Are ASEAN VCs Over-Correcting Their Investment Strategy?
There seems to have been a shift in investment strategy among ASEAN based VCs recently. A lot of them seem to be shifting their focus to deep tech or AI and blockchain based start-ups.
There’s also been rumours that a significant number of seed and early stage VCs are starting to shift their investments from seed to Series A and later stages instead.
If they do that, who’s going to be funding the pre-seed and seed rounds?
That would mean only kids from rich families can start start-ups, and you will be severely limiting the quality of the start-up pool by doing so.
Stubborn Fixation On Regional Copycats & Revenue Generating Start-Ups
For the longest time, ASEAN VCs generally have a strong preference for regional copycats and revenue generating start-ups only.
Most of them might not admit that they prefer regional copycats, they would say something like they are looking to invest in innovative and proven business models that has yet to be implemented in Southeast Asia — but that’s basically just a nicer way to describe a regional copycat.
Revenue & Earning Multiples Is A STUPID Way To Value Early Stage Start-Ups
This might be due to most of their experience from private equity and banking, because that’s what they are familiar with and the only way they know how to value a company — based on revenue or earnings multiples. Unfortunately, that’s an entirely WRONG WAY to value disruptive early stage start-ups that could become the next Google or Facebook.
Facebook & Google had none. That means they would not have gotten funded here.
To keep their options open, most of them would say that they are open to any type of start-up as long as it is promising, but the truth is often far from that.
Actions speak louder than words, all you need to do is to look at the types of start-ups in their portfolio to know what their real investment thesis is.
If you are an X of Southeast Asia with good revenue, you stand a good chance.
Stuck With Profitable Small To Mid Sized Start-Ups That Can’t Exit
I suspect that one of the reasons why this shift is happening is because plenty of ASEAN VCs are now stuck with small to mid sized start-ups that are profitable or breaking even but can’t find a way to exit.
Too Small To IPO
Because most of them are regional copycats or businesses that are simply moving conventional businesses online, they can’t grow beyond ASEAN, simply because the original they copied from would be in the way.
That severely limits their market size.
On the other hand, those that are basically moving conventional businesses online will find it hard to expand to other countries due to existing incumbents or heavy logistics or capital requirements — their growth will not be exponential.
Because of that, many of them are too small to exit via an IPO.
Unable To Get Acquired
Unless there is a stable original start-up you copied from in Australia that is planning to expand to Southeast Asia by acquiring a start-up, the chances of a regional copycat getting acquired by anyone is pretty low.
It will be a gamble.
Truly Innovative Start-Ups Will Usually Not Want To Acquire Local Copycats
A truly innovative start-up that wants to conquer the world like Facebook, Google or Airbnb would not want to grow by acquiring a local copycat. An innovative technology they could integrate into their product, yes, but not a local copycat.
They would rather set up shop alongside you and fight you, because they know that the best product will eventually win, and they have the vision and passion to continually improve and iterate on their product until they are the last and the best at what they do.
Just listen to what Mark Zuckerberg’s advice to Brian Chesky was when Rocket Internet copied Airbnb in Europe to understand what I mean.
Groupon made that mistake, that’s why they are not doing very well today. They are still losing money, their stock flatlined, and had to shutter many of their overseas operations. Just look at how their stock has performed and their financials here.
Find the latest Groupon, Inc. (GRPN) stock quote, history, news and other vital information to help you with your stock…finance.yahoo.com
These start-ups will not want to acquire local copycats unless its virtually free.
So what do you do if you are a VC with a portfolio of small to mid sized start-ups that can’t really grow anymore, somewhat profitable, but can’t IPO and no one wants to acquire?
You’re stuck collecting dividends, with that 10–30% share of yours.
Defeats The Purpose Of Being A VC
That’s actually pretty stupid, because that’s not how VCs are supposed to operate.
If you really wanted to collect dividends, you should have started a private equity fund or invested in blue chip stocks like Public Bank or Microsoft instead.
In fact, you would be much better off investing in an amazing recipe or F&B business like GoNoodle House or an amazing Nasi Lemak franchise if you really wanted to collect dividends from your investment.
Venture Capital As An Asset Class Is Supposed To Be Super High Risk Super High Return
VC as an asset class is supposed to be super duper high risk, super duper high return.
Like SUPER DUPER!
Go BIG or go home man!
Yes, 90% of your portfolio will crash and burn, but you’re looking for that 1 start-up to become the next 100 Billion USD company like Google or Facebook, or at the very least the next Airbnb at 20 Billion USD to make supernormal profits for your entire fund!
That’s why VCs should really only be investing in start-ups that CAN become 100 Billion USD world-changing companies if they succeed.
The bigger the challenge, the BIGGER the REWARD!
Might As Well Invest In Bonds Or Listed Companies
If your goal is to generate a conservative return on investment, you’re much better off investing in bonds, private equity or listed companies.
An Over-Correction To Deep Tech & “Sexy Technology”
I suspect that some ASEAN VCs have realised this problem, hence the shift to and correction towards “Deep Tech” and “Sexy Technologies” like AI and blockchain.
But if you ask me, that’s an over-correction and another huge mistake.
Deep Tech Is Elon Musk Level Stuff + 100x Harder + 100x More Capital Intensive
True Deep Tech is usually extremely capital intensive, a lot harder and usually the stuff on the level of what Elon Musk is doing at Tesla or Space X.
Southeast Asia just doesn’t have the manufacturing or ecosystem infrastructure to truly support Deep Tech. It is almost going to be a suicide mission. You should be leaving deep tech start-ups to Silicon Valley or places like Shenzhen where there’s plenty of R&D budget, huge tech companies with deep pockets who are truly interested in deep tech and the infrastructure required for you to iterate on deep tech quickly.
Invest In Software Based Start-Ups Solving Global Problems Instead
What ASEAN VCs should really be doing is to invest in truly innovative software based start-ups that can solve a global problem and become a platform everyone would use in the world and become as big as Google or Facebook one day — something like Wowwwz.
Southeast Asia won’t be able to support such a start-up all the way, but it can act as a stepping stone to get it started until Series A before it continues its journey in Silicon Valley & the rest of the world.
The Bullshit Behind Blockchain & AI Start-Ups
I would say that most VCs or start-up founders in this region who talk a lot about AI and blockchain don’t really understand what they are truly talking about.
I could probably count how many true AI & blockchain experts there are in this region with just a few pairs of hands — at least those that I know of.
Blockchain & AI Are Like Electricity — A New Technology
Blockchain & AI are new pieces of technologies. It is like electricity.
No joke, electricity was the new piece of technology that a tech start-up in 1892, called The Edison Electric Light Company, started by Thomas Edison, which J.P Morgan, the first Venture Capitalist invested in to build an Minimum Viable Product (MVP), to light up his house with electric lightbulbs, which later became today’s General Electric, used to power their main product — lightbulbs and solve the problem of lighting.
Thomas Edison did not invent or discover electricity, instead he figured out how to properly apply it in the RIGHT WAY to solve a problem — one of the problems being lighting.
Just Using It Is Nothing Special
Saying that you’re building an AI or blockchain powered something is like saying you’re building an electricity powered fan or fridge. Of course it is powered by electricity!
Almost everything is powered by electricity! Similarly, almost everything will be powered by blockchain and AI in the future. It’s nothing special.
The Prize Lies In Applying Blockchain & AI To The Right Problem Correctly
Real AI & Blockchain start-ups usually won’t say that they are an AI or Blockchain start-up. They would say something like that they are a logistics start-up, but when you really understand how they were able to make logistics 60% more efficient and cost effective, you’d realise that they were able to do it because they have immense amount of data and were able to use AI to increase the efficiency of logistics by 60%.
Watch this interview by Sam Altman from Y-Combinator to understand what I mean.
Most ASEAN AI & Blockchain Start-Ups Are Just Bullshitting
Unfortunately, from what I am seeing, most ASEAN “AI” and “Blockchain” start-ups are just bullshitting. Not every problem in the world should be solved using blockchain or AI.
The prize lies in applying the right technology to the right problem in the right way.
Most start-ups are just trying to plug AI & Blockchain into problems in a way that doesn’t make sense just because it’s “the trend”. Any true AI or Machine Learning expert would know that there are many levels to AI and you will need a significant data set for AI to really work.
You need huge datasets to be able to train your Machine Learning models and the ability to come up with the right hypotheses to test and work towards solving a problem more efficiently.
Just Plugging Tensorflow Into Your Project Doesn’t Make You An AI Start-Up
A lot of these start-ups are just plugging in a publicly available library like Tensorflow without any meaningful purpose just to call themselves an AI start-up.
This is something that anyone who knows how to code can do.
I am not going to say which ones, but plenty of ICOs I know are actually elaborate con-jobs, the money raised is already long gone, spent on lavish offices and siphoned out by the founders, but many are still oblivious to what is actually happening.
Wowwwz Is Actually Perfect For AI — But We Don’t Call Ourselves AI Powered Yet
With the data graph that we have, Wowwwz is actually perfect for AI & Machine Learning, but we are not shameless enough to call ourselves an AI start-up because at this moment, we aren’t one yet. Simple if/else statements, complex queries and algorithms would do a better job at the moment.
We would integrate AI & Machine Learning into Wowwwz at some point in the future, but it will be for very specific purposes, to solve a very specific problem. You need to know what you are doing and what do you plan to achieve, and plan the relevant models accordingly.
Otherwise, your Machine Learning models might come to the conclusion that poor people shouldn’t be able to find a soulmate or less attractive people should not be able to find true love, which is untrue, horrible, ethically wrong, and absolutely not what you want to achieve.
It would be perfect to help singles identify which other singles would be a good match based on their values, social graphs, compatibility and interests based on certain ground rules or to identify which couple activities a given couple with a certain set of interests would enjoy doing together on a weekend, but we need to be very clear on why and how we are going to integrate AI & Machine Learning into solving a problem and helping everyone in this world find true love and live happily ever after.
Learn To Invest In Truly Innovative Tech Start-Ups Solving Global Problems
What ASEAN VCs should really be investing in are truly innovative tech start-ups that are solving global problems and can become 100 Billion USD global companies like Google or Facebook if they succeed.
I believe that start-ups like Wowwwz is one of them.
Our ecosystem has the talent & money to get them started, but start-ups like these are not getting funded because they are not copycats and don’t generate any significant revenue for the first 5–7 years of their lives before they have solved the problem thoroughly.
What VCs here need to understand is that such start-ups are the ones that would eventually generate billions in profit every quarter once everyone in the world is using the service everyday, just like Google & Facebook. They both followed the same path and did not generate any significant revenue until they are confident they have solved the problem thoroughly.
Find the latest Alphabet Inc. (GOOG) stock quote, history, news and other vital information to help you with your stock…finance.yahoo.com
Find the latest Facebook, Inc. (FB) stock quote, history, news and other vital information to help you with your stock…finance.yahoo.com
If ASEAN VCs really want to make money and not be stuck with small to medium sized start-ups that can’t IPO or get acquired, they need to change their mindset, learn from the best VCs in the world and start investing in game changing start-ups like these.
You can start with Wowwwz.
I hope you will help me out a little here so that I can build the tools to help everyone in this world find their soulmate whom they can grow old together and live long happy lives with.
If you have access to a brand, company, working building, community or even VCs, let me know; I can help you build a community of people who like your product or brand and introduce them to each other, or bring a community closer by introducing people at the same building or company to each other!
You can reach me at email@example.com or LinkedIn.
Don’t forget to SHARE this story and all related stories to as many of your friends too, we need to more people to spread the word so we can start a positive paradigm shift in our ecosystem.
Also, you can help by downloading the app, give us a good rating, subscribe to my Youtube Channel about relationships-coming soon, leave your email, join this Facebook Group and check back every few months for cool updates.
*Search for Wowwwz on the App Store or Play Store to download
JohnsonKhooTV — Subscribe to my upcoming Youtube Channel where I will be talking about real life stories about love & relationships
FB Group To Stay Updated On Wowwwz’s Journey — Join this Facebook Group so you can stay updated on our journey, new features and new stories and new updates on our quest to build a start-up that could help everyone in this world find true love and live happily ever after
Help me out, because many people’s lifetime happiness is in your hands.
Once you’ve downloaded the app and signed up, you can also start to meet other amazing single people in Kuala Lumpur or Singapore who share the same values and interests as you by scanning the QR codes below.
*Search for Wowwwz on the App Store or Play Store to download
SCAN with Wowwwz to meet amazing single people in Kuala Lumpur!
SCAN with Wowwwz to meet amazing single people in Singapore!
Do SHARE this with as many of your single friends as possible so they can find their soulmate soon, we can get more traction, and raise the funding necessary to build you more cool features that will help amazing single people meet each other and amazing couples grow their relationship!
Let’s do this together!
The world needs YOUR HELP so all of us can find true love!
You have the power to become a superhero!