GDP Per Capita vs. Unicorns, Interest Rate Liquidity Lever & Localized Approached - E528

Jeremy Au explored the evolving venture capital landscape in Southeast Asia by linking GDP per capita thresholds (US$5K in Vietnam, Indonesia & Philippines vs. US$94K Singapore) to the rise of unicorns like Gojek and Grab. Jeremy also explored the implications of high global interest rates, which have reshaped venture capital deployment, shifting focus toward early-stage investments while reducing late-stage funding. Lastly, he analyzed the diversification of startup models, such as Vietnam's localized mini-conglomerates and Singapore’s globally focused virtualized teams, emphasizing adaptability as a key driver for success in a fragmented yet promising ecosystem.

(00:09) Jeremy Au: So a unicorn is worth about over a billion dollars.

(00:53) And so what we know is that unicorn by country. So the United States is about 234 unicorns, China is about 123 (01:00) United Kingdom has 25 India 23. Then you could kind of go down Germany, South Korea, Brazil, Israel, and you say Indonesia at five, then you say Singapore has three.

(01:08) And then I think right now we have a few of them moving from China's bar into Singapore, Singapore's bar as well. So all the accounts are getting weird now. But I think this was a good snapshot about a few years ago. And if you look at market cap by country you can see roughly what that looks like as well.

(01:24) It roughly corresponds to the same piece as well. So 683 billion, 512. 84, 70, 29, 25 all the way. Yeah. So these are all the unicorns that you can see on a per country basis. So I'm really talking about this to help you understand that you see the major classes, right? So the United States is a big one, China is a big one.

(01:42) Then obviously India is another big one, it's the emerging market. United Kingdom is probably a HQ for European the pieces. And then you have South Korea, you have the Asia pack developed. So South Korea looks a lot like Japan, I would say, which looks a lot like China to some extent and obviously you have your emerging markets like Singapore is (02:00) closer to South Korea and so on and so forth.

(02:01) Okay. So I think Asia Partners has put together this chart for what they consider the Southeast Asia Golden Age. So basically, this axis chart shows, on the x axis shows the time from 1960 to 2020 plus, right? And then on the y axis is the GDP per capita.

(02:17) So we have GDP per capita around 1,000, 2,000, 4,000, 7,000, 14,000, 28, 000, 56, 000. So what I'm saying is that at each stage, unicorns are built at each layer of it. So these are the types of companies that come up. So for example, at the most advanced GDP per capita countries, like USA, Australia, Japan, South Korea you see companies, for example, Microsoft, Google, Facebook, Rakuten, Yahoo, Japan, Netflix, Uber.

(02:42) So these are very advanced economy type of companies. Then what I say is that for China, around 7, 000 to 14, 000, which is around, Malaysia is about 15, 000 around here, and Thailand is also around 7, 000 plus, depending on how you look at it. But this range is about, the size of tech companies is about 30 to (03:00) 700 Alibaba, ByteDance.

(03:04) So you see a lot of these companies tend to be, you notice these are very consumer or e commerce oriented type of companies, because these, And we'll talk about it, but these people have more spending power, right? To entertain themselves or buy stuff. And then what you see in this next category, Southeast Asia.

(03:19) Indonesia, Vietnam, so you see C, Grab, Gojek, Lazada, Tokopedia, which is e commerce but probably a little bit more basic, and also maybe a little bit more some learnings here about entertainment and so forth, and transportation. And then you see India is roughly about you know, two to four billion dollars GDP per capita.

(03:36) And then you have Flipkart and Make My Trip. And then you have M, the lowest, which is like M passa, which is like a wireless payments transmission piece. So I think what you're making an argument, and you know, this is a sexy word, is the golden age. So this is the time that Asia, Southeast Asia is gonna break out, and it's gonna start generating some China like unicorns over time.

(03:54) So, so TBD, big question mark, but this is how they look at it, which I think is actually a quite useful framework to think (04:00) about it. Because in general, I think it makes sense. The reason why we see the biggest deep tech AI companies are happening in the US, is because they've already achieved. All of the previous startups and unicorns ranging from gaming, basic e commerce to logistics, et cetera.

(04:13) So they're building very deep tech, unicorns at this stage right now, right? Versus if your country is very new and basic, the fundamental issue is logistics or travel, domestic travel. So the kind of unicorn that's being done is the most, you call it basic, but the most, I wouldn't say primitive, but you know, it's like a fundamental piece of infrastructure.

(04:31) And so what you can see here is the IPOs by sector. In China, right? So this IPO is from 1995 to 2020. And so these are all the various IPOs that were done on the China Stock Exchange, or the US. And what you see from this is the, from bottom up, and this is a rough organization from their perspective is the fundamentalness of the technology.

(04:53) So at the bottom is wireline telco. You make a wire from point A to point B. Wireline telcos include television, telco equipment, semiconductors, consumer electronics, wireless telcos, software, online advertising, and data centers. To have a data center, you need wires and semiconductors running around, right? That infrastructure is fundamental.

(05:14) Then when you have a data center, you can afford to do online games, travel, online HR, online content, online education. That marketplace, online automobiles. Because online automobiles is an expensive purchase, right? An automobile is, I don't know, 10, 000, 50, 000. So you should probably sell off online games, which is about 1 to 10 purchase.

(05:34) Then online real estate, because real estate is a million dollar purchase, right? Then your digital security, because it's B2B SaaS, eventually e commerce, online lending to other businesses around here, payments, wealth management, you are very rich as a country, so you're managing your extra wealth, your e commerce logistics, online health.

(05:53) So anyway, I think basically what I'm trying to say here is that on average, You're more evolved as you go up because you're building on more fundamental stuff. (06:00) So they create this nice little slope that they have here, but basically that in general IPOs happen over time, right? As they build on previous kind of like companies that IPO'd in the past.

(06:12) So everybody's building on each other's stack. So this is from Asia Partners, and so from their perspective Southeast Asia is going to have a lot more from their perspective. So they look at the exact same grid and they're saying, wait a moment, like, okay, you know, we have a few small data centers right now that are billion dollar companies that are listed from Southeast Asia.

(06:29) But, you know, we still have not seen the IPOs yet for online health, which is true, or e commerce, logistics, or wealth management. So wealth management, we have like, I guess, endowers, we have Stash away, you know, there's a whole bunch of them all around Southeast Asia as well that are competing.

(06:43) But they're all private right now, so they're not yet so what I'm trying to say here is that, from their perspective, looking at China, which has had a similar GDP per capita as Vietnam, as Indonesia, and now they have gone. to effectively GDP per capita as Malaysia and Thailand. Today, you (07:00) know, there should be a lot more IPOs coming soon in Southeast Asia.

(07:02) So this is Asia Partners. This is their research report explaining this to prospective LPs. So they're basically making a case to say that there are lots of private companies today that are worth investing in, and they'll eventually, this chart will be filled out the same way.

(07:16) China did. It’s just going to take some time to get there. If you think about it, as a result, some people have a thesis. For instance, in Vietnam, they have achieved online games and other successes. So, what’s next for Vietnam? Does it make sense to move into healthcare or online automobiles?

(07:27) Does it make sense? Is it healthcare? Is it online automobiles. Does it make sense? There's a argument to be made about the thesis. So we see a lot of China VCs, and I met some of them. They moved to Singapore. We were all in Sentosa hanging out, and everybody was speaking Chinese. I was thinking to myself, man, I really should have brushed up on my Chinese when I was a secondary school student.

(07:46) Even though I did an exchange semester in Tsinghua, which came in useful talking about some stuff. But the key thing was they were like, I understand Southeast Asia. I made money in China and I understand these markets. That's why I moved to Singapore because I'm ready to invest, you know. I mean, (08:00) so they feel like they've seen that playbook happen already.

(08:02) They want to repeat that playbook, for example. So I think it depends on market to market that you have but there's a thesis, there's a hypothesis that you say, these economies are going through these IPOs or these structures, right? So as a result, I'd like to say that Asia Partners has come up with two major paths to create a Southeast Asian unicorns.

(08:19) So Southeast Asian unicorns, I think historically in the first wave, were either in Singapore first or Indonesia only. So Indonesia only basically saying, I am running Go Jek, I only do transportation in.

(08:31) In Indonesia, I do one product, it's big enough. 300 million people, that's quite a lot of technical talent. It's big enough as a market. 300 million people is the same number of people as America, right? So, I can build a big enough business in a single product, if that makes sense. So that's, that's the piece for Indonesia.

(08:47) And then recently we saw the news from Gojek, they recently retreated from Vietnam because they felt like the Vietnam was too competitive a market, it was too expensive, they're fighting Grab, both sides are losing money, and Gojek is like, you know what, Indonesia is big enough, I just need to win Indonesia.

(08:59)But of course, they burn lots of money in Vietnam fighting Grab because they don’t want Grab to win the market, right? So it’s always a bit difficult in terms of competitiveness. Grab has always pursued a regional strategy, starting in Singapore and expanding to Indonesia, Malaysia, the Philippines, and Vietnam. Grab says Singapore is too small to sustain a business, but it’s a great launchpad with excellent infrastructure and talent. This regional strategy likely provides a more compelling narrative for US retail investors than Gojek’s Indonesia-first approach.

(09:14) So we start in Singapore, then we do Indonesia, Malaysia, Philippines, Vietnam. So Grab is available in all of these countries. Because they say Singapore is too small a market. to do this play. But we are very good in Singapore to be like a USB port. We have very good airports. We have a lot of technical talent.

(09:30) We know how to run companies like multinational corporations easily because we’re meritocratic, and everybody speaks English. That would be the argument they make. By nature, Singaporean companies are better at going regional. Gojek, on the other hand, was trying to limit Singapore’s regional play to keep their own market dominance intact.

(09:59) Anyway, we don't (10:00) value you to win the Vietnam market anyway. So I think there's a little bit of that rationalization. You know, so I think that's the argument that they have. So those are the two major ways. I think there are two other ways that we see. So, for example, if you look at Vietnam they have about a hundred million people, so it's a bit too small.

(10:15) Some people, I mean, the argument is too small, and right now it's not, it doesn't have enough income, GDP per capita, to do so. This argument would probably be true for Thailand as well, which is at 70 million people, but has about twice the GDP per capita as Vietnam right now. But what I'm trying to say here is that these are considered generally too small, if that makes sense, to be a single country only play.

(10:36) So, what we have noticed is that these companies have become super apps, which is another fancy word from my perspective, which is a mini conglomerate. Does it make sense? So they may choose to integrate vertically either upstream or downstream. They may, or they may build an adjacent product line. So, for example you may see a Vietnamese company.

(10:55) They are doing, so I interviewed them recently called Phonos. They started out doing (11:00) audiobooks. So they saw a market opportunity, which was that Kindle does not do anything in Vietnamese. So audiobooks, the copyrights are available and not utilized. But Vietnamese are learning quickly, they want to get educated, they want to learn about rich dad, poor dad, and personal finance, and their schools don't teach it, so they want to learn something.

(11:20) Does that make sense? So they started out with one product, which is audiobooks, and that has given them a very nice growth, but now they feel like it's not enough, so they need to do something else. So now, They're going to build something else, which is they build meditation classes and personal mastery classes, like masterclass.

(11:36) Reading "Rich Dad, Poor Dad" shows a desire to learn personal finance. So, creating a mini-conglomerate makes sense. If your revenue product only generates $10 million due to a small market size, adding 10 more product lines with similar revenue potential can scale your business to $100 million.

(11:52) And if you look at VNG Group it's kind of similar to that. They will do only Vietnam, but what they did, they started out with their internal communication chat (12:00) messaging app. They have internal games and licensing. They have internal shopping. They have internal logistics. So these are mini conglomerates basically at a country level to get to a hundred million dollars of revenue.

(12:10) From a Vietnam perspective, is it difficult to expand to Thailand? Maybe Thailand is easier because it’s nearby. But expanding from Vietnam to Indonesia is more challenging because there are likely already Indonesian founders building similar companies there.

(12:22) so for example, there's a lot of Vietnamese ad tech co founders that would love to go to Indonesia, but they know that Indonesia already has a lot of ad tech founders, and they don't feel like the DNA needed to win, right? So for example and then I think the fourth category that we have is virtualize.

(12:34) So basically, you just happen to be based in Singapore, or Bali, or Phuket, or wherever, but you're just building a company because you just happen to live here, you're doing crypto, you're just building for the world, or you're selling to the U. S., so it may be a virtualized team, but in general, you're just not making money from the domestic audience, right?

(12:48) You're making money from some other virtualized, which is the U. S., probably the E. U., or some other SaaS business, so, but you're not, you're based here, but you're not selling to a domestic market. Okay. So these are (13:00) I'll say four major types of unicorns or puffing that you see. So as a result, I think what we saw is that high interest rates have caused a gold capital slowdown.

(13:08) So what we can see here is that you know, from this chart shows 2022, then it goes to 2020, second half of 2022. And then the first half of 2023, this comes from central ventures. Unfortunately, there isn't more recent data, but it's the cleanest, I think, that does it.

(13:22) And what we see here is that we show the US, EU, China, India, Southeast Asia, Latin America, Africa, Middle East, right? And so there's the amount of venture capital that was invested every half a year. And America dropped 46 percent from 133 billion dollars that was invested, dropped to about 71 billion dollars.

(13:37) So about half, 50, you know, half drop. And then in Southeast A so EU dropped from 70 to 30 billion, and China dropped from 38 to 25 billion. India dropped from 20 billion to 7 billion dollars and Southeast Asia dropped from 6. 8 billion dollars to about 3. 1 billion dollars. So interest rates global high interest rates in the U. S. cause a slowing in venture capital deployment and (14:00) LPs. Probably not going to do a giant macro piece here, but basically when you have high interest rates. The cost of money and waiting for money goes up. Therefore, VCs have to wait 10 plus years, which is a long time to wait, which means that it's very not worth it to wait so long.

(14:14) Versus when you're very low interest rates, when during the zero interest rate era, after 2008 financial crisis, where the U. S. was pumping its economy, that caused a gigantic boom, because when you have zero percent interest rates, it means that a dollar in 10 years is the same as a dollar today. So I might as well spend all my money now.

(14:32) to get as much money in the future. So I think that's the dynamic that we had. But the key thing to know is that Southeast Asia, yeah, you know, is, globally for venture capital for deployment. So this shows, I think, the historical time series of Southeast Asia deployment. So from the left hand side, 2013 to 2023.

(14:49) And the line shows the number of deals that were made, number of individual deal transactions, and the bar chart shows the amount of capital deployed. Okay? So what's interesting to note is the first thing is that (15:00) despite all this, you know, slowdown, blah, blah, blah, actually the number of investments have gone up, so there are more and more investments being done.

(15:07) However, the amount of capital in general as well, the total amount capital has generally gone up over time as well. But you've always seen that this boom and bust, right? It went boomed in about the 2018 era, then dropped, then boomed again in 2021. so there's always like a boom and bust cycle on the capital side.

(15:23) And what's important to note is that if you actually subdivide this, so seed. The Series A, Series B, Series C. The amount of capital is actually relatively linearly growing, I would say. So it's kind of growing like this, you know, but it's generally growing over time.

(15:38) So the big swings are really from growth capital, right? So your Series D, Series E, Series F kind of capital. So these 50 to 100 million deals the giant swings of capital was really done by US funds that were investing large checks. In Southeast Asia. So in 2023, the only ones that did it was Aspire, Advanced AI, which is the (16:00) Advanced Intelligence Group, which is your Atomy and your other finance stuff Toons and BiMed.

(16:05) So these are the four, larger deals that were done so in 2023. So anyway, what I'm trying to say here is as a result, I think you can roughly do the math. That means that most of the capital even today are going Capital is less, but you're doing more companies, right? So, a lot of money is going to early stage deals.

(16:21) So a lot of deals are being done at the seed stage or the pre seed or series A stage right now. So in general, this is the median valuation across Southeast Asia. So across this time frame again from 2022 to 2023 to H1 on the right hand side.

(16:36) The average valuation for pre-A startups is $5 million, and a typical VC buys 20% of the company for an investment of about $1 million. For Series A rounds, the median valuation today is $21 million, meaning a 20% stake would cost around $4 million. By Series B, valuations increase significantly, with today’s median being $43 million, requiring an investment of approximately $8 million for a 20% stake.

(16:52) Because it goes back to your work. The average valuation is about 21 million today. The median 21 million dollars. So 20 percent of a (17:00) 21 million dollar round is about 4 million dollars, right? So they're investing about 4 million dollars per company for a series A deal, right? And a series B deal, so you can see, the drop off is higher but today is about 43 million dollars, right?

(17:12) 20 percent of 43 million would be about 8 million. So what you can see is that the changes are much larger, For series B, series C, series D. Does that make sense? so this is really important for you to understand this is for Southeast Asia obviously because America, these numbers would be higher for the definitions.

(17:26) So the key takeaways here is that, startups have attacked incumbents to create trillions of dollars of value globally. And then of course Southeast Asia is kind of like a tech frontier because, you know, that's why you see a lot of European founders under Rocket Internet. They were like, we saw this happen in Europe.

(17:41) This thing called Groupon. We need to install Groupon in Singapore. And after we successfully installed Groupon in Singapore, we're going to install Groupon in Indonesia, right? So there is a frontier. Imagine a frontier. And so people feel like they're traveling a time machine. Does it make sense? Americans traveling to Singapore.

(17:55) Oh, you don't have a deep tech AI startup You know, I can build one so (18:00) they feel like a time machine, right? Because they feel like they're traveling back in time. Does it make sense? Then a Singaporean or European might travel to I don't know Malaysia or Thailand. a good one would be the Chinese VCs are traveling, going to Indonesia and Vietnam right now, right?

(18:15) Because China's GDP per capita is about 15, 000, Vietnam's about 7, 000 to 8, 000. So they're traveling back in time, they're going to Vietnam and say, I've seen the future, it is China, right? And so I travel back in time, I'm going to invest in the same market thesis. Does it make sense? The frontier has moved back in time, right?

(18:31) but of course whether that's true or not. And your ability to do so depends. But there's a frontier or time machine that you need to be thinking about from a GDP per capita basis. Of course, we can definitely choose to improve our odds to source and improve successful unicorns.

(18:45) There are more LPs that are interested in supporting ESG or impact oriented funds in general. So that's one. Two is, as a result, there are more funds. There are two types. There are impact oriented funds that are very impact oriented, so they're probably impact first.

(18:59) But (19:00) also you see that in other way, which is there are funds that are doing financial returns, but then they also show that they have ESG benefits as well. This is like the difference between 80 20 and 20 80. It's kind of weird, but everybody agrees that you shouldn't do illegal or bad things like cut down trees.

(19:17) or kill orangutans, right? So it's all agreed in the due diligence questionnaire that you should not do bad things by LPs. Okay, so this is the universe of the fund basis. I think from an LP perspective, it depends because of the mandate of your LP. So there are some alpha LPs I mentioned earlier, where they have been subpoenaed by Congress for investing in non financial returns.

(19:43) Because they feel, the republicans and conservatives feel, that investing in DEI, et cetera, is not an acceptable outcome for capital. So, these kind of LPs would not invest in an impact oriented fund. they just wouldn't ask for it. So they'll (20:00) just invest in funds, that's one. Two is, there's another school of thought by Milton Friedman, which is that, if you're making money, you are creating value for the world, right?

(20:10) So, you don't need to be an impact fund to be creating impact. So, if you invested in Go Jek that created jobs for everybody, blah, blah, blah, what's the social impact of that? Now, under the United Nations Sustainable Development Goal, it created more jobs for families, it, I don't know, increased safety for drivers, because now they're all standardized.

(20:28) Let me give you an example, right? So, there's a bunch of UN Sustainability Development Goals, but all the people who invested in Go Jek and Grab in the early days, There was no such thing as an impact fund back then in VC. And so all of them just invested in it, but now all of them have a CSR page for sure, right?

(20:44) You know, so what I'm trying to say here is, if you are investing today in a company that focuses on AI, do you need to be an impact fund to be investing in AI? I mean, you know, so you have to think through that, right? But then you're saying, but

(20:55) AI will make everybody's life easier.

(20:56) You don't need to be a marketer anymore. You don't need to be a lawyer anymore. You can (21:00) enjoy a universal basic income and never work again because AI will work for you.

(21:04) You also think about, oil and gas, right? Oil and gas was funded by early financiers who financed people searching for oil, kind of similar to the industry in the early days.

(21:14) And then they created oil and gas, and oil and gas has powered all of our computers and energy and aircon and everything. So is oil and gas an ESG outcome? Well, for the emerging markets we have here where People using 5 times to 10 times less energy per person compared to America. Energy is impact.

(21:36) Lower and cheaper energy is impact for people to read books at night, to have an air conditioning when it's hot, to a computer, to charge their electric bicycle. So, I think there's a big debate, I would say, but in general, I would say that there are three or four types of LPs that are out there.

(21:54) The first category is, I have a mandate from the World Bank, or I was a philanthropic (22:00) endowment from the king of Austria or something like that. So I have a mandate to invest in an impact goal. So I'm looking for impact funds to put in a second category is I am an LP and due to my, my mandate and due to my shareholders and blah blah blah, I've decided that I wanna do more ESG.

(22:18) I'm gonna try to in invest in funds that report ESG outcomes as well. Or they may choose to invest in impact funds, depending, there's category two, category three is, there's a bunch of people who are saying that. I cannot invest in ESG funds because of political concerns or I don't agree with that ethos, right?

(22:36) Can you imagine, some Middle Eastern funds investing in some of these impact goals? Like, because a lot of people are defining impact as moving away from oil and gas, right? So, imagine if your oil dependent sovereign wealth fund is, are you going to invest in an impact fund that's decarbonizing?

(22:51) Sounds a bit contradictory, so you may not choose to do it. And the last category is there's a lot of LPs who feel that investing in venture capital is investing in (23:00) technology, which will make the lives of the next generation better than the lives of the current generation. So it is already a form of ESG.

(23:06) Maybe the last type that I've seen is that a lot of these LPs are also universities or hospitals or other types. of philanthropic organizations, right? Endowments. So they will say like, I'm asking you to do financial returns. I'm not asking you to chop down a tree or kill orangutans, but I want you to make money for me because that 8 percent or 9 percent return will come to me and I will make social impact use of it.

(23:31) I will fund scholarships. I will pay for poor people. I will invest in a hospital. So I as an LP can make good use of the social impact of the fund. So I think there's a lot of different motivations on LPs, if that makes sense. but there's also different philosophies that you can actually end up doing.

(23:47) But I can tell you that right now that 99 percent of LP VC funds 98 percent would effectively either say themselves that they do VC investing and they report ESG outcomes or they say that impact outcome. There are (24:00) almost negligible funds, I can't think of it, that would say we are a SIN fund for example.

(24:04) Yeah, you know, which is I think a very cool idea. but, you know, a SIN fund like investing in ban industries or illegal industries, etc. But I think you can probably make a lot of money with that. But again, the problem with SIN industries is that they cannot go public because public markets do not allow you to trade in.

(24:18) certain stocks you can't trade on the public market, right? So, payment processes will not allow you to process, for example, pornography and then public markets don't let you list as a result of that, which means that as a VC, you can't invest in that type of industry, because there's no way for you to exit well, right?

(24:33) Does that make sense? Even though you can make a lot of money in these sin industries, for example. so I think there's also penalties for sin industries that kind of based on the movement like some endowment funds are being pressured to divest from oil and gas or coal or some other political reason whatever it is.

(24:52) So Union Square Ventures has invested in 62 companies and 8 percent are unicorns, okay? So 8 percent is about 1 (25:00) out of 12 unicorns. So that means that when they do an investment of 20 investments, They have about one and a half unicorns. Does it make sense? One to two unicorns per batch on average, right?

(25:09) So 62 investments is roughly about three funds that you've done, right? Sequoia Capital, that Katie was talking about, has 307 investments, early startups, and a unicorn hit rate is about 5. 5%, right? So if you think about that, it's about one 20 around there, right? And then your 4%, 3 percent is also about 1 in 20, basically, right?

(25:28) Now you can get away with some of these lower numbers, 2%, which is about 50, but because you're able to bet, if you look at Bessemer Venture Partners, they can do multi stage, right? So they can do wider base of companies that don't succeed, but then they can write large checks to jump and double down on the bet for the companies, the 2 percent that do succeed, okay?

(25:46) And for everybody, everybody knows Y Combinator. A company that has done 632 startups and their unicorn rate is 1%, does it make sense? So, their ability to spot companies is actually 8 times worse as Union Square Ventures. But, because the number (26:00) of startups is effectively 10 times more than Union Square Ventures, does it make sense?

(26:04) So they're 8 times worse at picking. But there are ten times more startups that they have funded. Does it make sense? So all of us when you think about it, you know, Y Combinator is way more famous to us in general today than Union Square Ventures because Union Square Ventures actually does those investments later and they focus on the stuff and they're very good at New York.

(26:21) So I was there at Union Square Ventures. If you're in New York and you're raising money you will try to get to Union Square Ventures. So they also absorb the ecosystem. And one of the values that have just had is that it was one of the first New York VCs. So, most VCs were in the West Coast.

(26:35) So, they opened up first in New York, and it actually turns out New York was very good at fintech, they're very good at fashion and direct to consumer. You know, there's a hub that was emerging, and they were able to ride that wave. They were the early source of capital, and now, even though it's a lot more competitive, there's a lot more U.

(26:48) S. New York VC funds, they're headquartered there, but they're the oldest, they're a bit of a brand. So that more people choose to go to Unisquare Ventures because it's famous in that sense. And so you see a lot of these companies are famous (27:00) because they're famous for picking good companies. So you look at Benchmark Capital, they did Uber, Bill Gurley.

(27:04) Again, their hit rate is very high, 4. 4%. They have 158 startups, which is about double that of Unisquare Ventures. And now obviously you see Benchmark, Cosla, Founders Fund, SL, First Round, Phyllis's, Bessemer, SV Angel, Draper Fish, General Catalysts, Anderson Horowitz. So, these are all, but what I'm trying to say here is that even in this top quartile of funds that are there, there's actually differentiation within that group, right?

(27:27) Does it make sense? So, there are better ones that are very concentrated. Unisquare Ventures is like, I can do 20 investments per portfolio. I can select, because I'm so confident. I know that every time I pick. By 20, I mean they're not confident, but they feel like they've historically, they've done one and a half, one to two unicorns per portfolio.

(27:44) Now, obviously, past performance doesn't predict future performance. This varies by partner. So if you look at different partners at different hit rates because it's a human decision making process. So if you look at Unisquare Ventures and Benchmark Capital, both the Unisquare Ventures and Benchmark Capital are quite similar.

(27:59) (28:00) They are very small funds that have very concentrated compensation structures for their partners. So each VC partner gets a lot of the upside, but it's not a team effort. And that's, I mean, it's a very small team effort. Does it make sense? So it's very craftsmanship, very deep, but everyone's expected to do everything.

(28:15) Whereas if you look at Sequoia. and S. L. partners and Bessemer, they'll look much more like a big company. They'll have a large team, a big pyramid. Does it make sense? They will have a lot of junior people, and they're all sourcing deals, and making investments, and blah, blah, blah. So it's more distributed and dedicated.

(28:31) So there are different organizational structures, and then Y Combinator is even the most aggressive version of that, right? Which is that they have all these YC partners, but they're all doing on a batch cohort, right? So lots of different approaches that are there. So as a result, what you have to know is that top VCs, as a result, are often investing in about less than 1 percent of the startups that they see, right?

(28:50) When you launch, there's no data, you don't Go on LinkedIn and write stealth or whatever, it's just in your brain, So, those startups are being launched without any data, there's no signal. So, unfortunately, Kang (29:00) Jin has not set up a Deloitte that automatically identifies and values every startup when they're born, you know, so, you know, when Anggi sets up a startup tomorrow for Indonesia, there's no independent platform that says, Anggi started yesterday and her valuation is one million dollars because she started yesterday. You get me? We don't know. Nobody knows. And everybody's ideas, and they could come from anywhere.

(29:20) They could be a university student. It could be a dropout. It could be somebody who is a Ivy League person. It could be somebody who is a big tech executive. It could be somebody who's already made money already and trying to build another company. you don't know where they are! They're all just hanging out, and they open up ChatGPT, and they're busy working, and coding, You know what?

(29:37) the best founders, will also move very quickly. So, the best founders, would self select, in the sense that, I've seen companies, obviously, because, you know, VCs. sometimes get lazy because they're like, on average, it takes two years for a company to grow three to four X.

(29:51) I mean, for a number of value. But I've seen some founders that are able to grow three to four X in six months, right? And so, you know, the VC is like, oh, I can take my time, blah, blah, (30:00) blah. And then, turns out the company grew three to four times in six months, and then straight away he went out, because VC friend, the VC like, what?

(30:07) You grew three to four X? Let me put my money in now. And so the VC is fighting against you, because the money is like, the guy was. You know, hanging out and then I've seen that a lot happen. So some of the deals that we see in Southeast Asia, they're also very clustered, right? Around, you can call it syndicate.

(30:22) You can call them a keratsu, which is a Japanese term for, you know, closed, semi private, semi public networks. So we see that a lot in Indonesia. It's very hard to get information. From Singapore, it's very hard for you to understand what's happening in Indonesia. Alright, so, all the Indonesia VCs are all dealing with each other, they're all hanging out, they're doing karaoke, and if you're not at a certain, the story joke is like, if you're not in this one shopping mall, in this one coffee shop, You're not gonna know the information, right?

(30:45) And so, the joke is, if you have a deal that's secret, you better not be in that coffee shop. Because if you're in that coffee shop, all the other VCs and startups will know, like, this guy is fundraising. Because if they say, like, Oh, you meet this, this, this, you cannot. So, but, that's the most common place because traffic's so hard, right?

(30:58) In Indonesia, right? so (31:00) everybody's all clustered around One coffee shop. So now all the VCs are all moving their offices to this one mall because that one coffee shop. So that coffee shop has become, I don't know, it's just full of, you know, VC startups and all that stuff, right? It's so funny.

(31:12) But everyone is competing with each other. So I think that's something that's important.