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Southeast Asia Tech: Emerging Trends, China vs. US as North Star & Startup-Building First Principles

· Podcast Transcripts,Clubhouse

Southeast Asia has really seen itself build up, a super-app approach for a lot of businesses in terms of how they look at lifetime value, how they look at the super app or home for multiple functions. And in that sense, that seems to parallel the experience of the Chinese technology scene where we're seeing increasing amounts of flow of money, as well as inspiration as well as talent and founders. - Jeremy Au

On 29 November, we talked to founders and venture capitalists on emerging technology trends in Southeast Asia. We learnt about which startups to join, emerging country and regional trends, and fresh takes on the latest founder, VC and investment news. Interested in joining us on our next episode of SEA Tech Clubhouse? Sign up on jeremyau.com. Nominations are limited and approved on a rolling basis. You can self-nominate or nominate someone who you think would fit the bill. You can find the episode's transcript in the podcast description. The audio quality for future episodes will be improved. Let’s dive right into it.

Jeremy Au: [00:01:12] Viren and Jeng, good to see you all. So Viren's dialing in from India, kind of like a great experience from his experiences as a marketer and leading and founding marketing startups in Southeast Asia. And then for Chia, VC of Saison Capital, has also a ton of experience in Southeast Asia as well. And then for myself, kind of founded and grew up in Southeast Asia. I've also built some companies along the way. So good to see all of us here today just discussing Southeast Asia.

So I think the big question for everybody here is what the hell is going on with Southeast Asia in 2020 and 2021. Well, what do you think about that?

Chia Jeng Yang: [00:01:57] I've mostly built companies as an operator and also as an investor in Asia. And I always hear very wealthy, different ideas of what Southeast Asia and Asia sounds and looks like. So I'd be curious to hear what people outside Southeast Asia think about the space.

Jeremy Au: [00:02:17] Yeah, I mean, I think the one big thing I think about Southeast Asia is that I think people often look at it from the consumption perspective, which is, hey, there are hundreds of millions in Indonesia and Vietnam, and so forth, and they're very much all middle class consumers who are experiencing for the first time, ascending the income ladder.

And I think there's a very familiar story for the Internet for that as a result, kind of like modeling the trajectory. It's like what is Facebook for Southeast Asia? What is LinkedIn for Southeast Asia? What is B2B SaaS for Southeast Asia? So I think that's how I think a lot of people talk about Southeast Asia. Primarily, it's like saying, this is the geography where consumers are growing, and the supporting enterprise sector is growing as well.

How about you, Viren, what do you think? How do people think about Southeast Asia?

Viren Shetty: [00:03:07] I think there are different lenses to view it in part. I think like you've alluded to, I think there's one type of companies that can be built, which are what I call the copy-paste companies, so your Uber clone, your food delivery clones, your e-commerce clones, et cetera. So I think that's one category of companies.

And then, I think you have the other category of companies which are very unique to a specific market opportunity, so you have your KhataBook in India. I don't think there's a KhataBook where it's not set in the US. Or there is, but it's very different. Yes, you can call it accounting software, but it's still very different. So I think the dynamics of the population, the dynamics of the market and all these combined, I think it gives rise to different opportunities, which could only partly be executed at that market or those specific markets and nowhere else. So that's how I feel.

Chia Jeng Yang: [00:04:17] You're right, I think the first general perception of cloning business models or the parts of the country, around the world and bringing it to Southeast Asia, that doesn't work for a lot of different reasons.

And I think, for me, looking at India has always been bigger proxy for COVID business models and we've invested in a few business models that worked really, really well in India as opposed to Europe, China, US, et cetera. So I think that's the first thing that comes to mind when we think about what knowledge really transfers over to Southeast Asia.

I think the second one that everyone talks a lot about is really about the fragmentation . So I think, first conversation I always have with a lot of Western VCs who'd tried to look into Southeast Asia is always, "Oh, Southeast Asia is great in this region, what's a great regional play that makes sense in Southeast Asia?"

And so, the first conversation is always pretty difficult which is like, "Hey, look, it's really fragmented." It's not just a uniquely localized niche geography-type conversation but a lot of things just don't make sense as regional space. Thailand, Vietnam, Philippines, Indo, Singapore, just so different that I really struggle to imagine non-cross border regional trade that really exists. So I think those two are some of the initial big conversations I have with people in Southeast Asia.

Viren Shetty: [00:05:45] Do you not think instead of things you have like PayMongo. It's basically doing Stripe for Philippines, do you not think there are certain spaces where you can do it for a single market?

Chia Jeng Yang: [00:05:58] It's still coming in with this like, "Oh, what's a great regional model to play?" I think a bit more interesting question is how deep you can go, especially when you talk about markets which are fundamentally, shallow from a GDP per capita basis.

I think the conversation is like, "How much of this mind share, wallet share can you really occupy in relatively shallow markets," and that's a very different way of thinking of, "Oh, how can I Blitzkrieg my way across 10 different Southeast Asian countries?"

Viren Shetty: [00:06:18] I think it really depends on the type of company though. I think there's some companies which allow you to go very deep because just the market size there wants specific market.

But let's say if you were doing a B2B SaaS play, I think a lot of markets in Southeast Asia by themselves are not big enough for you to do that, so you to go down the path of, "Oh, let me go and set up office in Indonesia, Philippines, etc.

I think it really depends on the type of company. For consumer also I think it depends. I mean, I guess once you get to a company like Grab size, so for those few who are in the audience who are not as familiar, Grab is the Uber for Southeast Asia. But they've expanded a bunch more than that, so they are now kind of like a super-app .

So I think for a company like Grab when you've raised the amount of money they have, you can't just sit in... I mean, even Gojek, you can't just sit in Indonesia. Either you have to go big or not.

Jeremy Au: [00:07:43] I think what's really interesting here is we're using a lot of analogies, so we're talking about Grab, it's like Uber to explain things. We're talking about shallow versus deep. And I think that parallels a lot of the conversations that we have that our original question, which is like how do we describe the state of Southeast Asia tech?

I think oftentimes we use analogies like imagine America but way poorer and fragmented doesn't have any other American models yet. And so, Uber entered Southeast Asia market by market and found themselves initially competing against Grab which was you could say cloned and localized by another Harvard Business School alum who had just returned to Southeast Asia from America.

And we also saw that happen for Gojek at the same time from the same year at Harvard MBA as well. So I think it's interesting to see that cross-pollination does work and I think a lot of people go for that breadth because they look at it as ties between geography, between culture and trade allows for the breadth first approach.

But it's also interesting to see that Southeast Asia has really seen itself build up, a super-app approach for a lot of businesses in terms of how they look at lifetime value, how they look at your app should be the super app or home for multiple functions. And in that sense, that seems to parallel the experience of the Chinese technology scene where we're seeing increasing amounts of flow of money, as well as inspiration as well as talent and founders.

So I think it's quite interesting to look at sometimes Southeast Asia continues to be, since Medieval times I guess, continues to be the trade route between East and West but also very much copying and cloning that into something quite unique.

Chia Jeng Yang: [00:09:34] They're essentially no different from a conglomerate run by tech. So a conglomerate plays are fundamentally like talent, capital arbitrage. And that's really, again, a reflection of the fact that Southeast markets capital account is really scarce and markets are also very shallow, so why not build a conglomerate play? That makes a lot of sense. You can dominate a lot of fields, increase your economics, blah-blah-blah.

So I've never really seen super apps as fundamentally a very different strategy from that. And so, the way that I look at it, again, is really like when you're talking about Southeast markets which are very shallow how can increase the LTVs, how do we increase our wallet share, et cetera, et cetera? I feel that that's still fundamentally the direction and the way that you need to talk about some of these markets.

I don't think the conglomerate approach is a bad approach necessarily. But I think you just need to be very aware of what the actual underlying dynamics look like.

Like I think ed tech, for example, in India has done a great job being able to provide that path of consolidation that allows ed tech to flourish, that really comes right now from a conglomerate private equity holding group type strategy, because of what they've done, they've managed to really create the economics that makes sense in a relatively shallower market.

Jeremy Au: [00:11:01] I think you raised two good points. I mean, I think the first is conglomerates usually out-perform a single product or company performers, which is something that's, I think, underestimated. I think when we look at the US, I think there's a huge thesis around conglomerates are inefficient and investors should be the ones diversifying to different product lines instead of companies.

And so, as a result I think in the States you do see that, on average, conglomerates tend to underperform the market because of the management efficiency.

I think I remember doing some analysis at Bain that one of the big points that we had was in emerging markets in many countries around the world if you looked at multi-year performance, conglomerates have some advantages. One is they tend to think over slightly longer term.

But two, I think the big part is invisible, is that there is actually substantial returns from the political and economic leverage you have normally when you are a conglomerate. You only need to look at, say, Samsung or Sony to be like, "Oh, technically it's underperforming but it's still going."

And so, I think conglomerates is often, I think the elephant in the room is not about economic performance. I think the elephant in the room is very much like, "What's the ability for them to leverage the invisible political and economic advantages or skill?" I know you said being able to leverage that compliance or whatever regulator in one field, but extend that to another vertical.

I always tell people when you're a sexy company you get called an Amazon. And then, when you're unsexy company then you're being called a conglomerate. But I think that's how people, companies in shallower markets have built out, like you said, the depth. They acknowledge that Thailand, like Chang Group, acknowledges that Thailand is a small market. I mean, not many people... People do drink Chang beer outside so obviously in other countries other than Thailand but not in the volumes necessary to make it a huge conglomerate.

But if you actually look at their web of products, they actually have multiple services and products that make it deep enough, I guess from a stack perspective and they tend to be mutually reinforcing each other as well. I think that's an interesting dynamic for conglomerates.

Chia Jeng Yang: [00:13:09] Thailand is a decently large market but the way that the political dynamic in Thailand, for example, where a lot of things are still fundamentally quite tightly controlled is rather different from Indonesia and Singapore, where yes, obviously families hold a tremendous amount of power but there's also you can still reach people, you can still do things semi-independently. To succeed to a certain scale, you don't necessarily need anyone's support after a certain point.

And so, I think that's part of the reason why Indonesia is I think, in my opinion, slightly more dynamic in the startup space, because the scale or the opportunity to reach a certain size exists without necessarily being to them worry about who you want to partner, et cetera, et cetera.

And so, the two things that come to mind when I think about Southeast Asia is how dynamic and open, what the political environment comes off, how early-stage companies can get support, can get plugged into so that the ecosystems can get that kind of conglomerate family type resources between different countries.

And then, second obviously is how fast some of those markets will go and how competitive it is, because you don't want to use the words families and conglomerates in a monolithic sense. There's a lot of competition that goes on between families and you want to understand how do the party business models play a role in that type of competition.

Jeremy Au: [00:14:41] I think a fun part of that is, when they first come and arrive in Singapore they always say, "I want to build a company in Singapore," let's start with Singapore because it's like, "Everybody from Singapore speaks English," and it's an easy place to live and there's good travel and everything. People realize like, "Oh no, the market's just, honestly, three million local citizens." And that's about the size of small city in America. I mean, with a similar GDP per capita but it doesn't hold a candle to the whole of America, even though both are called countries.

And then, after that the second thing that they always say after that is, "Oh, let's build something for Indonesia. It's got 300 million people." And then, they go there and they're like, "Oh wait, now the GDP per capita is an order of magnitude less than America."

And so, I think the failure of imagination breaks down very quickly when people are trying to like, "I don't understand the market," or in terms of building it out. And so, I think it's almost like when you enter Singapore you have to say, "Oh, this is like America in terms of what we're trying to build," whatever it is, "but we have to be comfortable with a 3 million person market, versus like, "Yeah, we're willing to go to Indonesia but we're willing to be okay with multiple shallow wallets. We're going to play for the long term. And we need to bring the correct business models, either from China, which targets their Tier 2, Tier 3 cities." Because truth is Beijing and Shanghai is richer and faster-growing than many Southeast Asia economies, in terms of just sophistication, in terms of user products and user education.

And I think there's a similar issue of cost for people tackling rural issues in many geographies, and how that'd be very explicit about how they're different from the urban place. I think it's very similar to how my friends tapping the South America or Africa market are also mindful about what analogies and what business models will thrive, not just from a culture market size that you talked about, but also earlier, like you mentioned, Chia, about the wallet size on a per pax basis.

For example, one thing I personally felt was really interesting, for example, is we've seen unicorns grow up in the travel space in Southeast Asia. And I think that's something that all the billion people across not just Southeast Asia but all of the travelers from Japan and Korea, India, that's a huge market in terms of travel destination and there's a lot of money being spent on the tourism industry.

Chia Jeng Yang: [00:17:11] One framework that might be helpful focus is I really, really like spending a lot of time looking at India. I generally believe for many industries in India, it's about four or five years ahead of Southeast Asia. Southeast Asia, we've got about, what, 11, 12 unicorns? And India has about 20 to 30, so we're four or five years ahead in India.

And so, I think one thing that really frustrates me a little bit is sometimes we ask questions that already have been solved in the Indian ecosystem, like enter any product the points very early on about B2B SaaS. Why can't we just open B2B SaaS offices all across Southeast Asia if the market's so shallow and then you founded a B2B SaaS company and then you know very much why you can't do that, because the market's still very, very shallow.

And so, the idea of like, "Oh, what's the timeline for when B2B SaaS is viable in emerging markets?" In my mind, solved. In India, there are some opportunities in India that have come to fruition but it's still very much for a lot of companies a very frustrating point. But you can see some pretty interesting areas where B2B SaaS has turned out not that bad in India.

In Southeast Asia, I think that type of comparison frequently isn't' made but it's kind of like, "Oh, let's take a bet and see where that goes." So that's been, for me, at least the most helpful framework I've used.

Viren Shetty: [00:18:47] No, but on that point even the Indian companies who are B2B, they end up setting up offices in Singapore, in Beijing, et cetera. Usually what I've seen is that most of these startups in India, they would serve maybe mid-market at a price. They start off with just Indian customers only. And then their play is that, "Oh, let's go off with the Southeast Asia regional play," because their US counterpart which they've cloned already kind of has a big market share in the US, so they don't want to go and fight them. And once they get real skill then they go and set up offices in the US or UK or something like that.

So I've seen a bunch of B2B SaaS companies go down this route. I also think maybe that's another reason why you don't really have... I mean, off the top of my head I can't think of a breakout, when I mean breakout I mean has 50 or 100 million ARRs [annual recurring revenue] B2B SaaS company in Southeast Asia or India which serves the enterprise market. Maybe there's PatSnap. I'm sure there might be some companies but generally there aren't. You look at Freshdesk, so for all these guys most of them focus on the lower SME end. And I've seen once you do the SME play that you can get customers anywhere you want. You don't need to have a localized team on always.

Jeremy Au: [00:20:19] Yeah, I think what's interesting here is we're covering, again, if you have to enter Southeast Asia, you're looking to build something or you're trying to figure out which startup is really going to take a wing and fly, you can't just look at cloning and localizing all the US firms and startups or other ideas, but you actually have to go and be quite intentional and say like, "Let me think carefully which vertical am I cloning and why," and then subdividing that by geography as well as the GDP per capita. And then, ensure even your business model from B2B SaaS versus direct-to-consumer.

I mean, I think you've seen so many times B2B SaaS companies really struggle because the market is not comfortable surrendering a transaction fee. This is like never had surrender transaction fee before.

And so, they are getting educated and saying, "Okay, as a SaaS we know we can take 1% or 2% as a transaction fee on a recurring basis." It takes time to educate the market, which is a funny thing to say, obviously because in the States people are pretty sophisticated and say like, "PayPal's already charging me 3%," for example, "so 2% is way better than 3%."

But that is a totally different conversation when you're looking at, for example, selling SMEs, small-medium enterprises, in various markets, even Singapore, for example.

Chia Jeng Yang: [00:21:39] Yeah, I'd love to hear from the audience actually but, Jeremy, I'm really curious to get your thoughts. You're somebody who's obviously built in the US and now coming to Southeast Asia and you're Singaporean so you do understand the scene in a very local way. What was some of the initial challenges and surprises that you have when you're ideating about Southeast Asia business opportunities?

Jeremy Au: [00:22:05] I think that's why during the pandemic and coming back to Singapore and Southeast Asia I put together a podcast at Brave Dynamics, and was really putting together my thoughts around this. And actually that's something, every time a guest comes onboard I often interview and search for all the people who are bridging different cultures, like they have been a CEO in both India and Indonesia, under Rocket or someone else who's done e-commerce in multiple geographies.

And I do think about it from three high-level things that surprise me.

I think the first thing that really surprised me coming back was, over the past, especially five years, has been how fast Chinese inspiration and products and services and ideas have become, I wont' say a North Star but an alternative North Star to America. You go back in 2012 to 2015, I think everybody was just talking about how do we copy US startups? How do we look at Amazon as inspiration? And I think to some extent there was also in Singapore and Southeast Asia actually a huge European perspective as well because I think the early bet that Rocket Internet had made in building out Lazada or Zalora. I think the flows from European funds into it. So I think people will look at that as American inspiration and talent, European capital as kind of like risk-taking capital in Southeast Asia was kind of the thing.

But I think coming back in 2020 you just see so many people are just like... You look at Xiaomi . I mean, it's a household brand but selling not just the phones but also all kinds of accessories. And I myself have an insect zapper I bought on Lazada which is owned by a Chinese company now for the Xiaomi brand.

And I think you see that in the best malls, just kind of Chinese tech goods at parity, I think from peoples' perspective, especially for the budget to mainstream consumers. I mean, obviously for the elite the Western-oriented, for example, iPhones are still a big thing. But I think there's a lot of interesting consumer differences but also inspiration differences.

I think second thing is the B2B sophistication level is just an order of magnitude different from the US versus Southeast Asia. I think on average American SMEs are much more tech savvy, familiar with opportunities but also very savvy discriminators and willing to take bets on new tools.

Whereas I think for Southeast Asia depending on market-to-market and obviously Singapore's a little bit ahead in terms of GDP per capita comparison, but obviously on the other end of the scale you'll looking at Myanmar, for example.

So a lot of people come into Southeast Asia, it's like, "Yeah, I sell these really savvy tools for people who already have a marketing stack and an accounting stack, for example, that empowers the way I do this sales stack, for example, or software." And I think they fall flat on that because you can't presuppose that existing tech stack to integrate with nor the cultural training stack.

And I think the last thing that's a big difference as well is, again, just how different the languages are. The real reality is that regulatory compliance is difficult and there is also a hidden cost of doing business in Southeast Asia. And those who are able to understand it, live with it, are going to be like, "Okay, I'm going to have to work with these departments and I will do these things and say these things to get it right."

And if you're not willing to do, I think for good reasons, then I think you have to be aware of that and to say, "There's some verticals which are still very vulnerable to individual regulators or compliance mechanisms." The solutions are very different.

And so, I think, for example, one of the big differences that we saw is if you look at when I worked with clients like, I don't know, the alcohol industry. For example, Thailand still doesn't... Obviously is a big consumption of alcohol but officially the government stance is that as a Buddhist country under the last king they put together very severe restrictions on the marketing of alcohol. So you can't do price promotions or you can't run ads, you can't do product packaging for promotions.

And when people hear that that's so mind-boggling because everybody knows that you can go to Thailand and drink wherever you can buy from anywhere. But if you think about it from a business perspective, imagine you enter in and say, "I want to do a spirits company and I'm going to enter Thailand," they're going to quickly find out that there's no way to create the premium marketing tools.

And I think that kind of idiosyncratic individual country-by-country risk is something that's really underappreciated, because I think the benefit of Europe, for example, is that the EU is kind of like a crossborder leveler and arbitrage on regulation. Whereas we don't see that in Southeast Asia. I mean, ASEAN is... And people are like, "Oh, isn't ASEAN like the EU of Europe?" And I'm like, "No, nowhere close. There's no regulatory bite. It's just a top shop." I think that's really a big thing.

So I think the three things is firstly, I think the emergence of China as a North Star alternate to the US, not necessarily competition but just as an alternative, in terms of inspiration, products, service, business models, and to a lesser extent European capital approaches, and obviously Indian startup business approaches.

And then secondly, we talked about is the regulatory differences as well as the differences in sophistication lastly in terms of the ability of the enterprise market to support sophisticated, more stacked or leverage technology stacks.

What do you think about that, Viren? What do you think about that, Jeng?

Chia Jeng Yang: [00:28:06] probably just maybe pushback slightly on the China as a North Star thing. I think that thinking certainly existed 2018, 2019, very popular.

I'm not very convinced that that's necessarily the right way to think about it. I think, for example, some Chinese models have done pretty well in Southeast Asia. I think one thing got bear in mind is, and the general takeaway is it's not just about localization. Local environments severely affects what is even possible or what the economics look like.

You look at China as a North Star, one reason you do that is because the infrastructure stack is so deep on a technical basis that the ability to manipulate tons and tons of data at a scale that no other country can see is very impressive.

But you take that stack and you try to apply it to an environment where there is very little data to start with, that just doesn't make a lot of sense. So, logistics I think is an area where some Chinese models have done this really well. I think insurance is probably, like B2B insurance for example I think that also pans out pretty decently.

But I do have some questions on some of the models and it's applicability outside China. And I think a lot of people, the way I see analysis and I disagree with a lot of it because they always try to look at it from a consumer perspective. So I don't know want to single out business models where but they say, "Oh, consumer purchasing patterns look pretty similar in China versus a Southeast Asian country, so therefore this business model will work out," without really understanding the dynamics behind, for example, how WeChat works and the dominance of WeChat and then, when they try to build these business models it tends to not work out too well. you can probably tell, I'm not a big fan of a lot of the consumer-facing Chinese business models that have popped up in Southeast Asia, and the cost of data.

So I think that's one thing to bear in mind. And again, that's why the actual tech stacks, the actual behaviors and back alleys looks very similar, with a major exception of the cost over fintech and as a current investor I also really get frustrated by a lot of people trying to creating fintech business models from India to Southeast Asia without really thinking about what the packet really looks like in some of these countries.

So I think that's something to bear in mind. But I think in general, good point. I do see China as a really good space to look at when you're thinking about specific types of industries.

Jeremy Au: [00:30:47] , I think maybe would clarify, I wasn't saying that China is the best model something to clone or to be inspired by. I'm just saying that it wasn't just saying is that over the past five years people have, I think in 2014, 2015 people would have said, " Oh, we're looking at Chinese companies for inspiration," nobody would ever have said that really, in 2012, 2013, 2014. I think now some people are saying that in 2020. So I think it's less about whether it's the right decision to do that.

I think you can fall in the same trap of getting inspired by American YC company which is very popular, or a European company or so on, so forth. I'm just saying that what's interesting in the emergence as China as a source of inspiration. And to a secondary aspect, I think Indian companies and startups and valuations as a source of inspiration. But I agree with you; I think people still have to think about this from a first principles market-driven approach.

Anyway, so, Viren?

Viren Shetty: [00:31:40] I was going to saying what models do you see China as a better proxy for? And then, which business models do you think you get a proxy for, for Southeast Asia business models?

 Chia Jeng Yang: [00:31:51] I think, again, the fundamental principle I go back to is something that requires the processing of a lot of data. there's only two areas so far I can think of.

I haven't looked into it exhaustively but I think Tier 1 cities e-commerce corridors was definitely one thing that's very interesting. And then, anything that requires a lot of data manipulation, so logistics, e-commerce backend, insurance. I think these are the areas that China has done really well in. And then, a lot of things that the India ecosystem has produced I think is quite interesting to look at.

So again, I actually spend most of my time looking more in India operationally to understand what the operation backend could look like in Southeast Asia. I look at US business models mainly for fun because I think they're really cool. I look at Chinese business models if I really want to dive into the technical B2B backend.

I know that's not an answer to what your company is building a nd I'll just pause there.

Jeremy Au: [00:32:47] I mean, it's kind of a complementary here is I was speaking about a Chinese component because I've also worked at a company that is backed by Temasek, Singapore's Sovereign Wealth Fund in China, and I was part of the expansion in the early year 2000s. And I've seen and also studied at Tsinghua and seen some of the crossborder comparison as well.

I think what's underappreciated and just focusing on the Chinese side, I think the reason why Chinese companies look at Southeast Asia, and I think that's something that maybe people outside China and Singapore don't really understand, but I think the reason why Chinese companies firstly think about it in terms of Chinese diaspora, which is that Singaporean supposedly has a majority Chinese diaspora in the population. So I think they look at it in a familiar ground in terms of supposedly language comprehensibility, because supposedly the Chinese people in Singapore should speak Mandarin, which I'm sure that Chia will disappoint them, as will I.

But I think that's something that is kind of like a presupposition there. Also, there's a lot of hidden trade that happens. I mean, obviously so much trade between India and America flows through Southeast Asia and vice versa. So many Chinese goods flow from China to the rest of the world through Southeast Asia.

And so, I think if you look at the goods on Lazada and e-commerce platforms, so much of the stuff that's packaged is just manufactured in China. And so, I think a lot of Chinese companies are saying like, "Hey, we're going to piggyback on, first, from a consumer's perspective let's look at the Chinese diaspora as a source of talent as well as a source of opportunity and comfort level in terms of cultural expansion."

I think there's also some truth from a Chinese diaspora talent perspective. I think there's quite known trend of Southeast Asia, Chinese inner city tycoons having conversations in China about partnering various companies and expansion paths.

But I think secondly as well is the hidden dynamic of goods and supplies from China is actually a big part for why you see so many Chinese companies looking at Singapore and therefore Southeast Asia as a next lightly expansion path.

And, of course, lastly is big shift away. I think a lot of Chinese companies back in the early 2000s were looking at America as expansion opportunity, just in terms of they'd look at top two as US and China. But I think with the US tensions, I think people just find it as too risky to expand to America, to build assets or talent and data warehouses which are likely to be seized or handicapped in some way.

And so, I think looking for the nearby geographic expansions, so I think that's why you see Chinese companies just growing aggressively in anywhere but America.

Viren Shetty: [00:35:44] Maybe I should be bring up some people from the audience floor, Jeremy?

Jeremy Au: [00:35:47] Yeah, so if anybody wants to ask any questions, feel free to raise your hand and we're happy to bring you in. Just note that this segment is being recorded because so many people in Southeast Asia are using Android and can't get in. So that's probably one of the decisions we had to make. So if anybody wants to raise their hand, feel free to raise your hand and ask a question.

All right, inviting Dmitri. What questions do you have, Dmitri?

Dmitri: [00:36:12] Jeng, hi, we haven't met offline yet but it's good to hear your perspective from B2B SaaS. Wanted to ask you the counterpoint question. What are the differences you see between India backend and Southeast Asia backends? And not to make this, again, about the unknown creature that is Southeast Asia. Let's just talk about, say, Malaysia and Thailand and Indonesia specifically.

Chia Jeng Yang: [00:36:35] Yeah. I think maybe specifically is your interest fintech?

Dmitri: [00:36:38] Well, let's talk about fintech if you like. I'm actually open to any discussion about your enterprise backends. We can do logistics. We can do media slimming, if you like.

Chia Jeng Yang: [00:36:48] Yeah, I mean, so fintech's a good one. Yeah, let's use fintech. The backend infrastructure's just so different, like UPI and what they're doing, what the ATPI is doing is just so far ahead of everything that you've seen.

I still remember maybe five, six years ago the conversation in Southeast Asia was how can we have QR codes as a concept. And then UPI is this huge thing, that's just popped up and potentially also going to overrun Southeast Asia.

And so, it's very hard to think about disruption of backend payment systems in a really meaningful way, given how different some of the ecosystems are and given how large of some of these challenges look like.

So you probably know we did Indo, and the type of challenge and the interbank switch. Interbank switch is very, very different from the type of system that the UPI is. So I just really struggle to imagine what some of the lessons can be when the backend really looks so, so different.

And so, that's one of the challenges I think. The other thing also, and maybe we'll take another vertical like insurance. I think the insurance ecosystem and the complexity of some of the regulations involved, the Thailand insurance ecosystem looks just so different from Indonesia.

When I look at, for example, what some of the Indian regulators are doing in the insurance tax space, and I'm actually a big fan. India recently released something to do with securitization around insurance. The type of conversations are just so different, the types of people that you deal with in terms of what the policymakers really care about, it's just so different that, yeah, I really do struggle sometimes to imagine what can really be brought over.

I can see some really interesting ideas, I can see some really interesting concepts. But when some of the regulators of industry still dealing with some very basic problems, yeah, it really becomes a struggle. I'm sorry, I don't know if that answers your question, Dmitri.

Dmitri: [00:39:11] No, you sound traumatized by dealing with the [inaudible] . But what about the one that's taking out one page from UPI book, isn't there hope there?

Chia Jeng Yang: [00:39:20] Yes, absolutely. I'm pretty excited to see what Sunday comes up with in Thailand. And payments in Thailand is absolutely fascinating.

I do have one specific problem with payments in Thailand, which is who will eventually win because the platforms dominant so much in Thailand that it's just very difficult to see who will win besides the conglomerates or the big tech companies.

But yes, absolutely. If regulation shifts I think in a dramatic way you can have potentially have third party players be a viable player in the long run.

But that's very dramatic shifts. If we think about some of the issues that the regulators in Indonesia are dealing with on insurance, it's just so far away. Yeah, our thesis is, yeah, whole stack insurance makes a lot of sense. Will that happen anytime in the next two years in Indonesia? It's slightly unlikely.

I think what India teaches us if what you can do to monetize on some of these foundations in a deeper way, and I think that's very exciting, especially from the idea of, okay, once these foundations are set up, and it's going to be costly to set up some of these foundations, how and how much money can we make from these foundations? And I think that, for me, is very interesting and gives a lot of hope for Southeast Asia.

I do go back to ed tech because I think Byju is obviously the big monster in it, but everyone used to say, "Ed tech, you can't make money through ed tech, it's really, really difficult. The only successful comparables are in China where it's Asian parents spending a ton of money and China's not exactly super poor, and so that's why it kind of works out." And Byju came along and build a model that proved that you can make money as an investor into ed tech in emerging markets.

So I really actually deeply respect India for their ability to think about these questions of how do you really make money in a shallow market once you've built some of these foundations up.

Jeremy Au: [00:41:28] I think we have time for one more question from the group and then we'll wrap at 10:00 Singapore time. Does anybody want to raise their hand? And then, the question is recorded. I feel like this is one of the awkward, like teacher in a classroom conversations, you know? It's like, "Anybody want to ask a question?" Okay, I got a question here.

Chia Jeng Yang: [00:41:47] Okay, go for it.

Speaker 5: [00:41:48] Hi, thank you, Jeremy. So one question that I had, and I think you may have talked about it before, but maybe just for me and for whoever just joined, just looking at next year what do you think are the industries that investors should be on the lookout for in Southeast Asia?

Jeremy Au: [00:42:05] Yeah, it's a great question. I think that the joke is tech trends are a function of what's hot, or a fad. I think Viren and I have talked about it before.

And then, of course, the contrarian point of view is that if it's hot right now or people think it's hot for next year, you shouldn't invest in that because too many people are chasing that set of ideas. And so, it's going to be very costly. What is the underlying contrarian bet?

I think that it's easier to describe it in what people commonly think is hot right now. So I think one field that's very hot in Singapore and to a certain extent is obviously Southeast Asia, is fintech. So fintech is obviously a big part of it is just saying people are making some decisions around emergence in the middle class. And so, to do so they need more financing options, they want to manage their money better, they want to make more money.

And that's also been accelerated. I think that market inside has also been accelerated by the success of new banks or the perceived success in terms of fundraising history of new banks and different fintech players in the various markets. And I think we also see that Singapore is massively subsidizing the fintech world in Singapore as a base of headquarters. And so, that's been a big set of reasons why you see a ton of fintech in terms of subsidizing VC funds to investment fintech to subsidizing fintech firms and so on and so forth. Because Singapore looks at itself as kind of like a New York or Switzerland for Southeast Asia.

I think other things, just to name off, I'm sure I can add a few more that you think are hot. I think two more that jump off the mind is education technology, so we just talked about it. Byju's success kind of derisked for many investors their point of view on how do you monetize and can you exit, I think there's a second question, from an education tech company. And obviously some people may argue as more individual, uniqueness/foolishness in terms of whether it's a good price and so on, so forth. But other people say, "Oh, this is inspirational and let's go for it." And VCs, similar again, rising middle class means rising budgets on education as a pathway success, which means more direct-to-consumer approaches to supplement or complement existing educational systems in terms of the public choice systems in Southeast Asia.

And I think the last one that we're seeing some interesting stuff is I think people are looking at China tech obviously, like small-medium enterprises now. So I think they were not really looked at as consumption or ability to budget. But I think now like KhataBook and a bunch of these other B2B SaaS, it's kind of like selling QuickBook or Xero but in a much more streamlined way. But some very basic tech stack stuff for underlying company needs for the various Southeast Asia geographies.

Chia Jeng Yang: [00:45:01] Yeah, so remember, probably Dmitri remembers it a lot deeper than me, but everyone was saying fintech was dead as early as last year. And then this year, oh, it's the year of fintech, which is great.

So yeah, fintech definitely is pretty exciting I think. Again, given how shallow some of its markets are, the easiest asset, like ways to make quite a lot of money was just information in financial services. So I think that's been now recognized as one of the main way for monetization.

So quite a few are pretty excited by. I still there's some small spaces in consumer finance, but very much looking into business financing solutions. I think that will probably be the future of a lot of opportunities, just given where Southeast Asia is at the moment.

And I think what's, again, interesting there is that KhataBook model I think is very unique to India. It's basically a simple AI PE ledger. I look at credit that you've dispersed out to some of your customers who might owe you money and pay you back a day later for some of these mom-and-pop shops. And then, the future of that focusing financial services on top.

So I think quite bullish on that. We've been pretty well known in the market for this idea of better finance, which is non-fintech companies that can build fintech services on top of them. So we've invested to Grab, for example, and helped build Grab Financial. And so, we talked to quite a lot of non-fintech companies who are thinking about applying fintech services on top as a real recognition of the potential to add on.

So we're still doubling down on the better finance, and writing a couple of articles on specific directions that I think it could go.

Jeremy Au: [00:46:20] Great. Well, thank you so much. That comes effectively to time. And for people who are interested, we'll be making this a regular weekly series, so this is something, there's an opportunity for people to hear more about and discuss as well.

So thank you very much, and thank you, Chia and Viren, for making it all the way here. Thank you.

Chia Jeng Yang: [00:46:43] Thank you.

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