Sam Gibb: New Zealand Law to Southeast Asia VC, Regional Fintech Upside & Aspiring VC Partner Advice - E438

· Podcast Episodes English,VC and Angels,Southeast Asia,Fintech

 

“One thing I've always tried to avoid is jumping on the current hype wave. Right now, there's a lot of buzz around generative technologies, and while there's some cool stuff being built, you need to ask where the real value creation lies. If you can pinpoint that, you'll identify the companies that will be sustainable in the next few years. From a fintech perspective, the reason it's had strong returns in other developing markets is that once you reach a certain scale and integrate digital business models, it generates significant cash flows. However, when businesses look at Southeast Asia, they often see half a billion people, the growing markets, and the highly digital population with rising GDPs. But the real challenge lies in navigating the diverse rules, languages, and cultures of the region.” - Sam Gibb

“I wouldn't say there are many funds focused on fintech, especially not at the seed stage. There are some funds that work at later stages, and we typically collaborate with them. If you look at the evolution of ecosystems in other markets, you usually see more vertical-specific funds emerging. When I considered this, I thought, from an investor's perspective, why would someone invest in a relatively small generalist fund when they could choose a larger one with a decade of experience and established infrastructure? It would be much easier for those funds to attract LPs. I realized I didn't have any differentiating factors to compete in the generalist space, so I decided to focus on fintech rather than continue as an angel investor.” - Sam Gibb

“I find it really interesting to see how people try to enter the space. Some believe they have an edge, but they haven't proven it yet. You have to ask, how do you know this is viable? Can you access enough qualified opportunities? Operating in a specific vertical is more challenging. As a generalist, I reviewed about a hundred opportunities monthly. Now, focusing on a specific vertical, it's more like 10 to 20. Business creation has slowed significantly, varying by vertical. Can you create a fund with reasonable economics there? Fundraising is challenging and requires a long-term perspective. I'm always surprised by first-time fund managers who think it will only take a month or two. You can't rush this process, especially in Southeast Asia, where relationships are key.” - Sam Gibb

Sam Gibb, Managing Partner of Resolution Ventures, and Jeremy Au talked about three main themes:

1. New Zealand Law to Southeast Asia VC: Initially set on a legal career, Sam quickly realized it wasn't his calling after interning at a law firm. Sam transitioned to PwC, where he worked in the finance sector. In 2011, Sam relocated to Singapore to tap into the deeper capital markets and work with hedge funds and private equity firms, focusing on Asian equities. By 2014, Sam had founded Resolution Ventures, a seed-stage fintech fund dedicated to the Southeast Asian market. The fund has been successful in deploying its initial capital and Sam is now in the process of raising a second fund.

2. Regional Fintech Upside: Sam emphasized the complex nature of the region, with its diverse regulations, languages, and cultural nuances across different countries. Despite these challenges, he pointed out the significant opportunities in fintech, especially in areas like alternative credit scoring and small-value cross-border currency transfers. He noted that companies that succeed in Southeast Asia are those that can adapt their strategies to each local market's unique requirements. He also mentioned the critical role of fintech in enhancing financial inclusion, allowing underserved populations to access financial services that can improve their economic standing.

3. Aspiring VC Partner Advice: Sam provided practical advice for new fund managers, stressing the importance of patience and relationship-building. He acknowledged the frustration many investors feel due to the challenging return environment in Southeast Asia. Sam emphasized the need for transparency in valuation practices and the importance of secondary transactions to improve liquidity. He urged fund managers to embrace realistic valuations and co-create genuine value, and not be tempted to overhype investment returns.

Jeremy and Sam also discussed ultra-marathons and how they shape his approach to personal challenges, the implications of capital stack dynamics on fund returns, and the strategies for building a robust network.

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(02:07) Jeremy Au:

Hey, Sam, really excited to have you in the show. I've always enjoyed your writing and ran into you in a couple of events. Great to hear your story. Could you share a little bit about yourself?

(02:15) Sam Gibb:

Yeah, sure. Thanks a lot for having me on today too. I really appreciate you being able to make the time to speak. So about myself, so just briefly, Kiwi, I've been in Southeast Asia now for going on 13 years. My background's actually in hedge funds and private equity, but then I started angel investing about a decade ago and then from there eventually built up a generalist seed stage fund and then the went to the second iteration of that which is Resolution Ventures which is what i'm working on now and so that's a seed stage fintech fund focused on Southeast Asia. We've actually almost finished deploying the first fund and currently working on raising the second fund for that.

(02:49) Jeremy Au:

Awesome. So tell me more about yourself, university, you are out in New Zealand. Could you share a little bit about what you were studying and why you chose to study it?

(02:57) Sam Gibb:

Yeah, this is a frustrating one for me. So I've actually been talking to a wife about this a bit because we both did the same degree. So, it was Bachelor of Management Studies and Law degree, both as undergrads. I think it's a bit different in New Zealand to some other parts of the world where you can study law as an undergrad degree as well.

So it's a pretty comprehensive degree and the management side of it, we actually covered most of the content that you typically cover in an MBA, which was great, but then it's also quite frustrating because it's not like that is actually recognized internationally or the university that I went to has any kind of, does any kind of brand building, brand awareness about the degrees that they have. So yes, I started off with law and management. I actually wanted to be a lawyer to start off with I was dead set on being a lawyer, but I thought oh, yeah, we'll do the accounting finance stuff as well because maybe that'll be helpful further down the line, however, I interned at a law firm one summer. Found it incredibly boring, fell asleep on my desk a couple of times, and realized that law wasn't for me.

(03:54) Jeremy Au:

And you decided to join PwC afterwards. So what was that thinking?

(03:58) Sam Gibb:

So at a law firm, this isn't the banking finance team, because I figured yeah, I'd love that, did not. And then in the tech team, I like the tech side of things because it was quite analytical, combined the number aspect with the legal aspect too, but if you started a law firm, then you're working with a relatively small team, like five, maybe 10 people in that team. However, if you started with one of the consultancies, then you're talking about 150, 200 people in New Zealand, I'm talking about specifically to, given it's going to be different in different markets here, but I figured it was better for career growth and to be able to get grounding early in my career at an accounting firm, learn a lot more.

However, in the, let's say one of the first days that we're there and this is around the time it was like Boston Legal on TV and so they were cool lawyers and I thought, yeah, you could be a cool accountant too. No, you can't. I realized pretty quickly like I was not the kind of person that is going to fit in an accounting firm. Actually, I almost got fired from PwC too. Yeah, because playing some pranks on the partners and it didn't go so well. But yeah, so from the end into, fund in New Zealand, which was effectively a hedge fund. They've done really well, really well since they started. And then we had the opportunity to move up to Singapore and personally, I wanted to go into a deeper capital market, get some more experience and do something more interesting. So we took the opportunity and came up here.

(05:09) Jeremy Au:

Awesome. And what was it like moving to Singapore?

(05:12) Sam Gibb:

Pretty challenging. Back then, a lot of things have changed since we moved back then. The cost of living skyrocketed, right? So I don't even know how young professionals would make it work these days as compared to previously. I thought when we first moved to Singapore that it's a financial hub. There would be a lot of hedge funds, a lot more on the kind of creative finance side as opposed to mutual funds and more vanilla kind of financial products, but realistically, there was more of an ecosystem around that up in Hong Kong, I think, at the time. It made it pretty hard for me to fit in.

And also, there were some things that just didn't culturally translate as well because with my wife, she was at PwC and I thought it would be pretty, you think it's pretty similar across the world. There were things that made it a lot more challenging here and in the way that vertical relationships were managed. So the first couple of years were very challenging, I'd say, and it took us a while to really find our niche. But at the same time, even back then you could feel that there was a lot of opportunity and potential here because of the systems and policies that had already been put in place. It feels like it's one of these places that It's only really just starting to build momentum and I feel like that now. I still feel like that, but some of those policies, some of that momentum is actually starting to come through. Like you're seeing some of the larger tech companies setting up their hubs here over the last few years. And that's probably because of the policies that were put in place way back then.

(06:33) Jeremy Au:

So what was interesting is that during this move to Singapore, you also moved towards more of a capital management and deployment role. Could you share more about that transition?

(06:41) Sam Gibb:

So it's actually quite a similar role to what I was doing in New Zealand. So more on the analysis and the investment. But then the first role that I picked up moving to Singapore was at a private equity firm where I was heading up the valuation team, so managing a team of analysts there. And I just wasn't really prepared for this. It's the private equity firm versus hedge funds. It was just so much slower. And so at the time I got pretty bored and ended up running ultra marathons. It was funny. There's a funny story. I went out to McRitchie one time. I wasn't much of a runner. I never really ran. I ran once around McRitchie, kind of ran, ran, walked. You know how it goes. If you're not really a runner and you go out there, give it a hack. And I figured nah, if you. Want to be able to do anything with yourself. You should, you should be able to run like a half marathon off the bat. So then I just kept going and did another lap. And I was like, I reckon I could actually learn to run distance, like actually get something reasonable up.

And so I started to run a bit more and build that mileage up. And then next thing, a mate was actually doing a marathon up Everest and my wife and I, we'd actually wanted to do a marathon that year. And we'd wanted to visit Everest at some point. And so we're like Hey, this is cool. We can hit two birds with one stone here. And we kept, kept doing a bit of training, then about a month before the actual event, it was the 60th anniversary of Tenzing and Hilary knocking it off. So they released this 60K Ultra, and I was like, my mate was gonna jump in and do the Ultra, and I was like I think I could do that too. The training would be going all right, and so I did. It was pretty scary, I mean there were points that you're going around, most sheer cliff faces, if you were to put a foot wrong you're gonna roll a couple hundred meters down the hill and then maybe fall off a cliff onto a river below. I know a couple of participants ended up sleeping in a yak shed that night because they didn't make it across a river crossing in time.

It was, it was pretty hairy but it was, it was pretty fun so I did that for a little bit there and then went to a hedge fund too. So that was doing Asia Pacific equities, mainly the macro staff, but mainly on the equity side. So for my whole career, I've largely been looking at businesses and trying to work out what works, what works and differentiate the top performers from bottom performers and just think, like a lot of the work was. Here's a thing that we like. Who are the top performers? Who are the bottom performers? Can we create a more or less market neutral basket with it while still getting exposure to this theme?

(08:46) Jeremy Au:

And what's interesting is that, you've been doing this obviously for different types of asset classes. And eventually you started focusing more venture capital. Could you share more about that part or decision making?

(08:56) Sam Gibb:

Yeah, so this goes back a while now, but when I was at the hedge fund, they had a pretty restrictive trading policy. So we weren't able to invest in public equities, which was frustrating for me, but at the same time, I was like, where's the opportunity in this? At the time the government was, and they still are, putting a relatively large amount of money into the early stage ecosystem. Kind of had a look at what was going on. I figured, Hey, maybe Singapore could become the Silicon Valley of Southeast Asia, which is a headline TechCrunch spat out a year or so ago. And then I slowly started to get involved in the space because I figured if I could learn a bit and make some mistakes early on, then I will have built up a network by the time the ecosystem starts to evolve and really start moving.

(09:32) Sam Gibb:

And there are a couple of things that I got wrong that I was like massively early in one. It definitely took a lot longer for the ecosystem to evolve and I'd say a reason for that being is there just wasn't really the skill set of people who had worked in high growth companies that, or the series C and D companies who could then go and work in the B's and C's or be angel investors to the C and A companies. Cause you really need the people who have worked at those slightly later stage high growth companies to then jump ship and look for a new challenge and go into the earlier companies. And that ecosystem's definitely starting to evolve now, it has taken a lot longer than I would've thought. So I think one of the problems with the ecosystem back then is a lot of money going in, but there was a lot of entropy because a lot of the lessons weren't carried forward. A lot of people repeating the same mistakes with different ideas.

And I'd say the ecosystem's at a really challenging point now because it feels like there's less focus on it. I think angels are starting to get very frustrated with their experience they haven't had as much impact in the businesses as they would have hoped They're not getting the right kind of financial returns from it as well because the exit ecosystem isn't really here. And so then they're asking why? Like i'm putting a lot of time and effort into this. I don't feel like that time's being respected or rewarded with the relationships from the founders And also why don't I just put some money into S&Ps and get a, what has been effectively like a 15 to 20% return over the last couple of years? That's a way easier solution than having to spend the time and effort doing the search the management of an agent portfolio.

(10:53) Jeremy Au:

Yeah. So what's interesting, obviously, is we're talking about the angel returns and VC returns and you decided to set up a fund. So what was your rationale behind that?

(11:01) Sam Gibb:

So I left one of the funds that I was at, and I wanted to, I wanted to leverage the skill set that I had. So at the time I was effectively looking at the trends, what trends are going to be succesful on the 5 to 10 year period. And then also I found that I was relatively good at actually building relationships and rapport with people, as well as the numbers side. There aren't that many people that I saw that are really good with both of those aspects. I was doing a number of angel investments and then you obviously have other friends and acquaintances that are asking, Oh, can we be involved? And it's pretty hard and relatively expensive to be able to set up SPVs all the time.

And then just trying to corral people into those SPVs, it is hurting cats. It's a very challenging experience for what are typically relatively small SPVs if you're going to compare it to other developed markets So I didn't want to do that. I wanted to set up the first fund, which was a, the generalist mandate to prove that I could actually help the entrepreneurs that I'm working with get into Interesting investment opportunities and also generate a return for the investors as well. And so I was able to do that help one One company in the tourism hospitality industry actually helped them negotiate an exit in early 2020 because there's a bit of a rift between the founders and the lead investor there.

So managed to really get them out of a sticky situation because obviously this was when COVID was, it was more of a thing here than it was in the U S which is where the acquirer was based. And I figured that it was only a matter of time before this business is either going to get bought, this is going to go through, or it's going to be a zero.

So I stepped in here and ensured that they got a result. Return wise, I was sitting around 50%, something similar for the second fund with the resolution as well. And yeah, I was able to get into some pretty cool opportunities. And we were some really great founders. So some really interesting people as a result of that. And that, led me to then go and raise the second fund, which was a fintech specific mandate because of the lead investor that I found, so Blipart Partners, working with them on the second fund on resolution. They wanted to have a fintech specific mandate. I was starting to do more fintech investments naturally anyway because of my background in financial services was able to see the problems a little bit easier and get my head around the opportunities there. And I'd say that so far, that's been really successful. I'm really happy with, again, the founders that we're able to work with and what we've been able to do for some of the portfolio companies in there.

(13:10) Jeremy Au:

Great. So it's interesting because FinTech has been having a moment, I guess, for the past five years since obviously Asia. Could you share more about why you decided to focus on FinTech? I think you mentioned, obviously, you have a better skillset, but it seems like a lot of funds also focus on FinTech in Southeast Asia. So could you share a little bit more about that thesis?

(13:27) Sam Gibb:

I don't know if I'd say there's a lot of funds that are focused on fintech, definitely not seed stage fintech, right? There's only one other fund focused on seed stage fintech and they've got more of a shotgun approach as opposed to having a more concentrated, hands on approach that we take. There are some other funds that are working at a later stage and we do typically work with them. When I was thinking about it, If you look at the evolution of the ecosystem in other markets, then typically you're gonna see a lot more vertical specific funds that are gonna come up. When I was thinking about it, I'm also putting the investor hat on here too, and thinking if I was gonna do a generalist mandate again, why would you invest with a relatively small operation when you can go and invest with one of the bigger generalist funds that have been around for 10 years and have the infrastructure there? So it is definitely gonna be easier for them to appeal to LPs and I didn't think I had any differentiating factors if I was going to stay in the generalist space. If I was going to stay in the generalist space, I would have just kept doing the angel thing.

(14:17) Jeremy Au:

Great. And a lot of people are looking at fintech and they feel like FinTech has generated stronger returns, at least that's some of the writing that's out there. How do you see that? Do you believe that's true? What are things that people should be thinking about as they look at FinTech across Southeast Asia?

(14:29) Sam Gibb:

Is that, is that specific to Southeast Asia though, or is that just globally fintech returns?

(14:34) Jeremy Au:

I would say that it's globally FinTech returns as one, of course. And I think the second part is in Southeast Asia. I think people feel like the non-fintech stuff has been underperforming relative to global. So by relative standards, fintech looks shinier, but that would be my point of view. What do you think?

(14:50) Sam Gibb:

So one thing I've always been trying to avoid is to focus on whatever the, the current hype wave trend is. At the moment there's a lot of stuff around generative definitely some cool stuff being built there. , Think you have to ask where the value creation is actually sitting though, and if you can solve that, then yeah, you'd be able to work out the companies that are actually going to be going concerns over the next couple of years. From a fintech perspective though, I would say the reason that it's had really good returns in other developing markets as well, is because once you get to a certain level and at that scale, if you're able to overlay the scale with a digital business, you're It really does start to generate very nice cash. The problem that a lot of businesses have had when they start to look at Southeast Asia is they think like, Oh, hey, there's half a billion people here, growing markets highly digital population, growing GDPs, the, But the problem is we're dealing with over a dozen different rules, languages, cultures.

So for any company that's going to be successful in Southeast Asia, they're going to have to change their go to market for each of the different countries. And even if we look at Indonesia, massive total addressable market there. If we're looking at the 300 million people, but then realistically, if it's a B2C product, who's your target market? Yeah, it's probably going to be the 20 million people in metropolitan Jakarta, and so then your total addressable market really shrinks. I mean, we've got a couple of focus themes. We can talk about those as well but one of those is around open banking and the things that are being built on top of the scaffolding that's being built now.

So you've obviously got the incumbent banking infrastructure and then you've got the API architecture that's being built on top of that and which is opening up the whole open banking infrastructure, and then you've got the layer two things that are going to sit on top of that. However, they've all been a bit of chicken and egg. So everyone's always wondering, if I do build this, will they come? Is it worthwhile investing in that infrastructure? However, if you don't invest in that infrastructure, then no one has the incentives or has the ideas to be able to build the layer two stuff on top of that. So that could be the personal finance apps or credit scoring applications or all the other things that can actually come from being able to get access to the banking information relatively easily. Yeah, I think it's really hard to build businesses around those things in Southeast Asia because of the market sizes and also the propensity to pay.

(16:53) Jeremy Au:

Gotcha. And from your perspective, what are some specific themes? So you said open banking, what are some other themes or hypotheses that you have about fintech in Southeast Asia?

(17:01) Sam Gibb:

Yeah, so one of the area that we're really looking at the moment is alternative credit scoring. And given there are some more advanced solutions that are already out there like Credolab, even Bizbaz, but we feel that that isn't a solution that has been well applied to multiple markets in the region because there's a lot of untapped credit demand in the region and being able to advance credit to the developing, to consumers in the developing countries, it allows them to better themselves.

And so, as fintech fund, one of the themes we're always looking at is financial inclusion. So if you're able to not just get the digital banking products to people, but then also open up a whole range of other digital banking products for them. So the micro-lending, micro-insurance, then you're going to create a whole heap more economic opportunity there too. So don't think that the alternative credit scoring problem has really been solved yet. And another thing that we're looking at is small value cross border currency transfers, because at the moment, if you're trading or transacting in Southeast Asia, typically you're going to have to cross from the currency into a major into US dollars and then back into another minor. You've got multiple different transactions here. You've got to cross the spread a couple of times. It's really expensive. And with the existing channels, you can't do it with relatively small amounts. Now with e wallets, the crypto rails, you can actually start to transfer $2, $5, relatively cheaply. Quickly, and so this creates a lot of economic opportunity because there's a lot of people in developing markets that will be willing to work for a couple of dollars a day and that actually greatly increases their lifestyle but it's been a problem that money to them. So yeah, this again on the financial inclusion side. This is something that we're looking at.

(18:32) Jeremy Au:

And I think what's interesting as well is that you do quite a bit of writing as well about some of the recent slowdown across Southeast Asia and how you people should be thinking through their capital stack a little bit differently. Could you provide a little bit more flavor about why your thoughts today?

(18:45) Sam Gibb:

Yeah, sure so the article specifically came about after a couple of conversations with investors, is investors being very frustrated about the lack of returns from the VC ecosystem and so going back to the point I made before, they're now asking why don't I just put my money into some ETFs as opposed to backing the funds? And typically investors will back the first and second fund. If they like the investor, they like the theme. By the time you get to the third fund, you really need to be able to show some returns there. There's a couple things we're working with here. You've got your total value to paid in and your distributed to paid in capital, right?

Total value to paid in is like your net asset value. If you started at a dollar, what that dollar's worth now. Your distributed paid in is how much of that dollar have you actually received back over time, right? I would say that if we were to look at the ecosystem, there's a number of funds that are out there saying we've got a 3 to 5 times TVPI. They've marked up that dollar, the 3 to 5x. However, they might have been a relatively early investor there, and then in subsequent rounds, what you're typically going to have is, obviously the preferred return, and then you might have a multiple on your liquidity preference there as well, two, three times, whatever.

And so if you've got a business that has been raising a lot of capital, so it requires marginal capital to grow, if we're talking about an inventory or asset heavy business, there's a, there's a number of them out there. Then the last set of capital's probably gonna have some pretty heavy covenants around it and liquidity preferences.

So what that means is if you were to go and actually liquidate some of these, like a five times TVPI, what you might find is, once you actually start to pay off the CAPS stack and all the investors that sit above that, then you're actually only left with a 1 or a 2x DPI and if we're at a 1 or 2 times DPI Then again, then this is asking the question. Why? Why would we invest in another fund when I'm definitely going to get a better return elsewhere? The reason that this is occurring is because the investors, I don't think a lot of investors are actually aware about how they're thinking about the valuations here too, because as far as I'm concerned, okay, we invested a dollar into this company or whatever, and it's gone up, it's raised more money, and now that dollar's worth $10 or $5, whatever it is, like I said, it's worth $5, keep going with this 5xTDPI example, right?

Now my share's worth $5, okay, so I should mark it to $5, right? That makes sense. Problem here is though, if you, let's say you invested originally at a it doesn't actually matter, you, you invested like a 5 mil valuation and then this business goes on to raise say an additional 15 mil and some of that's got a 2 times liquidity preference on it.

All right, and the valuation of this business, so you started at a 5 mil valuation, it's gone up to a 50 mil valuation. You might think that your dollar's now worth 10 if we're not accounting, accounting for dilution. However, the additional 15 mil that they raised, let's say that that's got a 3 times liquidity preference on it. It's pretty expensive capital. It's a difficult time to raise money. So then, realistically, that capital is going to get paid back 45 first, and then you're going to get paid back on the 5. So realistically, the value that has accrued to the existing investors is still that 5. 5, the 5 valuation that they invested at originally.

So when they're doing their TVPI calculation, I don't think people are actually taking into consideration what the cap stack looks like above them. And as a result, when it does come time to actually realize, or they have the opportunity to be able to realize that exit, that investment, they do the math and they're like, Hey, this is not gonna align with what we've been telling our investors. We need to roll the dice and hopefully we'll get some kind of Hail Mary exit at some point in the future, which is probably getting less and less likely because now investors and the public investors are getting more wary of what's coming out of the TKK system.

(22:03) Jeremy Au:

Yeah. I think that's really fair. And what do you think are the solutions from people's perspectives in now? Like how are people reacting to this? Is that true? Secondaries? How do you, think people are going to think through this?

(22:14) Sam Gibb:

It's hard man, that's hard to answer, eh? But realistically people just need to be more rational and yeah, take secondaries. The thing with taking a secondary is you have to be a bit more honest with your valuations as you're going through and then you have to be willing to take a discount on that secondary. If you get a discount on the secondary, you got DPI, people put a far higher, LPs are going to put a far higher weighting on that DPI than your TDPI. So yeah I think people need to start being a bit more realistic and maybe we will see that coming through in the evaluations and the narrative in the ecosystem but I don't know. I mean, I said every day, you can, you can get away with quite a bit of bullshit.

(22:44) Jeremy Au:

Go on, I've missed out on all of yours.

(22:46) Sam Gibb:

I just see it often from funds where they push a narrative, which is might not be an outright lie, but it's definitely a deviation from the truth. And it's one of the benefits in the venture ecosystem is you've got a really long feedback cycle. If you're able to spin a massive yarn, then it's going to take a while for the chickens to come out to roast here, right?

Like it's, you can get away with it for a number of years. If we're talking about like public equities and you're making a claim as to how your system works, over a couple of quarters, you're going to get found out if you're not generating the right kind of risk adjusted returns. Or you're deviating from your mandate. But in the venture ecosystem, that's, that doesn't really happen. Even, even, even if you look at look at it from another perspective here too. There's, there are a number of funds that have treated entrepreneurs very poorly over the last couple of years and they don't get called out here. They never get called out.

So a massive supporter of the, actually we've, we've talked about this before, having that kind of rating system and Tech in Asia came out with that Glasswall recently, which is great because now there's actually a little bit of transparency around what investors are doing, at least get some kind of rating. But previously, people pulling term sheets, people pulling definitive documents, like they've been through a month or two of due diligence, another couple of months of drafting and documentation. It's probably about six months, three to six months from term sheet to the signing of definitive documents.

And then there's that expectation that within a couple of weeks that money should land. That company's probably right at the tail end of their runway. And you pull definitive docs and go, sue us. They don't have money to sue anyone. Yeah, it's, There's a lot of bad behavior and it's, it's good if it actually gets called out on, on both sides on both sides. So again, I don't see that behavior being called out on the funds either. I guess this is the kind of pushback that you're getting from the market now.

(24:27) Jeremy Au:

Yeah. And I think what's interesting is that we're making a lot of decisions these days about how to deploy capital and how to articulate LPs. And LPs I think have kind of like, wisened up a lot to the dynamics in Southeast Asia. What advice would you give to a first time fund manager of say, you've just going on into your second vehicle so how, and what advice would you say to somebody who's looking to build a venture capital fund?

(24:52) Sam Gibb:

I've had, I've had two of these calls in last week, so I know what I would say. I mean, it depends on what their background is and how they're coming at it. I find it really interesting to understand how people actually try to get into the space and some of the people that I've talked to, they perceive that they have some form of an edge, but they haven't actually started to prove that out at all. And so then you got to say Hey, how do you actually know that this is a thing? Can you actually get access to enough, like enough qualified opportunities? Because if the, talking about operating in a specific vertical, then it becomes a lot more challenging. Like when I was a generalist, I'd look at a, around a hundred opportunities in a given month.

Now being more specific, I mean, over the last couple of years, it probably was more like 10 to 20 opportunities in a given month. Now, probably five to 10. It's the, I mean, business and the company creations definitely slowed down a lot. So depending on what vertical you're looking at. Are you actually going to be able to create a fund that has reasonable economics there?

The other thing that I've definitely told them is it's like the fundraising environment is challenging and you have to take a long term perspective at it when you're, you're going out there. I'm always blown away by the first time fund managers who think it's going to take a month or two and then you're off. Some LPs, some larger LPs, they're going to take. a couple of meetings, two, three, five, six meetings before they really get comfortable with you and then are willing to make a commitment. So it's, it's quite hard to rush these things, especially in Southeast Asia, right? Like it's a very relationship oriented culture. So yeah, I think it's worthwhile being patient.

(26:21) Jeremy Au:

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

(26:24) Sam Gibb:

Yeah. So I don't know if this is brave or not. So I did know that this was coming up and the concept of being brave is difficult, right? It means different things to different people and sometimes you could just be aware of what the danger, or what it is that you're dealing with is, but you keep going anyway, right? I just remember specifically, this is a situation that I've been thinking about a bit lately.

And there was this day, woke up, raining, got some exam results, not good. I think I've failed like the first, one of the first times I've ever failed an exam, horrible. Go outside, dogs whimpering, turns out the dog had actually been hit by a car overnight. And half of it's face had been ripped off and so it was in a pretty bad way, ended up actually getting put down. So it's a pretty challenging day to start with. I went out, I was, at the time I was actually working in an orchard thinning apples if you will. So this is back in New Zealand as a student and a little fact for you, so with export apples, apples will typically grow in bunches of two to With export apples, they want to be in just a single, right?

So you want to rip off all the apples around that. I was doing that, which involves going up and down trees, carrying a steel ladder around. And, The first time I did it, it was contract work, so you paid by the tree, working with a another couple of guys who had done this before, and I was just ripping, ripping down the row, chucking the ladder under the wire, up again, chucking the ladder under, up again, doing my bits, and just trying to keep up with the other guys, just, just trying to keep up the other guys.

After a couple rows, what I realized was, I was actually doing both sides of the tree, everyone else was just doing one half. And I it made me realize, and it's something that I keep coming back to is, a lot of the time I end up working a lot harder than what I see other people working around me because it's, it's very hard to understand what people are actually doing or what's going on in their life unless you really get to know them. And so I guess it's given me the confidence to know whatever I do, it's probably going to be enough.

(28:03) Jeremy Au:

How do you see that playing out in your life today?

(28:05) Sam Gibb:

Sometimes I think I'm not really doing a whole heap and then I think I will look back in five or ten years and be like, wow, you've like really helped a lot of businesses and I'd like to think that I'll be really happy with everything that I've done over the last couple of years. However, at any given point in time, I think I could always be doing more.

(28:21) Jeremy Au:

On that note, thank you so much for sharing. I'd love to kind of like summarize the three big takeaways I got from this conversation. First of all, thank you so much for sharing about your early journey from New Zealand and your early days as a lawyer and aspiring accountant. And how you moved to take some big risks in terms of moving to Singapore, to focusing more on capital allocation, and eventually into venture capital.

Secondly, thanks so much for sharing about fintech in terms of your hypotheses about how you see Southeast Asia and what opportunities are in terms of the various verticals and approaches.

Lastly, thanks so much for sharing about the advice that you would give to other fund managers, especially in how to think about fundraising and how hard the job is, but also about the learning curve and the choice of whether you want to spin a yarn versus actually real venture capital fund that really helps companies get to the next stage on that note, thank you so much, Sam, for sharing your story.

(29:08) Sam Gibb:

Thanks. Thanks so much for having me on and making the time for me. I appreciate it.