
You'll just like watch yourself on your phone. And you'll just like, what was I talking about? That's the stupidest thing I've ever said. Thanks so much.
Shiyan Koh: (36:24)
All right, thanks Jeremy. Have a great week.