Indonesia: eFishery’s $1B Valuation Collapse, 2024 Fraud Allegations, and Sovereign Fund Exits with Shiyan Koh - E525

· Indonesia,Southeast Asia,Startup

“What's your thought about taking money off the table, especially in the context of Southeast Asia? I think a lot of it depends on who you are. So, as an angel, right, your LP is you. And so, I think there's the question of what your hurdle is and what you’re underwriting for. As an angel, you can be like, “Hey, ten X feels pretty great” or “three X feels pretty great.” And as an angel, you’re also managing your own personal liquidity. You can take it and recycle it back into other investments. If you’re a venture investor with a ten-year fund, and you get three X in a year, your LPs will be like, “What are you doing, man? That’s not what I paid you to do.” So, I think a lot of it depends on who you are as an investor and what your hurdle rate is. For a lot of angels—those people who made the initial checks on the founder and bet early—it is perfectly rational and reasonable, once the major investors come in, to say, “Hey, I’ve done my part, and I’m going to take the money off the table.” And then there’s always this question: do I take it all off, or do I let some ride?” - Shiyan Koh, Managing Partner of Hustle Fund

“I think another key takeaway is that VC funds are going to double down on due diligence again. During the boom times, the average due diligence time shrank from five to six months down to one to two or three months. That’s probably going to creep up again. Obviously, the due diligence was long before because there weren’t many DCT providers and a lot of people were still learning the processes, so there was some efficiency gained. But I think it’s going to stretch out again.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast


“I want to tell everyone that starting a company is hard. Growing a company is hard, and getting to a million in revenue—that’s an accomplishment. Getting from one to ten is actually quite hard, and then the same with ten to fifty—it’s pretty hard. Fifty to a hundred is hard, right? Every step comes with different problems to solve, and it’s hard. You shouldn’t expect it to happen overnight, because if you’re actually making something of value, solving someone’s real problem, then there is value to be captured.” - Shiyan Koh, Managing Partner at Hustle Fund

Shiyan Koh, Managing Partner of Hustle Fund, and Jeremy Au discussed:

eFishery Fraud Allegations: Once an Indonesian agritech darling, eFishery’s end-to-end aquaculture solutions were lauded for their potential to improve farmers’ productivity and incomes. eFishery had achieved a $1 billion valuation in 2023, backed by investors like Temasek, Sequoia, Northstar, and GGV Capital. Whistleblower allegations against the founders surfaced despite significant financial oversight, including audited accounts and reputable due diligence processes. Shiyan emphasized the trust deficit such incidents cause, and drew parallels to Zilingo’s earlier downfall which caused a chilling effect on Southeast Asia’s growth-stage investments.

Early Exits Signals: Jeremy highlighted the divergent strategies of eFishery’s investors during its Series D round. Notable exits included Ideasource, which achieved a 40x return over a decade, and Sui Ling Cheah from Wavemaker, who bought in via secondaries in 2019 and accomplished a similar return in five years. These moves showcased varying approaches—early-stage investors seeking liquidity versus late-stage investors balancing signaling effects. They also discussed the challenges of timing exits in Southeast Asia’s market context, balancing growth ambitions with prudent capital recovery.

Ecosystem Red Flags: Jeremy and Shiyan debated how weak financial governance impacts Southeast Asia’s startup ecosystem. Citing eFishery’s CFO resignation and earlier signals as red flags, they stressed the need for stricter board oversight and robust due diligence practices. Jeremy noted how fraud incidents strain ecosystem trust, making diligence processes longer and more expensive. Drawing parallels to the U.S., Shiyan emphasized how trust and long-term reputation are critical for founders aiming to sustain multiple ventures. They discussed how practices like misreporting revenue—common in sectors like e-commerce—distort valuations and create cascading governance failures.

Additional topics included Southeast Asia’s funding culture, revenue-quality metrics, exit dynamics for early employees, and honest advice to founders.

(00:00) Shiyan: you need to conduct yourself in a way that's Oh, like I treated my investors.

(00:03) I treated my employees well. I tried to deliver a good outcome, even if it wasn't the one we all wanted. I behaved in a way that shows that I'm a good actor in the ecosystem. Hey Shiyan

(00:59) Well, (01:00) that's like way too much when you're this close to me do what it's somehow it's less intimidating when we're like We have the separation of the screen.

(01:07) Jeremy Au: Yeah, I know. The high energy opening.

(01:10) Yeah. This is our first time recording in person together.

(01:13) Shiyan: And it might be our last.

(01:15) Jeremy Au: It was like, no, this is too much. I need more distance. I need kilometers of distance.

(01:20) Shiyan: Away a little bit.

(01:22) Jeremy Au: new year 2025. We took a little break and now we get to chat a little bit about what's been going on in the ecosystem.

(01:28) Shiyan: The news doesn't stop, Jeremy. Oh

(01:30) Jeremy Au: yeah. We can go for holiday, but news doesn't stop. And the last episode that we had, we did five predictions and five wishes for the Southeast Asia ecosystem.

(01:39) Shiyan: And congratulations. I think Santa was listening as we were making our Christmas wishes.

(01:44) Jeremy Au: to be exact, I wished for better accounting.

(01:49) I didn't wish for

(01:51) Shiyan: more fraud

(01:52) Jeremy Au: to be happening in Southeast Asia, but you can't bet against more fraud in Southeast Asia. That's a losing bet.

(01:57) Shiyan: That's such a, so depressing.

(01:59) Jeremy Au: (02:00) It's imagine your shirt, it's you can't bet against Southeast Asia fraud. Okay, and it was alleged, it's alleged, right? So it's allegations, obviously it's quite serious.

(02:09) So the big news that has come up is that eFishery their founders have been suspended by the board of directors. And it's very fuzzy in terms of the details. Obviously it is a claim of embezzlement which is quite serious because it's a very serious allegation, right?

(02:25) And this allegation is actually quite provable, right? Did you see the transfers, et cetera? There must be some substance to the whole set of parameters, but it's very unclear to me because there's so little public detail about what's going on. Yeah.

(02:39) Shiyan: Yeah. But I think what's worrying is that, this is a pretty late stage company, at least from its financing history.

(02:45) It has a host of really reputable Investors on board who numably conducted deep diligence. I think a company of this stage also generally has audited financials, right? This isn't like (03:00) some six month old startup that's running the whole business on QuickBooks. So I think that's what's also a little bit worrisome.

(03:08) And it's just not a good look, right? Let's be honest, it's just not a good look for the ecosystem. And. Yeah, a little bit disappointed.

(03:16) Jeremy Au: Yeah, so I think I'm of two minds. I think first of all, my wish was that there was better accounting, and because we have good accounting, the board wouldn't have made this allegation against the founders.

(03:26) And also the founders will record it sooner and clean it up earlier. Or the founders also would not be in this position of having been suspended and while we wait for this, set of, legal processes to work out. So better accounting would have made life easy for both the founders and for the board of directors.

(03:40) Let's talk a little bit about the history of eFishery, right? So I think not everybody knows what eFishery is. So eFishery, I think the thesis behind it is that aquaculture or fish farming in Indonesia is very fragmented, is very inefficient, and these fish farmers, for example, aren't able to bargain for supplies at a good rate.

(03:59) They're (04:00) not able to improve the productivity of their fish farms using automated fish feeders or water testing and so forth. And also they're not able to maximize the value of their harvest. by trading it out. And so eFishery does this end to end where they support the farmers, increase productivity, help them trade.

(04:16) And that's supposed to give them a better returns for the farmers. And then eFishery gets a stake of it. And then eFishery has been the darling of Indonesia agri tech over the past. 10 years, I think. I would say so. 15, right? I think it was. Yeah. And I think over the past five years, their success In terms of achieving the Series B, Series C, Series D, last year, inspired so many Indonesian agri tech companies to be founders, but also created a lot of interest amongst investors who suddenly are investing in agri tech deals and it was like, e fishery for chicken, e fishery for rice, e fishery for, there's a lot of companies that have, it's just but the core thesis is what is the full stack end to end, Of the whole supply chain from the start from inputs to (05:00) farming, productivity to outputs to trading. How can you manage that in a more controlled fashion? What do you think about that original thesis for the Indonesia market?

(05:08) Shiyan: Everything can make sense at the right price. Yeah. Yeah. I think all the things that you said in the original piece is like, Oh if we could make farmers more productive, wouldn't that be great? And shouldn't we be rewarded for a piece of that? Yeah. And, Oh, there's like different levers for making them more productive, right?

(05:21) We can lower cogs through better negotiation on the feed side, right? We can improve yield through, more modern management practices and we can improve pricing because we'll get, . More aggregate power and we can, so all those things are like non crazy assertions, right?

(05:38) Then I think the question is what should those Things be valued at, right? What are we including in this revenue? And I think we actually did an episode on this last year around the time of the big round and you had mentioned I think some baked in that revenue number is not just like software and IOT and all these sort of more recurring things, but it's also just like low margin fish feed revenue.

(05:58) Which you probably don't want to apply (06:00) the same multiple to. And again, right? What's the right price for this kind of business? And were we thinking about it and how much more could it grow? I think those things are things to like, think about.

(06:11) Jeremy Au: Yeah, and I, that's entirely right because the quality of revenue is different.

(06:14) And I think that's what trips up a lot of Western or Western trained investors because a SAS company, the B2B, SAS product one, SAS product two, SAS product three, they actually have the same finance and revenue model. But I think the tricky part is that for Southeast Asia, a lot of these conglomerate type of, end to end, they actually have a fish feed revenue, the logistics business, and then they have the trading.

(06:37) And then each of them actually has their own multiple like trading should be similar to Olam, because they also do trading, and then logistics would be a different thing. So I think You know, but I think what happens is that a lot of people take the whole consolidated revenue and they put a technology SaaS multiple.

(06:52) Which also at the peak was crazy. And so you have a double craziness, right? Which is Southeast Asia. You're equating agri tech (07:00) or logistics or some sort of very brick and mortar business revenue, which is low quality revenue and lower recurring revenue. And then you make it seem like B2B SaaS, you add the peak valuation multiple, and there's a double error.

(07:14) That's already happening on a fundamental basis, which is, I think the concern already at the Series D was, I think a lot of investors were like scratching their head. Kazana backed out of initiating the lead investors for Series D and it backed out.

(07:26) Shiyan: Yes, but there's still another Malaysian sovereign, right?

(07:29) Kuop is in.

(07:30) Jeremy Au: Oh, yeah. So I think it's interesting to see and so I think the question from my head is, which I still don't know because again, these are allegations and I still don't know the facts on my side, but. Is it like, because the financial performance is underperforming since the past two years, the multiples have dropped the quality of revenue and revenues have been disaggregated.

(07:47) And there's some sort of come to Jesus moment where everyone's like grappling at that, or is that like more serious material fraud or embezzlement, which is what the board is claiming, which is much more different, right?

(07:57) Shiyan: Yeah. I think if it were just pure (08:00) performance, it feels like the announcement would be different, right?

(08:02) We're making cuts. Yeah. We're slimming down our product portfolio. We're concentrating on our core, things like that. I don't think it'd be like we suspended the founders because of embezzlement. That just feels like a much more serious charge. And I think more worrying, right? Because at the end of the day, like what makes startups work is there is an element of trust to it, right?

(08:25) Which is that somebody starts a business and at the beginning, there's nothing right. And you have to be like, Hey, I believe you, you can go make something of it. And over time you deliver against, the plan or the vision and people are like, Oh, it seems like it's working. Like we'll fund the next leg of growth and so on and so forth.

(08:45) But these things like destroy trust and send the chill over the ecosystem where then you're like I can't trust anything. Like I have to, it'll make diligence processes way longer. And I just think it's just terrible.

(08:57) It's just terrible for ecosystem. It makes me profoundly (09:00) sad.

(09:00) Jeremy Au: We had Zilingo, which is actually a lot of similarities to this so far, which is a full stack helping textile makers do all of their materials, efficiency, productivity, trading. So it's similar end to end.

(09:13) And also I think South, strong Southeast Asia routes and operations. So I think that nightmare happened several years ago and now we have another one. So I think people could say there's a one time thing. And then also I think your main argument is some of the smaller cases of fraud that we've discussed in prior episodes were one off emerging market items that were caught, maybe relatively smaller, but this as large as Zilingo in terms of the valuation, very late caught, or at least the allegations are coming in very late.

(09:45) So I think it's going to have a huge chilling effect on All growth investors in Southeast Asian companies.

(09:51) Shiyan: Yeah, it's not great. But some people made money on the deal.

(09:55) Jeremy Au: They did. We were discussing that there were three people that were able to exit their positions (10:00) in the last series D. ? Northstar,

(10:03) Shiyan: and Sui Ling from Wavemaker.

(10:05) Jeremy Au: Yeah, she was an operating partner and it was interesting because I think all of them actually showed different approaches to their investment style, I think, if you think about it. NorthStar came in early in terms of, not as early as a, Southeast Asia growth investor would be.

(10:20) And then when they sold a position that covered their original investment amount. All this data comes from Industry Asia, obviously. I think the second was that Ideasource came in the earliest, right? Yeah, we have an angel track and then they exited the they exited like a large chunk of the position, but not the entire position.

(10:38) But they were able to realize about maybe 40X MYC over almost 10 years, nine, 10 years. And then Suningcha bought secondaries in 2019 and then she sold in 2023, 2024. And then she also got about a 40X return but she exited her whole position which makes her the best performing fund manager in Southeast (11:00) Asia.

(11:00) Because she got, because the, IEA Source did 40X, but it held for nine years, right? And then she got 40X as well, but she did it in five years. Yeah. Yeah. Congrats, Lily.

(11:11) Yeah, it's interesting. Now, I think if anyone is on the cap table of her as she exits, everyone's going to be like it's time for me to take some money off the table. What's your thought about taking money off the table, especially in the context of Southeast Asia?

(11:22) Shiyan: I think a lot of it depends on who you are, right?

(11:24) So as an angel, right? Your LP is you, right? And so I think there's what is your hurdle and what are you underwriting for? And as an angel, you could be like, hey. 10 X feels pretty great. Or three X feels pretty great. And as an angel, you're also managing your own personal liquidity, right?

(11:39) Which is basically Hey, I could get, let's say three X in a year. That feels pretty good. And then I can take it and recycle back into other investments. If you're a venture investor, you have a 10 year fund, you get three X in a year. Your LPs will be like, what are you doing, man? That's not what I paid you to do.

(11:54) So I think a lot of it depends on who you are as an investor and what your hurdle rate (12:00) is. I think for a lot of angels. Who were those people who made initial checks on the founder and bet early it is perfectly rational and reasonable once like the major investors come in to say Hey, I've done my part.

(12:12) And I'm going to take the money off the table. And then there's always this question do I take it all off or do I let some ride? And do I cover my cost? Do I more than cover my costs and let the less right. And again, that's given the company's current valuation and what you know about the progress, do you think that is fairly valued?

(12:30) Is that aggressive? Hey, they're going to take some time to grow into that. Is it. Undervalued Hey, I actually think there's way more here that people are not seeing. I think that really influences how much to take off the table or not. Yeah. And so it's a constant debate with fund managers, right?

(12:45) We, and I think some people have religion on it. It's you've got to hold on. Yeah. Other people are like, Hey, we re underwrite it every time. Like we have to ask ourselves if we're not a buyer at this price, are we a seller? So I think that's it's like an interesting, it's an (13:00) interesting philosophical debate for folks, but I think in general, as a fund manager, people like it when you give money back to them.

(13:07) So there's also this psychological impact of maybe I'm going to lose a little bit of upside, but I'm giving DPI back to my LPs. And. They can come and turn around and put it into my next fund. And I'm willing to sacrifice a little bit of upside to have that forward momentum. And then there's other people who are like, I have no trouble raising my next fund.

(13:28) I'm just going to sit and hold. My LPs will thank me later, so I think there's so many different considerations in terms of like how people think about when to exit.

(13:36) Jeremy Au: So there are actually four types of investors that we saw from this process, right? I think the investors who kept and held on for the ride, those who sold enough to cover their initial investment check, there are those who sold partially so that they realized some return, and there were those who cashed out entirely.

(13:53) Entirely. Sui Ling, so she cashed out entirely. Of course, as I said, also, these are also different investor types as well, right? So (14:00) Northstar is a reputable, straightforward, legit, but large. And so them selling it actually creates a large signal to the market that, if they sold their entire stake, I think it will cause a lot of loss of confidence for the new investors coming in.

(14:13) But on the other end of the scale, Su Lingxiao, who is a small individual investor with a small quantum, selling an entire stake because of those liquidity reasons, perhaps would be very understandable and would not create a negative signal. for her to cash out. So I think it's an interesting dynamic there.

(14:29) I think it really makes me wonder to myself what are the key takeaways here for the ecosystem?

(14:35) Shiyan: I think as a founder, I don't know, as a human being, don't cheat, la! I just, I feel like it's just so upsetting. I think you're trying to build a business and you're like ruining things for everybody else.

(14:48) , It will get found out in the end, right? Like it's going to be, it's going to be there. I think, there's always a little bit of messiness when people get started. So I think people have some understanding of Oh, okay. Maybe your RevRec was (15:00) not like super perfect at the beginning.

(15:02) Because you were trying to figure things out. I think over time, like by the time you get to series A, you should have a proper head of finance. You should start putting in place some of these like cleanliness and hygiene factors. Definitely if you are anyone who was like thinking about getting ready for IPO, like all this stuff has got to be buttoned up, like you're not going to, you're not going to go out with a reputable underwriter with, this kind of situation.

(15:25) And so think about what your end game is here, right? Even if you're just purely self interested in the long run, you really should be you really should be trying to build a clean ship. I think the one thing we didn't find in the News was like, did the founders take any money off the table?

(15:42) Jeremy Au: I'm clear. I'm sure as the details check out, I'm sure some of those details will come out. I think what I think about actually is that, there was some micro signals. I think the CFO left, so they joined and then left like a fishery. And then I think it's always a (16:00) signal.

(16:00) I think Zilingo as well. When the CFO left. For Zalingo, for him, Zalingo is interesting because he came from a very reputable bank and then he came in and then he left very quickly within a year. So I think, for investors, you always have to be aware that if a CFO or senior executive is leaving, it's really important to do a strong exit interview.

(16:21) Just to be like, And look, people can leave all the time. You can be tired. Chemistry. Chemistry. There's all kinds of reasons why a senior executive leaves. But I think it's really incumbent on the board to really make sure that exit interview is done. Because a lot of exiting executives they're covered by confidentiality agreements.

(16:39) They don't want to be a whistleblower because whistleblower, there's no whistleblower protection in Southeast Asia. So I think, it's a bad situation to be in for a departing executive who is departing because of perhaps disagreements on how these statements are done. So I think it's really important for boards to do that level of a clarity or trust with the executives.

(16:59) Shiyan: (17:00) Yeah, that's just that's just the pits.

(17:01) Jeremy Au: Yeah, no, it's pits. I think the another key takeaway is I think VC funds are going to double down on due diligence again. I think that during the boom times, I think, the average due diligence time shrank from five to six months down to one to two to three months for due diligence.

(17:17) So that probably is going to creep up again. Obviously the due diligence was long also because I wanted a lot of DZT providers, a lot of people learning the processes. So there's some efficiency there, but I think it's going to stretch out.

(17:29) Shiyan: What I'm saying really is that anybody who wants us to do diligence on them, we can just plug straight into their bank account and I could just run analytical software on it against what you claim your financial statements is.

(17:40) Jeremy Au: The IRBC funds is effectively built that bridge in I won't say the names, but that's part of it. It's hard

(17:46) Shiyan: to get them to, it's hard to get founders to do it.

(17:48) Jeremy Au: Oh, it's something that founders tend to agree to because

(17:52) Shiyan: they're desperate for the money.

(17:53) Jeremy Au: They're desperate for the money in Southeast Asia.

(17:56) So I just think that it's whether the VC funds wants to invest their (18:00) limited management fees to create like a finance and engineering audit team effectively, which is not normally what they focus on. They're focusing on value audit, sorry, value addition rather than audit. Because I VC perspective, it's two ways, right?

(18:12) One is at due diligence, which is every two years, You do want to due diligence work already. So you already know supposedly anything that's good. And then in two years time, you're going to fundraise again. So somebody else is going to do due diligence. So like the intervailing period doesn't feel like a massive risk factor.

(18:30) When you should be focused on increasing the value. Until it

(18:32) Shiyan: is.

(18:33) Jeremy Au: Until it is, but then, do you want to I'm just giving you an example here. I made an investment, I deploy my engineering team, and I find out like, oops, there's already fraud, 40%. Like

(18:41) Shiyan: maybe you can clean it up, right?

(18:42) Jeremy Au: Yeah, but then you just write off the investment and just be like yeah, so I think that structurally there's an incentive towards value addition rather than.

(18:49) Shiyan: That's true. That's true. That's pretty, it's just janky.

(18:52) Jeremy Au: It's janky and I think it's terrible because, we talk about people who put money off the table, but normally pulling money off the table is because the, it's, the (19:00) money goes well and then you take money off the table, which makes sense, and then the company keeps growing.

(19:04) That's what it is. Or maybe the company has a plateau of jobs, but because of market factors, because the pandemic happened, because competitors moved in. I think there's all kinds of rational reasons, but I think, if I was a growth stage investor from America and I got Basically screwed because from my perspective, the prior investors didn't put enough financial controls and governance to make this happen.

(19:26) Then I would be like, I don't trust all of these series, a growth stage investors and early stage investors who made. Representations to me and on a board of me that this company is okay. Because now, if you're saying like, okay, over the past one year, since the investments embezzlement or something happened, then that's incumbent on the, but if the due diligence point was done by the growth station best and stuff was shit, I guess was happening before then what was the previous investors doing?

(19:55) Yeah. You said, yeah, I'm sad.

(19:58) Shiyan: Just feel like life is too short (20:00) to like, blow yourself up this way. Yeah.

(20:03) It's more honorable to blow yourself up hey try, you tried to do something really hard, and it didn't work. Not like. You went and committed fraud. It's like

(20:12) Jeremy Au: alleged fraud. Okay, that statement is for all founders who have been confirmed to have done fraud in the past.

(20:18) Like I said, then there's a X percentage chance that, these allegations are found to be false, right? So I think that's one. So let's see how that shakes out. But yeah, it's definitely not, it's still confidence breaking. It reminds me of, it's what they say about like a flight, right?

(20:31) Regulations, safety regulations, like every part of that safety regulation is written in blood.

(20:36) Shiyan: Yes.

(20:37) Jeremy Au: Because some plane had a crash and then they created a new policy which is like, Oh, the door of the cockpit pilot cannot be entered by random passengers because people will try to crash the plane.

(20:47) Shiyan: Yeah.

(20:47) Jeremy Au: And then that's one. And then the second thing is Oh, it turns out that pilots who are by themselves may sometimes crash the plane themselves and lock people out of their thing. So now you need to create a policy where nobody, there must always be two people, another person in the (21:00) plane.

(21:00) So that when a co pilot steps out, then the, stewardess is in there to be there just in case the pilot decides to do something funny. So like every step is like a screw up so I feel this kind of screw up or at least, scandal is necessary. To get people to be like, Oh, the chances of getting caught is high that I thought, and the reward of doing so is lower than I thought.

(21:24) Shiyan: If you're an engineer in Canada, you get this ring that's made from the metal of a collapsed bridge in Quebec. Wow. It's like a reminder of the responsibility of an engineer. Oh. What can go wrong if you like, don't do your math properly?

(21:41) So we need A VC ring forged in the, from the metals of bad accounting. I don't know what the equivalent is. You don't have a bridge, but what can we do

(21:51) Jeremy Au: you take all of the, I don't know, the audit paper statements and then you either recycle them into a, I don't know, paper fan or paper ring.

(21:59) (22:00) Yeah. I think It's a real problem. And I think, I think everybody has to step up, right? I think VCs have to step up in terms of ensuring the governance, right? And controls. Just to make, because it's just a good practice anyway, right? And I think if it's designed properly the way that it's done in the U. S. It can be actually be relatively lightweight for founders. I

(22:18) Shiyan: actually think there's obviously fraud in the U. S. as well, right? Yeah. But I think part of it is that, In the U. S., let's just real talk, right? The probability of any one startup succeeding is low. This is a high risk sport, right?

(22:32) We're not becoming accountants here. And so people know that, or eventually they realize that, right? And so they're not playing for one startup. They're playing for repeated shots at startups. And if you think the probability is that, your startup is probably going to fail, or it's not going to be, like, the unicorn, You just want to have more shots on goal.

(22:54) So you can't commit fraud in your first or second attempt because you're going to lose out on shots on goal, right? People don't want to work (23:00) with you anymore. And so there, I think is a little bit of a long term perspective on like, how do I operate in this ecosystem for the length of my career in a way that makes sense?

(23:10) And . Sam Altman is the CEO of open AI today. His first startup was not like a giant success.

(23:15) Jeremy Au: Yeah. It was effectively a medium.

(23:16) Shiyan: Right. And but that was okay. It's not that everything you do has to be a giant success, but you need to conduct yourself in a way that's Oh, like I treated my investors.

(23:25) I treated my employees well. I tried to deliver a good outcome, even if it wasn't the one we all wanted. I behaved in a way that shows that I'm a good actor in the ecosystem. And like fraud is the opposite of that, right? And so we all need to like be on the same page about how to operate an ecosystem to make it better for all, for everyone else.

(23:46) Because if it is all like zero sum and cutthroat and I don't know who's cheating, who and whatever, then it's it doesn't work.

(23:52) Jeremy Au: Yeah. And I think that's where the dynamic is that. Who loses from this entire situation when it's bad (24:00) accounting, right? And bad. Faith and bad apples that's there.

(24:04) I think it's just horrible for a lot of people as well. So I think people should just be like, it doesn't just harm my own career. It harms my employees, right? We'll find you a job, my customers who are out, my fish farmers who are, going through turmoil. But I think one thing also I think about is that, she, and you sound like such an old person, because you're like, you think about your length of your career, the whole thing.

(24:24) I think there's a lot of fraud, right? The joke about Forbes 30 out of 30 is we had Elizabeth Holmes or, out of college, did Terranos in the U. S. I think there was I think the  Forbes 30 out of 30 lady who sold her fintech startup to J. P. Morgan and then found out that a lot of the user counts were fraudulence as well.

(24:43) That's happened in the U. S. as well. But, of course, I think, I would say that I feel like that denominator is larger. I would say, I feel like because the U. S. ecosystem is so much more. Fraud

(24:51) Shiyan: per unit startup, right? Yeah.

(24:52) Jeremy Au: I think

(24:53) Shiyan: we have a higher ratio of fraud per unit startup.

(24:55) Jeremy Au: We should calculate this.

(24:56) Shiyan: Fraud per unit success.

(24:58) Jeremy Au: Oh, fraud per unit success is even lower. Because (25:00) Southeast Asia is down to, how many successes we have? Grab.

(25:03) Shiyan: SEA.

(25:04) Jeremy Au: SEA. Go to. I think those would be the three exits. We do have. bukalapak Yeah, so 2 BY 5, right?

(25:13) Shiyan: Yeah, I think that's the thing, right? We just need to like, actually, I want to tell everyone is like, starting a company is hard.

(25:20) Growing a company is hard. And it's like getting to a million of revenue. That's an accomplishment. Yeah. Getting from one to 10 is actually quite hard.

(25:28) Jeremy Au: Yeah.

(25:28) Shiyan: And then the same 10 to 50 is pretty hard. 50 to a hundred is hard, right? Every step there's like different problems to solve and it's hard.

(25:35) And it's you shouldn't expect it to be overnight. Yeah. That's not actually a reasonable expectation. You should expect it to be hard. But that's okay, because if you're actually being, if you're making something of value, you're solving someone's real problem, then there is value to be captured, right?

(25:50) And so then it's on you to think about, okay, how do I capture it more effectively, faster, all those things, at the core of it is am I solving someone's problem in a valuable enough way that they want to (26:00) pay me for it? And they want to pay me more than it costs me to acquire them, right?

(26:02) Or to serve them. I think this is the flip side, right? Which is like what I want to have something positive. I don't want this whole episode to be about fraud, right? We're at the beginning of the year and, hopefully people have put out like, their OKRs or like thought about what their annual plan is.

(26:16) But I think there's this big picture question of okay let's say I'm doing a million of revenue this year, right?

(26:22) What would it take for my business to be 10 million of revenue? And is there levers in my business that I can try to pull that accelerate that process. And then again, try to picture my business at 25 or 50 million, right? What are the must believes there? Because I think sometimes, you fought your way a million of revenue and you're just so tired.

(26:44) You're like, Oh, and then you're like grinding. And you're like, okay I can see my way to 2 million of revenue. And you're like, okay. Then you're like I doubled, but still actually not that big a company. Yeah. And it's not a venture scale type of growth or return.

(26:57) And so really trying to think (27:00) about, where are those step function changes in your business? If you have a little bit of downtime before things get super crazy I think it's useful for routers to think about those catalysts to their business. And of course you always need to like have the operating business in the stable ship.

(27:16) But if there are investments you need to make in order to realize these catalysts. Think about where you're going to make time to do those things, because otherwise you end up with a small business, right? You're like five years in and you're like, look, I'm cashflow breakeven and you're like, whoopie.

(27:31) That's not, this isn't the big outcome that everyone was working for. So I think that's like something that I would encourage people to think about. And it's actually exciting and scary because it might be really scary to think about Oh, actually. We'd have to go do this really hard thing to truly transform our business in this way.

(27:49) But maybe it's exciting because then you're like, but I think it can be done. Yeah. It just requires us to do X, Y, Z thing. That's my attempt at a positive (28:00) conclusion.

(28:01) Jeremy Au: I think that reminded me about one alternate version of events in the multiverse, right? And I think that if eFishery for the last round of Series D had gone for a local listing on the IDX.

(28:15) Because, there were a couple of hundred million dollar valuation. I think their history could be very different. I'm just getting an example, right? Because I think that, instead of going for this large, obviously, like with all these sovereign wealth funds from Europe and Malaysia and Singapore coming in.

(28:29) I think that if they're gone for that localistic, a couple hundred million dollars, which is doable as a fish business, retail, I think there's a retail investors and they're continue supporting it. I think also. It goes back to the fraud triangle, right? That we talked about in the past episode, which is like, what incentives, right?

(28:44) And I think the VC type of returns and wanting to show that kind of profile generates that incentive for founders to engineer that using accounting, trickery rather than whatever. I feel like if maybe two rounds ago, somebody has said, go for the local IDX listing, I suspect, I'm not saying it, (29:00) but the incentives have been there, they've been tapered off they could have restructured their financial accounts, right?

(29:05) Material disclosure, clean it up, get it done. Because, it is still a significant business. Are

(29:10) Shiyan: you saying that because the VCs were putting growth pressure, there is an incentive to embezzle?

(29:16) Jeremy Au: No, I think there is an incentive to report great growth numbers. And you and I would do great growth numbers by just working our ass off.

(29:26) And if working our ass off doesn't give us the growth numbers, we will just tell our investors and say, sorry, these are shit. And then we just have to eat shit and, I don't know, get fired or whatever it is. But because like you said, we have a long career ahead and, it's not worth risking the rest of my career for this, whatever.

(29:43) But I think for people who are first, most founders in Southeast Asia are first time founders and they're surrounded by other first time founders. And from that perspective, if somebody says, Oh, this is the way that he has for us, small, medium businesses in terms of. accounting wizardry in (30:00) whatever.

(30:01) So you think it's, and then you think it's a common practice and you don't think you'll get caught. I think all those are the ingredients together. I'm not asking for VCs to lower the expectations. I don't think that point is. I'm just saying that I think there was a path where around the CSA, I think if they said, let's go for a local listing, I think they will build the company in a slower way and potentially You know, avoided this whole situation.

(30:25) Shiyan: That seems like a very positive

(30:27) Jeremy Au: spin. You just asked for a positive way of ending. Okay, wait, I

(30:32) Shiyan: still want people to build great businesses and it the right way lah.

(30:36) Jeremy Au: Of course, you said the thing about overnight success, right? There's no overnight success. There's no overnight success, but let's be super real.

(30:42) It was a button that said overnight success. And people could push it. And then everyone was like, what? And then if you said, okay, there's a 50 percent chance that your career for the rest of your life is over in Southeast Asia, when you press the button. What percentage of people will press the button? Oh, probably quite high.

(30:58) Quite high, right? I'm just saying because (31:00) people don't think they'll get caught. If you think it's a 10 percent chance of getting caught, you'll probably hit the button. 50%. So I think the whole ecosystem is I think founders have to wake up to be like, there's a 99 percent chance you'll get caught if you press this button.

(31:11) And then the reward just drops off, right?

(31:14) Shiyan: Okay la, but maybe I'm just too naive, which is, even if you don't get caught, can you live with that? You walk around every day like you're a fraud.

(31:22) Jeremy Au: That's what therapy is for, right?

(31:23) Shiyan: You're giving therapy a bad name!

(31:25) Jeremy Au: No, you take your ill gotten proceeds and then you use it to, I don't know get a therapist, become Batman, fight justice, and get,

(31:36) Shiyan: oh my god. I don't know. I think Yeah, no, this is just human, right? Which is if there's some, feels like there's some easy win, yeah, the likelihood is people will take it. But, hopefully we can all consider the consequences.

(31:48) Jeremy Au: Yeah, because it's not easy, because it's a pain, and it's not a win because you're gonna get caught, eventually.

(31:53) Because everyone's sophisticated and wasn't caught at a series D level, you're being caught at a series E, a series F, (32:00) eventually. Yeah, I hope, it goes all the way. No, I think one thing also, maybe one thing I would say is that, I think there are some founders that I met then actually who are at the start of this process.

(32:10) There's accounting and there's always some level of treatment of accounting, right? A versus B, right? And maybe they started with B because somebody told them it was the right way, blah, blah, blah. But there's a little bit of a snowball where, which is like, it compounds, right? It's once you, then you're stuck in it and then you feel if I change it now back to accounting track A.

(32:29) Anyway, I always thought that was just like. If you have to eat shit, just eat it now and don't nibble. Just eat it now, because is this going to get worse? Because if you do it now, it's after one year or two years, but now that you're finally understand it. And I am telling you that this is a problem because I can see it because of the way you have it,

(32:47) Shiyan: but it's also just if somebody brought this to you, imagine your behavior was being reflected back to you by someone else. Would you be like, Oh yeah, I love this shady accounting. You should do more is that the advice you would give?

(32:59) Jeremy Au: No, but they don't (33:00) think about it as shady accounting, right?

(33:01) Literally I worked with one founder and he was like, yeah, this is a cash back program to Whatever it is. But then the net effect was that, you are discounting revenues, which should be reflected between gross and net revenues. And now you're moving that cost of revenue of marketing into your sales and marketing expense budget, which is below the line, and then you have this interesting effect, which is actually very common, actually, over the past five years, I think starting to get cleaned up now, but it's been very common in e commerce platforms where you're like, I spent 20 percent on revenue on, and then my revenue goes up like crazy.

(33:37) And then my. rating and it just goes up at the same rate, but it's below. And then people apply a multiple on the revenue without looking at this.

(33:46) Shiyan: That's why I hate e commerce.

(33:47) Jeremy Au: Yeah. E commerce is very common. . But the moment, the most interesting is the moment you have that accounting treatment, because he has always been done in Southeast Asia, then there's a natural incentive as sales reps and other people are like, let's do more discounts, let's do, yeah, let's do more of (34:00) that program because that's what's working and that's what I get rewarded for.

(34:03) So to some extent, some structural. Decisions in accounting can actually spiral because the incentives become out of whack.

(34:10) Shiyan: You're doing a terrible

(34:11) Jeremy Au: job of being

(34:12) Shiyan: positive, Jay.

(34:13) Jeremy Au: No. Look, it's like fairy tales, right? Today, fairy tales are very nice and whatever it is, but people forget that the point of Little Red Riding Hood is, yeah, is to scare the kid and just be like, there are wolves out there and you need to keep your eyes on a swivel.

(34:30) And sometimes they pretend to be your grandma. You and then you should fight back and you should run away and sometimes a woodcutter will come here and help you get justice But the point of it is that these fairy tales used to be way more Gruesome, 100 years ago when they existed as folktales because they were literally stories to warn kids Anyway, I just can't think we can't like

(34:52) Shiyan: yeah.

(34:52) Yeah. No, I mean look reality's reality going businesses is hard. Yeah And honesty is the best policy.

(34:58) Jeremy Au: Honesty is the best policy, and (35:00) I hope that these allegations are false, because that means that it was a giant misunderstanding.

(35:07) Shiyan: Pretty big misunderstanding. Yeah,

(35:08) Jeremy Au: that is a very big misunderstanding, but those things happen, so I'm, you asked me to be optimist, I hope it's a giant misunderstanding, right? I seriously do. Then we don't, then it doesn't have this chilling effect on the Southeast Asia ecosystem and all this other stuff. It's just that I wouldn't bet.

(35:23) I just have to wait for the facts to come out. I'm waiting for Deel Street Asia to report on this, and let us know. Sounds good. Good. Alright. Peace out. See you next time. See you next time. (36:00)