Thomas Tsao: First-Generation Immigrant to Founding Gobi Partners, Asia Career Growth & Challenges and Southeast Asia Investment Thesis "Crouching Panda, Hidden Tapir - E360

· Harvard,VC and Angels,Southeast Asia,Thought Leaders


“I learned about how people sometimes get caught up in a craze, things go up, bubbles get created, and the bubbles get popped. We saw that in '97. That was one very valuable lesson because that's when the Asian financial crisis happened. We went from extreme highs. Everybody thought they could become millionaires in a day. It's no different from crypto. People kept saying. ‘This time, it’s different.’ And it's never different. We went from everybody was trading and everybody got caught up in margin financing. That's another lesson. Don't take on debt. You see what happened then and you saw the pattern just repeats itself. Once crypto is over, it normalizes, then there'll be something else. From that, what I learned was that every generation has to relearn lessons of the past generation.” - Thomas Tsao

“I had to work hard. I always knew that I was brought there to remind the legacy students of the opportunity. And it's really weird. One of my friends recently told me how we worked our asses off so that we can raise children who look down upon the students that we once were. Our kids have that advantage, but we were brought in to remind those kids with the privileges what a wonderful opportunity Harvard was. I felt like I was brought in and I had such a great attitude. I did work study, I did dorm crew. I was cleaning up. I worked in the cafeteria. And now when I'm reading about things from Harvard, when you look at it from an equity standpoint, it's not fair because there are students now saying, How can I be treated fairly if I'm the guy that has to clean up the puke from another student? How can I be viewed fairly?’ And I was thinking, I didn't even think about that back then. I had fun, but when I look at the sons and daughters of my friends and even my daughter, I certainly am not having as much fun as they are now.” - Thomas Tsao

“In 2015, my family had been in Shanghai. I was loving it. But then, we saw the data and our interpretation was it was going to be a big opportunity to connect Northeast Asia with Southeast Asia. That seems obvious now, but back then, everybody was doing East to West. ‘Let's connect China with the US, US to China’, and there were many firms that did a fence. When you look at what GGV was doing, Lightspeed, all these guys were building out great franchises. We said, that's a great strategy, but what we saw was there was also an opportunity to connect Northeast Asia to Southeast Asia. Our rationale was quite simple. We saw Northeast Asia was aging. It was generating surplus capital and developing technologies. They were ahead and they were a technology leader. When you then look at what was going on in Southeast Asia, it was the exact opposite. Southeast Asia is young. The demographics are young. They're entering the spending phase. The middle class is growing. Southeast Asia needed capital. And Southeast Asia was at the early stage of the tech adoption. So we said, wow, it fits together like a jigsaw puzzle.” - Thomas Tsao

Thomas Tsao, Cofounder of Gobi Partners, and Jeremy Au discussed three main themes:

1. Early Life and Education: Thomas talked about his background as a first-generation immigrant. He shared his family's journey from China to the USA and how aspirations and work ethic influenced his upbringing. He discussed the complexities of navigating life as an immigrant student at Harvard and contemplated 'selling out' vs. maintaining his ideals while choosing his first job post-graduation. He opted for a career in banking to gain financial independence and pay off student loans which led him to Wall Street and starting his career at Merrill Lynch.

2. Asia Career Growth & Challenges: Thomas recalled his career journey that paralleled Asia's growth, from the optimism of Hong Kong to the Asian financial crisis. He witnessed and contributed to the technological expansion in China and Asia. His journey included multiple experiences in the Asian financial markets, the tech boom, and the transformative economic landscape of the region. This experience shaped his understanding of market cycles, the importance of frugality, and the value of adapting to new technologies.

3. Founding of Gobi Partners & "Crouching Panda Hidden Tapir" Investment Thesis: Thomas shared his experiences during the Asian financial crisis and the dot-com bubble, which led to the founding of the Beijing Technology Development Fund and later, Gobi Partners, amidst uncertainties like 9/11 and the SARS outbreak. He navigated the challenges in TMT (Technology, Media, and Telecom) and saw China's potential for homegrown innovation, shaping Gobi's focus on fostering innovation. He later saw a unique opportunity to connect Asia with Southeast Asia, leading to the strategy of "Crouching Panda, Hidden Tapir." He discussed that his move to Malaysia solidified Gobi's expansion and focus on underserved markets like Taqwa Tech, aimed at the global Muslim economy.

They also discussed Thomas’ learnings from Harvard University, the founding of Beijing Technology Development Fund, the SARS outbreak and its impact on business, and the integration of diverse cultures in corporate environments.

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(02:08) Jeremy Au:

Hey, Thomas, really excited to have you on the show. I heard so much good things about you through the Harvard Alumni Network. And so really wanted to hear a little bit about your story. But please go ahead and introduce yourself.

(02:18) Thomas Tsao:

Hi, thanks, Jeremy. It's great to be here. My name is Tom Tsao. I'm originally from Brooklyn, New York, grew up on Long Island, did the reverse immigration, and now I've spent more than half my life outside of the US, in Asia. I'm also one of the co-founders of Gobi Partners. We're a venture firm, Asia focused, and I think we've actually worked with Monks Hill on a couple of deals.

(02:39) Jeremy Au:


(02:40) Thomas Tsao:

Delighted to be here with all your listeners.

(02:42) Jeremy Au:

So I've got to ask, like all the way back, what were you like as a student, as an undergraduate? Were you a partier, were you academic?

(02:51) Thomas Tsao:

Jeremy, you're bringing back memories from my my awkward days. I'm sure we all can go back and think back, but I think like many of your listeners, I was a first-generation immigrant. My parents came from China. My grandparents fought on the wrong side. They were KMT. And so, we were then, the family went to Taiwan and then every family then, Jeremy, I'm sure it's familiar to many of the overseas Chinese families. One kid from every family was picked to go to the US as an insurance policy. And so my dad and my mom were picked from their families.

They met up in Brooklyn, and they had me. So I was made in the USA, and again, if you think back then to the larger kind of global trends, what was going on was my dad got to the US because of the Cold War. The US needed engineers, and my dad was deaf but very good at engineering. And so he was a beneficiary of that. But you know, later on, I realized the discrimination he faced. And I think my father's generation, there were many of them of that generation. I think just like your parents, Jeremy, right? A lot of them went to Southeast Asia. Some went to Europe, but the, overseas Chinese diaspora was quite broad. Our side went to the US and great opportunity. Certainly, when I look back I think back fondly to my teachers, my classmates, very generous America was at that time. I benefited from the public school system.

But we also always knew as well that we had to work maybe a bit harder because we were a minority there. We had to do more. And when I look back now, I just think of the generosity of my neighbors but also the opportunities that were offered. But again, Jeremy, it was a lot less competitive back then and so as a college student, I was fortunate. I was on scholarship, but I was also work study and I benefited tremendously from the very generous financial aid package that Harvard had and also from the US government. But I was work-study, so I had to work pretty hard. I always knew that I was brought there to maybe remind the legacy students of the opportunity. And it's really weird. One of my friends recently told me, Tom, we work our asses off so that we can raise daughters who look down upon the students that we once were. And I was like, whoa, that's kind of right. And it's really weird. I mean, when I look back now, we were given tremendous opportunity but I also think that we were brought in to remind, and I think Jeremy, I mean, we're working hard.

So our kids have that advantage, but we were brought in to remind those kids with the privileges, what a wonderful opportunity Harvard was. Or you see what I'm saying? I felt like I was brought in and I had such a great attitude. And I was reading recently, like I did work study, I did dorm crew. I was cleaning up. I worked in the cafeteria. And now when I'm reading about from Harvard, they're saying, that's when you look at it from an equity standpoint, it's really not fair because there are students now saying, how can I be treated fairly if I'm the guy that has to clean up the puke from another student. How can I be viewed as fairly? And I was thinking, wow, I didn't even think about that back then. So your question is, I think I had fun but when I look at the sons and daughters of my friends, I certainly am not having as much fun as they are now. And even my own daughter, I think, but you know, things are different.

(05:57) Jeremy Au:

Yeah, I think I really resonate with, my great grandparents, my grandparents left China in multiple ways of emigration during that time period because of all the instability that was there, right? And they all left because they wanted a better life for themselves and they wanted a better life for their children and families. So I think there's that generational aspect for sure. How do you think that has translated because you said that's been something that is on your mind. And you went off to start off your first job. How did you go about picking your first job?

(06:22) Thomas Tsao:

Well, I think what I learned and I think, back then Jeremy at all these great schools. Every class, when you're around senior year, you wonder to yourself, am I gonna be a sellout, right? Cause, you have all these ideals when you're younger. And to a certain extent, we still do. But then reality hits in. And I remember the discussions we used to have over the dining tables, and I was a Winthrop House guy. We would discuss oh, you're gonna become a lawyer, a doctor, and chose the banking path. And again, I was quite I think clear. I knew I needed to make money.

I needed to pay off my student loans. And I heard some of my other friends and, they just had, I think, maybe less financial pressure. So they had more choices and I kind of admired that. But you know, life being what it is, I mean, I didn't feel bad because, hey, you come out with a Harvard degree and the Harvard degrees just opened up so many doors. And I feel bad for saying that because I feel like it only increases the competition. Look, there are other ways. There's other great schools. I mean, I look at now the admissions rate. I remember when I got in, it was the lowest admission rate ever. I graduated more than 30 years ago. The admission rate has gone down every year. So I say that but for me, it was like, Hey, I knew I needed to get out, at least get some financial independence. And that was very, again, I was very lucky. I was part of the SEO program, Sponsors for Educational Opportunity. I otherwise never would have gotten onto Wall Street. And that program really opened up the doors. And in fact, we can talk about this later, but then I brought SEO, the program, to China. But I feel like I've been lucky that there were always organizations that kind of helped open doors. And I've been a beneficiary and I've always been very grateful for that. And so, yeah, so I took the Wall Street path. So I went to a firm that many of the listeners may not even remember it was called Merrill Lynch, which is now part of Bank of America. So I went to Wall Street after graduation.

(08:11) Jeremy Au:

What did you learn at Wall Street?

(08:14) Thomas Tsao:

I learned work ethic. If you think about now, yeah, I learned about discounted cash flow, pro forma analysis, but what I think what I really learned is, wow, that work ethic, when you talk about 60 hour work weeks, you really start understanding what a 90 hour work week, what a 100 hour work week, and what a 120 hour work week looks like. And now that I think back, if we were doing that today, it'd probably be viewed as kind of abusive. But, we did it back then, right, Jeremy? Nobody had handphones. It was a different time but I think what I learned on Wall Street and I was very fortunate to have worked with tremendously talented, again, people very generous with their time, with their networks but what I also saw was, if you want to get ahead, my goodness, the work that people were willing to put in was really quite incredible.

(08:59) Jeremy Au:

Any particular mentors or lessons that you learned from that time?

(09:03) Thomas Tsao:

Oh, I think so many. From the guys, I still remember a guy called Dan Cain, Merrill Lynch, I was in the FIG group. A guy that I worked with called Dave Caceres, in fact, he just texted me on But what we learned there was it just meant attention to detail. And Jeremy, you'll probably appreciate this. Well, I don't know if you will, you're a lot younger than me. One of the things we used to do as analysts was we have to go to the Bloomberg terminal and write down the stock prices and enter them in to a Lotus one, two, three spreadsheet.

(09:31) Jeremy Au:

Oh boy.

(09:31) Thomas Tsao:

And if you could graph that, wow, you were like super analyst. But again the attention to detail. And one of the things I remember was always check for typos on the footnotes. And that was drilled to me like, "Tom, take it back. This is unacceptable." And I'm like, well, the presentation's perfect. That typo is wrong. That footnote is wrong. The only product we make as an investment bank are the PowerPoints. And would a baker bring out a cupcake that had a speck of dust on it? And I was like, no, it's like we cannot generate a PowerPoint that has a typo on it. And I was like, wow. And that was ingrained to me at a very early point in my career and something I've carried over. A lot of people that I've worked with, and I'm sure many of my younger colleagues are like, Oh, Tom, you're so anal, but that's one of the lessons I took away because, as a venture firm, right, Jeremy? We're in financial services, or there's other, it's like consulting. The product we make are the presentations. So that's something that I always took away. The other lesson I learned was, sometimes You don't get laid off. It's because you understand technology a little better than the older guys. And I'll give you, you probably remember this. Look at the time I survived a couple, on Wall Street, there was always layoffs, right?

I survived a couple of rounds because I was a master of a new technology then. I was one of the few guys who can convert the Lotus One, two, three files to Excel. And that's what really kept me my job. It's because none of the older guys could do it. And now when I look at what the younger folks are doing with TikTok, I'm like, well, they're mastering a new technology.

(10:56) Jeremy Au:

Yeah, definitely. And what's interesting is after this, you started to move from the US to Asia, but also during that time, also move into more of an executive role as well. So I'd love to hear you share about what was going through that transition from your perspective.

(11:10) Thomas Tsao:

Oh, Jeremy, I'm sure you remember back then. It was like, Hey, if you did well, you do two years, right? It was really like bootcamp. You get the third year analyst. And here's what, I talked to a lot of friends, and you probably remember this, Jeremy, it's just, back then Hong Kong was the most exciting place to be on the planet.

(11:25) Jeremy Au:

So hot. Yeah.

(11:28) Thomas Tsao:

Right? I was coming out '94, '95. And I tell folks now, I'm like, there was a place that was more exciting than Silicon Valley, New York, Abu Dhabi, Doha, and they were like, well, what place was that? I'm like, it was Hong Kong. Hong Kong, right before the handover, it was like, the possibilities were endless. And so, reading that, and I remember reading a novel called Taipan. I'm sure your listeners know that. And I was really reading that and I was like, wow, what an exciting place. And then of course the flat 15% income tax was also very attractive. And the fact that they'd cover your housing. Well, back then it was hardship pay, expat packages. It was a no brainer. And I was fortunate. I made friends at the time with Merrill Lynch, some of the senior guys. And this was when Merrill Lynch was right about to set up and go into the China market. And so another lesson that I learned is, don't always try to just talk to the "cool" people at a conference. Sometimes talk to the people who may seem a little by themselves in a corner. Because that's what I did during analyst training.

(12:24) Jeremy Au:


(12:25) Thomas Tsao:

I was sitting there and I saw a guy I'm like, this guy looks like he's Chinese. He's standing there. Well, he's older than everybody. And that guy turned out to be Zhang Liping who, wanted to start off at the bottom, wanted to train with the analyst, but he had actually been tapped by the chairman, Bill Schreyer, to run Merrill Lynch's China operations. So I just went to him and I said, Hey, and this is, I gotta give a lot of credit to my mother. My first language was Mandarin, 'cause my dad was deaf, really couldn't speak English that well. And I was like, Hey this is Ng Shang Ma, where are you from? And he was like, oh, are you like from Shanghai? And I'm like, yeah. Well, Baba is a Shanghai and he's Oh, you speak Chinese. I'm like, yeah, we just got to talk in. And then through that program, met another guy. His name was called Feng Feng. Also was at Merrill Lynch. It turned out these guys were the ones that were going to build out Merrill Lynch's China operations. And they said, Hey, listen, one day, if you're interested in coming back to Hong Kong, you should look us up. And so I remember that two years later, reached out to them. We kept in touch and they're like, you absolutely should come out. And so for my third year, I went to Hong Kong and again, I was a witness to China's rise.

And we did one of the first IPO duo listings.. It was for a company called Shanghai Petrochemical. And again, that team , I was very junior on that. I claim no credit. But that team then also did China's first global bond offering. So, to really see that, and I think people sometimes forget is just how far China has come, right? Over these last decades. They went from having, they had no Moody's rating, Jeremy, to now being one of the largest issuers, of sovereign debt. Sometimes we forget the perspectives.

(13:51) Jeremy Au:

And what's interesting is that you said that you've always been, a little bit more interested in technology compared to your peers. And so when you moved to Hong Kong, you didn't just obviously move to doing banking, but also started moving more into technology sphere as well. Could you share a little bit more about what you were seeing, what you're feeling, the context of that time?

(14:06) Thomas Tsao:

Yeah. So again, in Hong Kong I got caught up. If you remember right before the handover, Hong Kong was Jeremy, how old were you in ‘97?

(14:14) Jeremy Au:

I was around, I would actually go to Hong Kong pretty often because, my father's side is Cantonese.

(14:18) Thomas Tsao:

Oh, there you go.

(14:19) Jeremy Au:

And then my mother's side is more on the Fujian side.

(14:22) Thomas Tsao:


(14:22) Jeremy Au:

So, you know, we go to Hong Kong very often, actually.

(14:25) Thomas Tsao:

But in ‘97 as well, so you must've been still young though, right?

(14:28) Jeremy Au:

Yeah, I was still young, you take the Star Ferry.

(14:31) Thomas Tsao:

There you go. Okay. Well, Hong Kong at that time, trading volumes exploded. And we were at Merrill Lynch and then Li Ping and Fong, we decided to go to a locally-backed brokerage. They wanted to create you know what, I think the equivalent later of what would become CICC. But again, we didn't get there, but a locally backed brokerage was called C Power. And it had one of the largest local retail brokerage networks and we helped take a lot of the Chinese state owned enterprises called Red Chip public in Hong Kong. So we kind of saw that and that's when I got more into an operations role, right? We were looking at upgrading the the trading. At the time it was still very paper driven, you had to call in. So we saw a lot of opportunities there. Volumes were going up.

We were developing great relationships with companies like, Shanghai Industrial, Tianjin Development. Basically these municipal state owned enterprises that had like, they were conglomerates with different assets and we were listing them. And so it was from that, that I really learned about how, essentially how people sometimes get caught up in a craze. And then how things go up, bubbles get created and the bubbles kind of get popped. And we saw that in ‘97. So that was one very valuable lesson, to see that because that's when then the Asian financial crisis happened.

(15:44) Jeremy Au:

That was a tough one.

(15:45) Thomas Tsao:

I guess, Jeremy, I'm so old right now. I mean, when people said, Oh, what were you doing during the last financial crisis? And I always I'm like, which one are you talking about? Because everybody's referring to '08, '09. And for me, the big one was '97.

(15:57) Jeremy Au:

Let's talk about it, actually, because, one interesting thing is that so many folks who are guests, but friends, actually, they remember their families being impacted, right? Their fathers or mothers lost a job, did a downsize and so forth. But, I'm kind of curious because you saw that your own eyes in the banking and associated industries, but what was the experience like from your perspective?

(16:15) Thomas Tsao:

Well, we went from extreme highs. Everybody thought, hey, I could become a millionaire in a day to, I mean, it's no different from crypto. And I think if you have that perspective, you just say, wow. Every time, you look back then, I heard it like this time's different and it's never different. So we went from everybody was trading and everybody got caught up in margin financing. That's another lesson is do not take on debt. Don't take on debt. And I had friends they were over leveraged. There were a lot of people who had to jump out of buildings. I mean, it's really sad, but to see that, and then you see what happened then, you saw the pattern just repeats itself. And once crypto is over, it normalizes, there'll be some, there'll be something else. I guarantee you that. But if you go through that, from that, what I learned was, every generation has to relearn lessons of the past generation.

(16:59) Jeremy Au:

And what's the lesson there that people eventually go into collective overhype mode.

(17:04) Thomas Tsao:

Same thing, FOMO, right? Everybody was buying these companies. And then at the height, there was a company called Tom. com Lee Kai Shing. That's when we saw the beginning of the internet. It was a heady brew of China, the internet all coming together. And I remember there was a company called china. com. So to see that, it's just been a cycle that will repeat. And when we discussed this, you'll see how the cycle played out again. So ‘97 happens, we had to do a management buyout because one of our biggest backers was an Indonesian company. And if you remember the Indonesian rupiah it just, it just went from, at the time, I think it was about 2000 rupiah to one US dollar. And then it got depreciated like a 14, 000. I mean , fortunes were wiped out so we ended up doing a management buyout. I was still in my late 20s. I was asked to join in and again, that's the other thing, if you can always live below your means because if you can save up cash, you never know when there's opportunities when you can deploy it. And so, it comes back to my college days. I was always a frugal guy cause I just didn't have the opportunity to spend. I had a little saved up. I was able to participate in that management buyout. Again,, very small sum, but we ended up then buying out those are the institutional business, corporate investment banking, asset management, and then, uh, Lee was able to find a buyer and that was Dresdner Kleinwort Benson. And so I ended up there.

So, so that was a very difficult period, ‘97, And so, it's no different than where we are now. But I think that's really shaped my worldview because I've been through this a couple of times. And things are never as great as they seem to be and they're never as bad they seem to be.

(18:34) Jeremy Au:

And what's interesting is that after this experience, you would eventually go on to enter venture capital in China. So could you talk to me about that first, entry into the asset class of venture capital?

(18:44) Thomas Tsao:

Yeah, and it really started when I was at Dresdner Kleinwort Benson. you know, I never really understood what corporate culture really meant. As a younger person, you're like, who cares about corporate culture? I'm just going to go to whatever firm pays me the most money, and the first time I realized how important corporate culture was when I went to Dresdner Kleinwort Benson. And so Dresdner Kleinwart Benson was a strange combination. First of all, you had Dresdner, which was this big German commercial bank. They had acquired Kleinwart Benson, which they were like the merchant bank for the queen, like very blue chip. And then they acquire this entrepreneurial Hong Kong mainland Chinese brokerage called C Power. So now when you take those three cultures together, that's when you're like, whoa, that's what I realized. And I remember the first day and that's when I said, you know what? I don't think I'm going to last very long here. Every morning, at an investment bank, you get in. And that morning that you kick off the Monday meeting and we used to do that at Merrill Lynch, CPower and they have it like, 9 AM if I remember and I go in, I get there at 9 AM. Everybody's already seated there and the Dresdner guys look at their watch and say, look, at our bank, 9 AM means 8:45. Oh, and I was like, okay, and they're like, okay. I'm like, it's your first time. Don't let that. I'm like, Oh, okay. I got that. And then we go around the room. Like we're introducing the CPOWER team, not part of the team. And I look at them and they're like, Oh, now Tom, why don't you introduce yourself? And I was like, Oh yeah, my name is Tom and I'm just so delighted I get a chance now to be working at Dresdner Kleinworth Benson. And I remember the senior German guy looks at me and he's like. it's "Dresdner". And I was like, Whoa. Oh, Dresdner Kleinwort Benson. I'm thinking to myself, I don't think I'm going to last here. But it turned out that guy was great. But it helped me also understand that, coming from the US, we thought things were only done the Wall Street way. But then working with this big German bank and then understanding what they were doing, leveraging their balance sheet. I mean, the idea was to leverage their balance sheet with the deal-making ability of a client war Bentsen and add that in with what we were doing in China and Hong Kong. On paper, that seemed great. And I think we were executing that but again it's where I learned how you have to create diversity, being inclusive. And I think they did a great job of trying to include everybody in this larger mission because we had a lot of competition coming out of the Asian financial crisis.

(20:56) Jeremy Au:

Yeah. And, you went on to deploy in venture capital, and this across Asia, primarily but those early days, obviously as an asset class is very unclear. It was very fuzzy, definitely not many books about it. So how did you decide to say Hey, this is an asset class that I want to keep going on?

(21:11) Thomas Tsao:

Well, I think to answer that, we may just step back a bit. I'll fill the gap from Dresdner to how I got into VC. And it was very simple. When I was at Dresdner, or "Dresdner", that's when the internet, so that was kind of ‘97, ‘98. The internet was starting to gain a place in the public consciousness now of Hong Kong and China. Like it was starting to trickle. It's already been developing in the US but it was starting to gain. I got very lucky. Oh, it depends. That's why in my life, I've also realized things that don't turn out the right way. There can be a silver lining. So one thing when we were back then at Dresdner is they went by seniority to give you the sectors and the clients that you're going to cover. And we all had very high quotas we had to hit. I was at that time, I think one of the youngest directors. And so I didn't get to pick until like last.

And so you can imagine everybody wanted like real estate. They wanted real estate, the industrials, Lee Kai Shing, Hutchison, and those kinds of got taken off the table right away. And so when they got to my turn, it was like, what was left and it was telecom, media, and tech. And they were like, well, geez we think none of these are going to create revenue. You know what, Tom, why don't you take all three?

(22:19) Jeremy Au:

TMT. Yeah.

(22:21) Thomas Tsao:

And I was like, okay, but can I get an increase in my title? So at least I look good. And I'm thinking to myself, I'm not going to generate anything. But back then it was like, I think Hong Kong. So I was covering the mobile guys and they were like, six mobile operators. This is when getting a 3G license was a big deal lIke people's phone, Sunday, orange. And so, so I go cover these guys and the one thing I asked and the firm was quite nice was like, if I want to learn more about this I need to go to Silicon Valley and they said, fine, you got to be able to generate enough revenue. And I said, okay, let me go out and that's when I started gaining exposure. So what turned out to be, what looked like it was a bad thing ended up being a good thing because I got to cover TMT. And I saw what was going on and I was like, Whoa, this is big. This is when Bezos was first starting and how I transitioned was, there's an interesting story. So after the Asian financial crisis, the Chinese government basically assembled these think tanks and they went around the world studying and of course they studied what was going on. The US was doing incredibly well. I think Clinton was president. We didn't have a budget deficit. The cold war was over. We had the peace dividend, the internet's about coming. The US was running a budget surplus. We got rid of 30 year treasury bonds. And so, the Chinese government, I think was studying and they came to a couple of conclusions.

One of them was, the US has this thing called Silicon Valley. The rest of Asia is mired in this economic crisis, the US doing extremely well, what's the secret sauce? One of the ingredients was, they had this thing called Silicon Valley. And at the time, I remember one of the government guys saying to me, Silicon Valley is powered by the ICs. And I was like, that's very observant, integrated circuits. And he said no. It's powered by the Indians and Chinese. And I was like, yeah, you're right. And he said, guess where else has a lot of Chinese people? I'm like, oh yeah, China. Of course, why can't China create a Silicon Valley?

And so that was one of the key takeaways and then again, they went to a lot of these underemployed investment bankers like me at the time. And they're like, hey, how do we create something? Give us your best ideas. And I remember competing against the guys at Goldman, Merrill Lynch, the OR Fay these are guys in my generation.

We came up with plans and one of the ideas was, Hey, why don't you create a venture fund? We were doing it cause we're like, Oh, this is a great way. We maybe we can make some fees cause no companies were going public. And so, everybody's coming up with proposals and I remember the guys, one of them was like, Hey, we got this proposal from Goldman Sachs and they said we can raise a 200 million fund and do a JV, with the hottest VC firm at the time, Kleiner Perkins.

(24:46) Jeremy Au:


(24:47) Thomas Tsao:

And they asked me what I thought. And I said, you're going to go there. They're not even take your call. And they're like no. And so they tried it first. They went out there, couldn't get anything done. And then they came back to me, they said, how would you do it? I said, let's start small. You got to find a firm that kind of has an interest in China. When government guys come in, they'll send an airport pickup. It's not like what we do in the States, right? You're very independent. And they said, okay, well, why don't you come up with a proposal? And I did. And we found a US partner. And then after we did that, they said, well, you got to go raise the fund. I said, sure. And that became the Beijing Technology Development Fund.

(25:19) Jeremy Au:


(25:20) Thomas Tsao:

It was one of the first US dollar funds. And, the idea then was very simple. We called it C2C, which was Copy to China. Jeremy, it's so funny now. It brings back some memories. I remember back then, like if I was hanging out in Silicon Valley for a week, I'd go back to China. And I'd instantly be smarter than everybody. It's like I'd gone into the future and I came back. That doesn't happen anymore because of what we've been doing in the internet, we've flattened the world but then, back then, there was this real kind of arbitrage. And so, that's how I got into VC. We raised this ,at the time it was a 60 million dollar fund. And we started investing. And one of the big hits we got at that one was a company called Commerce One. And we brought them to China. Unfortunately, the technology really didn't work. And it was during that time that I got to meet a lot of the first generation China entrepreneurs. So the good news is we invested into Commerce One, we did extremely well. But the bad news is because I was invested into Commerce One, we passed on Alibaba twice. There's always good and bad, right? That's what I'm saying for everybody out there, things that look like, it's adversity may turn out to be an opportunity, and opportunities may turn out to be adversity. So you really never know. You just got to be patient.

(26:26) Jeremy Au:

Yeah. How did those experiences lead you to founding Gobi Partners?

(26:30) Thomas Tsao:

At the the Beijing Technology Development Fund. I was there. Again, I knew a guy called Wai Kit l au, who actually recruited me when I was at CPower. And I said, Hey, let's do this. So again, Y Kit and I always had a great relationship. We were there, set up the Beijing Technology Development Fund. And then, then the dotcom bubble hits. So the Asian financial crisis, ‘97, dot com hits. I mean, it's like the Olympics every four years. There's before we could even catch our breath dot com bubble hits and everybody, all the US guys, the JV part, everybody's leaving. They were last in first out. And I remember going, Oh, well, so. So when we were thinking there, I had a lot more hair, better looking, well, maybe not better looking, but a lot more hair. It was just like, what are we going to do? And we sat down and we said, look, let's clear through the noise. What's the key thing that we should be focusing on?

And the key question was, did we think China was going to continue to innovate? And I think everybody was missing that. Everybody was just like, oh, the dot com bubble, the internet. And we were just like, look, the internet is just starting in China. And do we think it will continue to get bigger? And when we sat down and we thought about it, we said, yeah. And so we just said, hey, we should do this. We should set up Gobi Partners. And our thesis then, we didn't want to, you know, the Copy to China, we thought we could still do it, but we saw a bigger opportunity, which was homegrown innovation from China. And I know Jeremy, when I say that now, you're like, Oh, that's so obvious. It wasn't so obvious 21 years ago. That was sort of a big bet, and I remember that government guy, Chinese people do great. Silicon Valley. Why can't they do it in China? And we just said, well, let's help them. And we set up Gobi Partners and that's how we started. And I remember we made the decision to do it the week before 9/11. And then 9/11ourse 9 11 happens, the world changes. So, my first reaction was, Oh my God, this is a horrible tragedy. I had a lot of friends in New York, checked on them. And then about two weeks later I was like, Oh my God, I just resigned. And we decided okay, well, we have to go do this then.

(28:24) Jeremy Au:

Yeah. Any behind-the-scenes stories of what it was like to found Gobi Partners?

(28:30) Thomas Tsao:

Well, I'd like to say it was a bed of roses but no, it, was, it was difficult. We had many doubters. I mean, when you look back now. It seems so obvious, but I think others like myself I think we were at the forefront. We had to educate the market. And I think this holds true. I'm telling this because it's the same thing is true for Southeast Asia. So I'll tell you some of the questions I used to get, and Jeremy, I'm sure you're getting them now, is back then, I used to get a couple of these questions was, oh, how are you going to get exits in China? Can you point to companies that have exited? And I was thinking, well, the whole point is you're supposed to, what? Aren't you supposed to be a smart long term investor? The whole point is, yeah, there are no big exits. There are going to be exits. But then you realize that a lot of the LPs, their risk appetite is different. And I came to learn and understand why. Is they need to see the data and there was no data. And it's interesting because now, fast forward, we're getting those same questions now for Southeast Asia. Oh, tell me about the exits.

And so the only thing I can say to that, Jeremy, is there, there's no right answer and if I could go back into time, what I would say to, to a lot of people who are asking those out of good faith, but is this, yeah, there's no data. You almost have to believe, but again, they're like, I'm not in the belief business and I get that. And I guess the only way you can answer this is look, talent hits a target that no one else can hit. Genius hits a target that no one else can see. So at the end of the day, look, we know the exits are coming right, Jeremy, but we don't have the data for it. So you almost have to just kind of see it. So that was a question we used to get all the time. And I always kind of, counsel, the newer GPs, look, fundraising's always been difficult.

The second question is, say you could convince them on China. Then the second question always was like, well, is China doing real innovation? We hear that now for Southeast asia. It's from the China guys. And it just keeps coming. It's like, Oh well, tell me what Southeast Asia, is doing is not real innovation. It reminds me what the Americans were saying about China 20 years ago. And now you hear the Chinese guys going, Oh, that's great, but Southeast Asia isn't doing "real" innovation. Do you know how many times I get that question, Jeremy? Can you please define innovation, right? So those are some of the things, and quite frankly, I mean, there were numerous times when we thought we'd have to, we couldn't continue. And if you remember, we set up an O2 right after the dot com bubble, what happens a year later? We hit SARS.

(30:44) Jeremy Au:

Right. Asia. Yeah.

(30:45) Thomas Tsao:

A lot of people forget that. But again, having gone through SARS helped prepare us as a firm for COVID-19, because we remembered what worked, and didn't work and we were fortunate because again, when COVID happened, we had the playbook for what we did during SARS and we realized that it wasn't the end of the world. We would come out of this and in fact, if you had continued investing during SARS, you did extremely well, just like if you continued investing during COVID-19.

If I could just add one thing. I think that the big opportunity now is like, when I think back to what we were doing, it was really about providing access to opportunity, for Chinese entrepreneurs. So that mission for Gobi has grown, we saw the same thing happening in Southeast Asia. And I think Monks Hill saw that same opportunity as well, which is, hey, some of the stereotypes or misperceptions that the West had about China, China, Northeast Asia sometimes has about Southeast Asia and now what we're seeing is, that bias sometimes from East Asia towards South Asia or Central Asia, it just, all these provide opportunities. So, Gobi's mission, and what we started off as, is an extension, and we continue to do this. It's just any time, there's underserved or underrepresented communities, that's where we want to serve. And one of the big opportunities we're seeing now is in Taqwa Tech, which is focusing on empowering entrepreneurs and entrepreneurs who are focusing on innovation for Muslim consumers, businesses, and communities. So I just did want to add that in and we think that's a big opportunity, especially here in Southeast Asia, given that Indonesia is the world's most populous Muslim country on the planet.

(32:19) Jeremy Au:

Could you share a little bit more about what Taqwa Tech is?

(32:22) Thomas Tsao:

Well, "taqwa" is the Arabic word for faith, piety, and purpose. And so what we see is a large opportunity, and I actually think it's a bigger opportunity than even China was 21 years ago, is when you just add up the total addressable markets, right, Jeremy, for the global Muslim market or the global Muslim economy, you're talking about 1.8 billion consumers. It's almost 2 billion people, and it's the fastest-growing demographic on the planet. We've created this investment thesis and we call it Taqwa Tech. And we think that's going to be a very key sector to be investing into for the next 10 years.

(32:59) Jeremy Au:

I do have some companies to refer to you then.

(33:01) Thomas Tsao:

Absolutely. Please show them. We can work together on them.

(33:03) Jeremy Au:

Yeah. On that note, could you share a personal story about a time that you've been brave?

(33:07) Thomas Tsao:

Oh boy, I think not just me but my whole family. It was probably 2015. So, we'd been in Shanghai both my kids were born in Shanghai my wife from Shanghai, and my dad's family. I was loving it. But then, we saw the data. And the data we saw, our interpretation was it was going to be a big opportunity to connect Northeast Asia with Southeast Asia. And again, that seems obvious now, but back then, everybody was doing East to West, Let's connect China with the US, US to China, and there were many firms that did a fence, you know, Sequoia, China, right? Neil. When you look at what GGV was doing. Lightspeed, all these guys, IDG, fantastic, building out great franchises. And we said, that's a great strategy, but what we saw was there was also an opportunity to connect Northeast Asia to Southeast Asia. China, Japan, Korea, with what was going on. Our rationale was quite simple. It was, we saw Northeast Asia was aging. Northeast Asia was generating surplus capital and Northeast Asia was developing technologies. They were ahead, developing technologies, technology leader. When you then look at what was going on in Southeast Asia, it was the exact opposite. Southeast Asia is young. The demographics are young. They're entering the spending phase. Middle class is growing. Southeast Asia needed capital. And Southeast Asia was at the early stage of the tech adoption. So we said, wow, it fits together like a jigsaw puzzle.

And so we decided we would really try to grow out the Northeast Asia to Southeast Asia linkages. And we created a name for this strategy. We called it Crouching Pandam Hidden Tapir. And I don't know if many of you are listening. You guys know, you know what a tapir is, right?

(34:49) Jeremy Au:

Yeah. But this is like both also to there's a movie, right?

(34:53) Thomas Tsao:

Yeah, yeah, yeah. So it's a play on, crouching Dragon, Crouching Tiger Hidden Dragon. We call it Crouching Panda Hidden Tapir. And we thought it would be, we thought that, that term would take the world by storm. Unfortunately, it hasn't caught on, but that was our definition of kind of our strategy for Northeast Asia to Southeast Asia. So where was I brave? I'll tell you. So we first started off, we, and we opened up an office in Singapore. I think we were one of the first China based VCs to Chuhai. We set up in Singapore. We did well. And then we decided to double down. And that's when I moved my whole family to Kuala Lumpur in 2015. And I'll tell you why I was brave. Because we were actually seriously thinking of leaving. And the reason was quite simple. When we were about to leave, I kind of tried to convince my wife. This is what I told her. I said, honey, you remember always during, Xin Nian we always vacationed in Malaysia. So I'm like, hey, imagine we could now work in a place we'd like to go vacation at. And so she was like, okay. And I said, hey, and think about it. In China at the time, the air quality, it was kind of the peak when the air quality was really bad. And I said, Malaysia's fantastic. The air quality is great. And I said, in China, we've always been concerned. Sometimes there's corruption. And I think Malaysia is great. There's no corruption. And you don't read about this. It's, it's kind of very safe as well. Yeah. And so she's okay, so we get there in 2015. So what do you think happens? 2015 is the worst haze Malaysia has ever had in 50 years. Cause I don't know what was happening, something in Indonesia, the wind direction changed. I don't know if you remember that the worst haze they ever had. 2015 was also when 1MDB is hitting the headlines.

And so my wife's like, wait, what are you talking about? And that year, and I was like, Malaysia is very safe. That was also the unfortunate year of the tragedy, with three airplanes right from Malaysia went down.

And then on top of that, it was just like, I remember I was like, I'm so stressed. Things weren't necessarily going well. And then on top of that, my wife is Hey, Tom, I think there's something wrong with my eyes. And I'm like, well, what's wrong? She's like, the walls seem to be moving. And I'm like, what are you talking about? She's look at the walls. I think there's something wrong with my eyes. The walls in the guest room, they look like they're moving. And I said, what are you talking about? So one day I go into the room and I'm looking at it from afar. I didn't turn on the lights and I'm like, Whoa, it does look like it's moving. I turn on the light and that's when I realized the wall is covered with insects. Like these little bugs. So the wall looks like it's moving. It's because there's like thousands of bugs on the wall. And so of course we get the fumigator in and we're like what is this? And I go, maybe Malaysia is humid. We can't identify the source. And then with all the stress that's going on, I finally said, Hey, honey, can we bring out my favorite buckwheat pillows from China. You know what buckwheat pillows are. I like the buckwheat because it gives a little more support. And again, we've been so busy moving that we hadn't taken it out. So there was that one box in the corner. I'm like, honey, it's time to break out the buckwheat pillows. We opened the box. Open the buckwheat pillows and it is swarming with bugs. The bugs from the wall came from the buckwheat pillows because the buckwheat had these like insect eggs. And we were like, we had to get rid of the buckwheat pillows. The insects were gone. And my wife was like, I've had it. We've got to go. She's just nothing has gone right. And I thought to myself, I'm like, we were kind of, we were trying to keep it low tones because the kids were asleep and it's very funny kids have this innate ability when you kind of yell at them, they don't listen.

But when you try to lower your voice, they always hear. I remember what my wife and I talking and hushed tones are like, Hey, maybe we should go. This is a sign, right? These, the bugs, it's like biblical, right? And also I looked down and I'm like, well, I see my daughter. She's standing there. And she's Oh, mommy, daddy, what are you guys talking about? I'm like, Oh, nothing. Go to bed, honey. And she's I heard, she's we can't leave Malaysia. I'm like, why not? She's like, this, it's a test. And I was like, Whoa, she was like, I like it here. We can't, it's just, it's a test. And so I look at my wife and I was just like, Whoa. And so we stayed, and things got better. And I've been in KL now for eight years.

And we kind of kept building out. And again, I know when I first came here, a lot of my friends peers in China were, a little skeptical. They're like, Hey, why would you go to KL? It's a, you the Deon. It's so far away, the birds don't even crap there. And I'm like, I just really feel like this connectivity is gonna happen and we'll see. I think it looks like it's going to happen. I think the ecosystem, you know what Jeremy, you were doing Monks Hill, others like, like Nick Nash, your other guests. I think we're building something that's going to be very important, not only for Southeast Asia, but for the entire planet.

(39:15) Jeremy Au: Amazing. Thank you so much for sharing. I'd love to summarize the three big takeaways I got from this conversation. First of all, thank you so much for sharing about your early university days, but more importantly, I think the story of your family, the dreams of your parents about a better life for themselves and for family and how you're a product of their dreams, but also their work ethic and what you took into that, into prestigious elite institution like Harvard, but how you felt different, but also how you decided to make certain decisions about your career accordingly, based on what you felt was important. So thank you so much for sharing about that.

Secondly, thank you so much for sharing about your career, especially I think really parallels the growth of Asia. So we talked about the Asia financial crisis, but also the optimism of Hong Kong before that, we talked about the growth of technology across China and Asia, and also how your career was very much not just seeing it, but also being part of it, and I thought that was a really interesting arc to see that personal eye on that story.

Lastly, thank you so much for sharing the story about how you set out to co found Gobi Partners and how you had that initial thesis about connectivity, not just across Asia and in China, but also with Southeast Asia. So there's an interesting dynamic around the strategies that you had, but also I really appreciated, like you said, that how you've seen the patterns across the decades, the questions that people have. I love what you said about the fact that isn't data for the future, because the future hasn't come yet. So I thought it was really fascinating to hear about how you continue to be a pioneer in so many ways. So I thought it was very interesting for you to share these different stories. So thank you so much, Thomas, for sharing.

(40:43) Jeremy Au:

On that note, thank you so much, Thomas, for coming on the show.

(40:45) Thomas Tsao:

Excellent. Thank you so much. It's been a pleasure.