Latest / SEA of Startups / 🎙EP 4B: How Jakarta’s AI Megacenter & Malaysia’s VC Reboot Shape SEA’s Tech Future

Transcript

🎙EP 4B: How Jakarta’s AI Megacenter & Malaysia’s VC Reboot Shape SEA’s Tech Future · SEA of Startups

• 0:02
  Welcome to The Sea of Startups,
• 0:03
  the show where Southeast Asia's startup game gets real.
• 0:07
  SPEAKER_02: No pitch decks,
• 0:09
  SPEAKER_02: no puff pieces,
• 0:10
  SPEAKER_02: just unfiltered stories from the founders,
• 0:13
  SPEAKER_02: funders,
• 0:14
  SPEAKER_02: and operators building the region's future.
• 0:18
  SPEAKER_02: In this second half of episode four,
• 0:20
  SPEAKER_02: we're moving from capital flows to compute infrastructure,
• 0:24
  from Jakarta's massive AI data center to Malaysia's sovereign
• 0:28
  startup ambitions.
• 0:30
  It's the continuation of our deep dive into Southeast Asia's
• 0:33
  tech backbone.
• 0:35
  And a reminder that that in this region where the data goes
• 0:39
  often decides where the power lies.
• 0:41
  SPEAKER_02: So let's pick up where we left off.
• 0:50
  SPEAKER_00: Next,
• 0:50
  the data center arm of UAE's DMAC group has started building a
• 0:55
  colossal 2.3 billion
• 0:58
  SPEAKER_00: AI-focused data center in Jakarta.
• 1:00
  And I can't emphasize more,
• 1:03
  but this thing is massive in a designed IT load of 144
• 1:07
  megawatts.
• 1:10
  SPEAKER_00: So meaning it can power tons of high-performance servers.
• 1:13
  SPEAKER_00: And they broke ground after buying land just four months ago,
• 1:17
  SPEAKER_00: March 2005,
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  SPEAKER_00: and they're aiming to get phase one operational by end of next year.
• 1:22
  SPEAKER_00: So what's your view, Kevin?
• 1:24
  SPEAKER_02: Yeah,
• 1:25
  they put it into part of the broader context because across
• 1:29
  Southeast Asia,
• 1:30
  SPEAKER_02: we've been seeing a huge increase in investments in data sensors.
• 1:34
  Basically,
• 1:35
  all your hyperscalers,
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  whether you're talking about Microsoft,
• 1:38
  Google,
• 1:39
  AWS,
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  SPEAKER_02: Everyone has been dumping a lot of money into the sector.
• 1:45
  And you have a lot of the names that you may not necessarily be
• 1:48
  as familiar with,
• 1:48
  SPEAKER_02: but there's been a big,
• 1:50
  SPEAKER_02: let's call it real estate move towards data sensors,
• 1:53
  SPEAKER_02: understanding that the demand for compute is just increasing.
• 1:57
  But the interesting thing here is that designed IT load that
• 2:04
  this new one is going
• 2:05
  SPEAKER_02: to be able to hold,
• 2:07
  SPEAKER_02: where most of the ones that you see are on the much,
• 2:10
  SPEAKER_02: much smaller size.
• 2:11
  SPEAKER_02: And when I say much smaller size,
• 2:13
  SPEAKER_02: maybe 10%,
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  SPEAKER_02: 20% the size of this massive one that they're planning.
• 2:20
  So it is definitely like,
• 2:22
  let's take a hyperscaler and put it on steroids because it's
• 2:25
  there's going to be a huge surge in demand for ai compute and
• 2:30
  there's going to
• 2:30
  start being similar sort of moves across the region so i think
• 2:34
  this is a space to
• 2:35
  watch out for in a lot of the circles that i'm in i hear more
• 2:38
  and more people
• 2:39
  SPEAKER_02: talking about it and a lot of people are interested in the full stack of
• 2:44
  investments that are going to end up having to come along with
• 2:47
  the the the increase
• 2:49
  SPEAKER_02: in these data sensors
• 2:51
  SPEAKER_00: Yeah, exactly.
• 2:52
  SPEAKER_00: And the founder of the Mac,
• 2:53
  SPEAKER_00: Hussein Sachwani,
• 2:55
  SPEAKER_00: he said the scale of AI workload demands a new class of infrastructure.
• 3:00
  So in other words,
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  if everyone's developing AI,
• 3:04
  you need specialized facilities.
• 3:06
  SPEAKER_00: And this Jakarta Center will feature...
• 3:09
  SPEAKER_00: high-density AI racks and for those hot, power-hungry AI servers.
• 3:16
  SPEAKER_00: And it's targeting a PUE of 1.32.
• 3:20
  SPEAKER_00: In layman terms,
• 3:20
  SPEAKER_00: that's what I'm trying to understand is that,
• 3:22
  SPEAKER_00: which is quite efficient by global standards.
• 3:25
  And so they're emphasizing it's greenish and cutting edge,
• 3:29
  the way I see it.
• 3:30
  Yeah.
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  SPEAKER_02: Yeah,
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  SPEAKER_02: you kind of have to,
• 3:32
  because there's already data coming out in regards to some of
• 3:35
  the data sensors in
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  the US in regards to what percent of the grid power that
• 3:41
  they're starting to pull.
• 3:42
  SPEAKER_02: And it's becoming massive.
• 3:43
  SPEAKER_02: So we're going to end up having to see,
• 3:45
  SPEAKER_02: as he said,
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  SPEAKER_02: a new class of infrastructure that is more efficient,
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  SPEAKER_02: because as demand comes along,
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  we're either going to end up having to increase the amount of
• 3:55
  power production,
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  SPEAKER_02: which could end up being a lot less green,
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  or we're going to have to figure out how to become much more
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  efficient because one
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  SPEAKER_02: way or another,
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  SPEAKER_02: power hungry is kind of an understatement.
• 4:08
  SPEAKER_02: So it's certainly going to end up being...
• 4:13
  A trend going forward is people are going to be talking much
• 4:16
  more about these
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  SPEAKER_02: efficiency metrics in regards to how data sensors are operating.
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  SPEAKER_02: And that's going to be,
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  SPEAKER_02: you know,
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  SPEAKER_02: as as a lot of these have to solicit the governments,
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  SPEAKER_02: whether country governments or regional local.
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  They're going to likely end up having to talk about what the
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  impact on the local
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  SPEAKER_02: electricity grid and power consumption is going to end up being.
• 4:39
  SPEAKER_02: So talking about these efficiency standards,
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  certainly new class of infrastructures is definitely going to
• 4:45
  end up being
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  SPEAKER_02: demanded.
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  SPEAKER_00: I mean,
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  SPEAKER_00: I sure hope it's going to be efficient because all these data centers,
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  SPEAKER_00: they do have an impact on the environment.
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  SPEAKER_00: And being where we are right now,
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  SPEAKER_00: which is quite close to the equator,
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  SPEAKER_00: it's not going to help us,
• 5:00
  SPEAKER_00: right?
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  SPEAKER_00: It's just going to get hotter at this end of the world.
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  SPEAKER_02: Yeah, they require a lot of cooling.
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  So being in a tropical destination is probably not the best
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  place to stay cool.
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  SPEAKER_00: Yeah, exactly.
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  SPEAKER_00: And anyway,
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  SPEAKER_00: so based on this,
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  SPEAKER_00: I guess,
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  SPEAKER_00: Jakarta's appeal has pretty much grown and,
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  SPEAKER_00: you know,
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  Indonesia's digital economy is booming and there's a push for
• 5:22
  data sovereignty.
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  The government and major telcos want critical data and compute
• 5:27
  infrastructure in-country.
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  SPEAKER_00: often called Sovereign Computer.
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  And we have seen moves like Telcom Indonesia partnering with
• 5:35
  IBM on a server AI
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  SPEAKER_00: cloud solution and other Indonesian players launching AI infrastructure.
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  So having a giant AI-ready data center locally fits that agenda
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  and keeps the data
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  SPEAKER_00: and the AI processing on Indonesian soil.
• 5:52
  SPEAKER_00: It's a very strategic choice and...
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  SPEAKER_00: Somehow or other, it will all lead back to Singapore again.
• 5:58
  SPEAKER_00: I guess you can say that Singapore is a Rome in this part of the world.
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  All roads lead to Rome and Southeast Asia's data centers
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  gravitate to Singapore
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  SPEAKER_00: because of its stability and it has good connectivity as well.
• 6:11
  SPEAKER_00: Or maybe Malaysia, cheaper electricity.
• 6:14
  SPEAKER_00: But I guess Jakarta is really getting a lot of heat.
• 6:16
  SPEAKER_00: Yeah.
• 6:17
  SPEAKER_02: Yeah, I mean, I think there's a couple of things to unpack here.
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  SPEAKER_02: Every country is now pushing more of this sovereign compute,
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  SPEAKER_02: especially as more AI starts coming around.
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  SPEAKER_02: You're going to start seeing more data privacy,
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  SPEAKER_02: data protections,
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  SPEAKER_02: more involvement by policymakers,
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  SPEAKER_02: etc.
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  So I think a lot of it because of the lead time in order to get
• 6:37
  these data sensors
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  SPEAKER_02: up and operational.
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  You're already starting to see a lot of these players being
• 6:42
  kind of ahead of the
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  SPEAKER_02: game,
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  SPEAKER_02: like AWS,
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  SPEAKER_02: for example.
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  I think they've committed like six billion in each and every
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  single one of the
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  SPEAKER_02: Southeast Asian,
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  SPEAKER_02: the top six Southeast Asian countries,
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  SPEAKER_02: Indonesia,
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  SPEAKER_02: Malaysia,
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  SPEAKER_02: Singapore,
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  SPEAKER_02: Thailand,
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  SPEAKER_02: Philippines.
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  SPEAKER_02: It's basically across the board.
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  And so I think you're going to start seeing a lot of these
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  different plays being
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  SPEAKER_02: replicated as that starts playing out.
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  SPEAKER_02: I think the off roads lead back to Singapore is definitely true.
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  SPEAKER_02: You know,
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  SPEAKER_02: like there's this aspect,
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  SPEAKER_02: especially in Malaysia where,
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  SPEAKER_02: you know,
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  SPEAKER_02: Johor is booming right now and they did the special economic zone.
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  They've done a few other sort of policy changes in order to try
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  and create more
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  SPEAKER_02: bridge and cooperation with Singapore.
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  SPEAKER_02: And I think because there's much more abundance of land,
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  There is electricity,
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  although there are some supply constraints on the electricity.
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  SPEAKER_02: The other key factor is water.
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  SPEAKER_02: I am quite curious because,
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  SPEAKER_02: as I learned,
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  SPEAKER_02: because I was not aware previously,
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  SPEAKER_02: but during the pandemic,
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  there was a lot of news stories about the export of water to
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  Singapore coming out
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  SPEAKER_02: of Malaysia.
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  SPEAKER_02: And Malaysia actually started slowing that down,
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  SPEAKER_02: which started leaving a lot of thirsty people out.
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  SPEAKER_02: down in Singapore.
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  SPEAKER_02: As the data sensor boom in Johor happens,
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  SPEAKER_02: that's going to put a lot more demand on water resources.
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  And so there is a curious connection of what's that going to
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  end up doing as all of
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  a sudden they need to start running the calculation of the
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  allocation of a finite
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  SPEAKER_02: resource.
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  SPEAKER_02: of where is it going?
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  Is it feeding my data centers that are now popping up in the
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  southern state of
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  SPEAKER_02: Johor,
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  SPEAKER_02: or is it being exported to our southern neighbor?
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  SPEAKER_02: So certainly a number of things to think about,
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  SPEAKER_02: but without a doubt,
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  SPEAKER_02: the boom in data center is not slowing down.
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  SPEAKER_02: Global phenomenon,
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  SPEAKER_02: we're realizing it here in Southeast Asia,
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  and it's just going to keep on picking up space because as AI
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  just keeps on picking
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  SPEAKER_02: up,
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  SPEAKER_02: our demand for compute is just going to continue to skyrocket.
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  SPEAKER_00: Yeah,
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  and I hope the Johor and Malaysian government will be smart
• 8:49
  enough to actually use
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  SPEAKER_00: that to their advantage.
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  Because if you really think about it,
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  you talk about hydroelectric stuff,
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  right?
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  SPEAKER_00: You can actually use water to power the grid.
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  SPEAKER_00: So hopefully there's some line of thinking that goes with that too.
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  SPEAKER_00: It's an arm race to provide the...
• 9:04
  SPEAKER_00: Undersea cables,
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  SPEAKER_00: data halls,
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  SPEAKER_00: and the server racks that tomorrow's tech like AI,
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  SPEAKER_00: IoT,
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  SPEAKER_00: 5G will run on.
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  SPEAKER_00: And Jakarta emerging as a hub is really notable.
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  Perhaps a sign that Indonesia is giving its huge population and
• 9:19
  market needs its
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  SPEAKER_00: own regional hub.
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  SPEAKER_00: Although everything leads back to Singapore, I get it.
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  SPEAKER_00: But at the end of the day, physically, it's an island.
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  SPEAKER_00: So I'm not throwing heat, okay?
• 9:31
  SPEAKER_00: Don't come at me.
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  SPEAKER_00: But Singapore can't handle everything.
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  SPEAKER_00: It really can't.
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  Singapore has that moratorium on new data centers for a while
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  for environmental reasons.
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  SPEAKER_00: So investors look to neighboring countries.
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  SPEAKER_00: So people like us, I mean, we benefit from that.
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  SPEAKER_00: And plus,
• 9:50
  SPEAKER_00: land and power are cheaper and indoor,
• 9:52
  SPEAKER_00: and though one can't ignore the challenges,
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  SPEAKER_00: can Jakarta ensure reliable power and cooling for 144 megawatt beasts?
• 10:02
  SPEAKER_00: They will likely have to if they're attracting AI workloads.
• 10:07
  SPEAKER_02: Yeah, without a doubt.
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  SPEAKER_02: Indonesia is a big startup ecosystem,
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  SPEAKER_02: and even though it kind of took the biggest hit as the bubble burst,
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  it's going to end up being one of the primary startup
• 10:21
  ecosystems in Southeast Asia
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  SPEAKER_02: going forward.
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  SPEAKER_02: So the demand for computers is going to end up being there.
• 10:27
  SPEAKER_02: As we're moving into this new era of technology,
• 10:30
  SPEAKER_02: the same way that we invested in the prior infrastructure layers,
• 10:35
  SPEAKER_02: electricity lines,
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  then we got into fiber optic or whatever other sort of cables
• 10:41
  that we were
• 10:41
  SPEAKER_02: utilizing.
• 10:42
  SPEAKER_02: This is just the new infrastructure plan.
• 10:44
  SPEAKER_02: And you actually see a lot of the really large infrastructure
• 10:50
  private equity infrastructure players moving heavily into the
• 10:54
  space so in the in
• 10:55
  the long term we're going to end up starting to see a lot of
• 10:58
  this in the short term
• 10:59
  i hope this has residual direct benefits to startups you're
• 11:02
  already starting to see
• 11:03
  a lot more let's call it generosity of the startup programs
• 11:07
  that many of these
• 11:08
  hyperscalers are giving out there's always been like the credit
• 11:11
  model that many of
• 11:12
  them have had starting to be much more generous it's starting
• 11:15
  to become more of
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  SPEAKER_02: like a a battle for a
• 11:18
  SPEAKER_02: players to come onto their systems.
• 11:22
  SPEAKER_02: And hopefully we'll start seeing the startup ecosystem benefit out of it.
• 11:27
  SPEAKER_00: And essentially, it's paving the way for the next gen of startups.
• 11:30
  SPEAKER_00: And it's not just software and funding.
• 11:34
  SPEAKER_00: You need these digital factories where computation happens.
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  SPEAKER_00: So think about a budding AI startup in Southeast Asia.
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  SPEAKER_00: Their computing needs can be huge.
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  SPEAKER_00: And if the region lacked that optimized data center,
• 11:47
  SPEAKER_00: those startups would rely on distant cloud regions.
• 11:51
  SPEAKER_00: which could be potentially suboptimal.
• 11:53
  And now with projects like this,
• 11:55
  they are the enablers putting in place locally.
• 11:59
  SPEAKER_00: We talked about flyovers earlier.
• 12:01
  SPEAKER_00: So it's like building highways before the cars arrive.
• 12:04
  And it aligns with the broader strategy of invest in tech
• 12:07
  infrastructure to
• 12:08
  SPEAKER_00: future-proof the economy.
• 12:10
  SPEAKER_00: Residual benefits will be gained.
• 12:12
  SPEAKER_00: So that's definitely a story to watch.
• 12:15
  SPEAKER_00: And now from infrastructure bets to policy nudges.
• 12:19
  SPEAKER_00: Our third big topic,
• 12:21
  SPEAKER_00: you know,
• 12:21
  SPEAKER_00: Kevin,
• 12:22
  SPEAKER_00: take us into Malaysia's recent moves to boost its startup acquisition.
• 12:26
  SPEAKER_00: What's that like?
• 12:28
  Yeah,
• 12:29
  so there were basically three things that ended up getting
• 12:31
  talked about just recently.
• 12:34
  SPEAKER_02: A few different initiatives.
• 12:36
  SPEAKER_02: One was Jelawang Capital, which had previously been signaled.
• 12:40
  SPEAKER_02: It was announced a long time ago,
• 12:41
  but they finally came out and announced their first set of VCs
• 12:45
  that they were
• 12:45
  SPEAKER_02: investing in.
• 12:48
  SPEAKER_02: You had them release a new set of VC tax incentives.
• 12:51
  This is not the first iteration,
• 12:53
  but it was a newly publicized promotion of it.
• 12:57
  And then you also have Cradle coming out with their Startup
• 13:01
  ASEAN regional program.
• 13:03
  SPEAKER_02: All new announcements.
• 13:04
  They've been pushing the marketing channels on their efforts
• 13:07
  relatively recently.
• 13:09
  And they're trying to position Malaysia as a major hub for both
• 13:15
  VC and startup activity.
• 13:17
  SPEAKER_02: I guess they see them trying to compete up with Singapore.
• 13:22
  SPEAKER_00: Okay, so let's start with the first part.
• 13:24
  So Jelawang,
• 13:25
  named after a waterfall,
• 13:26
  I believe,
• 13:27
  and it's quite poetic for a fun name.
• 13:30
  SPEAKER_00: Give us a lowdown on Jelawang.
• 13:32
  SPEAKER_02: To be honest with you,
• 13:33
  I'm a bit cynical because it's not the first time that Malaysia
• 13:37
  has tried to do
• 13:38
  SPEAKER_02: this.
• 13:39
  And what ended up happening was the prior iterations of their
• 13:43
  attempt to be a fund
• 13:44
  SPEAKER_02: of funds for venture capital to inspire the ecosystem.
• 13:48
  SPEAKER_02: They all got consolidated underneath Kazana, the sovereign wealth fund.
• 13:54
  SPEAKER_02: So these were MavCap, which was the original, it dates back some time.
• 13:58
  And then during the pandemic,
• 13:59
  they came out with another one that was called Pinjana.
• 14:03
  SPEAKER_01: Yeah.
• 14:04
  SPEAKER_02: Neither of them were effective.
• 14:07
  You can't really point to any of them as being success cases to
• 14:13
  model after.
• 14:14
  SPEAKER_02: And so both of those ended up getting consolidated underneath Kazana,
• 14:18
  and they came out with this new idea of wanting to do a new
• 14:21
  iteration of the fund
• 14:22
  SPEAKER_02: of funds.
• 14:23
  SPEAKER_02: It kind of seems like same playbook,
• 14:25
  SPEAKER_02: new name,
• 14:26
  SPEAKER_02: new slogan,
• 14:27
  SPEAKER_02: new marketing,
• 14:28
  SPEAKER_02: but let's just do more of the same as they've done in the past.
• 14:33
  SPEAKER_02: you know, you do the same thing.
• 14:35
  SPEAKER_02: Are you really expecting to have a different result?
• 14:37
  SPEAKER_02: So yeah,
• 14:38
  a bit cynical in regards to whether or not this is actually
• 14:41
  going to play out the
• 14:42
  SPEAKER_02: way they think.
• 14:44
  SPEAKER_00: Right.
• 14:45
  And like I said,
• 14:46
  it's a form of rebranding and time will only tell if it really
• 14:50
  works.
• 14:51
  SPEAKER_00: So I'm just going to leave that there and let the audience sit with that.
• 15:02
  SPEAKER_00: and we can move on to the tax incentives.
• 15:05
  SPEAKER_00: So they're basically telling VCs and PE folks, like, come here.
• 15:10
  SPEAKER_00: Let us keep more of your profits, right?
• 15:12
  SPEAKER_02: Yeah,
• 15:13
  so this is not drastically different than the tax incentives
• 15:17
  that they put out a
• 15:17
  SPEAKER_02: couple of years back.
• 15:18
  Basically trying to put out concessionary taxes for the
• 15:21
  management companies and
• 15:22
  SPEAKER_02: for the funds themselves.
• 15:24
  The tricky part on the funds themselves is that Malaysia has a
• 15:27
  zero capital gains tax rate.
• 15:29
  It seems like it's signaling that they're not going to treat
• 15:32
  carried interest as capital gains.
• 15:36
  So that's a bit of a question mark that I haven't had a chance
• 15:38
  to talk to a tax
• 15:39
  SPEAKER_02: attorney,
• 15:40
  SPEAKER_02: but it's probably something there.
• 15:43
  The flip side of that is there's probably not a lot of
• 15:46
  institutional investors that
• 15:48
  SPEAKER_02: are going to domicile their actual fund in Malaysia.
• 15:53
  So the applicability of this is probably pretty limited to the
• 15:57
  Malaysia only investor base.
• 16:00
  There may be something out of the Jellawang that we just talked
• 16:03
  about to where they
• 16:04
  SPEAKER_02: want to have a Malaysia domicile.
• 16:06
  But as somebody that's actually had to go out and get
• 16:09
  institutional capital...
• 16:11
  institutional capital really only likes a handful of geographic
• 16:14
  destinations for
• 16:15
  SPEAKER_02: being a fund domicile.
• 16:17
  SPEAKER_02: And Malaysia is not on that list.
• 16:18
  SPEAKER_02: You have places like Singapore,
• 16:20
  SPEAKER_02: US Delaware,
• 16:22
  SPEAKER_02: maybe a British Virgin Islands,
• 16:23
  SPEAKER_02: Cayman,
• 16:24
  SPEAKER_02: used to be Hong Kong before the geopolitics got in the way.
• 16:27
  SPEAKER_02: But these are kind of like the standard sort of destinations.
• 16:30
  SPEAKER_02: And Malaysia is not on that list.
• 16:32
  SPEAKER_02: And so the applicability seems to be relatively limited.
• 16:36
  SPEAKER_02: Yeah.
• 16:37
  SPEAKER_02: If I were them, I wouldn't be focusing so much on that component of it.
• 16:42
  What they can focus on is the tax incentive for the actual fund
• 16:48
  management entities.
• 16:50
  SPEAKER_02: And the positive is that the last time that they came out with this,
• 16:53
  I gave a heavy criticism that it was originally intended for if
• 16:57
  they were investing
• 16:58
  SPEAKER_02: solely in Malaysia.
• 17:00
  SPEAKER_02: And there was a few different criteria that it was based on.
• 17:05
  SPEAKER_02: And I basically came back and said,
• 17:07
  SPEAKER_02: you should be focusing on percent of capital invested in Malaysia,
• 17:12
  SPEAKER_02: not on other sort of factors,
• 17:15
  SPEAKER_02: which is an easy one for them to come around on.
• 17:19
  SPEAKER_02: I think that there's an advantage from a cost standpoint,
• 17:21
  SPEAKER_02: because simply from cost of headcount to have them in Malaysia,
• 17:25
  SPEAKER_02: you can actually compete on where the management company is located at.
• 17:30
  SPEAKER_02: You get cheaper rental space here than Singapore.
• 17:32
  SPEAKER_02: You have
• 17:34
  SPEAKER_02: Lower cost of headcount here, still cover the region.
• 17:37
  So there's some validity in making sense out of trying to
• 17:41
  incentivize the management companies.
• 17:43
  But this is something that's already been done in the past and
• 17:47
  it wasn't effective.
• 17:48
  SPEAKER_02: So I was still,
• 17:50
  it's a little bit of a question mark of whether or not good
• 17:52
  intention is actually
• 17:53
  SPEAKER_02: going to end up having positive results.
• 17:56
  SPEAKER_00: Yeah.
• 17:57
  SPEAKER_00: And again,
• 17:58
  Malaysia is put in a spotlight whereby people always take a
• 18:01
  step back and really
• 18:02
  SPEAKER_00: just skeptical about the success of their initiatives.
• 18:06
  SPEAKER_02: Yeah, exactly.
• 18:07
  SPEAKER_02: So I'll take something else that's recently in the news because they're
• 18:10
  SPEAKER_02: flip-flopping around on SST.
• 18:12
  SPEAKER_02: In regards to adding new things into it,
• 18:15
  SPEAKER_02: there is a trust factor involved,
• 18:17
  SPEAKER_02: which I talked about when referencing Singapore,
• 18:20
  SPEAKER_02: is that they have decades long of consistent,
• 18:23
  SPEAKER_02: reliable rules,
• 18:26
  SPEAKER_02: regulations,
• 18:26
  SPEAKER_02: etc.
• 18:27
  Am I going to uproot and change the entire location of my team
• 18:31
  when maybe you get a
• 18:32
  change of heart next year and all of a sudden have flipped
• 18:34
  around what the rules of
• 18:36
  SPEAKER_02: the game are?
• 18:37
  SPEAKER_02: So there is quite a bit of a question mark in regards to that.
• 18:44
  It's hard for that not to come into play because if you're
• 18:47
  trying to lure foreign
• 18:48
  SPEAKER_02: investors in,
• 18:49
  SPEAKER_02: they're looking at it.
• 18:50
  SPEAKER_02: They don't know you personally.
• 18:51
  SPEAKER_02: All they're seeing is these sorts of data points of this,
• 18:55
  SPEAKER_02: that,
• 18:55
  SPEAKER_02: then back,
• 18:56
  SPEAKER_02: then this,
• 18:56
  SPEAKER_02: then back,
• 18:57
  SPEAKER_02: then this.
• 18:58
  SPEAKER_02: And you kind of look at it and you say,
• 18:59
  SPEAKER_02: are you playing table tennis or are you playing policy regulations?
• 19:03
  SPEAKER_02: Yeah.
• 19:04
  SPEAKER_00: Yeah, it's a pretty much grey area, like the way how Malaysia operates.
• 19:08
  SPEAKER_00: It's no fine line compared to its neighbouring country in Singapore,
• 19:11
  SPEAKER_00: whereby everything is just pretty much black and white.
• 19:13
  These are the rules,
• 19:14
  you're just going to follow it and that's it,
• 19:16
  straightforward.
• 19:17
  SPEAKER_00: There's no wishy-washy around that.
• 19:19
  It's been a bit tricky to get things off the ground and you
• 19:21
  really think about it,
• 19:22
  SPEAKER_00: like even with these two programmes that Jilawang has,
• 19:25
  SPEAKER_00: you know,
• 19:26
  SPEAKER_00: the Emerging Managers programme.
• 19:28
  which fosters new local VCs and the Regional Managers
• 19:31
  Initiative to bring in and
• 19:33
  SPEAKER_00: collaborate with established regional VCs.
• 19:35
  And these five are chosen with a mix in local ones like Vin
• 19:38
  Capital and Kairos Capital.
• 19:40
  SPEAKER_00: They are an interesting couple of regional players.
• 19:42
  SPEAKER_00: AdWorks from Taiwan,
• 19:43
  SPEAKER_00: First Move,
• 19:43
  SPEAKER_00: which I think is Malaysian,
• 19:44
  SPEAKER_00: but with a regional scope and Granite Asia.
• 19:47
  SPEAKER_00: Where's the play Ad really?
• 19:48
  And it kind of flows through the way things are done,
• 19:51
  like with tax incentives.
• 19:52
  You're trying to position Malaysia as a global competitive hub
• 19:56
  for venture and private capital.
• 19:58
  And even brag that KL has just entered top 20 in startup
• 20:01
  genomes imaging ecosystem ranking.
• 20:03
  SPEAKER_00: It's all nice and dandy,
• 20:05
  SPEAKER_00: but when it comes to the execution part,
• 20:07
  SPEAKER_00: I'm aligned with you in terms of how well it can be done and how,
• 20:12
  SPEAKER_00: you know,
• 20:14
  SPEAKER_00: from...
• 20:15
  SPEAKER_00: from Malaysia being in the bad books again.
• 20:16
  SPEAKER_00: There have been so many news pieces.
• 20:18
  I'm not going to dive into that because I think we are way past
• 20:21
  that at this point.
• 20:22
  SPEAKER_00: But it makes you wonder,
• 20:23
  SPEAKER_00: like the succession of all this stuff,
• 20:25
  will it ever hit a point whereby finally Malaysia would gain
• 20:29
  some better news from
• 20:31
  SPEAKER_00: these initiatives.
• 20:32
  SPEAKER_00: And just a slight tangent there,
• 20:33
  SPEAKER_00: but let's not forget about the third leg,
• 20:36
  SPEAKER_00: you know,
• 20:36
  SPEAKER_00: the cradle Asia platform and the broader regional play.
• 20:41
  SPEAKER_00: And Malaysia is the ASEAN chair in 2025.
• 20:44
  It's a good place to give Malaysia the stage to push regional
• 20:47
  startup integration.
• 20:50
  SPEAKER_02: Yeah, yeah.
• 20:51
  SPEAKER_02: So I wish I could switch off my cynical nature,
• 20:55
  SPEAKER_02: but I have too much experience with this organization.
• 20:59
  SPEAKER_02: The challenge across the board with this is that...
• 21:03
  SPEAKER_02: There's a lot of good attention coming down from the top,
• 21:06
  but where it's always stumbled at is translating that into
• 21:11
  execution and action and
• 21:14
  SPEAKER_02: actually getting ROI on these initiatives.
• 21:17
  Because as I've already said,
• 21:19
  none of the stuff that they're trying to do is new.
• 21:22
  SPEAKER_02: They've done it before.
• 21:24
  Every single one of these initiatives,
• 21:26
  with the exception of this ASEAN one,
• 21:28
  because that's new.
• 21:29
  But they're basically trying to replicate the playbook that
• 21:32
  they did domestically
• 21:33
  SPEAKER_02: and do it at an ASEAN level.
• 21:36
  SPEAKER_02: but it didn't work out at the national level.
• 21:39
  SPEAKER_02: And so like,
• 21:40
  what are they actually trying to do here is a bit of a question
• 21:44
  mark because they
• 21:44
  SPEAKER_02: basically put kind of,
• 21:47
  SPEAKER_02: I'll call it sloppy,
• 21:49
  SPEAKER_02: a kind of a sloppy platform together that is not super useful.
• 21:54
  SPEAKER_02: I don't know who they had design it,
• 21:56
  Now they're going to try and roll it up because they're the
• 21:58
  ASEAN chair and try and
• 22:00
  SPEAKER_02: do something at the ASEAN level.
• 22:02
  SPEAKER_02: At the surface level,
• 22:03
  SPEAKER_02: if you're sitting up way up at the top,
• 22:04
  SPEAKER_02: you're like,
• 22:05
  SPEAKER_02: yeah,
• 22:05
  SPEAKER_02: let's take a leadership role.
• 22:06
  Let's create more of a brand for the country to kind of step
• 22:10
  into a leadership role.
• 22:12
  SPEAKER_02: But if you're down on the details,
• 22:14
  SPEAKER_02: the startup genome report,
• 22:15
  I don't know any practitioner that actually follows that or
• 22:18
  believes that the
• 22:19
  SPEAKER_02: results accurately reflect the rankings across ASEAN.
• 22:22
  A lot of their ratings are based upon factors like policy and
• 22:27
  all of that.
• 22:27
  SPEAKER_02: And in all honesty,
• 22:29
  Malaysia is quite good from an ease of doing business and
• 22:33
  policy standpoint.
• 22:34
  SPEAKER_02: If you start comparing it to a Vietnam or an Indonesia,
• 22:38
  SPEAKER_02: you have less red tape,
• 22:40
  SPEAKER_02: less bureaucracy,
• 22:41
  SPEAKER_02: less of these problems.
• 22:43
  SPEAKER_02: But you also have a lot less of a startup ecosystem.
• 22:46
  And so how does this higher ranking actually connect into what
• 22:49
  the actual startup
• 22:50
  SPEAKER_02: ecosystem truly is on the ground?
• 22:54
  SPEAKER_02: And so that kind of ties back into a lot of this.
• 22:57
  I know good people that are in many of these different
• 23:00
  organizations that are here
• 23:01
  SPEAKER_02: that really intend well.
• 23:03
  SPEAKER_02: But the leadership across these organizations,
• 23:05
  SPEAKER_02: you can't find one person that has an understanding of startups.
• 23:09
  SPEAKER_02: You know,
• 23:09
  SPEAKER_02: not one person that actually came from startup ecosystem,
• 23:14
  SPEAKER_02: startup founder,
• 23:15
  SPEAKER_02: startup investor.
• 23:16
  You just don't find anybody that actually has a relevancy of
• 23:20
  knowledge or experience in them.
• 23:22
  And the challenge that probably is related to the aspect of why
• 23:27
  they're oftentimes
• 23:28
  SPEAKER_02: trying to start on step three without accomplishing step one and two.
• 23:32
  SPEAKER_02: And so with many of this,
• 23:33
  when I start questioning whether or not they're going to end up
• 23:35
  being effective,
• 23:37
  SPEAKER_02: often it's kind of coming back to,
• 23:39
  Are we actually doing the thing that matters for today or are
• 23:42
  we just having these
• 23:44
  nice intentions and let's get some marketing buzz as opposed to
• 23:48
  a real ROI?
• 23:49
  SPEAKER_00: I think at this point,
• 23:54
  SPEAKER_00: it's well understood among investors and policymakers,
• 23:58
  people who are not within the Malaysian ecosystem to have that
• 24:02
  skepticism because
• 24:04
  SPEAKER_00: of the way things have been and are right now.
• 24:07
  SPEAKER_00: But I think perhaps,
• 24:10
  SPEAKER_00: I'm just going to say this,
• 24:10
  SPEAKER_00: I'm just going to give them benefit of doubt and let it be.
• 24:13
  SPEAKER_00: Let's see how it goes.
• 24:14
  SPEAKER_00: To their own credit, right?
• 24:16
  SPEAKER_00: It's a smart move.
• 24:17
  If you can't beat Singapore one-to-one,
• 24:20
  you can broaden the playing field.
• 24:22
  So I guess that's where they're taking it from a leadership
• 24:24
  position and becoming
• 24:25
  SPEAKER_00: the champion of the whole region's integration.
• 24:28
  And that gives Malaysia some itch and possibly first deeps on
• 24:33
  regional initiatives.
• 24:34
  SPEAKER_00: Yeah.
• 24:35
  SPEAKER_00: you know,
• 24:36
  SPEAKER_00: who knows,
• 24:36
  SPEAKER_00: you know,
• 24:36
  SPEAKER_00: it could funnel more regional activity through KL,
• 24:39
  SPEAKER_00: for example,
• 24:40
  like if the startup ICM platform matches setup to investors and
• 24:45
  it runs out of
• 24:45
  SPEAKER_00: Malaysia and Malaysian ecosystems might get more visibility of roles.
• 24:48
  SPEAKER_00: So it's...
• 24:51
  SPEAKER_00: You know, it's a ripple effect.
• 24:52
  SPEAKER_00: It's soft power.
• 24:53
  SPEAKER_00: I am hopeful,
• 24:54
  SPEAKER_00: you know,
• 24:54
  potentially real economic gain if more regional funds and subs
• 24:58
  engage with Malaysia
• 24:59
  SPEAKER_00: as a hub.
• 25:00
  SPEAKER_00: It sounds great.
• 25:00
  SPEAKER_00: I mean, money, tax breaks, big programs.
• 25:03
  Given where Malaysia is at right now,
• 25:05
  there is a point of human capital and network effects.
• 25:10
  SPEAKER_00: So Singapore has a dense network of investors, mentors,
• 25:13
  SPEAKER_00: multinational HQs.
• 25:15
  SPEAKER_00: And Malaysia can't conjure that overnight with money alone.
• 25:19
  SPEAKER_00: And there's also that political will.
• 25:21
  SPEAKER_00: Now, that is the tricky part, right?
• 25:22
  SPEAKER_00: Will this incentive survive if there's a change in government or parties?
• 25:26
  SPEAKER_00: You know, sustained effort is key.
• 25:28
  And over the last few years,
• 25:29
  at least since 2018,
• 25:29
  there have been two rounds of
• 25:33
  SPEAKER_00: government changes.
• 25:35
  SPEAKER_00: So again, that is already impacting the startup ecosystem in Malaysia.
• 25:39
  So I'm just making comparisons to Singapore's EDB and agencies
• 25:43
  have been investing
• 25:44
  SPEAKER_00: in VCs and co-investing in startups for decades.
• 25:47
  SPEAKER_00: And going over to the Middle East,
• 25:50
  whereby Saudi Arabia's PIF is now plowing billions into local
• 25:54
  startups and global
• 25:55
  SPEAKER_00: funds.
• 25:57
  SPEAKER_00: to create a tech hub in Riyadh.
• 25:59
  SPEAKER_00: Results are unknown, but they've still got big pockets.
• 26:02
  And India's SIDBI Fund of Funds launched in 2016 and is often
• 26:07
  cited as a success.
• 26:09
  SPEAKER_00: So all these examples, if they're done right,
• 26:13
  SPEAKER_00: a fund of funds can actually work.
• 26:16
  And the India example is encouraging,
• 26:19
  although true India's market's huge and timing was good.
• 26:22
  But for Malaysia,
• 26:23
  maybe a realistic hope is to significantly boost that 429
• 26:30
  million figure.
• 26:31
  SPEAKER_00: If in a couple of years,
• 26:32
  SPEAKER_00: they're doing a billion a year startup funding,
• 26:36
  SPEAKER_00: that's going to be a big win.
• 26:37
  SPEAKER_02: Hopefully there is something there.
• 26:39
  SPEAKER_02: I would love to jump on the bandwagon of optimists.
• 26:43
  Because I do think that Malaysia has the enabling
• 26:47
  characteristics to be a number
• 26:50
  SPEAKER_02: two startup ecosystem.
• 26:52
  I don't know whether or not we can necessarily dethrone
• 26:54
  Singapore because it's kind
• 26:56
  SPEAKER_02: of entrenched itself as the financial capital.
• 27:01
  SPEAKER_02: of the region,
• 27:02
  but it does certainly have the enabling characteristics to
• 27:05
  where it could be a
• 27:07
  SPEAKER_02: number two.
• 27:08
  SPEAKER_02: And when I arrived in the region,
• 27:10
  SPEAKER_02: it was actually number two,
• 27:13
  SPEAKER_02: but I've watched it fall from a number two all the way down to where it's
• 27:18
  SPEAKER_02: essentially lost a lot of that ground.
• 27:22
  SPEAKER_02: And largely, it's not like any of these programs didn't exist
• 27:25
  SPEAKER_02: during those years of that decline, they were all there.
• 27:28
  SPEAKER_02: They were all doing a lot of this stuff.
• 27:30
  So I'm optimistic because I do think that the startups deserve
• 27:34
  it and that there is
• 27:35
  SPEAKER_02: a lot of that capability.
• 27:37
  SPEAKER_02: They're basically doing a lot of the same things with new slogan.
• 27:40
  I think the proof is in the pudding in regards to we have to
• 27:43
  wait and see where the ROI is.
• 27:44
  SPEAKER_02: I hope it works out.
• 27:46
  SPEAKER_02: But again, history may not repeat itself, but it certainly rhymes.
• 27:50
  SPEAKER_02: If you do the same things, it's hard to expect a different result.
• 27:54
  SPEAKER_00: Yeah, there's a bit of catch-up and maybe defensive play here.
• 27:58
  SPEAKER_00: I'm just going to add on a bit of context.
• 28:00
  SPEAKER_00: So in the past couple of years,
• 28:01
  Indonesia and Vietnam were grabbing a lot of invested attention
• 28:05
  due to huge markets
• 28:06
  SPEAKER_00: and Singapore entrenched itself as a financial hub.
• 28:09
  SPEAKER_00: And over the years, Malaysia has risked being overlooked.
• 28:12
  It's pretty much like Malaysia is kind of the middle child of
• 28:16
  ASEAN startups.
• 28:17
  SPEAKER_00: Not as a large market as Indonesia, not as rich as Singapore.
• 28:22
  SPEAKER_00: And it needs to hustle to really attract attention.
• 28:25
  SPEAKER_00: And these moves are that hassle.
• 28:28
  SPEAKER_00: And I must say,
• 28:28
  SPEAKER_00: the coordination of multiple initiatives,
• 28:31
  SPEAKER_00: funds,
• 28:32
  SPEAKER_00: tax,
• 28:32
  SPEAKER_00: regional platform,
• 28:33
  SPEAKER_00: it's commendable.
• 28:35
  SPEAKER_00: It's fairly comprehensive.
• 28:37
  SPEAKER_00: It's an attempt to stay relevant in the regional startup race.
• 28:42
  SPEAKER_00: And if they follow through over the next 5 to 10 years,
• 28:44
  we might look back at 2025 being the turning point where KL
• 28:48
  became a significant
• 28:50
  SPEAKER_00: startup hub.
• 28:53
  SPEAKER_00: Part of me feels hopeful about that.
• 28:54
  SPEAKER_00: I really hope so.
• 28:55
  SPEAKER_00: Hopefully.
• 28:57
  SPEAKER_00: Yeah,
• 28:57
  SPEAKER_00: I mean,
• 28:58
  SPEAKER_00: worst case scenario,
• 28:59
  SPEAKER_00: if it fizzles,
• 29:00
  SPEAKER_00: it'll be a case study in,
• 29:01
  SPEAKER_00: oh my gosh,
• 29:02
  SPEAKER_00: in a well-intentioned but insufficient policy.
• 29:06
  SPEAKER_00: And, you know, we'll definitely keep an eye, I guess.
• 29:08
  Maybe in a future episode,
• 29:09
  we'll report on Malaysia's big startup push payoff or not.
• 29:13
  SPEAKER_00: I don't know.
• 29:13
  SPEAKER_00: I mean, it's a bold gambit.
• 29:17
  SPEAKER_00: We've touched on a lot of core topics this round.
• 29:19
  SPEAKER_00: Yeah.
• 29:20
  SPEAKER_02: Yeah, I mean, exactly.
• 29:22
  SPEAKER_02: I think common thread is where's the money moving?
• 29:25
  We're seeing in the data in regards to startup activity and the
• 29:29
  whole AI data sensors.
• 29:32
  SPEAKER_02: Hopefully some of these policy channels,
• 29:35
  SPEAKER_02: you know,
• 29:35
  SPEAKER_02: every government has their own initiatives,
• 29:38
  SPEAKER_02: this and that.
• 29:39
  SPEAKER_02: We talked about what Malaysia is doing.
• 29:41
  SPEAKER_02: Hopefully it works out.
• 29:42
  SPEAKER_02: I've got a healthy dose of skepticism.
• 29:45
  But one thing's for certain,
• 29:46
  I think Southeast Asia's tech scene is evolving on multiple
• 29:50
  fronts.
• 29:50
  SPEAKER_02: And I think there's definitely a maturation that's going on.
• 29:53
  SPEAKER_02: I'm net bullish, even though I have the cynicism.
• 29:56
  SPEAKER_02: There's a lot to keep our eyes on.
• 29:58
  SPEAKER_00: And talk about seeing the tech ecosystem from all angles.
• 30:02
  SPEAKER_00: It's all encompassing.
• 30:03
  SPEAKER_00: And before we sign off, a quick call to action for our listeners.
• 30:07
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• 30:09
  SPEAKER_00: please subscribe to CF Startups on your favorite podcast platform.
• 30:13
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• 30:15
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• 30:19
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• 30:21
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• 30:24
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• 30:26
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• 30:29
  SPEAKER_02: Let us know.
• 30:31
  And share this episode with a friend or colleague interested in
• 30:34
  Asian tech,
• 30:35
  SPEAKER_00: especially if they think all the big action is only in Silicon Valley.
• 30:38
  SPEAKER_00: It's not.
• 30:40
  We are here to show that Southeast Asia has its own thrilling
• 30:43
  saga unfolding,
• 30:44
  literally.
• 30:50
  And speaking of untold stories,
• 30:53
  in the next episode,
• 30:54
  we head to the Philippines.
• 30:57
  SPEAKER_00: Kevin sits down with Joseph De Leon,
• 31:00
  SPEAKER_00: angel investor,
• 31:01
  SPEAKER_00: strategist,
• 31:02
  SPEAKER_00: and ecosystem whisperer,
• 31:04
  SPEAKER_00: for a real talk on ambition,
• 31:07
  SPEAKER_00: investing,
• 31:08
  SPEAKER_00: and the billion-dollar gap no one's solving yet.
• 31:11
  SPEAKER_00: Hit follow, and we'll see you there.
• 31:14
  SPEAKER_00: Peace out for now.