Southeast Asia Startup Evolution, eFishery’s $100M Capital Burn Lessons & Private Equity Style VC Insights with Mohan Belani - E540

Mohan Belani, CEO and Cofounder of e27, and Jeremy Au talked about how the Southeast Asia startup scene has transformed over the past decade, including the shift from early-stage exuberance to a more cautious, capital-efficient mindset, and citing specific cases like eFishery and Carousell. They touched on regional challenges, with markets as different as Singapore, Indonesia, and Malaysia, while urging investors to adopt a more hands-on, private-equity approach. They highlighted the importance of personal growth, and they advocate for curiosity and balance in leadership.

1. Southeast Asia Startup Ecosystem Evolution: The early days (2010–2015) were marked by wild “what if” dreams and a Silicon Valley mindset. By 2014–15, that excitement had given way to healthy skepticism.

2. Investor Caution: Cases like eFishery, which raised over $100M, show that excessive capital without sustainable growth can backfire.

3. Founder Maturity: Founders now, often serial entrepreneurs, are more experienced, with clear goals, as seen in companies like Carousell.

4. Regional Challenges: Scaling is tough when starting in a strong market like Singapore and expanding into countries where purchasing power drops (e.g., to Indonesia where GDP per capita is 10× lower, or Malaysia where GDP per capita is 5× lower).

5. Shift to a PE-Style Model: There’s a growing call for VCs to be more hands-on and adopt a private-equity approach to drive liquidity and realistic exit strategies.

6. Exit Realities: While VC valuations can be 10–20× revenue, public listings in Southeast Asia often fetch around 1× revenue, highlighting a significant exit gap.

7. Personal Growth & Leadership: There’s a need for curiosity and balance—staying childlike in innovation while being pragmatic—to solve problems and build great companies.

(00:00) Jeremy Au: Hey Mohan, good morning.

(00:01) Mohan Belani: Morning.

(00:02) Jeremy Au: I heard you went to Pickleball this morning.

(00:03) Mohan Belani: Yeah, I did. I decided to do like a 7am Pickleball session.

(00:06) Jeremy Au: Did you win?

(00:07) Mohan Belani: No, I got trashed.

(00:09) Jeremy Au: Are you like a newbie or you're just not?

(00:10) Mohan Belani: I'm quite good. It's only my second time. So I went with my wife and Nick, one of my very old friends and early investor at E27. He's been training for six months. My wife, she did really well.

(00:20) Jeremy Au: She did really well?

(00:20) Mohan Belani: She did.

(00:20) Jeremy Au: Are you sure you're not trying to like,

(00:21) Mohan Belani: She doesn't have the best hand eye coordination, but she really did well. She was like, good, she was like really trying to learn hard. So maybe we're thinking of taking lessons now.

(00:29) Jeremy Au: Oh really? That's good. That's such a good couple's date.

(00:31) Mohan Belani: One day. One day.

(00:32) Jeremy Au: We should do it as well. I mean, my wife is actually pretty good at pickleball. Oh really? And I'm horrible, so my average probably is the same as you as well.

(00:39) Mohan Belani: Does she take lessons?

(00:40) Jeremy Au: No, she didn't take lessons, but she's always been very good at all these like badminton and all these games,

(00:44) Mohan Belani: We should try it next time.

(00:45) Jeremy Au: Yeah. So we wanted to catch up because, we've always had a lot of fun catching up and it was just, you know what, we should just chat a little bit more regularly and take the opportunity. So I think, I wanted to talk about three major components, right?

So I think the first is like generally what we're seeing as investors in the space, but also we're both founders and executives, so I think that's one piece. And then to me, a little bit of reflection about our own life journey, some of the attributes you see.

So I guess the first big thing is when you look at the, say startup and VC landscape today, and we've both been in the Southeast Asia tech landscape for 10 years. Yeah. So I think there's those that like before and after, what do you think has changed like from your perspective?

(01:22) Mohan Belani: Yeah. I had a good catch up with the client yesterday and he was actually my client, in the same space. Back in 2014, 15. Yeah, when things were exciting, right? I think the common theme when I talk to people who have been in the space for a while is that the exuberance that was there in the past definitely does not exist anymore, right? There is a healthy level of skepticism an expectation that things should work out and not everything should be crazy risky or too ambitious, but at the same time, there's also this sense of feeling that maybe overall the ecosystem has been a bit of a letdown.

A lot of things that were supposed to pan out have not. And then you've got the recent eFishery case that has really put a very black mark on Indonesian and even Southeast Asian founders and venture as a whole, right? I've heard, term sheets getting pulled out from other founders in Indonesia from overseas investors because of what happened there, right? And the sad thing is, also, the founder VC community is suffering, but then you've got the employees also getting a bit of a bad rap because there's a level of distrust on who's involved. So I think that really has led to just overall skepticism, negativity. Back then, when you see an idea, you meet a founder, right? There's always this mentality of " Oh, wow. What if...," "Oh this could be this, could be that." And now that has really shifted. Now I think it's a bit more skeptical. "Oh, can it work?" "Will this make sense? How do you rate?" "Can this raise capital?" On some level, it is healthy and I think, if you look at VC, if you look at the origins of VC, if you look at why the VC asset class exists, it's really to do big things, right? I think AI has helped in some sense,, maybe get back the shift to, investing in big ideas, doing crazy things, but it's just not what it is.

(03:03) Jeremy Au: Yeah. Definitely. And I feel like there's been like three waves, right? I think the first wave where we both were there in the early days, back when it was like the first co-working spaces, Block71. It was very much, I think that first wave was, everybody was naive about startups. And so, all of us were like watching "The Social Network," the movie about Mark Zuckerberg and all the startup movies. Everyone's "Wow, that's so cool." Copy the founder lifestyle in terms of wearing the clothes and focusing on work. It was all that optimism and it was just saying okay, what systems and models can we import from America or even China into kind of Southeast Asia ecosystem. So I think it was like that huge optimism and naivete, right?

I think the second wave was like the gold rush 2020 to 2022. I think that's when there was a lot of optimism and naivety by the VC. There's a lot of VCs that came in to bring a lot of money because of the zero interest rates. And I think the founders are more jaded by then because you'd be working your ass off five, six, seven. But by now, of course it was like boosted, a pumped right in that. And then the VCs were the one that were very naive. And it was a very hot job, high status job.

And then now, everything has reverted back to pre-pump, pre-waveave. And now everyone's okay, all the founders are like, yeah, it's equally as hard. But now we know that the return profile is much harder because, it's hard to see the exits for Carousell or Ninja Van. There's so many companies that are like, we're part of that first wave and now it's still pushing and growing. I feel like the reward profile has become, what's the word, material. And now it's oh, it's actually very hard, right? And then, I think the VCs now are like, oh actually this is a very hard space to be in as well.

(04:37) Mohan Belani: See, the truth is this, okay, in the early days, when I say early, maybe 2010 to 2015, right? Everything was about Silicon Valley. And if you recall Silicon Valley was in the era of no revenue, just growth at that point in time. So we all got sucked into that mindset and concept. Not to say it is wrong, but that concept, really worked well in an environment where access to capital and having a very liquid exit market was prevalent. We do not have that here. Even when Carousell first started, I remember at Block71 just a few guys there. No one deliberately questioned how is this going to make money? How are you going to raise capital? Everyone is just obsessed about the idea of wow, if I have something to sell that I don't need at home, I can put it on a platform of the community and get it done. And that's where the original, naive excitement over the what ifs was really strong in that era. And that's really because also the Silicon Valley folks that we were looking up to were all saying, "Look, build a great product. Grow your community. Don't worry about revenue first." That can come in later, right? To some level, it worked fine in the early days, but for Silicon Valley once monetization starts, in most of their businesses, monetization ramps up extremely fast. That doesn't happen in this part of the world at all. It has taken Carousell a really long time just to get to what 80 mil revenue around there. Many of the other well known brands barely even break 50 to 100 mil range in this part of the world.

So at least today, the need to get to monetization is a lot stronger, which I think is the right way, but a lot of ideas also need time to germinate. They need time to grow. The push for monetization too early can also create this unneeded pressure that startups have to basically do the easy thing. Or just, look at what the customers want, make things simple and just execute, which is again, not what the venture class is all about. So I think it's a fine and tricky balance. This region is learning how to manage that. But also the big wake up call is both on the founder investor side, which is at the end of the day, you have to return capital to LPs. You have to find a way to exit. And I think there's a bit more pressure and effort now to do that, but not enough has done that over time in a structured way and working with the right entities to do that, so it's a bit challenging moving forward, right? what kind of, whether more founders are going to come out and say, "Hey, look, it is actually worth my time and effort to build companies." It's challenging to see whether, what kind of new funds are going to pop up. Cause if every other fund is going to be just an AI fund, cause that's just a hot topic. Then when AI collapses, what's next? There needs to be funds that look at, hey, look, can there be good, sustainable, proper businesses in this region, which we don't see a lot of, right? In a way, Orvel's whole thesis of, "hey, let's look for financially sustainable companies" is trying to fix that but we also know the challenges with finding companies like that, right?

And then lastly, just fixing or tackling the exit scenario problem. I don't think there's any one entity, person or organization that can fix that. It's not like the government can come up with an exit grant, right? but there has to be some level of maturity in the ecosystem, with respect to scale of companies. Enough companies have to go past the 100 million revenue range to allow for them to start saying, "oOkay, it's more efficient for us to get to the next level through M&A." And maybe the SMEs can help with that, potentially. So we're doing an accelerator program with META to help SMEs figure out, okay, how do they scale better, right? And maybe through introducing better tech to SMEs, they can then say, let's start getting into the M&A game a bit more.

(08:00) Jeremy Au: Yeah. I think the crux of it is that people find it harder in the Southeast Asia market than the US market, which I love that insight there which is, adding the US market was like, okay, it is a problem. And then if the problem is I don't know, I'm just talking out loud, but like Pinterest, I guess. I find it hard to put my images into an image board. And then, for the US as a market, a starting market, it's rich enough. It's big enough that you just solve that problem. It's actually huge, huge enough to be like, yeah, I can probably go for a hundred million dollars and you can build a business, right? But in Southeast Asia, if you have to do that, then sure, Singapore as the starting market for, let's say 3 million actual users, is a easy way to start, but then it runs into this kind of blender called regional expansion, where the GDP per capita of Indonesia is 10x lower than Singapore, right? Or Malaysia is five times lower. And then a market size, different cultures, different languages, different regulations.

So I agree that all these companies that we saw and we talked about that were the heroes of the day, right? Because in our day, who are the heroes at our early days. It was like, we had Grab, Gojek as well. I think it's a good example. Patsnap. Yeah, Patsnap as well, strong company. But I think there's a lot of companies that just those that were like much more US indexed or moved to the US as well, continue that US trajectory of okay, just keep doing one thing, but valuable, and scale through the US and therefore globally from there versus those that were more geographically bound. Give you an example, be like recently the Gojek co founder came out and said Hey, We have to focus on Indonesia only. We should have done Singapore, right? And technically, if we have a time machine, probably there would have been a question that would have come up in year one of those two companies. But again, both of them were just like, let's solve the transportation problem. Let's just solve for the markets we understand the best because the Indonesian founders were Indonesian. Malaysian founders also understood Malaysia and Singapore. So to them, it was just like the first base. And they're both Harvard MBAs as well. So anyway, I just feel like now everybody is getting asked at a very early stage, right? It's " Hey, you're a pre-seed founder. Okay. For my angel check, which geography is it going to do?" Don't you know? It's very hard to scale. Like you get all these business questions that you and I never got back years ago, right? Yeah.

(10:05) Mohan Belani: And to be fair, people have learned from their mistakes. So they've learned that, a lot of founders say that they're going to do a lot of things or that the hypothesis they have about the market doesn't always pan out because it's not very well thought out from the start. A lot of founders were more product or tech centric. If you want to build a Pinterest, right? Don't build it up from here. The truth of the matter is that you do need to be in an environment or ecosystem where the support network, the ideas, the talent, has experienced knowledge and even interest building a company like that.

If Pinterest is built out of here, the likelihood of success would probably be way lower versus a Pinterest being built out of the US. Fun fact, one of the early engineers at Pinterest was a guy that was, I think, Singaporean or based in Singapore for a very long time and grew up here, right? Sahil, who started Gumroad eventually. So that's problem number one, right? The kind of company you do, I think to some level, geography matters. Large consumers type companies, India, China, US, but there are also niche opportunities in B2B, whether it's agri, logistics, fintech, that you can capitalize on in this part of the world, right?

Make33 is a good example of a company that started from the US, identified amazing opportunities in the feature phone space, and then decided to move completely to Indonesia. They couldn't make the jump to smartphones, and that's what led them to not be around today. But that's a really interesting example of focus on the ideas or opportunities that make sense in the part of the world that you're operating in.

And that's why we get compared a lot with South America. If you speak to LPs today that are US based or more global, the immediate comparison is that, "Oh, so your market looks very similar to LATAM, but LATAM seems to be doing way better than Southeast Asia. So why should I then invest in a fund that's South East Asia focused? I might as well just do LATAM."

And it's a very valid question. There's the Carousell equivalent in LATAM. There's the Grab equivalent and all of that. And all of them seem to be doing a lot better. What is it about those markets that are doing better? A lot of it fundamentally boils down to GDP, right?

The GDP numbers that we've been talking about in Indonesia just haven't panned out. But then you've got situations where founders realize that hey, maybe the middle market is not the one that's going to go well, let me go for the next lower market and that's how you get Kopi Kenangan, right? They said let's go mass market in Indonesia there's a propensity to pay a bit more and I can offer a product or service and go after that market. So that's where I think there has to be a tweak or rethinking or what kind of companies can do well here and then build businesses around there. Now, if you do launch a business here and then you realize the market isn't willing to pay or the market is too small, then get out.

And Mito did that really well. When we saw Mito early on, I think the struggle, again, we had to, we were also thinking is how big is the market, but Mito figure out, yeah, the market isn't that big. Move to the US and I think they seem to be doing really well, opening up all over the US and I think that was a very smart thing to do, right? I would have never believed that they could do it. And 10 years ago, so any founder that said they could do that, you would immediately write them off, right? But in today's world, I think that's definitely a lot more doable. I think what we're starting to see now is there are a newer breed of Southeast Asian founders that have realized, forget this market. Let me focus on the US market. Let me either build a team there or build the restructure, my product and services to cater to that market better. And they seem to be doing a much better job this time than last time.

(13:22) Jeremy Au: Yeah. I think that's actually a really big difference. It's super fair, which is that 10 years ago, nobody was like, I want to build from Singapore or Southeast Asia for the US market. Didn't exist . Everybody was like, I want to solve the problem for my auntie who has this problem in this country, therefore, it's a big problem. Yeah, definitely. I think you see a big, and I call it the corridor, right? So it's a corridor between the Singapore and the US.

I wouldn't say it's really necessary, like Malaysia to the US or Indonesia to the US, but more of a Singapore to the US corridor where Singaporean founders are trying to tackle that. I think we also see that for Castlereagh. We also saw that for Patsnap as well. I think there's a lot of founders that have made that track.

(13:57) Mohan Belani: Patsnap did China first, Europe, and then US has now come in much later. There are a lot of missteps along the way for that market. But for them, again very deep tech product. So the need to have a US team, a US base, and for Jeff himself to be based there, was quite critical. A lot of companies don't need to do that.

Actually, to be fair right, PiktoChart Malaysia based company, for the longest time they were fairly global, right? and they did a good job serving a global market, but, with Canva rising and all that, that has been tricky. Web3 companies on the flip side have seemed to have less of a problem. What is that company in Malaysia that has served the Web3 market really well from a content, media, and insights side? When it comes to me I'll bring it up again. But there are multiple Web3 companies, based out of this part of the world, that are doing really well globally. And that's something to think about, right? What did they get right? Was it a product standpoint, or was it the fact that Web3 in nature seems to favor Asian companies a bit better? Was it regulation related issues, which is why US companies couldn't build in that space quickly enough, right?

(14:56) Jeremy Au: Yeah, I think that's totally fair. And I think the answer is exactly I think the regulatory side. America is very anti crypto. A lot of China as well. Only until the recent Trump administration has there been a shift, right? And so I think people just had to build outside of America. So there's a lot of American expatriates or diaspora or they're working in kind of a global decentralized networks. So from their perspective, if they're working with a Filipino for example, at YGG, right? There's a Filipino working, like everybody's just so flat, it's quite fair, right? It's some ways. Today I'm closer to some of my American friends than to my Singaporean or some of these Asian friends because it's just more like we're the same vertical, same conversation and we're just messaging each other.

We can stay more in touch than somebody who's physically closer. Right. And also, Web3 also came into existence roughly during the COVID era as well, the whole vertical. So the whole norms of it, everybody would be like, can you imagine a Web3 company says we believe that everybody's on site in the office five days a week.

(15:48) Mohan Belani: Yeah. Does it exist? Yeah. Culturally it doesn't work for them.

(15:50) Jeremy Au: It's just everybody's just laughing you out.

(15:52) Mohan Belani: It's just like centralized manpower, right?

(15:54) Jeremy Au: And we'll pay you in your local currency, through your normal bank account, through fiat, yeah. Fiat. Everyone would be like, what kind of scam Web3 company is this, right?

(16:04) Mohan Belani: The funny thing is, anyone that actually took, or didn't take fiat, I would assume a lot of Web3 guys do that, right? But anyone that didn't do that in the 2017, 2018, would be sitting on a pile of assets right now, that would have made them extremely rich, way more than any ESOP in any startup in the Web2 side.

(16:20) Jeremy Au: Yeah, exactly. And I think that's a fair piece, right? To some extent, I think we also see that a little bit in the AI side as well. I think AI companies are starting to blend a little bit, which is I think they're just so hungry for talent. They just don't care where you are at the startup side It's just like, can you do the coding?

(16:35) Mohan Belani: I think for talent, right? It's a mixed bag. On some level, the teams that require collaboration, I think the realization is that they really do need to be in the same space, but for a lot of work that doesn't require collaboration, whether is it back office, whether is it content creation, whether is it marketing services, where it's really more access to the certain type of talent, creative, good at English, and then, fast, being able to create content or data quickly, right? And then have good access to skill sets in AI. I think those can be all done remotely. So I think it's not, I don't think it's fully true that a hundred percent remote is a good thing, or a hundred percent in office is good. What the world is realizing is that you need a healthy hybrid level. And some part of the work can or needs to be done physically, but a lot of it remote is totally fine.

(17:21) Jeremy Au: Yeah, and I think it's interesting because I think you see, the stiffening of that camps because I feel like the big companies that would just never could do a hybrid or remote, but they had to do this because of COVID. Now it's just like, we're going back 100% return to office which is, I think a good choice actually in some ways because it's just saying, "Hey, we acknowledge our hierarchy and culture and the type of the way we hire, this doesn't allow us to do that." And like our company is not interesting enough. We can't pay enough to force people to be really interested, and be trusted to work well remotely.

(17:49) Mohan Belani: I think on some level, there are probably enough bad apples that have not perform as well. It's the same thing with employee benefits, right? Like in the past, the amount of employee benefits in the Googles and the Metas of the world, was ridiculous. And a lot of that has been rolled back in the last five years, right? As the push to profitability or the push to better unit economics has been key, right? So to me, the work from home thing is also a privilege. And now that it's been taken back, people are starting to see, Oh no, it was a right that I had all along. And I think that's, There's some reframing that needs to be done, right?

The other thing is this also. Some companies like, like for example mine, we are fully supportive of work from home and we give the responsibility and onus to the employee to figure out which model makes sense. And interestingly, more and more people want to come to the office. That healthy delineation between work and home is something a lot of people are realizing, right? Unless you're someone that really needs to be home, for a specific reason, or maybe you stay in an area where a good co-working space is not accessible, or you've built a nice little home office like what you have over here, right? I think then, it makes sense. I think giving people the choice is what is important, but for larger companies, it's very hard to do that.

(18:55) Jeremy Au: So, that brings up the question of how founders are changing. What's the style of founders change between 10 years ago? So I think for me, one big change very quickly would be like, I think there was a lot of like university students, all of us were like, "oh, let's just build this," and then, just run straight into whatever problem that we see. And then there was no such thing as a professional tech executive or professional tech founder, like serial founder. Whereas I think today there's a lot of like serial founders or like much more like sober, mature. They've done one or two gigs already. So there's more like a cadre of folks that, understand the game and the mechanics. How about you? What do you think are the differences?

(19:36) Mohan Belani: Yeah. So there are a few that I see that are interesting, right? So there was a company I was tracking, solid tier one founder, and I just saw recently that he had left the company and joined a big company as a head of AI or something like that. So I called up someone who knows him really well. I said, "Hey, so what happened?" He said, oh, the founder realized that he could build the business to maybe a fifty, a hundred KMRR, and beyond that it would be really difficult. So he decided it's not worth his time and effort. And I think that's a, that's brilliant though. I think that one change is something that a lot of Silicon Valley guys do really well. If they know that the business cannot scale any further, they'll either completely pivot, shut it down, or sell it in an equity higher model and then get back to doing something else more productive. I think that trend is something I would love to see a lot more.

Second thing is that, I don't see this enough. I've seen this only a few, and I think I've talked about this briefly, right? Finding a better blend between new money and secondaries. This mindset of early stage investors exiting at the maybe A and B round and that being a negative signal really has to change, right? You need to drive liquidity for early investors, is it should be a deliberate effort at every stage through secondaries from the new money that's coming in, right? And the logic is that you should be allowing early investors to exit if they want to continue on the right, let them reinvest in the other round, but providing liquidity in the ecosystem, it's an important, necessary thing. You talk to most LPs now. The number one gripe is no liquidity in the ecosystem, right?.

The third thing is I think if you talk to founders now, most of them have a much clearer idea of what their customers want or don't want. And whatever they're building for seems to have very clear 6 to 12 month clarity on the product market fit. They might not have built it yet, but they know, okay, I've spoken to these 20 customers. This is exactly what they want. This is what they're willing to pay for. Previously, it was always I'll build first. I'll go to customers later on. And I think that switch has been healthy. Those are just some of the things I feel has changed quite a bit.

(21:29) Jeremy Au: I think another difference has been the regionalization of the founders from 10 years ago I think 10 years ago, a lot of the founders were primarily Singaporean or like sea turtles returning from America to Southeast Asia. And I think now you see a lot more local kind of founders in Vietnam, in Indonesia, Malaysia as well. So I think that's one trend.

Another trend I think I see is that, in the past, it was always about Singapore as the place to meet and gather. I think that's decentralized, whereas almost like different clusters where each country, the clusters know each other.

(22:01) Mohan Belani: Yeah.

(22:01) Jeremy Au: And then there are some like regional connective tissue, either because people travel a lot or because the companies are in both markets or the VCs who have that mandate. I think the VCs are much more connected in the same sense. I would say it's much tighter than Singapore as a hub, because of your fund administration, because you've got fundraisers from LPE, it's because of, all the various conversations we have if you're American or Chinese counterparts, but I would say there's an interesting change as well.

(22:24) Mohan Belani: Yeah. There's also less of a desire for founders to be based exclusively in Singapore, right? If you look at the ecosystems regionally, like Malaysia is coming up extremely well. So a lot of founders are, also because of the core space, right? Much more open to be basing themselves full time in Malaysia, which I think is a great thing. Philippines is also coming up quite a bit. So a lot of founders figured, "okay, why not just base ourselves there, or go there more often," so I think Singapore might not be the number one choice for where you base yourself physically. Your company will always be headquartered here. Where you base yourself physically might not be there. But capital raising in Singapore will always have that number one choice. I think more so now, even considering all the issues in Indonesia, because I think there's still a better respect for the rules of law and the rigidity on DD here.

What I think will change over time, is that founders are definitely, like we mentioned earlier, more open to non Southeast Asian markets. At some point, if Southeast Asia doesn't work, they'll start looking at markets like Australia, US, Europe. So I've seen some founders here, get some decent product market fit here, but realize markets like Europe make no sense. Tesseract, for example, legal tech space. Mito in the health tech space. Decube in Malaysia, in the AI tooling space. I think that one is great opening themselves up to global markets is something they should do faster.

Second thing is the ability to pivot faster. We had a conversation with a founder yesterday where, if you realize the sales cycles are taking too long or the segment that you have cannot move quickly enough, how do you pivot quickly enough to complimentary segments where ideally maybe the AOVs might be a bit lower but the sales cycles might be faster? So that faster, quicker pivoting capability is, I think, something that still needs to be done a bit better in this region.

(24:09) Jeremy Au: Yeah. I think it's interesting because another piece that reminded me of is that the regulatory interaction is much more visible to founders today compared to 10 years ago, cause 10 years ago it was just like, "Oh, it's inefficient and it's bad. Therefore, I'm just going to solve it," And then they build a product and then they work out the business model along the way. And after that, they talk to regulators later. Whereas now, I think there's much more sensitivity, especially in Vietnam or Indonesia and Gita Sahir, a co-host shared in a previous episode, she said if there's friction, somebody is benefiting from the friction today, right? And therefore you need to understand what are the incentives, but also how they're going to push back against you if you remove that inefficiency.

(24:44) Mohan Belani: Yeah.

(24:45) Jeremy Au: And therefore I think a lot more thinking about, stakeholder management in Indonesia is very key, right? So I think now you see some founders who are basically piecing out from Indonesia because there's this like, I don't want to handle the stakeholder management. I just don't want to handle the government and the various, trade offs or sacrifices that are made. I'm just going to peace out and build for America where, I build a SaaS business or whatever. So I think I've seen quite a few founders.

(25:08) Mohan Belani: The other thing is also that realization is, hey, you can keep trying to bang your head on the wall. If it's not going to collapse then just leave, right? And I think like the more traditional industries, like your agri, your supply chain, the founders who have not found ways to better integrate locally as opposed to completely disrupt, they are the ones that are completely not surviving.

(25:28) Jeremy Au: Yeah, that's true. I think the ones we've seen is that those who take a more of a disruptive American approach, which is these people are horribly inefficient, which is going to disrupt them and kill them, they have definitely suffered more because I think the incumbents in emerging markets have more ability to push back in a non economic way. They don't have to compete and put up.

(25:43) Mohan Belani: I think the world under appreciates the amount of loyalty everyone has towards the existing system because their livelihoods are also challenged, but on some level, the larger conglomerates of the families control so much, that it's actually not worth the effort to try to disrupt yourself. So I think for the traditional non tech folks disruption is not a good thing but healthy evolution to make things better or to make their lives more efficient, that is something that can be thought about. And that's why I think a good example would be Baskit, right? I think Baskit is doing that really well in Indonesia with supply chain.

(26:18) Jeremy Au: Yeah. Cause I think they're much more like peaceful or willing to split the rewards, which makes it harder for them because there's less margin because, and then because you're a split of people, but then at least when you do it that way, your margin is sustainable. You're not going to have somebody kicking in your legs.

(26:34) Mohan Belani: Yeah, but then over time you can find maybe new inefficiencies or new opportunities in the systems that no one is looking at, and then build for that.

(26:42) Jeremy Au: Yeah I think that reminds me actually another thing is what makes the incumbent so difficult to disrupt versus how the market is evolving to that. I think a lot of people tend to think about these family run conglomerates of businesses as single product, right? It's okay, this is a bad experience, therefore this is bad. But actually if you look at the conglomerate actually is vertically integrated, right? And also horizontally integrated, but I think the vertical integration is really the part that's really scary because they just make more money at every step, right? Which is like they make money at the, basic materials, inputs, they make money on the logistics, they make money on the trading and distribution. So take all those cuts and then and each business is worse than a pure play or whatever, but then actually all these things can squeeze and actually compete. So I think there's a very tricky piece. Family run conglomerates, have internal pricing. So in other words, they can control the stakeholders in the system, right? Because every single person is reporting to the mothership versus here, if you're single pure play then you end up having to give a cut through a refugee share, whatever it is, the layer above you and the layer below you, and that can be actually quite extractive, right? And so I think that makes it very difficult to compete.

(27:45) Mohan Belani: See, no company is going to cover everything. There are going to be market segments that they will ignore or there are going to be verticals or areas where they feel that it is not large enough for them to bother. That's where I think there's opportunity for startups. There's a piece I read where there were two companies, and then one of the companies received like a hundred million dollar investment, and the founder of the other company decided, rather than close and struggle from this competition, they should laser focus on a very particular segment. They were offering some kind of assessor, very particular segment and build deep features and services in that particular segment.

So if you look at Nexo, I think in Australia, right? CRM for example is already a big market, right? What they did extremely well is laser focus on the legal industry and laser focus on the industry where it's more services driven and then they built all sorts of features and tools, that was extremely valuable to that segment. I think in Southeast Asia, there's a tremendous amount of opportunity to look at, opportunities like that. Are there areas, for example, let's say in Malaysia, right? My own father in law is a FinTech founder, right? There are opportunities, for example, in just few fleet management, that you can build a very sizable business on that very few people or practically no one is looking at simply because they think the market is too small. And I think Indonesia has a lot of opportunities there that founders can think about and what then needs to be done is raise less capital, do smaller seed rounds, raise less capital. You get to profitability much faster, then use profitability to then scale to adjacent verticals.

(29:11) Jeremy Au: Yeah. And I think actually, the response by the founder side is that they are becoming vertically integrated as well, horizontally integrated to build out synergies from their perspective. So I think they look at these businesses and they're like, so their reaction to also what we just talked about earlier about whether the product or market is big enough is now they're saying like stuff like, earlier, a founder shared to me, he said, "Jeremy, I just want to be a aggregator of boring businesses in this vertical."

So each business is a hundred million dollars, maybe top, but then because they have the same, cost based on the technical side, same competency on the vertical. And then my perspective was like, okay, before you go too fast horizontally, like maybe focus more on the vertical integration because it's a little bit easier to build a product before you jump to a new vertical, even though it's adjacent. So I think there's been, I think one big push and I think that's why a lot of people are so excited by the eFishery story because it felt like, I think it clicked for a lot of people in the agri tech space, which was like, okay, you know what, they're solving for the wastage between let's say vegetables at a farm that a city is not enough money.

But if we can do end to end, then it becomes a mini agricultural conglomerate that's vertically integrated from the entire supply chain and they make enough money from each stage. And then each part also makes it a little bit easier to compete. And then maybe potentially in the future you can expand to new geographies for the same play. So I think people were very excited, remember about the eFishery and I think Indonesia, remember you and I will be debating all the time and I'll say, literally if I was to say we had eFishery for X, which is implied horizontal geography across Indonesia in terms of islands, vertical integration of the margin, increased productivity, reduced waste. Those are the code. And of course we're gonna make a lot of money like eFishery. So those are the code words, right?

(30:56) Mohan Belani: Okay. So if we thought aside right, if we took a step back on eFishery, instead of making it a crazy venture, a backable business and raising all that money, could eFishery have been a really good, maybe $20 million top line business that was extremely profitable? And I think that's probably, not the mistake, but something that the founders should have, thought differently about. Rather than raise all that capital, change the model, make it extremely profitable, super tight in that aqua niche, then raise capital for vertical expansion.

He could have applied these opportunities to poultry, cattle, or many other sectors, right? I think that's where he got caught up raising too much capital and inflating all that numbers because he's really just needed to justify that the aqua culture vertical was massive enough and money just could be put into support that vertical, which probably was never the case.

(31:44) Jeremy Au: Yeah. And I think that's what we saw, when you dig deeper into the kind of like the audit findings was like, burning over a hundred million dollars, into trying to boost that. And what's interesting is that actually, if you look at it, the leakages were not leakages out of the company, right? It was actually burned on trying to expand the company, but it just couldn't make the top line growth, so inflated the revenue, but because it's different because it's if the money went to somebody's pocket, the vast majority of it is very different, but vast majority is being spent on trying to boost, but I think they hit some kind of like plateau on their growth where the more money they threw in, the growth didn't show up. And so they were just digging themselves deeper and deeper in the hole. "Okay. I inflated my revenue, I'm just going to put in more money to catch up that growth." It doesn't pan out because the marginal return of that dollar is less because I think the market's saturated.

And so, I think one thing I often think about, I've also talked to a lot of the founders who have, and we've talked about it even before the eFishery blew up was I also said, I think they should just try to list on the IDX, on the stock exchange, which is, obviously the valuation multiple is very low. It's like very one for one, for every, EBITDA, but I think you can make the case like at least it's a sure path for a liquidity event. And then you drew a capital efficiency, and then you can exit about a hundred million valuation. I think there's a path to get there. You just focus on the capital efficiency.

(32:56) Mohan Belani: They should have just built a 20, $30 million top line business. Maybe nicely profitable. And then expanded across other verticals through VC money, if it made sense, if you look at it.

(33:04) Jeremy Au: They could have bought out all the adjacent agri tech. There's actually another thought about it. It's super fair.

(33:08) Mohan Belani: They could have done an M&A play, right? They could have raised capital to buy out equivalence of this in adjacent verticals and then use their expertise to help them scale.

(33:16) Jeremy Au: Correct. So there's like shrimp farming. There's rice farming.

(33:21) Mohan Belani: Within agri alone, they could have maybe deeply specialized in salmon or certain breeds of aqua, types, right? Shrimp is another one that you mentioned really well but if we take perils and learning from Grab, Grab started as Grab Car. It started as MyTaxi first, right? Then it started as Grab Car, and then they did the massive rebranding to be Grab, and then they went into all sorts of different verticals themselves. So they were able to raise that capital, but also go into adjacent verticals that made sense to their primary vertical at the start, which was transport.

So to me, they were a good example of an organization that was able to scale in a reasonable manner, across different verticals. And now, of course, in fintech and delivery from like packaging and everything else. There's still some time for them to prove that they can be profitable. I think it's still promising, but, great example of a company that had raised capital in the correct manner and expanded vertically that way. I think that's the missed opportunity for eFishery.

(34:14) Jeremy Au: And I think the worst part about accounting fraud, I think people forget about this, is that when you build the metrics wrongly, you end up telling the story wrongly to the investors. And then you think to yourself like, "Oh, I can keep my story straight," but actually it's not, because when you tell the story to your investors, it breaks your own internal story to yourself and your employees because those stories have to be quite similar actually. And then you never end up making a strategic decision about, they call it "come to Jesus moment," like they don't have that revelation to be like, this isn't working, or this market is too small. And it's not your fault. And it's okay. It's okay. What? The fact that they build out quite a sizable business in fisheries, it was actually quite positive, if you look at the numbers, you're like, that's actually a pretty healthy number, healthy market.

(34:53) Mohan Belani: Evo did the same thing, right? Roy did the same thing with BounceBack, right? He got it to a level and then realized that, okay, to get to the next level, even if the market's too small, the capital requirement for that is too much. And then he launched Stryv through his learnings with his own investors, right? That actually, the electronics, vertical, has a lot more room to grow. The market's a lot bigger, launched Stryv and that's now a bigger business than BounceBack.

(35:15) Jeremy Au: Yeah. So there's a horizontal integration play because they're using the same internal capability of marketing and brand building, product market fit distribution.

(35:22) Mohan Belani: Plus they already had the distribution network with the influencers, plus the original network that they had that they were selling the hangover pills to, they were very complimentary to selling these new electronics and products.

(35:33) Jeremy Au: Yeah. And if you think about it they, for example, eFishery had this massive amount of fraud on fish feeders, right? So it was like probably like 90% of fish feeders were fraudulent, but if you think about it, if you meet just 10% of fish feeders and then you make feeders for chicken and there's everything else, there's all kinds of productivity devices like IOT, whatever you call it, and you just build out a competency.

There's more than 20 types of agricultural products. They didn't need to conduct that fraud if they just said, "okay, the key insight here is we're just going to do it, make it a little bit easier for farmers to feed the fish on time or the animals on time," that's all you have to do, right?

(36:07) Mohan Belani: See, this is where sometimes I wonder if there was a private equity investor running eFishery, how could they have changed the outcome, in a way, right? Because we all know PE firms are a bit more profit driven. They really like to cut out all the fat to maximize the profitability. And they are perfectly fine having lower top line numbers, but very good EBITDA and net margin numbers. So that actually could have been interesting if a PE firm actually bought the business or was able to turn that around.

(36:35) Jeremy Au: Yeah. You can imagine a situation where somebody, bought and consolidated all of them, right? So you have, I think eFishery, let's just say, DELOS does shrimp. Then you can add Eratani for rice. You can add BroilerX for chicken. I'm using example, right? Yeah. Then they're all, a lot of them are quite Indonesia focused as well. Then you add Aeonic, which is the agricultural drone from Malaysia. And you're like, wait a moment, this is pretty good because basically you're saying like for any kind of Southeast Asian crop, we have a fleet of mobile field offices that can handle different, whatever it is. And then you have a drone company to help with your, spraying of pesticides, of fertilizer. Then the stack gets quite interesting.

And I think that's where I think I see some founders starting to think about it, but they don't have the private equity muscle. I think what's interesting is that you see the founders speculate a bit about it, but I think they struggle because the founders don't want to exit because VC path So they don't want to sell at a certain multiple or they raise so much money at a VC multiple

(37:32) Mohan Belani: Not just that. They start to realize the PE multiples are nowhere near the bullshit multiples that the VCs give them. What we have learned is that on the IDX level a lot of businesses are valued at 1x revenue and most VC funded businesses at the early stages end up growing towards a PE type business where at the max, they can get maybe two X, three X of revenue, right? And so you, for most founders, I think the bubble is burst in terms of their own net value in the organization.

The moment they realize that, 20X of a net margin is considered very generous, and considering the small net margins they make already, it's a bit of a, it's too much of a reality shock, which is why I think they'd rather than just go down the VC path, push for the high growth number thing.

(38:12) Jeremy Au: Yeah. And I think that's a tricky part, right? Because the reason why the VCs are doing a lot of the early stage capital is because they're the only ones in the frontier markets. They took the country risk. But then the reward profile that had been promised was like you said, like a 25% percent IRR. And then what that boils down to is yeah, the valuation multiple they're giving is 10 or 20x revenue multiple. So now you'll have this mismatch where, like imagine theoretically, there is a rollup, a private equity play across, let's say this agri space. It was brainstorming here, right? But then everybody, their private investors made the decision to make a 20x and maybe over the past year, they doubled the revenue. So it's still only a 10x multiple. But then if you want to do a private hero, you got to offer them what? A 1x, 2x and then suddenly, like the VC on the board is yeah, why am I going to sell and take an 80% haircut on the valuation of this company just so that you can be part of a private equity rollup. And I should be the one doing it. I should be the one acquiring you.

(39:02) Mohan Belani: I should use the paper valuation to raise my next fund. Oh yeah, exactly. And then continue kicking the can down the road. And that's the problem. That's essentially the issue with the whole industry, right? Nobody's driving the exits because they're starting to realize, or the sky's down falling, right? Because you're starting to realize that the actual values of what they have is nowhere near the VC values.

(39:20) Jeremy Au: Yeah. And I think, I previously shared my thesis as well for SaaS, right? So there's a lot of HR and CRM SaaS tools. They're actually very adjacent to each other and we need a market size for each one is only 10 million in Southeast Asia. But yeah, if you handle a rich excess, then you do payroll, then you do payday lending. And then each one is like 10 million of revenue. If you think about it, people are trying to do like, gamification, employee gamification. You're like, okay, as a standalone business, is it big enough for Southeast Asia? No, but can you imagine maybe $10 million of revenue across Southeast Asia for the right people who want to do it? Yeah. You can do it. And then you just have imagine this monstrous one stop HR solution. For each item and model that we have, our job is to be 90% of what Americans do.

(40:01) Mohan Belani: Yeah.

(40:02) Jeremy Au: Let's say, whatever the American does, I'll just be 90% and then they build to do the product market fit, they do the design, the UX. Our job is just to be an efficient clone and clone 90% of functionality. But more importantly, it works across the region. Then each piece is $10 million revenue. Yeah, there's more than 20 HR modules and company modules. But the problem is that, again, each of these SaaS modules in Southeast Asia were valued at 20x, 30x.

(40:24) Mohan Belani: Yeah, the 20 mil valuation the entry price, right?

(40:27) Jeremy Au: Yeah, exactly. That's what they were all good at. So it's like people are just talking to each other and you're like, yeah, but if you can imagine if you put everything together, it's actually a very big business and I think it'd be a very profitable business.

(40:36) Mohan Belani: Which is the big issue why the exits on the corporate sites also have not happened. If you talk to any conglomerate and if they see, let's say they see a startup doing 10 mil in revenue, 1 mil in net margin, they're not going to pay more than 10, 12 mil.

(40:48) Jeremy Au: Yeah. M&A side as well.

(40:50) Mohan Belani: They will not.

(40:51) Jeremy Au: Yeah. Because who's the, who's my competitor?

(40:52) Mohan Belani: They can't make the capital back as well. Yeah. It'll take them 10 years just to make that capital back. That's problem number one. Problem number two is that this guy probably raised his seat round at a 12 mil valuation.

He probably raised his A round at a 35 mil valuation. Now he has to go back to all his business saying, "Hey, I'm going to sell the company for 10 mil." And everybody's going to lose, and then he's, he probably has anti-dilution clauses in there. So he's going to lose even more. So what happens then?

(41:15) Jeremy Au: Yeah, what I would, as a founder, it's a very bitter pill to have to swallow, right? Let alone for the VCs who are like there, right? So I think the reason why we're talking about this is just a call to action. I think we just have to be rational about the end state of these things. Otherwise, you just see a lot of people like repeating stories on the conference panels and speakers and they're talking such a big game.

(41:35) Mohan Belani: What if every VC pivoted to be a PE company? And they changed everything to operate for the PE mindset.

(41:41) Jeremy Au: If you're assuming that the LPs agree.

(41:44) Mohan Belani: Yeah. Let's assume LPs agree, right?

(41:45) Jeremy Au: Assuming everybody's egos are okay with it.

(41:46) Mohan Belani: If you tell the LP like, the likelihood of me losing your money is 90%, but the likelihood of me giving a 10x with that post. So if I could either lose all your money with the investments I'm doing, or I could potentially give you back 3x, but operate in a PE kind of style, how would that work?

(42:02) Jeremy Au: First of all is I think that your multiples will drop by about 10x. Now It may not show up in all in price, but it may show up in control rights as well, just like a lot more bought seeds a lot more which we've all hands on right more hands on I think the overall package the multiple will drop about by about 10x. Maybe the price on it Drops 5x, the other 2X come from control, right?

(42:22) Mohan Belani: You were at Monk's Hill, right? Imagine Monk's Hill Ventures suddenly pivoted their whole model and say, okay, we'll be hands on. We'll be PE tile style investors. And from now on, we'll take more majority stakes and companies will operate. Maybe we'll bring in new management as well. Do you think that will help looking at, let's say amongst his portfolio in the past or maybe some of the deals that they've done?

(42:41) Jeremy Au: I think that the talent does exist in Southeast Asia and that kind of talent that's willing to go hands on doesn't get enough opportunities to do that. So what I mean by that is I think we see a lot of really good general managers in Singapore, I would say, but also in Southeast Asia who are running family conglomerates and they run a business very well. Let's be super real. They control everything. They know how to manage their stakeholders, like the government or the levels or whatever it is, they focus on profitability, they know their books. They're very good. It's just that they're stuck to a family for their whole career.

(43:16) Mohan Belani: And they wouldn't want to leave their family to risk it too.

(43:18) Jeremy Au: Yeah. But I'm just saying there's also a lot of people who are non family executives reporting to a family that are just like in that structure. So it's a lifetime role, but I think there's a lot of great talent that you can imagine that. If you talk about that fishery roll up or consolidation. Are there agri executives across the various countries in Asia that are known to be hungry, get shit done and take no nonsense?

Yeah, duh. But it's just that they are, they're in one conglomerate and they can't move to another conglomerate. So I think private equity fund that has that strong agri business could be like, okay, I'm going to take you out. You go do a four year stint, clean up this thing. I think the talent does exist, but they just can't get out. And so I think one benefit of the private equity play, it's a marriage of two things, right? You know what I mean? Because on the VC side, it's very much like our job is to identify the best founders, because no matter what, we want them to be fond of that to some extent, and we're very hands off on the support.

And then now it's the other way around, right? I think we see private equity funds and that now to some extent, like search funds are happening now, which is micro PE, which is they raise some money, 10, 20, 30 mil, but then of course it's the same person as a one person job, right? That one person is basically supposed to be raising 10, 20, 30 mil. And they are also going to run the business. And so this combination is pretty rare, actually.

(44:35) Mohan Belani: But this is still in the very early stage, right?

(44:37) Jeremy Au: No, they're buying family businesses, right? Ah, okay. So those such funds are, I'm going to buy a second or third gen business that, the kids don't want to run. Yeah. So therefore but of course, what I'm trying to say is that kind of talent is quite rare. The people who are good at operating find it difficult to raise 10, 20, 30.

(44:49) Mohan Belani: So those are already businesses that are going fine. They have the profitability. They're not going to grow 5, 10x. And they have, maybe older retiring founders or founders that don't want to do it anymore. Slightly different, right? What I'm saying is, what if a PE company went in and restructured Carousell to make it a super profitable machine? Would the investors be okay with that? But Carousell is not going to get the billion dollar or even the $800 million valuation they have now. Yeah, it might scale down to 200.

(45:14) Jeremy Au: Correct.

(45:15) Mohan Belani: Because now if, say Carousell gets to a 10 mil net margin level, right? 20x of that would be a fair valuation.

(45:21) Jeremy Au: Yeah, you're effectively arguing for like an Elon Musk takeover of Twitter, right? I mean, I'm just saying like, Elon Musk fired 80% of the workforce. Unfortunately, when he did that, revenue also disappeared by about 80%. So he ended up in the same net position.

(45:35) Mohan Belani: X is not a great example, right? But let's look at EQT, a lot of these firms, right? We need a mini EQT equivalent for this region.

(45:41) Jeremy Au: Yeah. So I think the problem is that we have micro, we have small, we have medium, and we have large. And for large private equity funds, there are just not enough targets in Southeast Asia. And there are too much political and government control, if that makes sense, to ever allow those acquisitions to really happen at a fundamental level. But fundamentally,  there's just not enough.

(45:57) Mohan Belani: There's just none.

(45:58) Jeremy Au: Yeah, and then the micro is your search funds, which are starting to emerge and I think they're getting quite hot, but of course there's some struggles and we can talk about it later, obviously they have their own struggles because the issue is that you're small and medium. And if you look at the US, the issue is that the micros will normally sell to the small PE and a small PE was out to the medium, you know, and then the medium ones will sell to the large PE, so to some extent, it's like the VC ecosystem, the same thing, which is there's still an end game of a public IPO market exit. And it's a chicken-egg dynamic where if you had this anchor at the end, then the value flows. So you see a lot of the search fund folks in America, for my friends who are running search funds, their job, they don't want to run a tire repair shop forever. Their job is they want to buy one, make efficiency, buy 10, 20, 50, 100. But then they, after that, they want to sell to the small ones. The small one sells to the medium one, the medium sell. So to them actually,

(46:51) Mohan Belani: But they can only do that because at the start, there's a really capital efficiency, there's a really sustainable unit economics, and there's profitability.

(46:57) Jeremy Au: Yeah, so the question now is, what's the incentive for a medium sized PEF, for example, to buy a tech business like the, whatever it is, to buy over, like what's the end game for them, right? Because is it going to be a local listing that has a low multiple? Then people are like, is it really worth my while to do that, right? Versus everything else in life that they can go off.

(47:16) Mohan Belani: So EQT buying Property Guru, for example, right? Do you think the end goal is for them to release Property Guru?

(47:21) Jeremy Au: I have no idea.

(47:22) Mohan Belani: No, but, so that's the thing. I'm thinking, actually, for most companies, the endgame is not a public listing. I literally had another session with a founder and he actually spoke to folks who had publicly listed companies. Having a public company is a shit job. It's so much better to be privately held within a PE firm, and you use the profits to pay dividends. It's actually way more worth it long term.

(47:42) Jeremy Au: No, I get it. Because if you are a founder holding a private company and a management team, then you don't have to do the compliance side, but the crux of it is what's the private equity incentive? And for the private equity funds that are large to medium size,and this is whereere I think it goes back to it is they just have a better return profile in the US. So I think that's the crux of it, right? Is that I think if the US market was not so compelling because of the relatively low interest rates, because of I think the government tax subsidies that make it better for private equity funds to operate versus I think other forms of corporate instrumentation.

Then, for a private equity fund, then it was just like, wait, these are all the benefits that gives us a better target list there's a lot more deeper, a lot wider to go after in the US market, compared to doing it in Southeast Asia, you get me? So I think that's where there's a little bit of like chicken and egg problem.

(48:34) Mohan Belani: The end issue of a capital listing in this part of the world or in Southeast Asia is something that I really cannot foresee that getting fixed anytime soon because there's no real effort to even fixing it.

(48:45) Jeremy Au: I think we see, I would say, small and maybe medium private equity plays in healthcare in Asia. So I think I we do see that.

(48:54) Mohan Belani: Yeah, but as in for the end game to get them listed, right? You're saying that for the latest stage private equity firm for them to get incentivized to do all the deals Yeah, there has to be still an exit scenario where it goes to a listing.

(49:06) Jeremy Au: For example, yeah, and I think that's in the US, that's a pathway, right?

(49:10) Mohan Belani: But in this part of the world, that pathway just doesn't exist yet. Could Japan fix the gap? Maybe. Australia, it doesn't seem like they'll do that very much for Asian companies. I think there'll be more US entry. Could India do that on some level? I think it'll still take a long time. They're going to favor their own companies for the longest time. China, I think nobody would want to do that even if the option was there, right? So the truth of the matter is in Southeast Asia, I think private is a game to go for a while.

(49:34) Jeremy Au: So I think that he goes back to it. It's just private equity and venture capital are both forms of capital to support growth and what it boils down to is the quality of the founder and the management team to be capital efficient because like the private equity and VC game is this, if the reward profile is there, I think where the region is ill served is when we go to a big conference and everybody's these are returns are possible. And then the founders are like, okay, I'm going to go for that growth strategy to match the VC profile. And then, but they keep the game on and then, it just feeds this very echo chamber illusion that has been slowly collapsing over the past few years.

And then it doesn't allow early stage founders to be like, we start this being disciplined earlier to be more capital efficient earlier to create a set of reward profiles that can work with private equity or more like capital efficient venture capital. And vice versa is only with by doing this group of founders coming in, can these people come in and start pitching to LPs that, okay, actually we have founders that are quite capital efficient and willing to roll up or consolidate. It's a bit of a chicken and egg at this level because this game is so good, right?

(50:35) Mohan Belani: Yeah, so the tricky balance is then for the VCs at the early stages, they have to start getting a lot more Pragmatic on the valuations. They are giving founders at the early stages, not to the level right where they start discouraging founders on raising capital early on Yeah, because if every VC starts to say I'm only going to give you, maybe at a seat around a four million dollar valuation then founders are just going to completely stop starting companies, they're just going to continue with their corporate job. So that, that balance has to be there, right? The VC cannot give too high of an early stage valuation because then, they're disincentivizing founders to get to profitability quickly enough. So that's the first part of the problem.

The second part of the problem is that, growth stage capital needs to be less VC centric, more PE centric. So maybe even a Series A investor, from now on, maybe Series A investors should think less like VCs, more like PE managers.

(51:24) Jeremy Au: And I think that's where the VC funds are smaller, have to be there for more hands on versus the amount of check they bring in. Because obviously, if you're too tight on valuation, then founders are also like, why am I even taking this money as well?

The funds in Southeast Asia become much more disciplined about the amount of value they bring, and it's always like that scale, right? Which is maybe I bring a very large check, but then we are very hands off, but then you have to pick very well. Or your check is very small, and your amount of help is obviously low, but it's not so low.

(51:54) Mohan Belani: So maybe they start having a bit more accountability on the value.

Yeah. So how much value? And I think we're going to see two bifurcation of that fund support. We either have partners who are just going to do all the support themselves because they understand the business. They are the board to some extent, or they know the numbers and are very clear and laser focused about, then VCs basically work harder, the GP. But I think the other way that we're seeing it is the accelerator models, your Antler, et cetera, where they just focus on very structured key pieces that you delegate, but like it's almost, again, it's not as good as the hands on one, but it allows them to provide, even though they scale to 20 or a hundred or 200 or 2000 startups, the amount of value doesn't drop too low. And so it's still good ROI for the check. I think the thing that's going to die in between is like the in between us, it's I don't help you at all effectively, I delegate it to a bunch of people who are not very motivated. I think that's where also I think VCs start to collaborate a bit more of each other because it's okay, no VC can be good at hiring, marketing, support, strategy, and blah, blah, blah. Like I think maybe more like syndicates where I think, I'm just saying as an example, right? The VC is going to be like, okay, I'm really good at marketing, but I can't do anything else. Let me partner with somebody else who's really good at consumer, for example.

I'm just thinking, the role of government here really could, rather than play matching fund roles, where they provide, let's say, one on one matching based on capital rates, the role of government here is to provide that support that the venture, see, the value of the funds that they provide to founders is only going to be a function of how much fees they can collect. So if you're starting a 20, 30 mil fund, there's really very little hands on support that you can provide to the founders because the fees are too low. The government can come in and say, "Hey, look, if you have a 20 mil fund and you have a very clear plan on how you're going to support founders, this is where we can provide support."

(53:39) Jeremy Au: So we're not providing matching on capital raising for you to invest more. We're providing support on your fees. So you can hire better folks to provide better support to founders?

I haven't thought through all of that. I would say that for government, theoretically I think whatever you support, who will be supported and do more of, right? It's just that obviously supporting financially is easier to audit and to deploy than to determine the value of value added services of VC funders. So I think that's the tricky part of the audit side. So that's one.

(54:07) Jeremy Au: I would say that one thing I do think about is, if VCs do a better job sharing and saying, " okay, I want to get this allocation for sure." yeah. But it's just thinking test that bag is okay, but there's a gap in this company. Who are the two other, three other VC partners I want to work with. And we're going to work together to make this company more successful together. And I think that's obviously a big coordination problem, I would say.

But I think you can imagine that, that could be a way to increase the value of that business, right? Rather than trying to have to duplicate. Cause I think all I'm trying to say is like you have solo GP funds and a solo GP can only be good at one thing, which is, the investing and also whatever skills that they have. So if three or four different solo GPs work together, I think they can do a better problem. If they know and trust each other.

And on that note, I think we probably should wrap up here but if there's one word of hope that you want to actualize or visualize for the year of 2025, what do you think it's going to be?

(55:00) Mohan Belani: Oh, for me, it's curiosity. So that comes from the, I rewatched Ted Lasso, and one of my favorite quotes in the show is, " be curious, not judgmental," so I think for this year, at least I'm always reminding myself to have a curious mindset. If something is new or interesting or different, right? Just have a more curious mindset to understand why, and put in a bit more effort to be just less judgmental on things, but more open and curious. So that keyword for me is curiosity.

(55:28) Jeremy Au: That is beautiful. For me, I think the word would be equanimity. I don't know. It's a very Zen word.

(55:33) Mohan Belani: Complicated.

(55:34) Jeremy Au: It's like, how do I spell equanimity? But it's a nice way to say that when times are good, you're more calm, right? And when times are bad, you're also more calm. So you're not too swayed by the swings, right?

(55:44) Mohan Belani: Yeah, it's stoic in some sense.

(55:46) Jeremy Au: It's stoic to some extent, but we're in Asia, who's Marcus Aurelius? You know, Roman emperor. Zen, right? Buddhism. But I think, it's in every religious or cultural, spiritual tradition as well as that piece of equanimity, which is that basically the saying is that I think right now, like when the bull market was happening, everybody's like way too much of the Kool Aid and being super bullish. And then a lot of the people who did better want us to like, hold up, let me just, this is too good. Yeah. All right. Let me just take a deep breath or whatever it is. And now I think we're almost at the other end, which is, I think we're so tired, exhausted from the winter for the past few years that people are just like cynical, and especially because of the scandals and all this stuff, because they're finally imploding And so a lot of people are very like bearish, like we'll never work. And I'm like like that was not that bad, but it's just that we have to be more sober about what it is. So to me, I think that's it was a bit more centeredness.

(56:37) Mohan Belani: We have to remind ourselves sometimes to have a bit more of a childlike fantasy view on startups because at the end of the day, it is about solving problems differently. It is about creating solutions to or creating new ideas to issues that have existed for a while. So that healthy balance needs to be maintained.

(56:55) Jeremy Au: Exactly. And I would say that right now, I think the sentiment is too bearish for the fundamental macro economic fundamentals of Southeast Asia. And it's good because we've got to discuss this stuff and be direct and honest with each other on this podcast. So that whoever listens to it is, okay, there's a different approach you can do because if not, it's not the massive multiple valuation game, blah, blah, blah. Every country in Southeast Asia, the same country is super easy to expand versus this, we should never do startups and I should just continue in academy. It's somewhere in between corporate, right, but I think you've got to figure out the right niches. And I think there's some good founders that we mentioned to have figured it out.

On that note, let's wrap it up and see you next time.

(57:30) Mohan Belani: Yeah. Thanks for having me.