"People walked away from $50 million transactions because they felt like they could go much higher, much faster. Unfortunately, almost all the stories I know of, when they walked away, they ran out of runway. It is zero. An outcome is an outcome, and founders should not look down on it."
"The ones that are doing well, the ones that are continuing to get investor interest and scale, are the ones that had the unit economics fundamentals correct from the start. A market like Southeast Asia is going to require businesses that have a good gross margin because they cannot be over-reliant on venture capital for too long."
"The proximity in Southeast Asia has, for the first time in a long time, become an asset, not a liability. In AI, you build a moat really fast, but you lose it really fast if you are doing something global and generic. The Southeast Asia opportunity allows you to build a moat very deeply in specific verticals like agriculture and waste management."
Keywords: Southeast Asia Venture Capital, Startup Unit Economics, Artificial Intelligence in SEA, Micro Private Equity, Tech Startup Exits, Tech Layoffs and AI Automation, Southeast Asia AI Moats
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Introduction
Edric: Hey everyone, Edric here, producer from BRAVE. First off, if you've been following the BRAVE podcast, thank you so much for your support. If this is your first time tuning in, I hope you're going to check out our latest episodes on YouTube, Spotify, and Apple Podcasts, or simply head over to our website, www.bravesea.com.
Now, Jeremy was recently on an episode of The Accidental VC to unpack where Southeast Asia venture is actually heading in 2026, and we thought you'd enjoy this particular episode.
So, two of the sharpest points to listen for: Mohan on why the region's proximity has finally become an asset instead of a liability, and Jeremy on why walking away from a $50 million exit usually ends in zero. They cover the reset after the blitzscaling era, why unit economics have become non-negotiable, whether AI is coming for our jobs in Southeast Asia the same way it's hitting the US, and much, much more.
So do support our friends Milan and Mohan. Head over to The Accidental VC and give them a follow. Let us know what you thought about this episode in the comments, and please enjoy.
Welcome to The Accidental VC
Milan Reinartz: Hi, everyone. Welcome to the sixth episode of The Accidental VC, where we cover different topics around venture capital and startups, especially from the perspective of folks who have accidentally tapped into the industry of venture capital, as is the case here, I think, also with us to some extent.
Mohan Belani: Yeah.
Milan Reinartz: Today I have Mohan and Jeremy with me. And Mohan, Jeremy and I have actually run a fund for the last two years, so up front there'll be a lot of insider things here between us. We're pretty excited to have you both here. Oh, three years, yeah?
Jeremy Au: This is the fourth year.
Milan Reinartz: Really? Wow.
Jeremy Au: Yeah. Time flies. So we're here to party and talk about Southeast Asia, venture capital and technology, so let's get it rolling. What do you think 2026 looks like? What's going on in Southeast Asia?
What 2026 Looks Like in Southeast Asia
Milan Reinartz: Ooh, now I'm getting interviewed. That's nice.
Well, our business, as you know, has really pivoted from doing early-stage investing as an angel club originally, to now largely focusing on large-cap US investments. I suppose I've been a little bit out of the loop, other than the work we do together and some of the work we do with HeyMax on AI.
But one thing I noticed is that there's a sort of revival, in a way, that I see with interesting AI businesses coming out of the woodwork. And also comparing how some businesses that have been using AI, or have an AI element to their business model, that we've invested in, for example Staple and others, the differences between these businesses and also the valuation ranges. I'm starting to now see more companies coming back with those $15 million SAFE notes, which is interesting. And the question is, is that justified in a market like Southeast Asia?
But then also, in our recent investments, I think we still remain quite bullish, or I still remain quite bullish, about more physical world, real world applications that just seem to really make sense in Southeast Asia, where a lot of things still need to be built. Just basic infrastructure things like getting food to your door in more remote areas, and those kinds of things.
So yeah, it remains an interesting market. What do you guys think?
Unit Economics Were Never Optional
Mohan Belani: Yeah, I'm still excited, and that also is the reason why Orvel started, right? Businesses that can demonstrate the right and decent unit economics in this kind of market.
I think in 2022, when we hung out, we realised that a market like Southeast Asia is going to require businesses that have a good gross margin, because they cannot be over-reliant on venture capital for too long. And I think that story hasn't changed.
If we even look at our Orvel portfolio now, the ones that are doing well, the ones that are continuing to get investor interest and scale, are the ones that had the unit economics fundamentals correct from the start. So for me, any company that I see that loses track of that at the early stages is still a no for me.
Milan Reinartz: Even if it says AI in the name?
Mohan Belani: That's a nice little poke there, but we have to go back to what this region, or the reality of this region, is. And that hasn't changed in the last five years.
The End of Negative Blitzscaling
Jeremy Au: What's interesting in my head as well is the magnitude of the problems that still exist. People still struggle with having clean drinking water, safe food, and then it goes all the way to scale of being able to do marketing in English to expand into new markets, to be able to get products from point A to point B. So these problems are still sizable and still huge.
It's just that the approach and the ROI timeline has shifted, I think, over the past five years especially. Five years ago, the thesis very much was to say that these problems are still real, still large, and we're willing to burn a lot of cash with the assumption that somebody else will fund the next tranche of capital needed, and basically blitzscale.
But of course, we ended up in a situation where we saw a lot of negative blitzscaling, where you had negative unit economics and you blitzscale it, which basically means that you burn money even faster.
Milan Reinartz: Yeah.
Jeremy Au: That has turned out to be way too fragile a business model. And the past two years has really been about clearing that backlog out, both in terms of companies that have to reset their approach or close down. Founders had to reset their mindset as well, and VC funds actually had to reset their mindset and approach, and speak about this with their LPs.
So that's the tricky part. And now I think we're starting to come to a new position for 2026, which is that the problems still exist. They never went away. But now we have to be more thoughtful about our unit economics, and artificial intelligence could be one of the levers to bring the cost structure down sufficiently to make the unit economics work.
Whereas historically, having 100 people fly in from Europe, from America, and around Southeast Asia and Singapore to work on a problem in Indonesia doesn't really work anymore for the unit economics.
Big Problems, Small Wallets
Mohan Belani: Yeah. See, there are two big problems for Southeast Asia that are really against them.
One is that there are big problems, but regionally the market cannot sustain or pay for these problems. If you look at education, that's one good example. We've seen portfolio companies that look good on paper, but when you dig into the details, 80 to 90% of their revenue is funded by the government. And if the government takes away those incentives, then essentially the business collapses.
We've seen businesses in Vietnam, for example, where yes, the unit economics and the cost base is very, very low, but they are supporting a local market, and that market can't really pay very much either, and that also collapses.
Then the companies that do well are the ones that use the local cost base but target overseas companies. So in essence, they're not then solving the problems in Southeast Asia per se.
And then AI companies, the ones that I speak to quite a bit now, if you ask them what their perception of Southeast Asia is, whether it's an interesting market for them, the truth is it's not, because it's not a market that's known to be able to pay and is very forward.
So as much as there are problems and opportunities, the unfortunate truth is that a lot of these problems and opportunities are not worth solving purely from a financial standpoint.
Why a $50 Million Exit Is a Real Outcome
Milan Reinartz: Well, there's a lot to unpack there in all the things you mentioned.
For context, we started the fund together three-plus years ago, sort of spun out of our relationship in angel investing together, as investing with friends.
Mohan Belani: Yeah.
Milan Reinartz: And it's been a super fun journey, even though we're kind of heading into more of a harvesting period of our first fund.
What do you think still holds true to our assumptions back then, and what has materially changed in how you would invest, more from an angel investor's lens perhaps, for starters, and then we can talk also about what it means for founders? I think all of the factors you just described really deeply affect both the investor's mindset and the founder's mindset in how to build in Southeast Asia.
One thing that we talked about a lot was this factor of, we don't want to build a power law-based fund. And we don't believe that power law investing is a sustainable way of investing, we can call a spade a spade. But in Southeast Asia, unfortunately, they have actually... I mean, of course there have been power law outcomes like Gojek, Grab, Tokopedia, et cetera, that have made some fund vintages extremely successful. But it's not been a given across all the tier ones to be able to create power law outcomes and create DPI. And we built our fund on that thesis, and I sort of feel generally that was the right move, and we can see some of the fruits of that starting to develop.
How do you think that has changed? And has that changed with the rise of AI and new technologies?
Jeremy Au: Yeah, I agree that right-sizing the check for capital has been helpful, because it's very much a decision by both the investors and the founders about what that monetary funding transaction at that point of time represents.
And I think for us, being able to say, "Hey, a $50 million outcome, where there's an M\&A outcome for the founder, would be a tremendous outcome for the founder, life-changing for their family and their employees, but also would be an incredible return for the fund and our LPs." And that has been proven to be true, that those transactions can happen.
Milan Reinartz: We have one great example of that.
Jeremy Au: Exactly. Those transactions can happen in Southeast Asia. And one thing that we have to say is that we have to remind founders that they shouldn't look down on it. There's this weird position, I think, for many people. People walked away from $50 million transactions because they themselves, or the board, or whatever, felt like they could go much higher, much faster. And unfortunately, almost all the stories I know of, when they walked away, they ran out of runway.
Milan Reinartz: And then it's zero.
Jeremy Au: It's zero. So I think that's something for folks to be mindful of. An outcome is an outcome.
Power Law vs Micro Private Equity
Mohan Belani: So the first caveat is that it's not that power law investing doesn't work. The US is a great example of that working extremely well. The problem in Southeast Asia is that in the last 15 years it has been blown out of proportion, and every VC out there is purely looking for that billion-dollar opportunity. And that leaves a very good base of founders and entrepreneurs that are building good companies that can probably get to the 20, 30, $50 million revenue level, but just don't have the VC capital to support them. And that's the gap we were trying to fill.
3Cat is a great example. When we invested, the company was already doing a seven-figure revenue amount and I think was EBITDA positive at that point.
Milan Reinartz: Reasonable valuation.
Mohan Belani: And the business had grown more than 10x in the last couple of years, and the valuation hasn't skyrocketed based on a typical power law venture model.
Milan Reinartz: So do you think that means that a more private equity, or micro private equity, style approach to venture capital is something that's important to consider in venture investing in Southeast Asia? And have you seen that also flowing into fund strategies, you probably see more than me, into the tier ones here in the region?
Mohan Belani: There is an opportunity to invest in companies like that that was just not tapped on, because people were just blindsided by the Silicon Valley way of investing.
Milan Reinartz: Needs to be a unicorn.
Mohan Belani: Yeah. And I even recall founders that we invested in, when I asked them, "Why didn't your previous investor invest in you?" And the entire answer was, "Oh, this is not a billion-dollar opportunity." Which is a real waste, because I think this region has good potential to build a good number of $100 million valued companies.
So that's an opportunity we are tapping on. But there will always be the funds that will target the power law model, because there will always be the next wave of unicorns that will come out.
Milan Reinartz: Which is great. But if you have a $100 million fund, it's quite difficult to run a micro PE strategy without a very different mindset of operating, right? Because you have to put so much more money to work.
Jeremy Au: And I think the tricky part is that therefore all the things have to work. Obviously, companies and founders, many of them actually want to build good businesses, and on the way to a $100 million revenue company they need to get to 50 million, 10 million. So actually almost every founder will have that opportunity to make a decision and say, "Hey, I'm going to be more of a moderate growth company than trying to go for a VC-type growth curve."
So every founder will have multiple opportunities to choose, but it's really about the reconfiguration of VC funds to do so.
The first ones that we saw, obviously, were the VC funds that were more linked to family offices in Asia. Then because of their LP mandate, and that the LPs were okay with a lower rate of return for a more guaranteed return, I think they were the first to really start switching away from the home run, US-type VC approach to more of that openness to private equity or consumer brands.
Milan Reinartz: Brick and mortar.
Jeremy Au: Brick and mortar businesses. Yeah, I was going to say brick and mortar too. So they were the first to do so. But the VC funds that had more US-type LPs that were focused on that VC-type return equivalent to the US, those funds basically had a more difficult time talking to their LP base and saying, "This is what we promised you five years ago, and this is what we're seeing right now." And how do you square that circle? That's a very difficult conversation.
How Funds Are Adapting: Private Credit and Restructuring
Milan Reinartz: So how do you see what's happening in reality? Are these funds raising subsequent funds? We don't need to name names, but more as a theme, as a trend. Are the bigger funds able to raise their subsequent funding rounds? Are they delaying them?
Mohan Belani: Actually, there are a few things happening. One is that some of them are switching to private credit, looking at credit-based deals instead of just pure venture-type deals, in different shapes and forms around different stages.
Milan Reinartz: Using the existing fund's capital? Changing their mandate?
Mohan Belani: Using existing fund capital, yes. And they're doing this with the existing portfolio, because they have a familiarity with the company. They understand their financials better and the trust has been built.
The second thing that some funds are doing, and I'm an early-stage investor in some of these companies, is that the funds are going back to the companies they invested in, restructuring their portfolio, putting in some more additional capital, but ensuring that the investors have a larger role to play or take a larger chunk of equity, and doing some level of restructuring at the cap table level. So this also means returning some capital, although not that significantly, to earlier investors, just to make sure there's enough equity on the table for everyone to benefit.
Smaller Funds, Emerging Managers, Resetting Founders
Jeremy Au: Yeah. I think it's going to be interesting for all founders, all VCs, and all operators to really reset on what that means.
Some key takeaways for people are going to be, one, making sure you have the right fund size to be able to match that to the right outcomes you believe are there for the region. So there'll be smaller funds on average moving forward.
Two, I think there'll be a wave of emerging managers, because they are going to build those new funds, while existing VC GPs will continue to harvest or nurture their existing portfolios to whatever the outcome is to be.
And then thirdly, founders are starting to reset. Whether that's saying, "Hey, maybe it's not so bad to be a fractional CTO somewhere in the meantime, while I have my kids, and earn cash," for example, to figure out new approaches like search funds and roll-ups. There's going to be a whole stack.
And on the other side you also see employees do a reset, where they're much more thoughtful about what kind of company they're walking into, the risk curve. In 2021, 2022, everyone was like, "Let's join a startup no matter what," and ESOP, employee options are employee options, and it's going to make me a millionaire. And now people are starting to get a lot more sophisticated and say, "Okay, this is a risk."
Milan Reinartz: I prefer some salary.
Jeremy Au: Yeah. Cash is good. You can't get a mortgage with stock options, unfortunately.
Block's 40% Layoff and the AI Jobs Question
Mohan Belani: Look, if you saw what Block just did, most people are just happy making sure they have a job that is not going to be gone in the next few months, even though they put in effort.
Milan Reinartz: With all the layoff stuff.
Mohan Belani: Block laid off about 40% of their company. And the memo was that even though people were actually using AI, they still got laid off. It was just a function of, look, we just don't need that many people regardless of how productive you are.
And I think that wave is 100% going to come to this part of the world at some point, although we are cushioned by low salaries.
Milan Reinartz: We're cushioned by lower labour costs. Yes, correct. So that's a benefit, especially Indonesia, Philippines, Malaysia, et cetera. A lot of BPO in the Philippines.
Jeremy Au: Not fully. I've talked to my friends in the banks, and if you talk to their IT teams, the way it's showing up won't be in terms of layoffs, but it will show up as, "Hey, we're putting in a billion dollars of capital expenditure or investments." And then the number of jobs is actually a fraction of what historically it would have been as a ratio to capital.
So it's a nicer version of what America's going through, which is layoffs of very expensive American labour. But to some extent, what you're seeing in Singapore is that even though they're investing a lot of capital into IT, the job growth is much smaller. And so, very pleasant, doesn't go in the news, everybody doesn't look at it. But once you take a look at that ratio, then what you realise is that for the new workforce that's coming up, like your Gen Z folks, there are just fewer jobs.
Mohan Belani: All the entry-level guys, yeah.
Is Southeast Asia Facing a K-Shaped Economy?
Milan Reinartz: And does it hurt? I mean, this is like a K-shaped economy thing. I'm sure you've heard about it, read about it. Does it affect the... I mean, here we are all hoping for a rising middle class, right, like we've seen in China, India. And I think there's been some progress, but also some not so much progress. I think in Indonesia some numbers were published. Do you think that's going to get worse here, or what's your sense from what you see macroeconomically speaking? Jeremy, you're the man. You understand this stuff.
Jeremy Au: I'm the macro guy.
Milan Reinartz: He's the macro guy.
Jeremy Au: My shirt, I'm the macro guy. And you're the micro guy.
Milan Reinartz: And the guy who's led.
Jeremy Au: When we talk about a K-shaped economy, there's a common article which is talking about the change of wealth and income inequality for the upper class and the lower class in developed economies. So a lot of these articles are Substacks about America primarily, and to some extent Europe.
What's interesting is that Southeast Asia and Asia is a little different, because on the labour side, if you look at Southeast Asia, like Indonesia, Vietnam, there's still a domestic economy that wants to grow. People want more air conditioning, better food, and want to have a better life. And so there's still a domestic economy that's pulling people up into the middle class.
Milan Reinartz: And business owners too. Sorry to interrupt, but because of GPU costs, and relatively speaking lower labour costs even at the white collar level, let's say in banks, in industry, in telecommunications, where you have the bigger companies, a lot of them family-owned. It's really about the incentive, isn't it? So will they have an incentive to really enact mass layoffs at the larger scale industrial and government-owned corporation level, to really create these big job losses? Can AI and GPUs, LPUs, TPUs actually really solve things cheaper than an army of people? I think that's a big question.
Singapore's White-Collar Squeeze
Mohan Belani: But it's a very different issue in a market like the Philippines versus a market like Singapore. In a market like Singapore, where primarily it's white collar kind of work, if you look at what AI has done for the legal sector in the last few months, the same issue is going to start hitting the overall finance sector, the medical sector and so on.
So the displacement of workers in high-level white-collar jobs is going to be a much more painful impact than in a market like the Philippines. The Philippines has a significant amount of opportunities and work to be done in infrastructure, in travel, so some level of workforce movement and redistribution into other sectors is still okay.
But in a market like Singapore, I think that's going to be very, very difficult. If suddenly you see a whole bunch of doctors not having work to do, how do they keep themselves busy and occupied? I think that's the shift that we haven't fully figured out. The government was trying to put in some effort with all the AI programmes that they're launching, but that shift is the one that's going to be most complicated.
So on some level, maybe they will start to shift their work-life balance, where half the time they work and the other half of the time they do other social-centric work. That could help with things like the ageing population issue, that could help with social welfare, education, which are actually big gaps on the Singapore side that they don't have a lot of support on.
The other area would be just simple restructuring and re-understanding of what white-collar work actually means, and maybe more interest on the blue-collar side. You have a lot of Gen Zs now looking at doing repair businesses, doing air con businesses. So it could be that the blue-collar workforce in Singapore, that is primarily dominated by people from Bangladesh, India and other countries, could actually shrink and be driven by younger, more able-bodied Singaporean or local chaps to take over that whole space.
So there's really going to be a redistribution and reworking of the idea of work in this country, and it's going to be radically different in Singapore as compared to the Philippines, as compared to Indonesia.
Milan Reinartz: Makes sense.
Jeremy Au: Yeah. Basically, I don't think there would be a K-shape for Southeast Asia. I think K-shape definitely applies for the developed Western world, where middle-class jobs are getting attacked by both AI and offshoring.
But if you think about it, in Southeast Asia, AI is not going to eat a job because labour cost is low, and there's a domestic economy that's very physical.
Milan Reinartz: AI is not so cheap.
Jeremy Au: And they are pulling the job from the US still. Even today, no matter what, the iPhones and AirPods, even when they move from China, they move to India. So the net job creation is still there, and China's still going and making other things in that time, which is dancing robots.
Milan Reinartz: Yeah.
Jeremy Au: And even more driverless cars and helicopters.
Milan Reinartz: Military robots.
Jeremy Au: Yeah, exactly. So I wouldn't say there's a K-shape. And for Singapore and within Southeast Asia, of course, the tricky part is the dislocation effect, which is that people have to reset.
But Singapore is a manageable problem in the sense that it's five million residents. There are enough jobs for everybody, like you said, including blue collar. Singaporeans can work in the region. They can move and work as rotational or virtual associates, remote work. So it's still going to be painful for individuals, and the government still needs to take the lead on pushing it. I'm just saying that it would be more worrying if I was in Midwest America watching the hollowing out effect still happening. That's going to be much trickier.
Milan Reinartz: No, I can see that. It would be more like a wriggle line economy than a K-shaped economy.
Jeremy Au: Wriggle, yeah, exactly. It's like we've got to crawl our way, leopard crawl our way. Every country would. The German chancellor was on a speech saying Germans need to work harder because he came back from China.
Milan Reinartz: He did say that? Well, he's probably quite right. But I'm a pretty happy German, coming from a European, a German perspective, if you think about it.
Regulating the Human-Robot Mix
Mohan Belani: But the other thing is, there are also sectors currently in Singapore that are desperately in need of talent, very underserved, like the cybersecurity sector. They've been struggling to get a good amount of companies' interest and capital in, and I think AI will help reduce that problem.
The other massive opportunity, if you think about it, is in regulation. At some point, governments will also want to regulate how much AI is going to be involved in what sectors and what industries.
Milan Reinartz: And it goes into, like, Dario's conversation with the government and with the public. And then the bigger problem is not just AI, but it's the robotics and the manufacturing side, which is still a very big chunk of Southeast Asia's value. And Singapore probably has a role of sort of leading that discussion regionally, I suppose.
Mohan Belani: Yeah, they started with the white paper on agentic AI first. I think they've just started some blueprint work.
But if you look at Vietnam, for example, Vietnam manufactures a lot of the world's sports equipment. You know, On running shoes, Nike shoes and all that. If they start allowing all these companies to start throwing robots inside, I think there will be an uprising. And that's where again regulation will come in to say, "Hey look, a factory can only have a certain amount of AI and automation, and human balances."
Kind of like how Singapore's HDB has a certain amount of races so that you have a good amount of mingling.
Milan Reinartz: A good mix.
Mohan Belani: So the concept of intermingling between humans and robots is going to be regulated on some level.
Milan Reinartz: It's another race joining us.
Future Shock in a Waymo
Jeremy Au: I was in SF in January, and it was quite science fiction. Because there's this concept in science fiction called future shock, which is when the future arrives so fast that people are just shocked and they cannot react.
And the reason why I felt like that was because I walk into this Waymo and I'm carrying my Costco rotisserie chicken. And I walk right into this Waymo, no driver. I put my Costco chicken on the driver's seat, and then it starts driving, and then you pull up to this junction. And on the left is an Uber driver. On the right is a Lyft driver. And you're just chilling in the front seat of this driverless car. And then on the opposite side of the windshield, there are several homeless people who have no jobs.
And it's kind of crazy, because what you're thinking to yourself is, wow, this driver should have been a job. But it's no longer a job.
Milan Reinartz: It's quite a daunting image. Did they look at you? Did they give you threatening looks?
Jeremy Au: The guy eyeballed me and I was happily listening to my classical music, very loud. And if you think about it, it's the same price as the Uber and the Lyft. So what's constraining Waymo from taking all three cars? Nothing. It's just a matter of scaling.
So what's going to happen is the Uber job is going to be gone, the Lyft job is going to be gone. And how is the government going to prevent them from joining the homeless side with no job on the other side of the road, or reskill them to something else?
I think that's really the crux of it, which is kind of weird, because all the AI bros are like, "Uh-oh, this is a real problem." But it's something that is hard to even believe.
What Founders Should Focus On Now
Milan Reinartz: Maybe changing topic a little bit, but coming back to that labour side of the equation, in our context, in the venture capital context, what would your recommendation be to founders on what to pay attention to? What do you think founders should focus on these days, building here?
Maybe just a few thoughts I've been having in this context. I think there is an opportunity now with the application layer, and potentially software and hardware, to produce AI-driven or AI-enabled applications that can really become global companies.
Jeremy Au: Mm.
Milan Reinartz: I think there's potentially a higher level of trust in fully automated hardware solutions that come from Singapore or Australia. And we know this from Atlassian and Xero, that Australia and New Zealand have a history of producing very successful global SaaS solutions.
So in that context, I wonder if, with globalisation and the proliferation of access to technology, you have new opportunities on one hand. Of course, you have talent density in Silicon Valley and these kinds of things. OpenAI, Anthropic, and xAI as part of SpaceX, obviously all American-built. But then you have things like Higgsfield coming out of Kazakhstan, and that's really a global business. It's a completely random factor that it just happened to be born in Kazakhstan. It could have been born anywhere. The technology could have been built anywhere.
And I sort of feel like that's one thing that founders can consider: that now, with AI, it is actually less important where you are if you're building really well, so you can build global businesses theoretically, especially in the software application layer. Whereas obviously with things like Grab and Gojek, Uber never really made it here, because they were built locally. So they built local businesses, or Lazada became very successful here.
So AI creates these business model opportunities, and we probably don't even know the half of it yet of all the things that will come that you can build for a global audience. You can build tools for a global audience, and you just happen to be here. So on one hand, that's something to think about for founders.
And another thing is using the rise of AI and the tools that are available now to build more efficiently for the Southeast Asian market. Not necessarily just displacing humans, but building tools that build more profitably from day one. Because you can start with a much lower cost, talking about people using Claude Code for building applications without a 10-person development team.
I'd love to hear your thoughts on that. How do you think about it for founders, and what do you see more? You see a lot of startups. I'm sure you do too, Jeremy. You interview a lot of people from the founder community. What do you guys think?
Moats in the Age of AI
Mohan Belani: So I think the complexity now is that moat building has become way more difficult. You can build a moat really fast, but you can lose that moat as fast as well. The moment Claude launches a new feature, bang, that moat is gone.
So at least for Southeast Asia founders, I think the proximity in Southeast Asia has, for the first time in a long time, become an asset, not a liability. Because there are some very unique sectors and very unique problems that are relevant in this area.
Agriculture is a huge opportunity in this market. Just things like rice farming, palm oil, those kinds of things. Drones. There are subverticals within agriculture that startups can look at that are problems that maybe might exist in some other parts of the world, but are very, very unique to this part of the world. And you won't have a Claude or an American company solving for that problem.
So moat building is going to be difficult, but when you get that moat, it will stay. I think that's one big consideration.
Milan Reinartz: So just to be very clear, you're looking at very localised industries that the big US players aren't going to build for.
Mohan Belani: Correct. In any startup, you've got to build your moat. And in the past, moat building was either through data or community. In AI, moat building conceptually is that you build that moat really fast, but you lose it really fast as well if you're doing something global and generic. But the Southeast Asia opportunity allows you to build a moat very, very deeply in some specific verticals.
Agriculture, waste management, those are some of the areas where I think you can really put AI to good use. And those are the opportunities I think Southeast Asia founders should pay attention to. Because if you don't, then you can be a great company today, but you can completely lose that business in six months.
The Asia-to-US Corridor Is Closing
Jeremy Au: Yeah. That inspires a contrarian thought of mine, which is that there historically was an Asia to US corridor, trying to sell software as a service to US customers using Asian engineering talent and so forth. And part of it was also because the concept was that engineering was cheaper to do in Asia.
But if you think about it, now an American founder who understands the American customer very well can code it much faster and have marketing agents that are much cheaper than somebody based in Vietnam or India or Singapore. And so they can themselves actually build their own software stack.
And so I wondered to myself, as a hypothesis, whether it means that the historical corridor of Asian founders travelling to America to try to sell software as a service to US customers is starting to get eaten up by lots of native American founders using AI services to code everything.
Milan Reinartz: Makes sense. And do you think building global businesses from Southeast Asia is possible? Or more or less so than it was before? I mean, there aren't a lot of great examples. There's a few, of course.
The Right to Win: Durian, Web3 and Jollibee
Jeremy Au: I think there are great ways to build global businesses. It's just that you have to understand why build them from Southeast Asia rather than somewhere else.
For me, I talk about and host the BRAVE Southeast Asia Tech Podcast because I talk about Southeast Asia. But I'm not going to talk about American technology from Southeast Asia. That'd be a crazy thing to do, because I'm not there.
And so we have to stop reading the New York Times and Wall Street Journal and thinking in the mind's eye about the Midwestern customer, and say, what is that thing that gives us the right to win to build it from Malaysia or Vietnam, et cetera?
I would love to see more durian companies, for example. The king of fruit. No other countries in the world can really do durian. It's only Malaysia, Vietnam, and barely China now.
Mohan Belani: Christopher is doing something like that, right? Using freeze-drying tech for durian transportation.
Jeremy Au: Exactly. So you could make a global durian company servicing the whole world, make it the hottest food. I mean, in America they're going crazy over sriracha chilli, which was basically just Vietnamese.
Milan Reinartz: Bird's eye peppers. Chilli sugar water.
Jeremy Au: Chilli sugar water. So they made a global chilli sauce brand. I'm just saying, founders should ask, what gives me the right to win? Because if not, then could you move to America? That's a flight ticket away. But if you want to build from Southeast Asia, then why? What makes Southeast Asia not just a home, but also an asset?
Mohan Belani: Yeah. I strongly believe, and I still do, that you can build global companies from Southeast Asia. It's just a function of which verticals you want to target, and where the expertise is.
If you look at Malaysia, a lot of web3 companies are well used globally, and all built from Penang or KL, and also with very small teams. The asset that Southeast Asia has in areas like food, we look at Jollibee. Jollibee is a global brand now. And not just Jollibee the brand, but the group, the amount of assets they own under them. Phenomenal.
To some extent, I think Southeast Asia has been distracted by the fun, shiny things that are happening in the US.
Milan Reinartz: Hmm.
Mohan Belani: And I think that's what has been wrong in the last 15 years of venture. But if you look at the next 15 years, if you want to specifically build in AI, the truth is I think going where the talent density is, which is Silicon Valley right now, and the capital density to scale really quickly, the truth is you're better off being in the US.
But there are still certain verticals, like I believe in food and consumer, where Southeast Asia can actually be a really powerful global opportunity.
Quick Fire: Biggest Wins and Fails
Milan Reinartz: Makes sense. Well, okay, I think we're getting towards the end of this, before we get kicked out here.
One last section that we started to do here is a kind of quick-fire biggest win, biggest fail in the VC ecosystem, I guess, or broader if you will. What have you seen in the last month that you thought were your biggest wins and fails in VC?
Jeremy Au: Biggest wins and fails in VC? I think the biggest win so far in the ecosystem is finally starting to prosecute founders who commit fraud. Starting to investigate them and just say, "Look, we have this set of evidence. We are going to bring this to court." And then you have a defence lawyer, we have a prosecution, and let's see where the facts are.
The fact of the matter is that integrity is important for the entire ecosystem. Otherwise everybody has to eat a risk premium. And I think that government stepping in to protect the rights of employees, investors, and people who are doing the right thing benefits the whole ecosystem.
Milan Reinartz: Completely agree. And what's a fail?
Jeremy Au: People committing fraud. Stop committing fraud.
Milan Reinartz: No, it's a good one. How were the trials? Have you seen some of the trials, how they're going in Indonesia, or which ones are you referring to?
Jeremy Au: I think there are a few of them that are going on. People are being pulled in for questioning, et cetera. That's one piece.
I think we're also starting to see investigative cases being opened up by the Singapore courts as well, to protect Singapore investors. And I think that's good for Singapore. Because the whole point of it is, you choose Singapore, like Delaware, to have good incorporation, good rule of law. And when the law is broken, then there should be appropriate consequences for people who break the law.
Milan Reinartz: Yeah, makes total sense.
Jeremy Au: Otherwise, what's the point of the law then, if it's totally toothless? If the crime happens in a separate country and then you're like, "Wait, then why are you incorporated in Singapore?" So I think that's something for people to be thoughtful about.
Milan Reinartz: Makes sense.
Mohan Belani: I think one big win I see is the fact that VCs are evolving their models. The fact that they're trying out different types of investment, private credit being one of them. The fact that they're looking at brick-and-mortar businesses, they're changing their investment thesis. I think that's a positive change. At least there's some level of tweaking and innovation in the venture space, which I think is very much wanted.
The big loss, or negative, I think is the fact that people are starting to give up on Southeast Asia.
Jeremy Au: Mm.
Mohan Belani: I think the region still has a lot of potential. Yes, it has a lot of problems. Yes, a lot of the regions have not come up with any meaningful enough outcomes. But I think the venture community and the startup community here is still nascent, is still extremely young, and I don't think we should give up on it too quickly or be too critical on the issues. Because the truth is, a lot of the issues that exist in this region really do also exist in a lot of tier one ecosystems in the world.
Milan Reinartz: Makes sense. Yeah, so starting the other way around, my biggest fail I think is that there aren't enough AI infrastructure businesses being built out here.
Jeremy Au: Mm.
Milan Reinartz: And I can call out some of our portfolio companies across our broader universe. One is Aolani, which I think is doing a great job building cloud-based inference and GPU services for the local ecosystem. And I think that's really important because, as some of the data has shown, Moonshot's Kimi K2 is delivering the results at 50% of the cost of ChatGPT or OpenAI.
And I think we need to build infrastructure that specifically serves a lower GDP per capita audience and can deliver good results at efficient costs. And I think there's not enough going on at all in that space yet, and I'm hoping there's more. And we'll give you money if you build that.
Biggest win, a call out to Yiping Goh from FORMAS.AI, also something we are proud new investors in. Building the Canva of architecture. That's pretty cool, out of Singapore.
Jeremy Au: Yeah, that's a good one. Hopefully they go very far.
Mohan Belani: They're very impressive.
Milan Reinartz: Yeah.
Jeremy Au: On that note, let's call it a day.
Outro
Jeremy Au: Thank you for listening to BRAVE. If you enjoyed this episode, please share the podcast with your friends and colleagues. We would also appreciate you leaving a rating or review.
Head over to www.bravesea.com for member content, resources, and community. Stay well and stay brave.
