Jason Edwards: Lawyer to Founder & VC, Alternatives.pe Regional Capital Insights & January Capital Venture Debt Strategy - E417

· Podcast Episodes English,Southeast Asia,VC and Angels,Founder,Singapore


“There’s a famous saying, ‘A good negotiation is where each party is equally unhappy rather than happy.’ When you think about recovery, defaults, and enforcement, there are some cases where it's a real asset, but a business usually has most of its intrinsic value in itself. And just trying to take over the keys, if you've had an entrepreneur running a business for a decade or generations, we can't kid ourselves, you're not the person to come in and take over those businesses to get the best value. So very often then, it's a delicate balance between using your stick and your enforcement, but also wanting to work with the family or the entrepreneurs.” - Jason Edwards

“One of the things that I noticed from venture capital and private equity is that in private equity, you are cordial but you're very focused on your rights. If things don't work out, I'm going to take whatever action I can to get what’s mine, but in venture capital, if it doesn't work out, there's usually nothing left, so there's this mentality of ‘we're all in this together’. We're not fighting with the founder, saying, ‘Hey, this is my right eye on this.’ We want to help that founder as much as possible because if he succeeds, we succeed. And I really like that. That was such a nice change from banging the fist on the table and doing all other things. The whole mentality is different. We work together. We work with other VCs. We're all in this together. It's one for all and all for one.” - Jason Edwards

“Majority of VCs have pivoted. They are now pushing B2B because they've realized that there are very few exits in B2C. What kind of exits do they have? Do they look good? Grab raised $20 billion and its valuation is 12. It's the worst-performing startup in the history of Southeast Asia in terms of money lost. If you look at the other ones, there aren’t huge returns for every investor. That was one of the learnings, but for me, it was realizing how many opportunities there are. I love the environment. There were people who were leaving comfortable paid jobs to take risks. And that's exciting. They’re people who believe in what they're doing, who want to control their own destiny, and often, who are very smart and determined, even knowing full well that most startups don't succeed. That is a huge risk and I love to be in that environment where people really believe in themselves and are prepared to take risks for really strong outcomes.” - Jason Edwards

Jason Edwards, CEO & Founder of Alternatives.pe, and Jeremy Au talked about three main themes:

1. Lawyer to Founder & VC: Jason recounted his legal career at Baker & McKenzie in Australia and Hong Kong. Due to the Asian Financial Crisis, he focused on financial restructuring for distressed firms (many of whom had borrowed heavily in US dollars) across Bangkok, Singapore and Asia. He later moved into private equity with Clearwater Capital Partners ($1.2B AUM) and venture capital by co-founding Qualgro VC. He later founded alternatives.pe - an accurate data and insights platform for private capital market professionals looking for best-in-class coverage across Southeast Asia and Australia. The platform is now used by the majority of Asian funds including Square Peg, 500, Temasek, Sequoia, Tiger Global, Warburg Pincus, KKR, Vertex, GIC and Softbank.

2. Alternatives.pe Regional Capital Insights: Jason discussed the current shift of VC attention from consumer-focused (B2C) to business-focused (B2B) models, due to a faster route to profitability across diverse linguistic and cultural markets. He observed strengthening investment discipline focused on capital efficiency and strategic scalability. Jason also elaborated on the complex dynamics of negotiation and asset recovery in the region. He pointed out that Asian businesses usually hold most of their value intrinsically, which complicates asset recovery efforts when entrepreneurs have been at the helm for extensive periods, sometimes spanning decades or generations. He emphasized that a successful recovery strategy involves not just enforcing rights as per the norm in Western jurisdictions, but also cooperating with the original business operators to maximize value extraction. This nuanced approach highlights the importance of balancing 'stick' enforcement strategies with engagement and collaboration, underscoring that aggressive takeover tactics are seldom the best route to preserving or enhancing a business's value in Asia.

3. January Capital Venture Debt Strategy: Jason explained the rationale and timing for launching January Capital’s venture debt services to fill the regional market gap. He detailed the methodical structure of their venture debt deals, typically around $15 million, targeted at growth-stage companies that find traditional venture capital or equity financing too dilutive or misaligned with their financial strategies. He elaborated on how this approach is particularly opportune given the current high-interest rate environment and lower valuations, which would allow venture debt to provide capital without excessive equity sacrifices.

Jeremy and Jason also talked about his personal experience of the Asian Financial Crisis and ensuing layoffs, the importance of accurate and timely data for VC dealmaking, and personal reflections on entrepreneurial risk-taking.


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(01:39) Jeremy Au:

Hey, Jason, really excited to have you on the show. You are building some really interesting stuff out in Southeast Asia and broader beyond and you have this interesting blend of both a founder and an investor hat. So I really wanted to share your story. Could you share a little bit about yourself, Jason?

(01:52) Jason Edwards:

Yeah. Thanks, Jeremy. That's great to be here. I'm a VC and I'm also a founder. So I started my career as a lawyer in Australia. After six years, moved to Hong Kong, arrived not long before the Asian financial crisis and everything was in turmoil, and I was sent down to help the bank office of this law firm, Baker & McKenzie, I was working for to help them for 12 months because they've never had a public company go into insolvency and the majority of public insolvent because they all borrowed in US dollars and then the bank lost the peg and they allowed far more possibly pay back and that one year turned into seven years and it was a very interesting time of my life. And then one of my clients had set up a private equity fund in Singapore and they were doing special seats lending throughout Southeast Asia. So I joined them, and spent eight years there. And after that, I'd moved into VC. So I co-founded a VC fund called Qualgro with two other partners, B2B-focused, Series A and B. And I wanted to go earlier stage because I really believe the best risk-return in Southeast Asia is going C-stage if you can access more and so you have to be very data-focused, which is what I was focused on. So I joined the team at January Capital five years ago, and we're B2B-focused seed stage investors on the equity side. And we've just launched venture debt for growth-stage companies, which is a space that's really underserved. I also founded a company called Alternatives.pe, which provides information on private companies, startups private equity, M&A, et cetera, fund performance, family office, LPs by pulling the regulatory filings across Southeast Asia and Australia.

(03:18) Jeremy Au:

So tell me more about why decided to be a lawyer for, did you, I don't know, watch something on TV, how did you kind of get started on that route.

(03:27) Jason Edwards:

Yeah, look, we grew up in LA law and all those shows were going on and it was all very glamorous, but we all knew it didn't really look like that in real life. For me, the motivation was wanting to really know what my family's rights and the people I knew. I'd seen situations where I just thought, this can't be right, this can't be fair, but if you don't know what your rights are if you don't know where you stand, you really don't know what you can do. And so that was the driving force, and that stuck with me. I've always been a believer of look at a situation and think, are they allowed to do that? Can they do that? Can they get away with that? What can I do? I think to that extent it served me well. I spent 15 years as a lawyer in private practice. I don't think it's something many people want to stick around. It is a real grind. Some parts are very exciting, but there's a lot of work that you don't appreciate. It's all the stuff that goes on with building clients, timesheets, managing, or recording every six minutes of your working life. And that's what So that was the reason I got into law.

(04:20) Jeremy Au:

What was your experience in law?

(04:21) Jason Edwards:

I came from a pretty humble background. I was the only one of four children to finish school, do law, and do a Master of Laws and stuff like that. So I was really changing, it was, it was a bit of a sea change for me because I came from a background where I was going into a much more operational one, as one of the second largest law firms in Australia. So just working out where I belonged and making sure I felt justified in where I was because I was coming from such a different space, but then, I think I really had a fantastic time in the first few years. I had a great mentor both on a business level, professional and personal level. And spent six and a half years working at that firm. And with that particular partner, it was a life-changing thing for me. And so that opened me, opened myself up to opportunities back in that time there was a shortage of lawyers globally that the UK firms were recruiting like crazy, but I was going to go to London, but the last minute went to Hong Kong because I thought Hong Kong and Asia would be more exciting and I think that was the right decision.

(05:14) Jeremy Au:

Wow. What was it like? Because that was pretty much the heyday of Hong Kong, in terms of M&A corporate law.

(05:20) Jason Edwards:

'97, I got there, and it was extremely busy. Baker's was the biggest firm there. 750 people in one office. It was the largest law firm in the world at the time. And it was really interesting. And I came from Brisbane where you worked on very limited-size transactions to where we were flying all over Asia, big deals, which was quite exciting. And then about nine months later, the Asian financial crisis came. And I was a financial lawyer, and lending stopped. It stopped dead. And on one day, our firm fired 45 lawyers. And I'd only been there a year and I could see the person on the left and the person on the right who spoke Mandarin and Cantonese and been with the firm for five years, packing their bags and it didn't look good. And they came in to see me and that's when they said, do you like Bangkok? And I said I've never been. And they said we really need someone to go and help. There are no foreign senior lawyers down there. So yeah, it was a pretty exciting time. It was the handover period. It was incredibly busy. And then, I became a restructuring lawyer, like many other finance lawyers. And that was a really crazy part of the world because many companies in Southeast Asia very big had borrowed in US dollars and they were earning in different local currencies and all of a sudden, their loans had tripled, interest rates had doubled and they were dead, but there was very weak court enforcement and we all know if you shut down a big company, you don't necessarily get all your money back.

So it was definitely fun and games and lots of exciting things happened and a lot of crazy things happened. Some of the entrepreneurs are these big founders of these big tycoons. They would have people arrested as they came to the airport. If they were coming from the big accounting firms, etc. Saying you're here for meetings, aren't you? Technically, you're working. You need a work permit for any day. And the police would pick them up, for a couple of days. So it really got quite serious. Of course, there was some violence in limited parts, which was regrettable but yeah, by and large, it was a very eye-opening experience.

(07:05) Jeremy Au:

Asia's financial crisis was pretty much a big, I don't know what's the word, PTSD or trauma moment for a lot of folks in Asia. You must have seen it during that moment. Any other moments that stand out for you during the Asia financial crisis?

(07:18) Jason Edwards:

We were working on one restructuring where there was, there was a calamity. One of the partners of an accounting firm was set up in a small town where this company operated and was shot, and killed. And that was a signal. And that's just, kind of a thing here in emerging markets where it's quite unpredictable, in that sense. It just showed the length that people would go to and it also showed that you had to have a different approach. You couldn't come in with Western culture, Anglo Saxon saying this is our creditor rights in our country. You're going to play a game and do it exactly the way we want you to do it in a country or countries in emerging markets where that's not how things are things are typically done. So you had to learn that delicate balancing act of how you could try to get things done, protect, protect your client's rights, but also, you had to not be completely abrasive with because the consequences were unknown and potentially dire.

(08:07) Jeremy Au:

And that was a big moment because, after that, you went off to move from Bangkok to Singapore at Clearwater Capital Partners. So what was the context of that

(08:15) Jason Edwards:

Yeah. So one of my clients at Baker & McKenzie, the law firm had actually set up Clearwater and they got to 500 million AUM and they needed a general counsel and someone to be involved. And so I'd been in Bangkok for seven years. I actually loved it. I, when I went down there for the first time, I thought it was a terrible place. It was hot. I thought as a Westerner, it was dirty. And I've lived there for a few years. I thought it was an amazing place, very friendly people, great food, and lots of diversity. So they'd set up a fund. They wanted someone to join them. I didn't plan to live in Thailand for the rest of my life. Not that that would be a terrible thing. Many Westerners do, but I wanted to get back to a financial center. And I actually thought I'd never live in Singapore out of all the places in Asia, cause I thought, it's very small and and I thought monotonous, but of course, Singapore has its own charm and it's a great place for work.

There's lots of opportunities. And it's a city that just continues to, to outperform and to grow. So that's when I moved. We grew the fund to about 2 billion a bit over that. And we were doing some interesting stuff. So it was special seats. So we were, we were buying distress loans in difficult countries and then trying to enforce looking at the value we could get or we were lending at the periphery lending at very high rates to companies.

We knew that would struggle buying loans to own to take over assets. So doing all that kind of stuff where, it's one thing to act on the lending side and one in 100, you might have to do some enforcement and you might be involved a little bit and you hand it over to the litigators, but when you were really just doing that day in, day out, you had to run the process and create the efficiencies and work out what really worked to enforce in Indonesia and Thailand and Vietnam, because it's not the same as in the European countries, and we worked that out. So we knew what we could do, and we were very successful at getting our money back on a number of occasions that people were surprised at, but it certainly took a bit of learning.

(09:57) Jeremy Au:

I think that's a really interesting point, because of what the rights are for the shareholder and especially I think it's a good scenario that everybody's happy, right? And in the bad scenarios, then how do you even carve out that pie? So could you share a little bit more about what the dynamics are around getting your money out slash negotiating?

(10:14) Jason Edwards:

Yeah, another way to, I think the famous saying, a good negotiation is where each party is equally unhappy rather than happy. I think when you think around on recovery and defaults and enforcement, there are some cases where it's just a, it's a real asset. It's a security, it's a property. Okay. It's pretty simple, but if it's a business, businesses usually have most of their intrinsic value in the business themselves. And just trying to take over the keys, if you've had an entrepreneur running a business for a decade or generations, we can't kid ourselves, you're not the person to come in and take over those businesses to get the extract the best value. So very often then, it's a delicate balance between using your stick and your enforcement, but also wanting to work with the family or the entrepreneurs. So how do we maximize value for everyone? They don't want to pay anything. You want to get all your money back. How much pressure can you exert and get their help to some extent? Using the leverage that you have and that was a bit of an art, but I think that's, on these operating assets if you just try to get in there, rip it out, you would see the value probably deteriorate. That's what I think the biggest challenge was.

(11:15) Jeremy Au:

Is there any differences that you saw between say Europe and say Australia versus Southeast Asia and Asia in terms of the set of negotiations?

(11:23) Jason Edwards:

Yeah, I didn't actually go to Europe. So between Australia, it's a very efficient legal system that is very creditor-friendly and it's cut and dry. In Australia, you would look at what are your rights? What's the value of the business? What's the value of the assets? And it would be, you would discuss a little bit with the borrower, of course, but you would not give them much leeway and you would just be taking over those assets very quickly without going to court and selling them. It wouldn't even have to go to court most of the time. I did lots of enforcement in Australia and you don't have to go to court. You can just kick down the doors. Not that we do that. You hire people to do that when people aren't home because you can't use violence, of course.

And then you change the locks and you put a sign up that says, this is after you've, you know, there's defaults, there's discussion, you don't do this in a hurry, but when it's clear that they're not playing ball, you ask them to vacate or not vacate or even residential property, but to commercial property, and then you go in on a time when they're not there, you change the locks, and you put a sign up that says, " If you come back in, you are trespassing and you will be prosecuted," and that's the truth.

So it was incredibly creditor-friendly. You would never do that in Indonesia or Thailand. It'd be very risky kicking in the doors and trying that. And legally, I don't think you probably could all, it's, some of the times you probably could do some things, but no one's ever thought about it. So yes, a completely different approach because of the the effectiveness of the courts and the sophistication and also you've got the question of partiality of the court system. You can be pretty safe in Australia at the lowest level and the highest level. You've never heard of anyone ever taking money to be influenced by how a decision is made. You could not have that certainty in quite a few countries in Southeast Asia, even at high levels. And the decisions that have come out that I've seen have been extraordinary. They had very clear cases and the judges come out and said yes, he borrowed the money or this company borrowed hundreds of millions of dollars, but we think it's actually illegal in this line. So you'd get answers like that. Now you knew that if you got to the final court, you'd have a reasonably good chance of turning over that rubbish, but you always had a question. So they had leverage with that. And so you, you'd have to take that into account in negotiations and continue on, but very different approach to emerging markets.

(13:31) Jeremy Au:

And here's interesting because you also were doing the private equity side, and then after you moved on to alternative investment advisors, could you share about that?

(13:39) Jason Edwards:

Yeah, that was more consulting. So still consulting into people doing special sits investments. So did some work for Goldman Sachs, some of the other big funds as they look to invest or buy distressed assets. Sometimes, they were going into markets they hadn't had with. So that was what I did for a few years before taking the big sort of step and going into venture capital.

(13:57) Jeremy Au:

And that's a big one because, you're from consulting, you're going into Qualgro and venture capital. Could you share more about that? This is very early as well in the ecosystem.

(14:05) Jason Edwards:

Yeah, back in 2015, we, we launched Qualgro and, a couple of things, certainly, I was out of my depth because I'm an older lawyer, not a young tech-savvy person like yourself who really understands these new business models so quickly, and, and there is this age thing. I knew what I could add value and where, but it was going into a career path where it was very different. One of the things that I noticed though from venture capital and private equity is, in private equity, you are cordial, but you're very focused on your rights. These are my rights. These are your rights. If things don't work out, I'm going to take whatever action I can to get my stuff, but then, in venture capital, if it doesn't work out, there's nothing left, usually. So there's this mentality of we're all in this together. And I really noticed that in the first couple of years where it was like, we're not fighting with the founder, saying, Hey, this is my right eye on this. It's like, no, we want to help that founder as much as possible because if he succeeds, we succeed. And I really, really like that. That was such a nice change from, being banging the fist on the table and doing all that other stuff to saying, no, the whole mentality is different. We work together. We work with other VCs. We're all in this together. And, pretty much, it's one for all and all for one.

(15:17) Jeremy Au:

And what did you learn else in venture capital, because, 2015 was early in the ecosystem. What were other things that you learned along the way?

(15:25) Jason Edwards:

I learned everything because I didn't know much about it, to be very honest, when we started. So one of the things we did was my other partner, Han, was very methodical in his approach very senior partner at McKinsey. And what we first did was, we spent quite a bit of time working out what is our strategy. So venture capital, of course, you've got different stages, countries, sectors, etc. And we said what do we do in Southeast Asia? And we spent a lot of time and we analyzed all the other VC funds methodically. And this is what we came up with in 2000. We started this in 2014 as the majority of VCs were B2Cs. Actually, they were all B2C, predominantly. And we really thought about this and we thought to be successful in B2C, you need an enormous amount of capital to get to break even. You have to have a huge valuation to have a successful outcome because of the amount of capital you need to raise. And therefore you need to be very, very big.

And, to do that, you can't do that in Thailand. You may be able to do it in Indonesia, maybe, but that's still, the B2Cs are going to be able to make it work. So you had to be regional, and B2C does not go well transferring through cultures and languages. And so we thought that's a really tough market. B2B people weren't really interested in, but B2B gets the profitability much quicker, much more capital efficient. You can have valuations at many exits at much lower valuations and have good outcomes for everyone. And they do go from languages and cultures much easier cause you're not selling with the consumer. So we've had exits from Qualgro, $150 million in that range, and done 10x to 20x. You won't see that in B2C businesses. So from the outset, we said we have B2B. That was one of the learnings. And in January Capital was the same. It was very clear we were a B2B fund, but what, what you have now seen, you talk about startups pivoting.

(17:02) Jason Edwards:

The majority of VCs have pivoted. They are now pushing B2B because they've realized that, look, there are just very few exits in a B2C. There's a lot more in B2B. And what kind of exits do you have? Do they look good? Grab raised 20 billion and its valuation is 12. It's the worst-performing startup in the history of Southeast Asia in terms of money lost. And look at the other ones. There are not, huge returns for every investor. So that was one of the learnings, but for me, it was just realizing just how many opportunities there are. There were people who were, I love the environment. People who were leaving comfortable paid jobs to take risks. And that's exciting, right? The people who believe in what they're doing, want to control their own destiny and often very smart people, and they're determined. And knowing full well, as you know very well, Jeremy, that most startups don't succeed. So that is a huge risk. And I love to be in that environment where people really believe in themselves and are prepared to take risks for really strong outcomes.

(17:54) Jeremy Au:

And what's interesting is that you were there as a partner at Qualgro, and then you decided to become a founder and continue investing as well. Could you share about that?

(18:03) Jason Edwards: Yes. And this for me was, we were using Pitchfork and we were using traction, but we looked at the data on our own companies and they weren't covering Pitchfork didn't even half of our portfolio. And then when we looked at the data they have on fundraising for the companies they did cover in our portfolio, it was wrong 40% of the time completely because they missed rounds. Rounds weren't reported. They couldn't pick it up. Rounds were reported ambiguously, which is very common in Southeast Asia because founders intentionally want to give people a different impression. And they would pick up what the founder wanted you to believe, which wasn't the reality. And they didn't have anything we wanted, the valuations, cap tables, and financials, and they wanted 30,000 a year. Well, it's now 30,000. We thought this is crazy. So I knew as a lawyer, you could get a hundred percent accurate data on each company, but you'd have to solve a lot of issues. Cost being one, cause you have to pull every filing for every startup, and then you'd have to work out how to get notified when companies raise money or file financials of them are not reported and, and other issues. And I thought this is, this is what I want to try and do. So I spent my weekends testing this and building it and backtesting it with data of companies we had, and then working with some other friendly VC saying, just check this data.

And we were getting it a hundred percent. It was just, it was all right. And people were, looking at that thinking, how did you do that? And then it was an interesting time because it took quite a while by myself, it was bootstrapped and we just covered the Singapore-incorporated companies, but that's the most important because many startups around Southeast Asia incorporated in Singapore. And this is the thing that really surprised me.

I built something and I knew nothing about tech platforms. I just, I didn't, I had no idea, but we built something and then I looked at it and I thought this, everyone will want, everyone. And I had such incredible confidence. What really surprised me is no one wanted to see it initially. And that, to me, was demoralizing that I knew if they saw it, they would love it, but initially, I said, Jason, we don't want another Crunchbase. And these are VCs I knew, and I thought, geez, this is so difficult. So it took three or four months, and then people started to read the newsletter, and they say, hey, hey, we didn't report this, how did you pick it up?

You started to get a few more queries. And then, step by step, a couple of VCs, okay, let's have a look. And I'd be pitching, giving it my heart and everything. And within five minutes, they say, Jason, stop pitching. We're buying it. I just want to know how you're doing it. We had VCs handing over the credit card in the demo, right? It was like, wow, sign me up. And I'm like, actually, I haven't got access. I can't take your credit card, but this is just that you never, sometimes you just don't anticipate what will be the biggest challenges. Yes, I'm going to build a product challenge all the way there. And then it's going to sell like hotcakes. Maybe if people see it but now we've got 75% of all the VCs in Southeast Asia as customers. So we had to build new products because we're just so dominant. There's only so far you can go, but it wasn't always easy.

(20:36) Jeremy Au:

What's interesting is that you now probably are one of the most clued in at a macro level across the region, because I think one thing I realized is that working as a VC is that I think a lot of people are looking on a qualitative sense on an individual sequential way, but you're the only one who's kind of looking at this longitudinally and across the whole ecosystem. So any particular things that have surprised you over the years because you have all this data? Any particular tidbits that you want to share?

(21:01) Jason Edwards:

I was amazed by how quickly valuations went up, a couple of years ago, and I think everyone else can see that was unsustainable. I was surprised by the number of companies that funded when they would survive. I was surprised by the growth in the VC space and back in 2012 thereabouts, there were really just a handful of funds. You had Jungle, Golden Gate, East Ventures of course and Jungle's first fund was 8 million, and they just raised 600 million. So you had a handful of funds and they were Now you've got 250 plus VC funds to add to that many family offices that just in Southeast Asia and family offices, strategic, super angels, blah, blah, blah. The size of the investigators grows dramatically. You've got late-stage investors that were, going in a pre-IPO series C, realizing they couldn't get access to the came all the way down to Series D, C, and sometimes Series B. These are sovereign wealth funds. So you had all that excitement and then you started to get foreign interest, which is great.

Now obviously that's slowed down a little bit, but it was tremendous to be in and you were part of that, Jeremy, just to see that growth in the ecosystem. It was really exciting to see so much happening. And I think Southeast Asia will continue on a strong growth. Obviously, the whole market seeing smaller rounds, and that's what we're seeing now because we've got the data. We can tell you what's happening. You're actually seeing more companies funded now in Southeast Asia than ever, but the round sizes, particularly at the growth stage, on average, are much smaller. So that's an interesting thing, right? One of the other things that shocked me was, If you give a founder lots of money, they often, no matter how smart they are, they often won't be able to utilize that the most efficient way. And I don't want to pick on young people because young founders are often the best, but you give, someone 25, say, 50 million US dollars, and they've only worked for a couple of years for someone else in a pretty junior role, it's like, what do you expect them to do? And of course, they think the expectation is they've got to grow.

So they hire like crazy. They're going out and doing this. And then that didn't work and they shut down and that didn't work. If you give people a small amount of capital and they can be very capital efficient, which some of the funds do. And of course, they get priced out of some of these rounds, but some of them do. It really makes founders think with alternatives and I've funded that myself. So we had to be very thoughtful until we got to about 40, 45 people. And then we've just taken our first institutional capital this year. You had to be very careful. It's okay, I really want to hire that guy. Okay. Got to add a few more customers, right? Make it work, get to a point, justify it. You really think about spending on data and products.

When you're using a lot of money from someone else, you think about it, but in a different way. And I just think so many companies got funded with too much money. And those companies may have succeeded, but now their downfall is so much the fall in their valuation is so much, it's going to be so hard because all of the people, these upset that's underwater, right? So unless you're going to reissue everything at a new price. And I think just the spirit within the company as they get through such a fall. It's pretty hard to recover sometimes. and with the other thing that shocked me was in the frothy days going back two years ago, very young companies getting huge valuations, a couple of years, hundreds of millions of dollars, making no sense, almost no revenue, but not only that, selling millions of dollars of shares of the founder, so he's taking risk off the table. He's put no money in, he's getting millions of dollars out. It's just the whole wrong incentive, and that's not happening but that was and that surprised me.

(24:14) Jeremy Au:

Yeah, I think it's surprising because we could hear it, but of course, it'd be a time lag. And so I'll always be like, is that true? And it is true. So it's such as life. So it's interesting because you're opening up access to that information set.

I'm sure you got a lot of pushback as well because information is power, right? And so to some extent, when you make it flat, people don't like it. Could you share more about that?

(24:32) Jason Edwards:

Yeah, we did have a small number of startups, not many, come and say this is illegal, it's a private company. So we'd have to explain to them private company does not mean private data, and in fact all the data is accessible in ACRA or SSM or the equivalent across Southeast Asia, but it's, there's no valuations in ACRA, so we pull everything to make it informative and accessible.

We've had one or two offer to pay us to remove their data and pay us reasonable amounts too. And these were companies I hadn't heard of. And I thought, what do you do? We've had VCs. None of them have actually, I think they just accepted it. By and large, it's very net positive for VCs. Of course, but it opens up everything, right? So you can see what you invested in each company and what it's worth today. Did it work out? Did it not? But that's part of the course for VC. We're always going to get some companies that don't work out. The fund performance is probably the one that's a bit different. And I told a lot of people when we launched this product, I'm going to win some friends, but I'm going to lose some friends because you're either a winner or loser, and if you're at the top, yeah, great. Put it out there because I didn't give it to Prequent. They haven't got my data. Okay, fine. If you want to say I'm one of the top deciles, that's okay, but if your performance is not good we thought long and hard about that and we're a VC, so we're open to the same benchmark, but we think transparency as a whole is beneficial, but as you say, there's always some people who could benefit by lack of transparency, but I think for an ecosystem, it's a good thing. The other good thing I think is, is, is from a founder's perspective. We, the founders, were often saying, Oh I've got to raise this because X raised this. I've got to do this. And they didn't know really what, whether that was true. And the VCs had a much better access So it opened up the ability for the founders to say, Oh, hang on. I actually can now go and check on my competitors. I can see if this VC is actually really followed on. How much did they put into these companies? Do a bit of due diligence on them. So it gave them that capability. How do I work out my valuation? Oh, I can see every valuation for every FinTech at Series B in Southeast Asia with their revenue. Now I can try and justify it when I'm talking to a VC. How did you come up with that? I looked at every company you invested in and all your peers, and this is the valuation. Before you couldn't do that with confidence. So mostly positive, 99% positive. Just a couple really surprised saying, remove my data, which we did not.

(26:30) Jeremy Au:

And you mentioned that you also invest as well. Can you share more about that?

(26:33) Jason Edwards:

On the gen cap side. Yeah, so we are a, again, B2B for the reasons I went through before, but with the seed stage. And the reason for the seed stage, Qualgra was A and B, but we see the seed stage has better risk-return. Obviously, if you get the right company at the seed stage, the multiple is going to be higher, but it's a higher risk. So you want to get the right. Now, everyone knows the series A, and B companies, because we publicize them. It's all out there and it's usually no secret. Even the most in-the-loop VCs don't know more than 5% of all the unfunded startups because there are thousands of them. So if you could use data to access more than Sequoia, for example, because we can't build a bigger brand than Sequoia, it's not possible, but we can use data to see more companies than they were at the early stage because we do something quite different. So that was the idea. And we've done that. So we've now got January Capital's five engineers and data scientists in-house. And we also had, we're the only VC to get a grant of seven figures from the Monetary Authority of Singapore to build out this, our own data product called First Signal. So that we can see when start-ups are incorporated, we can see the quality of the founders, and we can use it. Get a front end and filter it education, by work history, because we know where a lot of the good founders come from in their backgrounds. And so that's why we went backstage. So very much on the equity side, seed stage B2B.

And we just launched venture debt for growth-stage companies. And we did that because all of our growth stage companies, the one complaint they had is we couldn't access credit. There's none. There's no venture debt for us. None of the existing players in a great firm at Genesis about, they all do typical check sizes, 2 million, two to three. And so we saw this huge demand and it's great to be in a space that's not competitive, right? So you're not sort of competing head on with lots of other lenders. So we hired the CEO. So he's fantastic. The most experienced venture debt person in Southeast Asia. He's brought across one of his best analysts has joined us and we're building up that team. And we've done our first couple of deals, 15 million each. So we are really aiming at a different space. And the demand is huge. Every growth stage company we've spoken to said, I'm interested in venture debt, whether it's right now or in 12 months, I definitely want to talk to you about it. So far things are going, going well. High-interest rates are great if you're a lender, but not so much if you're a borrower, so that works for us. And it's the perfect time for venture debt because high-interest rates, huge demand, and valuations are really, really low, which is great because you get your warrants at today's strike price, which is today's valuation, not two years ago when you'd be underwater. Fairly optimistic about where that's going to go.

(28:52) Jeremy Au:

How do you think about venture debt as an asset class? Because those are the macros, but what do you think are some of the parameters that should be what people should be mindful of?

(28:59) Jason Edwards:

From a borrower's perspective?

(29:02) Jeremy Au:

From a lender's perspective.

(29:03) Jason Edwards:

Yeah, it's interesting. When we were fundraising, one of the biggest challenges we had was that most institutional investors didn't know it or just did not know much about it to the point where they couldn't invest because in the US it's huge. It's about 35 billion dollars a year estimated to be more than 15% of all the capital. Massive. In Europe, it's growing very fast and BlackRock just acquired Creox, the largest venture debt player in Europe last year, showing the biggest allocators in the world find this exciting. Many of the players in the US are listed and you can see their returns through the cycles. 20% on average through cycles, incredible risk-return at the growth stage. For us, because of the lack of competition, we believe we'll do better. So equity returns, very low credit risk. But you know, one of the things that people ask you is why wouldn't I invest in a growth stage fund as opposed to a venture, a venture debt fund doing growth stage.

And for us, it was pretty clear. We said, that if you have the best outcome possible for a portfolio company, You will get a better return on the growth stage fund a bit. They'll want 25% IRR or more, but if they get a great outcome, the venture debt will get close to 25% IRR because your interest and fees are giving you mid-tiers, the warrants if it's a great outcome will drive it back that far. In every other scenario you will get more money in venture debt. So take a scenario where the VC gets a zero percent IRR, they just get their money back. Venture debt will get mid-tiers because you have to get your interest and fees before they get a cent. Or take a scenario where the VC loses all their money. Venture debt, typically amortizing. You're going to get all that money out first and then you're senior secured. So whatever value is left, you take the rest of it. And of course, if that's seed in series A, that's not much, but if that's a company that series D that's worth half a billion dollars, you can be pretty sure if it runs out of money, there's probably $10 million of value somewhere that you can get to cover your loan.

The last thing I mentioned there is what you look at. So people say it has to be high risk. You're lending to companies that are unprofitable, that don't have real state of security. And the answer to that is you're not getting funded the same way as a traditional lender. You are getting funded from some of the cash flows, but by and large, you're looking at if this company is very likely to raise at least one more because if you advertise over two to three years, companies raise every 18, 24 months, they raise one more round. You will definitely get all your money back. You'll get a mid-tier return and you've got your warrants as well. And so that's what we really look at, the quality of the investors. We look at obviously the performance of the company. We look at its trajectory. We look at how important this company is in each of the investors portfolios. We talk to the investors and we get very high conviction that this company will raise, even if it's a down route, we get a mid-tiers return So it's, it's like, it's a great place in terms of risk-return.

(31:27) Jeremy Au:

On that note, could you share about a time that you personally have been brave?

(31:30) Jason Edwards:

I personally think that every founder is brave. Everyone who does something new that is inevitably has a high-risk component, you set up a podcast or you set up a startup. I think it's even more so when you do it when it's highly visible and even more so when it's highly visible to your peers. So I was launching a startup and I knew, I knew data and filings, that's something that I think I know, most, maybe better than anyone, but, but I didn't know anything about setting up a tech platform. And I didn't know anything about all of the software I'd need to do to, to, to make this work. And that was daunting to me. And so I knew the risk of getting all this to high. And I was going to do this without being full-time, which just makes it even more unlikely to succeed. And if it didn't succeed, every VC would know that I tried and failed. And every other probably startup, cause we were, talking to them probably wouldn't know that as well.

And there's nothing wrong with failing, of course, but none of us like to fail. So for me, it was that point where I thought very, very hard, do I want to do this? Do I want to go out really hard and public and say, I'm going to do this? And take the risk that it might not succeed with all of my peers, all of my colleagues looking at me because I can guarantee you there would have been so many people who I told you so if it but that was a game changer for me because it, it made me take other response, other challenges with a different sense of strength. I'll give you an example.

Once I did that, I said to succeed in this, you've got to give it everything. I said to myself, I no longer have a right to say, I don't want to pitch to someone. I pitch to anyone. I pitch on weekends. I pitch in my sleep and I'll pitch to anyone and I will chase people to get in front of them. And that was hard because I was never the person, I'm an introvert, the Myers-Briggs sort of personality test. That's not me, but I never miss an opportunity. I meet anyone if I think they're remotely interested, I hit them and I chase them and I don't care. I don't have the privilege I tell myself to have weekends off, ever, and I haven't had a weekend off in five years. I said if I'm going to do this, I'm going to do this. But I also said I don't have the privilege not to be, afraid of public, to be afraid of getting up in front of 300 people and talking. Now everyone's a bit anxious about public speaking myself included, but I said no, I'm not going to run away from it. I'm going to run head on and I'm going to do as much as I possibly can. I get up at Superreturns. I get up at the VC conferences. But now it's, it's really helped because now I don't feel that fear usually does.

And I feel now that any challenge that comes, I take it with a new sense of, look, I've just tried to do something that I thought had a very high risk of failure that had a lot of reputational risk and that's if anything else fails, I'm okay with that. So that's what I think I've been brave, taking that risk to set up a startup and doing it without being full-time and doing it in a place where everyone would know if it didn't work out. And knowing that I didn't know much about anything except data. I knew nothing else about building a startup business. Even as a VC, I didn't know how to build the nuts and bolts. So I had to pull in a lot of favors. But fortunately, it's been successful.

(34:09) Jeremy Au:

You've definitely grown a lot over the years, right? As a lawyer, as an investor, and now as a founder, if you could travel back in a time machine, back to the Asian financial crisis. You're a lawyer. You're in the office, like you said, people were getting fired to your left and to your right, and you were able to, I don't know, grab your younger self for a drink at Lang Kwai Fong, or a bar. And what advice would you give to yourself back then?

(34:29) Jason Edwards:

Yeah, it's a great question. The one thing I think, I sort of went in, got into law with the mentality that I will just nonstop work to become a partner and then, make it of the firm and I got to become a partner. And then it was like, you work so hard, you give up so much of everything and you work in an environment that I mean, some people enjoy it, but I think most people won't. The advice I would give is that if you think that you should, everyone should think about whether they want to run their own business because you control your own destiny and you can also if it's successful, wealthy and everything that goes with it, but you're also your own, you can't underestimate how positive that is.

It comes with a lot of baggage and dealing with people. I would tell people to think about it sooner. And I know a lot of young people do it sooner and I, if I hadn't gone back I think I would have jumped sooner. I would have gone. I love doing the VC and I'm going to keep doing that because I actually love it, but I think I would have got out of the sort of large institutional stuff much quicker, taken some risk earlier and gone and tried to do something that was really dependent upon myself to be successful.

(35:25) Jeremy Au:

Thank you so much for sharing. On that note, I'd love to kind of summarize the three big takeaways I got from this conversation. First of all, thank you so much for sharing about your early legal journey as a lawyer in Australia and Hong Kong, in Bangkok and very fascinating to hear how you were thinking about the business, but also looking at how the different geographies played out in terms of how to recover shareholder outcomes, but also how to negotiate some tricky situations.

Secondly, thanks for sharing your perspective on Southeast Asia venture capital. I think obviously, there's a lot of optimism and pessimism. And I think really, I think you're sharing this quantitative point of view on what has actually happened over the past 10 years in terms of the ecosystem. Not just in terms of the startups, but also on the VC side, the supply of capital and investment discipline that people have been exhibiting as well.

Lastly, thanks so much for sharing venture debt as well as an instrument. I thought it was fascinating to hear about how you think about it in terms of why now's the right time in terms of the macroeconomics versus the asset class versus the operating parameters to do it. And I think he also ties back to your early points that you had about the discipline that founders need to have about the capital they receive and how investors should be prudent in helping founders navigate the most capital-efficient choices to grow their company properly and really survive. On that note, thank you so much, Jason, for sharing your journey.

(36:38) Jason Edwards:

Jeremy, it's been a pleasure. Thank you for having me on the podcast.