Zalora Talent Mafia vs. Network Magnets, English Language-Locked & Culture Dynamos, Vietnam Sea Turtles & Exits by Asia Partners - E236

· Founder,Start-up,Singapore,Vietnam,Purpose

"Mindset is so important. You need to believe that you can have big ideas and you can accomplish them, and then you need people with money to believe that you can do it. You have to convince other people that they want to do this too, and then you can go do it. Corporate or very hierarchical systems would question young entrepreneurs’ beliefs, and it's almost antithetical to innovation in startups. Mindset shift is necessary to have that belief and to be able to say, 'I’m not just going to wait my turn. I'm going to do something different.'" - Shiyan Koh

In this episode of BRAVE, Jeremy Au and Shiyan Koh discuss the Asia Partners report on Southeast Asia. They talk about the emergence of talent mafias in Southeast Asia, such as the Zalora Talent Mafia, and the potential for other talent mafias to emerge. They also discuss the importance of English language fluency and the emergence of "sea turtles" who have studied in the US and are now returning to Southeast Asia to build companies. They also mention the inflow of Chinese and Indian entrepreneurs as a potential engine for the region.

Download the 2023 Asia Partners Report here.


Jeremy Au: (00:50)
Another week, another insight drop hopefully from Shiyan and me. Today we'll be discussing the Asia Partners Report by Nick Nash, which is, I personally feel one of the underrated reports on Southeast Asia Tech. So I think we would love to dig into this, see what we like, see what we disagree with. Send out this love letter to Asia Partners and the Nick Nash crew for a 332-page report, which is one of the longest.

Shiyan Koh: (01:15)
You can also watch the one-hour documentary, I think they've tried to digest it.

Jeremy Au: (01:20)
Yeah. So, what jumped out at you Shiyan? What did you like about the whole report?

Shiyan Koh: (01:24)
I mean, I think overall it's a really positive report. I like how they tie it back to the original 2019 predictions to hold themselves accountable for where things are tracking on the prediction side, which is always. It's always nice to see. I actually really like the talent flow section, so they actually did a pretty deep dive into, hey a big part of innovation is talent. Where does the talent come from? Where does it go? Which companies are relative talent attractors versus people who lose talent and how has that evolved over time? And I think talent is a big part of the ecosystem that we don't talk about as much. I think capital gets a lot of attention. And so I thought that was pretty neat and I would love to jam more on that. And then there's stuff that just warms like the macro person's heart, right? Which is like, hey, value creation versus value capture. Where do we see it? In which economies? What's our prediction on which economies will be able to see both the GDP growth, but also, can investors actually participate in that upside?

And so those were the bits that I liked. I think overall a very optimistic report on the region. And a little bit of talking about their own book, right? But that's to be expected. But yeah, I think overall reasonably fair.

Jeremy Au: (02:40)
Yeah. I really respected it, I think that they had stated a bunch of predictions and then they went back and said, okay, these are things that we hit. These are things we underestimated, and we over-exceeded expectations. And these are things that we overestimated and we underperformed as a region. So I thought it was a really Thoughtful report. And I think the thing about it is I joked about 232 pages, but I think what they've been doing as well as they've been building on each previous report, right?

So I'm starting to get suspicion now that this report can only get longer, which is good. Like you say, it warms the macro side of your heart. It warms the DTR orientation side of my heart as well. And I think I totally respect what you said about talent and capital. I think I really enjoyed the case study they had around the Zalora Mafia, right? And they said Zalora was one of the first gen internet companies and there was a whole bunch of folks that had that training experience and then they went on to build ShopBack, Gojek, Love, Bonito, Shopee, as well as Antler. And I thought it was just a really interesting piece where they also went off to build B Group in Vietnam as well. I thought it was just an interesting case study and obviously, we heard of the PayPal Mafia, right? And some of that talent vortex, conversations in Silicon Valley.

But I think it was just nice to actually put, not just the name of that happening, but also show some of the faces and companies that have been built out. And I think one thing I do think about is like, hey, there may be more people who are building right now, who are part of PayPal/Zalora mafia, they're still building right now. And I think they actually do a pretty good job talking about maybe what are the future mafia or networks of talent that may be emerging. I think they name Bite Dance as a big one as well, and C Group and Grab as future vortexes or networks of talent as well.

Shiyan Koh: (04:16)
Yeah, I mean I think, so the talent question is an interesting one, right? Which is like first of all, how do you get great talent to say, hey, I wanna take a risk? They talk about earlier the talent was sourced from the big four or accounting firms or the big three consulting firms.
So how do you convince someone like that who is working there, presumably has this great prestigious job to say, okay, I'm gonna go join a startup. And then, once they have been part of a unicorn or something high growth how do you get them to take that next step to say, Hey, I'm gonna go start my own thing.

And so I think that's a really interesting and necessary progression for this ecosystem. And it's an interesting question also, which is what did people learn at each of their stops? And what things are applicable versus what things are not. There's always the joke that is like, hey, not all Google engineers are great entrepreneurs, right?

Just cause you were an amazing engineer at Google doesn't mean you're gonna be a great founder. Because you were at this super well-resourced place, you worked for a company that prints money, literally. Does that really apply to being a founder? Zalora and all of these Rocket clones are interesting use cases, right?

So we talked a little bit last week about, hey, Southeast Asia, business model innovation or real, like deep technical innovation. And in the sort of business model innovation frame of the world, rocket alums have great training because there's a real focus on customer acquisition, the P&L. If you talk to any Rocket alum, they'll talk to you about contribution margin one, contribution margin two, contribution margin three. And so I think that a very quantitative approach works on a lot of direct-to-consumer-facing businesses. A lot of rocket alums were in e-commerce where that attention to detail is really important.
This is again, the question, does that training translate to a product-driven SaaS company? TPD, right? We'll find out. For people who have grown up in a period of capital abundance, will the habits that they learned in those periods translate to a period of relative capital contraction? Do the strategies and the tactics that worked in that period of, hey blitz a bunch of countries, really fast, launch teams just keep going? Are those tactics gonna work, and in this day and age? When I meet founders, I always ask them, they always like, oh I was head of this, head of that at what various companies. And it's like, okay, that's great. What'd you learn? What was your takeaway? How do you apply those learnings to your current startup? What do you think is transferrable versus not?

Jeremy Au: (06:46)
Yeah. There was an interesting quant review of like top founders, who have generated great returns or built great companies. And what was interesting was that you had to be, was predictive of it was that you were an early employee of a company that went public or exit was a good predictor, but a late-stage employee of that same company was not predictive. Because arguably you learn different things of different scaling and it doesn't transfer well to being a founder.

But it was also interesting that if you are an early-stage employee of a company that did not exit was also not predictive. So I know it was an interesting dynamic about what I said. It's like what exactly are you learning from experience? Again, statistics and correlation are not destiny. Obviously you can be an early station employee of a company that failed for example but that doesn't mean that you're not gonna do that. But it's interesting what exactly did you learn, right? And I think also what are the capital advantages that you got maybe from being part of an exit process, what were the network effects that from the people you got to know as part of that dynamic.

Not all high-performing teams, in the end, provide high returns or have a high exit value. But I would say arguably that all high-exit value companies generally have high-performing teams. That's an interesting piece. I think they added it there as well. I thought it was interesting that they divided into three terms for like transfers of talent. They call it talent feeders, training grounds, and talent magnets. And this is a nice way of saying, do you have a net inflow of talent or do you have a net outflow of talent?

And I think my favorite part of it said the management consulting firms have been raided for talents as a training ground. Like they have a high inflow of talent and then there's a lot of outflows. And they said, especially the name BCG, as one that has a lot of alumni out of the consulting firms. And it reminded me, actually, of when I was at Bain. When I was there, it was just like the start of everybody leaving with tech. Everybody was going to work at Zalora, work at Grab work at C group. So just a huge intentional recruiting process, I guess by the tech majors. But also I think there was an interesting competitive requirement where Bain, BCG, and McKinsey basically had to say like, how do we improve our working environment to stop losing our best talent to the tech side? And so that was an interesting dynamic.

Shiyan Koh: (08:53)
I mean, it's not like Bain, BCG and McKinsey expect most people to go past the first two years. It's designed to be a training program. You expect some losses out of it. Everyone else is just arbitraging that training that you guys had, right? Hey, you have someone who came through that program, they know how to build a model. They know how to write a deck, they can do some presentations.

That's really valuable, right? You don't have to train someone on the job on how to send an email. And I think once you see someone doing it successfully, there's a lot of McKinsey people I grab. There are a lot of BCG people at Gojek. And so once you see someone, you trust them, you're like, oh, well if someone like me can go do this big impressive, fun thing, then I probably can do it too. So you're more willing to make that leap.

Jeremy Au: (09:42)
What's interesting actually is it reminds me that two outputs in terms of like talent, right? So talent's coming in, so on, so forth. And then we talked about whether they're gonna become great employees or whether they're going to become great founders. And those are two different skill sets that are emerging. And on that note, I think what was interesting was that on founders, they were also talking about how there's a lot of white spaces in the categories that they're looking at. So they say, Southeast Asia's entering a golden age. There are so many IPOs that could happen in all these various categories. Right?

They're divided by vertical automotive versus digital security versus real estate versus auto. So, I think they just listed every category in the economy and then create a digital version of that. And they said, okay there's all white space where there isn't like a digital-first attacker disruptor of the incumbent category. I thought it was a good signpost, I guess for a lot of founders who want to be founders I thought it was an interesting dynamic for a lot of folks personally.

Shiyan Koh: (10:35)
Yeah, I mean, I think those are all great spots to start, right? But then you also have to figure out, well, why haven't people done that? What is it about that category that hasn't attracted as much attention to date? There are some things that require a lot more infrastructure to be built before it's easier to launch those things.

I think wealth was one of the categories they didn't have a big digital provider yet. And I think part of that is like the evolution of how as economies become wealthier. You can't have wealth management until you actually have wealth or you have enough people in the population that have wealth that need to be managed to be truly like digital providers of the mass affluent, no mass affluent can't have a mass affluent digital provider. I think there are some interesting things there as well, but definitely a good spot for people wanting to start something to take a look and start surveying the landscape.

Jeremy Au: (11:25)
Yeah. And I think it's really a function of like you said great founders attracting great talent, and what we're talking about is also working in great categories, where there's some sort of tailwind or it's the right, not too early, not too late. And I think that's what I find a lot of like founders struggle with, right? It's they're like great founders, attracting great people, but way too early or way too late. And I don't know, it's so hard to tell whether it's too early or too late. I think that's the weird part.

Shiyan Koh: (11:48)
Well, I think part of it is also you have to find your niche, I think that's one interesting feature of Southeast Asia is that because you have 10 markets, submarkets are ready sooner. And so you might start in the markets that are ready sooner and position yourself for entry into markets that are ripening, so to speak, later, given the experiences.

Wealth management is an interesting one to me where you look at a wealth front or a personal capital in the US and that group of people that they're serving as people who have like sub 5 million of assets. They're not big enough to be served by the private banks that want 25 to 50 million of assets. But if you look at that comparable section in Southeast Asia, There are not that many people there. Maybe you started in Singapore, but then you feel constrained by Singapore's population as well. Like, hey, that's not that big a market, then are you gonna go pick off like Jakarta and Bangkok and things like that?

So, yeah, it's an interesting problem. But I think it's also just what we tell SaaS founders a lot is getting to a million dollars of ARR is gonna be a slog. And that's the line of, hey, do you have a real business or not? And so you need to capitalize yourself appropriately. You cannot go out and blow a ton of money and say, Hey, I have 300k of ARR. No one's gonna fund you. You just can't make it. And so if you have the mindset, hey, I'm gonna be super frugal and get to a millionaire ARR, then it's gonna open up a lot of things for you. So I think this sort of timing issue is you can't call timing precisely. Obviously, no one knows the future, but you can understand the capital requirements of your business and try to set yourself up to say what are some of the normal like a chasm or break points that people are looking for. And how do you get there? How do you optimize yourself for survival basically?

Jeremy Au: (13:42)
Yeah. And I think that's an interesting viewpoint, right? It's like you said the deck really shows the macro side and from a VC perspective, really interesting. But how does that boil down to the SaaS founder? One thing I think I noticed that came out and it was interesting was they were talking about the capture of shareholder returns versus like the GDP growth of the country.

And I think one thing they said was that they said that America, obviously GDP capital is growing. At the end of the day the shareholder returns or the stock market really outperformed that of its fundamentals, right? And they said part of it was due to the international growth total adjustable market. That American companies have the mindset, the training, the talent, and I'll say the geopolitical security/norms, right? To be able to go attack global markets. And so that was interesting to see that, there, and I think that reminded me.

Shiyan Koh: (14:30)
Well also the language. More people speak English outside of the US than in the US, and so you wanna go global. You actually have an internal language that you speak. Like you can hire people who are local to the markets, but they can still speak with headquarters. And I would contrast that I think with Chinese companies who are trying to go global, where even if they do speak English, that's not how they communicate within the company.

And so even when they hire country managers or other people, they still say, hey, fluency is preferred. And I think that really limits your pool of global talent and your ability to go unless you're really gonna just like parachute in your own people into every market. But yeah, I think, so two things, right?

One is the ability of American companies to go global, but I think the other is the depth of their capital markets that American stock markets also attract listings from international companies and also have great deep capital markets with all of the ancillary, the sell side analysts, the funds, like all the things that you need to actually turn that business success into actual shareholder value that can be captured. It's a struggle to get our own companies listed here, right? They all go to the NASDAQ or the NYSE. Because that's where the investors are.

Jeremy Au: (15:49)
Yeah. I think the language one is a real big issue. I was thinking about it over the holidays and I came off this phrase, I call it language locked. So you know how some countries are landlocked in a sense that they don't have access to the ocean. And so as a result they can't do trade, they can't do a whole bunch of stuff. Just having a port is so key. And, for example, utopia is just fighting all the time just to get access to a port because is this fundamental for so much trade and access to the world. And I think there's a huge amount of what I call language lock. Or some countries in Southeast Asia are actually not language locked. And what I mean by that is obviously, Singapore and the Philippines for example, are native English speakers, right? And so one interesting thing I've noticed is that Filipino founders are rapidly, I think improving, I think the way they speak in terms of like startup language, the ability to fundraise, story tell, even access lot models because they're just a hundred percent fluent in English.

And so they're downloading American YouTube videos about SaaS metrics and all these things. And so they're really able to unlock a whole bunch of it. But I think for folks who are just don't have access to that, Southeast Asia doesn't really have Chinese speakers not that much. And also there's not much Chinese, there are some Chinese resources. But yeah, I think if you're like language locked. I think this is just a ton of resources in English. And so talking about talent, you can't even climb the talent ladder if you can't access all those free resources and the internet.

It's crazy to see people educate themselves on crypto, on Udemy, and stuff like that. It's bonkers. And there are so many hungry people. I say God bless Britney Spears and Madonna and Ed Sheeran for teaching English and Taylor Swift. Because I think that they really have driven those fundamental English fundamentals, right? And that lets you access the global internet economy.

Shiyan Koh: (17:37)
Do you think our kids are gonna learn Korean? Given the explosion of K-pop popularity?

Jeremy Au: (17:45)
I think one thing interesting that I found out was that some languages are just harder to learn than others. Full stop. Like it is just scientifically proven. It's not even like a joke, right? It's like idiograms, like Chinese, is this fundamentally harder than English to learn. That plus obviously English has the power of global os of entertainment pushing it. As you said, I think you mentioned K-Pop. K-pop is a more interesting language to learn because of K-pop itself. So having that entertainment dynamo is key to the language. So it's, I don't know, I just find it hard.

Shiyan Koh: (18:17)
Cultural hegemony, man. I was in Taiwan and I met two teenage girls from London, learning Korean cause they love BTS. And I was like, what? They were motivated, they were teaching themselves and their parents were like, yeah, it's really confusing, but they're so into it. We spent like 200 pounds on a concert ticket for them to go see them. I was like 200 pounds. I don't have teenagers and I'm not paying for my kids to go for since some 200-pound concert. It's crazy to me. The fact that they were learning Korean, I was like very fascinated by it. So, yeah, it is true, culture matters.

Jeremy Au: (18:53)
Yeah. I was in Turkey as a tourist and there was a whole bunch of school boys and girls just tailing me through the museum cause they had a class trip and then they picked up the courage, to ask me for a selfie, because they thought I was Korean. And I was like, I'm so proud.

Shiyan Koh: (19:09)
Oh, it's your moment.

Jeremy Au: (19:11)
I took a photo still. There's a bunch of like photos somewhere in there, some phone cameras of me just doing a thumbs up or you know what? I just look, I wasn't gonna crush their dreams, right? I didn't say I was a celebrity, I just took the photos. But yeah, I think that's a huge hidden lever. Which is that entertainment complex can drive language adoption and language adoption lets you, like you said, excess talent markets, lets you sell the customers unless you even unlock capital markets.

We talked about, I think there's an interesting piece, they're talking about disposable income. And they talk about capital markets and what they're saying is that Southeast Asia is rising for disposable income. That's one level of it. And then the US is all about the US capital markets. What does it take to IPO there? And I think at the end of the day, there's a alchemy that happens somewhere between household savings/capital, to country level capital, to the ability of that to deploy that on a global or local basis. What do you think that?

Shiyan Koh: (20:03)
It's pretty awesome. Capital formation. We're capitalist, we like it. Sorry I cut you off. You had a much more serious question.

Jeremy Au: (20:14)
No, that's so funny. Definitely capital formation is gonna be an interesting thing. And I think what was interesting was they started comparing all the different countries in Southeast Asia, right? So they were saying like, okay, some countries are. high growth, high equities, some of it's like too good to be true. Some of its fair balance, some of its partial reward to shareholders. And he said also there's also group going in circles, which means that you're not really going anywhere in both GDP or shareholder value.

I thought what was interesting, they said it was like they said China and Vietnam have both had been model fours. Which basically says that there's a lot of GDP growth, but that growth is not going to the stock market, which goes to the, you know what I said, they are not capitalists, I think it's policy decisions that don't let capitalists or stock market returns have that lift from the GDP. What are your thoughts?

Shiyan Koh: (21:04)
I mean, I think there are a couple of Vietnamese companies that are on the cusp of IPO, that are big enough and robust enough. And I think if we had maybe another 12 months of a bull market would've made it out on the Nasdaq or so on. So I think you would start to see the beginning of that.

I mean, I think one of the challenges. Vietnam is sometimes an opaque, regulatory environment. And that makes investors a bit leery. And then the other one is related party transactions. You're like, oh, your supplier is owned by your COO's sister-in-law. And it just becomes like a much more murky situation where it's oh, the value capture isn't going to shareholders. It's going to employees but in this sort of backward way that I don't really know how to diligence. And so I think a little bit is you wanna see the maturation of those Laws. I mean, I think the good thing is that I think in general, most regional governments believe that their political fortunes are tied to economic development. So they want to keep conditions relatively favorable to business. And I think part of that is learning how to develop policy to put in place regulations that promote those conditions. And once everyone understands we're going to repeat game and we shouldn't just plunder from, external investors or whatever it is.

Then I think things can improve. Rule of law, respect for regulations, all that kind of thing. I think on balance, I'm still relatively optimistic. I think it's just that we're earlier in the cycle and I think once we get a few of these IPOs out the door, that experience and that capital also all flow back through the ecosystem.

Jeremy Au: (22:51)
Yeah. Let's double-click on Vietnam. Recently the VNG group went public on the domestic soccer exchange. And they said that they weren't allowed to go in the US Stock Exchange. Obviously, I think what's the claim versus what actuality of the performance is another thing altogether, but I thought it was a very interesting dynamic, which is that language around saying they're not allowed to go in the US stock market, which is because they're Vietnam listed, because they're Vietnam operations, makes it actually quite, if you look at their face value, honestly, it's quite distressing, right? Because basically what that means is that they don't have a good exit path to the US capital markets, which have the deepest, but the most liquid way to do IPO or SPACs or whatever it is, right?

Shiyan Koh:[23:30]
They were gonna go out, they filed, yeah, to the gas act last year.

Jeremy Au: (23:34)
They did. And then they switched.

Shiyan Koh: (23:35)
But I mean, I think there's like a market condition thing, right?

Jeremy Au: (23:38)
Yeah, I'm just saying I think it's market conditions, but it also said that it's because of the government side. I'm just saying that if you truly believe it's the government, I don't understand the facts of it, but if it's true the government prevented them from listing on the US exchange, then that's actually very bad news because that means that it's crippled, late stage growth stage, crossover investing in Vietnam and middle stage multiples, at least stage multiples.

Because it's basically saying that unless you're like a, I don't know, B2B SaaS, you're doing global market, but you have no Vietnamese operations. And so I think that's driving a lot of these Vietnamese startups also to domicile. In Singapore and do all these transactions to create the ability to have liquidity in the future. Well, Singapore lawyers are a winner for 2023, I think they definitely have a lot of business incorporating all kinds of startups or domiciles or family offices. I think one thing they also mentioned actually in Asia Partners Report, which is interesting, as they said, look out for Vietnamese sea turtles. So sea turtles are folks who are studying in the US have gotten trained and they come back and they said, yeah, Vietnam is full of engineers and folks who have studied in the US that are ready to build for the region. What do you think about that?

Shiyan Koh: (24:46)
It's awesome, right? And not just the US, I think any diaspora whether they've gone to Europe. I've met Vietnamese founders who actually grew up in Poland or other Soviet-associated countries because of the communist connection. And have experienced other ecosystems building up their skills in different economies and are coming home to exploit that. So I think it's great. So one is that they bring experience from different markets, and they also often bring capital from different markets. I've had French Vietnamese founders who run tech teams in Vietnam but have French investors. They can leverage all these different facets of their network to bring to bear the problem. And they're generally a little bit more open. They're not as scared of giving investors bad news. Something that I've found sometimes with Vietnamese founders is like, they want you to only hear good news.

And you get a series of investor updates and you're like, okay, but what's going wrong? Because it's a startup. So something's definitely going wrong. And if I'm not hearing about it, it's making me nervous. We have a founder, who went to the US on a government scholarship in computer science and came back after working in the Valley for a few years and he brought a lot of the practices with him.

He offers free meals at his company and he offers people a stipend if they live closer to the office. Cause traffic in Ho Chi Minh is terrible. And so he's like, I just want people working. I want them really dialed in. And you can feel it right, like that sort of camaraderie, that sort of buzz when you walk into the office.

It feels very, very Googly almost. Walking into his offices in Ho Chi Minh. So I think it's good, right? I think part of innovation is bringing ideas for different places, remixing it for the local context and making something better than if you were only from one place or the other.

Jeremy Au: (26:37)
Yeah, you reminded me of a US accelerated program that was expanding to Southeast Asia across the world. And basically it was just bringing the Silicon Valley mindset culture training. And one of the conversations I had with the head of international expansion was, it's what's your role model? What's your corporate benchmark? And then she said McDonald's. And I laughed and laughed and laughed because the night before I'd been walking my best friend and I said, this accelerator is basically the McDonald's for Silicon Valley. Like they're just taking the core model of Silicon Valley, outlook, mindset, hustle, benefits, whatever it is, but also localizing it for each place.

And I thought it was an interesting dynamic to see that westernization, globalization of these cultural attitudes. And I think you have to have that to be honest, because to build, to aim to build a billion dollar company is, already a crazy thing. But then to aim, to build a company that can get there with technology that has access to the US capital markets that's often English linked is really quite an interesting set of cultural beliefs. That are quite novel, I would say.

Shiyan Koh: (27:38)
But the mindset thing is so important. There was a tweet this morning, someone was like, I hate San Francisco. But honestly, there's no place in the world where you can be surrounded by as many people pursuing big ideas that you can learn from and he's like anywhere else you have to pay to get access to. Of course this set off this furious discussion on Twitter, but I think that's what it is, right? Which is one is, you need to believe that you can have big ideas and that you can accomplish them. And then you need people with money to believe that you can do it. And then you have to convince other people that they wanna do this too, and then you can go do it. And I think sort of corporate or very hierarchical types of systems, like who are you young pipsqueak to believe these things? Be quiet, take minutes. Don't have your own ideas yet. It's like almost antithetical to innovation in startups. And so I think that mindset shift actually is super important to have that belief, to be able to say like, hey, yeah, I'm not just going to wait my turn and do the thing. I'm going to try to do something different.

And I think that's actually a big issue for Singapore, right? We need to have big dreams. We need to be okay with having big dreams and not be so excessively practical. It was like, oh, why would I do that? That's never gonna work. Blah, blah, blah, blah, blah. If we don't try it, well, we'll never know.

Jeremy Au: (29:07)
Yeah. I think again, I want to have that t-shirt now. It's okay to have big dreams that be, that'll be so wholesome, right?

Shiyan Koh: (29:12)
We need a merch. We have a t-shirt that said, what happens if everything goes right? Which I kind of love as a T-shirt. Because you have to think that way, right? I mean, okay, I'll tell you a totally like random side story. My first job out of college was an investment banking analyst at JP Morgan, and it was from '05 to '07. This is a booming market, right? It's before the crash. And we took a company public called Clearwire. This is like donkey's years ago. This is when basically there were two competing 4G standards. LTE, which is what won, it is what we use today, and Clearwire standard, which is called Y-Max. And the founder of Clearwire was Craig McCaw, and he'd made people a bunch of money on McCaw Cellular. So lots of people were willing to give him money and they launched stores all over the US. They were selling like a little hardware box that gave you this 4G competitor Y-Max thing.

They made up their own non-gap accounting term called EBIT Dam. Okay, so earnings before interest, tax depreciation, amortization and marketing costs. So they were EBIT Dam Positive. Okay. Just imagine me as this like a fresh analyst. And I was like, that's very strange. It seems like this business is losing a lot of money, but they're reporting this funny thing called EBIT Dam, eBIT Dam Positive. And we're taking them public. And so I'm talking to my mom and she's like, oh, what are you doing at work? Blah, blah, blah. And I'm like explaining this thing. And then she's like, these Americans, they really know how to think big. No Singaporean would ever invent this EBIT Dam and try to convince people of that. And she's like, maybe cause they have big country, so then they can think bigger. We are small country. We don't dare to dream so big. but yeah it stuck with me, it's like a totally ridiculous story.

But like how audacious are you willing to be? For how long and can you do it long enough to actually make something happen? But yeah, they did go public. We raise a ton of money from them, but they did not win the 4g wireless standard war.

Jeremy Au: (31:17)
Yeah. I think there's a big reminder as well. Which is we talk about founders and we also talk about how capital is important and I think that's the grand bar game between venture capital and founders. Which is that founders can't pick dreams and they're funded by VCs who are gatekeepers of course, but are funding that big dream. But also the truth is, if it fails, which the vast majority will fail. Maybe some estimates, 39 out of 40 will fail. Like it doesn't wreck your life. It doesn't wreck your home. You lost time, but you got paid a salary during that time and more importantly, you don't get shame for it. I think the beautiful part about, I guess, startup culture is yeah, you build a $3 million company.

Shiyan Koh: (32:01)
But I think some people take this too far, right?

Jeremy Au: (32:03)
Of course, not fraud, obviously failing gracefully.

Shiyan Koh: (32:05)
Not fraud. We are anti-fraud on this podcast. But failing gracefully, failing, while treating all of your investors and stakeholders, employees, customers in a straightforward manner, I think is really important. And there's lots of people who have failed in their first or second endeavors who have come back raised successfully and built great businesses. There's structural things that enable that to happen. Which is in the US people don't give personal guarantees.

Bankruptcy laws are relatively favorable. They're no non-competes. Non-competes are not enforceable in California but in many other states. All these sorts of small things contribute to that ability to dare greatly but also fail. And keep rolling the dice on it. But yes, no fraud. We're not gonna talk about fraud today, are we, Jeremy?

Jeremy Au: (33:00)
I feel like we've been talking about fraud every week for the past 3 times we've done a recording.

Shiyan Koh: (33:05)
We gotta stop it. That is gonna definitely limit the ecosystem.

Jeremy Au: (33:09)
On that note, What's one key takeaway that you took away from the Asia Partners report?

Shiyan Koh: (33:13)
There continues to be a serious CD gap that Asia partners will fill. I think it's pretty consistent with what we've been saying about Southeast Asia. I think they've really put together all the data in a really nice way, all in one piece. And so it's a great primer for anyone who wants to get up to speed on Southeast Asia pretty quickly. But yeah, I mean, I think the macro conditions continue to be good for people who wanna launch in this area. I think the one talent piece that we didn't talk about, that they do highlight in the report is the inflow of Chinese and Indian entrepreneurs. I think that's a big deal. Just like we talked about the sea turtles going back to Vietnam, I think Chinese entrepreneurs who've built real businesses in China and who are wanting to launch new businesses or expand into Southeast Asia, I think are gonna be a great engine because they've got mental models, they've got networks and teams that they've worked with before. And so I'm excited to see what they're able to drive for the region as well.

Jeremy Au: (34:09)
Yeah, I think for me I really appreciated, I think the expansion of the report from a top-down macro piece, which of course, as you said, delights the macro nerd in my heart as well.
And then I think they drove into more of that network approach. So talking about talent flows, like you just said, from different countries, but also turtles we're talking about, and then breaking it out by firms to say, what proportion, what is the ability to attract talent? What is their unfortunate ability to feed talent to other companies in a many-to-many approach? Like really goes back to an attempt to unpack the network-ish component, which at a smaller scale is symbolized by the PayPal/Zalora mafia but at a larger scale, this means it's like a crazy thing to talk about.

And I thought it was a good reminder that at the end of the day, this is a lot of complexity, and I know I opened it up by making fun of 232 pages, but I enjoyed all 232 pages. I'm not saying I dug deep into the footnotes of them but I thought it was just really interesting cause I think these were really to go deep right into it.

And I got the pick out and synthesize the parts that I liked, so I really appreciate the attempt to unpack the networking thing, which is much harder to explain, right? Looking forward to the next year's report.

Shiyan Koh: (35:24)
Happy Lunar New Year to all who celebrate. Eat a lot of pineapple tarts. Yeah, happy Asia Partners report release. Gong Xi Fa Cai.