Latest / SEA of Startups / 🎙️ EP 8 :Fraud, Fish & the Fragile Currency of Trust

Transcript

🎙️ EP 8 :Fraud, Fish & the Fragile Currency of Trust · SEA of Startups

• 0:01
  SPEAKER_02: Hey everyone, it's Kim Yo here.
• 0:04
  SPEAKER_02: Last week, we talked about enterprise sales being chess, not checkers.
• 0:11
  Well,
• 0:11
  turns out some people have been playing with loaded dice this
• 0:15
  whole time.
• 0:16
  In this week's episode,
• 0:17
  we're diving into Southeast Asia's latest startup soap opera.
• 0:21
  SPEAKER_02: E-Fishery,
• 0:22
  Indonesia's sustainable aquaculture darling that somehow turned
• 0:27
  $150 million in
• 0:28
  SPEAKER_02: real...
• 0:31
  revenue into 750 million dollars on paper it's five times more
• 0:37
  than um the real
• 0:40
  number and it's the math that would make you know even
• 0:44
  elizabeth holmes blush hint
• 0:47
  SPEAKER_02: tyrannos
• 0:51
  SPEAKER_02: This isn't just another founder gone rogue story.
• 0:55
  This is about an entire ecosystem that got so caught up in ESG
• 1:01
  hype and fake it
• 1:02
  till you make it culture that nobody thought to actually count
• 1:06
  the fish feeders.
• 1:08
  SPEAKER_02: SoftBank and Tamase aren't exactly rookie investors.
• 1:12
  Yet here we are asking about how due diligence became optional
• 1:16
  when the checks got bigger.
• 1:18
  SPEAKER_02: And before you think this is just a Southeast Asian problem,
• 1:22
  from Vietnam's $12.5 billion real estate scandal to New York's
• 1:27
  fashion startups
• 1:28
  SPEAKER_02: inflating revenue 30x,
• 1:30
  SPEAKER_02: fraud has a universal playbook.
• 1:33
  SPEAKER_02: But here's the heartbreaking thing about our region today.
• 1:38
  The trust networks here are much tighter and they're more
• 1:41
  relationship-based.
• 1:43
  SPEAKER_02: When trust breaks, the damage spreads faster than the TikTok trend.
• 1:49
  And in a nascent ecosystem still convincing conservative family
• 1:55
  offices that
• 1:56
  SPEAKER_02: startups aren't Ponzi schemes...
• 2:00
  SPEAKER_02: This scandal set us all back.
• 2:02
  SPEAKER_02: Yeah, and so buckle up.
• 2:03
  SPEAKER_02: We're talking about what happens when hype meets reality,
• 2:08
  SPEAKER_02: when ESG stories become too good to question,
• 2:11
  and why the most important business advice is also the most
• 2:17
  uncomfortable.
• 2:19
  SPEAKER_02: Verify, don't just trust.
• 2:22
  SPEAKER_02: Even if it means driving around Java to count actual fish farms.
• 2:28
  SPEAKER_02: Let's dig in.
• 2:36
  SPEAKER_00: All right.
• 2:37
  SPEAKER_00: Welcome back to Sea of Startups.
• 2:39
  SPEAKER_00: I'm Kevin and with me as always is Kim.
• 2:43
  SPEAKER_00: This week, Southeast Asia served us a full startup soap opera.
• 2:46
  We've got tons of interesting things,
• 2:49
  spectacular scandal that's an ongoing saga.
• 2:52
  SPEAKER_00: We've got surprising comeback and,
• 2:55
  SPEAKER_00: you know,
• 2:55
  SPEAKER_00: the market's refusing to stay down despite some of the challenges.
• 3:00
  SPEAKER_00: So, Kim, where do we even start with the chaos to unpack?
• 3:05
  SPEAKER_02: I mean,
• 3:06
  SPEAKER_02: Kevin,
• 3:06
  SPEAKER_02: it's like watching a really expansive reality show,
• 3:10
  SPEAKER_02: maybe the Kardashians,
• 3:11
  SPEAKER_02: I don't know,
• 3:11
  SPEAKER_02: where the sticks are actual villains.
• 3:13
  SPEAKER_02: You know,
• 3:13
  SPEAKER_02: we've got fish farms with cookbooks,
• 3:15
  SPEAKER_02: a Vietnamese gaming giant clawing back to respectability.
• 3:19
  From fraud so blatant that it makes some of like the US
• 3:23
  Theranos and maybe even we
• 3:25
  can toss FTX or some of these other ones in there looking like
• 3:29
  they're kind of on
• 3:31
  SPEAKER_00: par with that.
• 3:31
  SPEAKER_00: So now we've got some recovery stories that,
• 3:35
  SPEAKER_00: maybe are restoring a little bit of faith in some of the fundamentals.
• 3:38
  SPEAKER_00: We've got some interesting stories out there this week.
• 3:40
  SPEAKER_00: So some good stuff for us to tackle into.
• 3:43
  SPEAKER_02: Yeah,
• 3:44
  SPEAKER_02: and speaking of Toronto,
• 3:45
  SPEAKER_02: it's a bit like Enron,
• 3:46
  SPEAKER_02: but in a Gen Z Enron scandal in a way,
• 3:50
  SPEAKER_02: I guess,
• 3:51
  SPEAKER_02: 25 years later.
• 3:52
  SPEAKER_02: And,
• 3:53
  SPEAKER_02: you know,
• 3:53
  SPEAKER_02: here's what struck me,
• 3:54
  SPEAKER_02: you know,
• 3:54
  SPEAKER_02: all of these mirrors,
• 3:55
  SPEAKER_02: patterns,
• 3:56
  SPEAKER_02: you know,
• 3:56
  SPEAKER_02: we have seen globally,
• 3:57
  SPEAKER_02: but with distinctly Southeast Asian flavors this time.
• 4:01
  SPEAKER_02: Very spicy, very distinctive, very different.
• 4:04
  SPEAKER_02: And the trust dynamics here run deeper, actually, because it reflects...
• 4:09
  the culture as well,
• 4:10
  and the fallout spreads differently and the comebacks.
• 4:14
  SPEAKER_02: Well, you know, they're more about quiet discipline than flashy PR.
• 4:18
  SPEAKER_00: Exactly.
• 4:19
  SPEAKER_00: Exactly.
• 4:19
  So I guess we need to buckle up and get ready for the ride
• 4:23
  because we're going to
• 4:24
  SPEAKER_00: dive into what happens when all this hype meets reality,
• 4:28
  SPEAKER_00: when trust starts getting weaponized and when,
• 4:31
  SPEAKER_00: you know,
• 4:32
  SPEAKER_00: sometimes maybe the good guys can win for once.
• 4:36
  SPEAKER_00: Um,
• 4:36
  SPEAKER_00: So why don't we start the docket off with the train wreck?
• 4:40
  It's always good to kind of rip the bandaid off,
• 4:42
  start with the bad news,
• 4:43
  shall we?
• 4:44
  SPEAKER_02: Yeah.
• 4:45
  SPEAKER_02: So Kevin Mitt Gibran Huzaifa.
• 4:48
  SPEAKER_02: His former CEO is Yves Desheri, Indonesia's architect darling.
• 4:52
  SPEAKER_02: I'm much about it now, but...
• 4:54
  SPEAKER_02: valued at $1.4 billion, backed by SoftBank and Tomasic.
• 4:59
  SPEAKER_02: So they are smart fish feeders, marketplace for farmers.
• 5:02
  SPEAKER_02: The whole sustainable impact story sounds really noble, right?
• 5:07
  Yeah,
• 5:07
  I'm going to make a guess here since we already know kind of
• 5:10
  the end game of this.
• 5:11
  SPEAKER_00: It was not all rosy.
• 5:13
  SPEAKER_02: Yeah, I wasn't.
• 5:14
  SPEAKER_02: No surprise there.
• 5:15
  SPEAKER_02: But it gets good.
• 5:16
  You know,
• 5:16
  Indonesian police detained Gibran and two executives last month
• 5:21
  for fraud.
• 5:22
  SPEAKER_02: And turns out they were running two sets of books.
• 5:25
  SPEAKER_02: The real numbers, they reported $750 million in revenue to investors.
• 5:30
  SPEAKER_02: In reality, five times less than that.
• 5:33
  SPEAKER_02: $150 million.
• 5:33
  SPEAKER_02: That's inflated by a lot.
• 5:36
  SPEAKER_02: And that's not creative accounting.
• 5:38
  SPEAKER_02: That's just, you know, fiction writing.
• 5:40
  SPEAKER_02: It's not great.
• 5:41
  SPEAKER_02: It's not looking good at them.
• 5:42
  SPEAKER_00: Yeah, this is a tough one.
• 5:43
  SPEAKER_00: So we got to do the caveats.
• 5:46
  SPEAKER_00: We're taking the numbers,
• 5:49
  SPEAKER_00: the figures from what's being reported out into the news,
• 5:53
  SPEAKER_00: not insiders.
• 5:55
  SPEAKER_00: Maybe some of the numbers may end up being off.
• 5:57
  SPEAKER_00: Don't come and sue us.
• 5:58
  SPEAKER_00: We're just kind of like commenting on what's actually out there.
• 6:02
  SPEAKER_00: But like,
• 6:03
  SPEAKER_00: So I'll tell you a couple of the things that really got me.
• 6:06
  So this is a massive inflation of revenue,
• 6:10
  assuming that everything is correct.
• 6:12
  SPEAKER_00: you know, they got a liquidator there in place now.
• 6:15
  I think it's FTI Consulting came in and they basically did the
• 6:19
  cleanup of everything.
• 6:21
  SPEAKER_00: And so a lot of the numbers that are being reported in the media of this,
• 6:24
  SPEAKER_00: like,
• 6:24
  SPEAKER_00: what is it,
• 6:25
  SPEAKER_00: like 600 millions of inflated revenue,
• 6:28
  SPEAKER_00: basically,
• 6:29
  SPEAKER_00: what is that,
• 6:29
  SPEAKER_00: like 75%,
• 6:29
  SPEAKER_00: 80% of their revenue is basically like
• 6:34
  smoke and mirrors you know that's that's that's that's crazy
• 6:38
  but the thing that
• 6:38
  gets me is like this is this is this is an ongoing saga so it
• 6:43
  hasn't actually just
• 6:45
  started i think you probably read this as well is that there
• 6:48
  was an interview that
• 6:49
  the same guy did yeah and after the scandal okay there's a
• 6:55
  little bit of a delay in
• 6:56
  SPEAKER_00: regards to seeing any action
• 7:00
  SPEAKER_00: The thing that got me,
• 7:01
  and I can't remember if it was Bloomberg or if it was one of
• 7:04
  the local media,
• 7:05
  SPEAKER_00: but there was an interview somewhere where the guy,
• 7:08
  SPEAKER_00: in my opinion,
• 7:10
  SPEAKER_00: reading it,
• 7:11
  SPEAKER_00: seemed like an open confession.
• 7:14
  SPEAKER_00: Like,
• 7:14
  SPEAKER_00: you know,
• 7:15
  SPEAKER_00: I don't know if there's Miranda rights in some of these markets,
• 7:19
  SPEAKER_00: sort of like you have the right to remain silent.
• 7:22
  SPEAKER_00: Anything can be used against you, sort of like clauses.
• 7:25
  SPEAKER_00: But it seemed like it was an admission of guilt.
• 7:28
  And then it took so long for,
• 7:32
  you know,
• 7:32
  now the police have detained them.
• 7:34
  SPEAKER_00: It's crazy.
• 7:36
  SPEAKER_02: Yeah, it is.
• 7:37
  And it's just crazy how they have the dignities to face the
• 7:43
  public after all that.
• 7:45
  SPEAKER_02: How do you even face people?
• 7:46
  SPEAKER_02: I can't do it.
• 7:48
  This one's tough,
• 7:50
  but to be honest with you,
• 7:52
  I don't know the person very well.
• 7:53
  SPEAKER_00: We met one time at a conference.
• 7:55
  SPEAKER_00: Probably doesn't remember me.
• 7:56
  SPEAKER_00: I barely remember the conversation myself.
• 7:58
  SPEAKER_00: So it's not like I'm closely linked with any of the people.
• 8:02
  SPEAKER_02: Was it fishy though?
• 8:03
  SPEAKER_02: I had to...
• 8:06
  There is an aspect of where I don't think that a lot of
• 8:08
  founders go into things
• 8:11
  SPEAKER_00: intentionally planning to defraud.
• 8:15
  SPEAKER_00: Yeah.
• 8:16
  What I think that there's a number of culprits that end up
• 8:20
  coming into it.
• 8:21
  SPEAKER_00: And like,
• 8:21
  I think part of it is the hype machine of the startup and VC
• 8:26
  ecosystem that is
• 8:28
  basically this sort of fake it till you make it mentality of
• 8:33
  kind of just juice the
• 8:34
  SPEAKER_00: numbers.
• 8:35
  SPEAKER_00: We'll figure it out.
• 8:36
  It's kind of the gambler's fallacy of like,
• 8:38
  you know,
• 8:39
  just put the rosy spin on it.
• 8:41
  SPEAKER_00: And that has a tendency of cycling down into this pressure of,
• 8:45
  SPEAKER_00: You know, just make it up.
• 8:48
  SPEAKER_00: Just tell them you're doing better than you are.
• 8:51
  SPEAKER_00: Get that next dollar in and then you'll be able to fix it.
• 8:55
  And then it just kind of spirals out of control because you
• 8:57
  never actually get out
• 8:59
  SPEAKER_00: of that hole that you start digging yourself.
• 9:01
  SPEAKER_00: And so I think that there's an aspect of this story where the blame,
• 9:07
  SPEAKER_00: even though it's not direct fingerprints on it,
• 9:10
  SPEAKER_00: the ecosystem is partially at fault
• 9:15
  Because they're feeding that ego and being like,
• 9:17
  yay,
• 9:17
  congratulations,
• 9:18
  you're doing fantastic.
• 9:20
  SPEAKER_00: So,
• 9:20
  SPEAKER_00: like,
• 9:20
  SPEAKER_00: if you're in their shoes,
• 9:23
  SPEAKER_00: and I'm not trying to say that,
• 9:24
  SPEAKER_00: like,
• 9:24
  SPEAKER_00: they did something wrong.
• 9:25
  SPEAKER_00: So, like, I'm not trying to, like, say no.
• 9:29
  SPEAKER_00: But...
• 9:31
  SPEAKER_00: If you're in their shoes and you're getting applauded,
• 9:35
  SPEAKER_00: you're getting accolades,
• 9:36
  you're getting like heads of state and like big organizations
• 9:41
  all singing your
• 9:41
  SPEAKER_00: praises,
• 9:42
  SPEAKER_00: chasing you as if you're like the hottest thing in the room.
• 9:47
  SPEAKER_00: What does that do to your psychology?
• 9:49
  SPEAKER_00: Does it make you feel like, hey, well, you know, maybe it's okay.
• 9:55
  It's easy to get sucked into the ecosystem to a point that you
• 9:59
  get this illusion
• 10:00
  SPEAKER_02: about what you're doing.
• 10:01
  SPEAKER_02: Like you said, fake it till you make it.
• 10:03
  Like how we watch the movies like Wolf of Wall Street,
• 10:05
  imagine how he did it.
• 10:06
  SPEAKER_02: And the more he did it, he gets so inflated and it keeps him going.
• 10:11
  And more and more when he did that,
• 10:12
  he gets so far and detached from reality.
• 10:15
  SPEAKER_02: And that's how I guess these things happen.
• 10:17
  SPEAKER_02: So it's not only...
• 10:19
  SPEAKER_02: You know,
• 10:19
  the part that the founder is doing a great job about what he
• 10:21
  did at the beginning,
• 10:23
  but because of the environment kind of promotes compounds on it
• 10:26
  and I made it
• 10:27
  SPEAKER_02: worse.
• 10:27
  SPEAKER_02: And I think on top of that,
• 10:29
  SPEAKER_02: it's like,
• 10:30
  SPEAKER_02: it's also another kicker,
• 10:31
  SPEAKER_02: you know,
• 10:31
  SPEAKER_02: this work for years because of,
• 10:33
  SPEAKER_02: you know,
• 10:33
  SPEAKER_02: there's one of the news pieces that one analyst called it.
• 10:36
  SPEAKER_02: the ESG halo effect because they're doing sustainably focused stuff.
• 10:40
  SPEAKER_02: So there's this effect as well,
• 10:42
  whereby investors wanted the impact story to be true so badly
• 10:46
  that they forgot to
• 10:47
  SPEAKER_02: count the actual fish feeders.
• 10:48
  SPEAKER_02: And actually, how many fish feeders do they actually have?
• 10:54
  SPEAKER_02: Well,
• 10:55
  SPEAKER_02: there's a thing that says,
• 10:56
  SPEAKER_02: well,
• 10:56
  SPEAKER_02: we have 24,000,
• 10:57
  SPEAKER_02: but let's just multiply by 17 and see if anyone notices.
• 11:00
  SPEAKER_02: It's like, no big deal.
• 11:01
  SPEAKER_02: NBD, let's just do it.
• 11:03
  SPEAKER_02: And no one knows.
• 11:03
  SPEAKER_02: But it takes some time for people to actually find out.
• 11:07
  SPEAKER_02: And then once it implodes,
• 11:09
  SPEAKER_02: it's like,
• 11:09
  SPEAKER_02: boom,
• 11:10
  SPEAKER_02: you know,
• 11:10
  SPEAKER_02: it goes everywhere and it's a big hoo-ha again.
• 11:12
  And I guess that's the thing about halos and they blind you to
• 11:16
  what's right in
• 11:17
  SPEAKER_02: front of your face.
• 11:18
  SPEAKER_02: But then again, the next question will be...
• 11:21
  SPEAKER_02: From the environment perspective, right?
• 11:23
  SPEAKER_02: So SoftBank and Tamastic aren't exactly rookie investors.
• 11:27
  SPEAKER_02: So how did that happen then?
• 11:29
  SPEAKER_00: You know, that's a good question.
• 11:30
  SPEAKER_00: And I can't speak to them specifically.
• 11:33
  There's definitely a question in regards to like the due
• 11:37
  diligence that goes into
• 11:39
  SPEAKER_00: the larger checks.
• 11:41
  If you're the person that came in at the seed round or like the
• 11:44
  Series A round,
• 11:46
  SPEAKER_00: the likelihood that you're going to like...
• 11:49
  Rent a car in Java and start driving around and trying to visit
• 11:53
  some of these
• 11:54
  SPEAKER_00: fisheries to like validate it is probably unlikely.
• 11:59
  SPEAKER_00: But,
• 11:59
  SPEAKER_00: you know,
• 11:59
  I used to do late stage and I used to do distressed where like
• 12:03
  everything is just
• 12:04
  SPEAKER_00: messed up.
• 12:04
  SPEAKER_00: And one of the key things was doing site visits,
• 12:08
  SPEAKER_00: doing customer calls,
• 12:10
  SPEAKER_00: going out and physically seeing things in order to validate it.
• 12:14
  SPEAKER_00: And that's kind of like standard protocol.
• 12:17
  SPEAKER_00: in a lot of situations.
• 12:19
  And so it does raise the question of what happened to the
• 12:23
  practices and procedures.
• 12:27
  SPEAKER_00: Was there an instance of, hey, follow the leader?
• 12:30
  SPEAKER_00: Because that happens in deals.
• 12:32
  SPEAKER_00: When you get a really good name that people respect,
• 12:37
  SPEAKER_00: that's leading the round or has some weight in the game,
• 12:41
  SPEAKER_00: you'll oftentimes come around and be like,
• 12:43
  Well,
• 12:44
  it's pre-validated because this person's there and I've got a
• 12:50
  lot of respect for them.
• 12:51
  I don't want to show bad face by questioning whether or not
• 12:56
  they actually did their
• 12:57
  SPEAKER_00: due diligence.
• 12:58
  SPEAKER_00: There's possibility, perhaps, that some of that is there.
• 13:03
  SPEAKER_00: I don't think that's truly valid because...
• 13:08
  SPEAKER_00: I'll follow rounds,
• 13:09
  SPEAKER_00: but I'm not going to follow another person's effort,
• 13:13
  SPEAKER_00: at least from my standpoint,
• 13:14
  SPEAKER_00: because I don't know their thought process.
• 13:17
  SPEAKER_00: I don't know their work.
• 13:18
  SPEAKER_00: I don't know whether or not they missed something.
• 13:20
  SPEAKER_00: And so I do think that there's...
• 13:22
  There's like blinders that probably got put on and it's not the
• 13:26
  first time.
• 13:27
  SPEAKER_00: There's tons of scandals that have happened out in the ecosystem.
• 13:31
  SPEAKER_00: And unfortunately,
• 13:32
  SPEAKER_00: there's an aspect of when the stakes are high,
• 13:35
  SPEAKER_00: when the dollar values are high.
• 13:37
  it's the incentives skew and we inevitably get some of this bad
• 13:43
  behavior which is
• 13:44
  why we can't really rest on skipping the the protocols and
• 13:49
  procedures of like is it
• 13:50
  real is it not you know let's take a look are there how many
• 13:55
  fisheries are there
• 13:56
  SPEAKER_00: like let's rent a car let's take a week or two or a couple
• 14:00
  SPEAKER_00: If you're getting ready to put,
• 14:02
  SPEAKER_00: and I can't remember the investment dollars,
• 14:04
  SPEAKER_00: but I'm just going to make up a number.
• 14:06
  SPEAKER_00: If you want to be investors and you're going to plop down $50 million,
• 14:11
  Spending $5,000 to take a week road trip and explore the
• 14:18
  beautiful island of Java
• 14:20
  and maybe have a once-in-a-lifetime experience traveling
• 14:24
  between super rural areas,
• 14:26
  SPEAKER_00: probably not the worst thing in the world,
• 14:28
  SPEAKER_00: especially if it's going to help safeguard that money.
• 14:31
  SPEAKER_02: Yeah.
• 14:32
  SPEAKER_02: And reputation as well.
• 14:33
  SPEAKER_00: Yeah.
• 14:34
  SPEAKER_00: Yeah.
• 14:34
  SPEAKER_00: But like peak Zerp hype era, startup land.
• 14:38
  SPEAKER_00: Yeah.
• 14:39
  SPEAKER_00: It's like the,
• 14:41
  SPEAKER_00: for people listening on Spotify,
• 14:42
  they're not going to see me doing like the hand motion of just
• 14:44
  like throwing the
• 14:45
  SPEAKER_00: dollar bills in the air.
• 14:47
  But it kind of felt like in many instances,
• 14:50
  and it's not unique to here,
• 14:51
  like,
• 14:51
  SPEAKER_00: It happens.
• 14:52
  SPEAKER_00: Similar scandals happen in the U.S.
• 14:54
  SPEAKER_00: and India.
• 14:55
  SPEAKER_00: Similar scandals happen anywhere.
• 14:56
  SPEAKER_00: There's a startup ecosystem.
• 14:57
  So I don't want to be like,
• 14:59
  this is a unique thing that's only ever happened here.
• 15:03
  SPEAKER_00: It just sucks that our ecosystem is so nascent.
• 15:09
  Actually,
• 15:09
  there's probably a lot more of these that are smaller that
• 15:13
  haven't hit the headlines.
• 15:15
  SPEAKER_02: Yeah,
• 15:16
  I think it's more impactful when it's in the VC industry
• 15:22
  because compared to other
• 15:23
  SPEAKER_02: industries,
• 15:24
  SPEAKER_02: they're more regulated.
• 15:25
  And VC is very based on hype and it's also based on the
• 15:28
  environment and it's also
• 15:29
  SPEAKER_02: based on the pitch.
• 15:31
  SPEAKER_02: And when pitch comes,
• 15:32
  it means that how can you present it and how can you present it
• 15:36
  also means...
• 15:36
  fake it he'll make it you know it's very much based on it's
• 15:39
  feeding off people's
• 15:41
  ego as well to be blatantly honest but that's the reality of it
• 15:45
  i mean it fits on
• 15:46
  that and then you have tyrannos you have so many of this that
• 15:49
  happened and it's
• 15:50
  based on one founder and because of that founder who got got a
• 15:53
  bit disillusioned
• 15:54
  and then these things tend to implode and when these things
• 15:57
  implode again there's
• 15:58
  that always oh we should really regulate it but then you never
• 16:00
  i don't know whether
• 16:01
  SPEAKER_02: it happens or not maybe it's not as regulated as i think it should be um
• 16:07
  SPEAKER_00: I would take a different view than the regulation.
• 16:09
  SPEAKER_00: So I wouldn't necessarily like criminal action should be criminal action.
• 16:14
  Like it baffles my mind that it took so long from like an
• 16:18
  interview that seemed
• 16:19
  SPEAKER_00: like a blatant admission of guilt to actual action.
• 16:22
  SPEAKER_00: But like maybe they're having to build up like
• 16:25
  SPEAKER_00: Instead of just going off the interview,
• 16:27
  SPEAKER_00: maybe they needed the actual paper documentation,
• 16:30
  SPEAKER_00: the trails.
• 16:31
  Maybe there was work behind the scenes of why there was a delay
• 16:33
  because they wanted
• 16:34
  SPEAKER_00: a solid case.
• 16:35
  SPEAKER_00: I don't know the procedures for the police or courts there.
• 16:39
  But instead of regulation,
• 16:42
  I feel like a lot of these happen when investors start
• 16:46
  slacking.
• 16:47
  SPEAKER_00: When they stop putting in the work to verify,
• 16:52
  SPEAKER_00: validate,
• 16:53
  we're naturally in environments of asymmetric information and
• 16:59
  oftentimes with
• 17:00
  SPEAKER_00: unavailable information in the super early days.
• 17:07
  SPEAKER_00: I can understand much more.
• 17:09
  SPEAKER_00: When it gets to the later days,
• 17:10
  SPEAKER_00: where the check sizes are much bigger,
• 17:12
  SPEAKER_00: when the track record has been longer,
• 17:14
  when the different data points that you could actually go out
• 17:17
  and validate are more
• 17:19
  SPEAKER_00: numerable,
• 17:20
  then I think that there's less of a justification other than
• 17:25
  your pile of cash is
• 17:26
  SPEAKER_00: just so big that this is too small of a check to matter.
• 17:29
  SPEAKER_00: And
• 17:30
  Maybe for somebody that's managing such massive amounts of
• 17:34
  hundreds of billions or
• 17:35
  SPEAKER_00: tens of billions or whatever their cash pile is,
• 17:38
  it was surrounding air that they don't really care about in
• 17:42
  regards to putting in
• 17:44
  SPEAKER_00: that amount of effort.
• 17:46
  SPEAKER_00: But the other thing that really gets me on this is...
• 17:51
  Southeast Asia's ecosystem is still nascent and the available
• 17:57
  capital in the
• 17:58
  SPEAKER_00: ecosystem is still restricted because by and large,
• 18:01
  SPEAKER_00: the vast majority of folks are very,
• 18:04
  SPEAKER_00: very conservative with their capital.
• 18:07
  SPEAKER_00: When you go around to high net worths around the region,
• 18:12
  SPEAKER_00: family offices,
• 18:13
  SPEAKER_00: et cetera,
• 18:14
  SPEAKER_00: they generally do not get into startup ecosystem.
• 18:18
  SPEAKER_00: They're very risk averse.
• 18:20
  SPEAKER_00: It's real estate, it's credit funds, it's fixed deposits.
• 18:24
  It's like black and white,
• 18:26
  straight and narrow,
• 18:27
  traditional asset all the way down the road.
• 18:30
  SPEAKER_00: And things like this, because it's not really the asset class.
• 18:35
  SPEAKER_00: It's not a problem of the asset class.
• 18:37
  SPEAKER_00: It's a problem of the strategy and it's a fault.
• 18:40
  SPEAKER_00: It's a partial fault of the investors that were there.
• 18:44
  SPEAKER_00: They didn't do their job in my opinion.
• 18:47
  SPEAKER_00: And because of that,
• 18:48
  the rest of the VC ecosystem ends up suffering because a lot of
• 18:54
  the other high net
• 18:55
  SPEAKER_00: worth individuals,
• 18:56
  SPEAKER_00: they see the scandal and they start saying to each other,
• 18:59
  SPEAKER_00: see,
• 18:59
  SPEAKER_00: I told you so glad that I never got into it.
• 19:02
  SPEAKER_00: And that's a problem because it's not endemic.
• 19:06
  SPEAKER_00: It's not systemic to the asset class.
• 19:11
  SPEAKER_00: It's when people stop doing the work that this is more common.
• 19:17
  SPEAKER_00: It happens in smaller denominations.
• 19:20
  SPEAKER_00: Like the natural course of things is not every company succeeds.
• 19:24
  SPEAKER_00: Right.
• 19:25
  But these massive blow ups happen more often when people just
• 19:29
  drop the ball and
• 19:31
  SPEAKER_00: aren't paying attention because they're caught up in the hype,
• 19:34
  SPEAKER_00: whether it's the ESG story,
• 19:36
  SPEAKER_00: whether it's the zero interest rate,
• 19:39
  like hype bubble of just let's throw money at people because
• 19:42
  it's free and easy and
• 19:43
  SPEAKER_00: it damages the ecosystem.
• 19:46
  SPEAKER_02: Yeah, and here's what's fascinating.
• 19:49
  SPEAKER_02: It's not just one bad actor.
• 19:51
  SPEAKER_02: It's the entire investment culture that paralyzes narrative over numbers.
• 19:56
  SPEAKER_02: That's it.
• 19:56
  SPEAKER_02: And the consequences,
• 19:58
  SPEAKER_02: they ripple through every pitch deck,
• 20:00
  SPEAKER_02: every due diligence process,
• 20:01
  SPEAKER_02: every startup conversation happening right now.
• 20:04
  SPEAKER_02: So it's like a total vibe out, right?
• 20:07
  We just need one bad,
• 20:09
  one in a way black ship,
• 20:10
  and then it wipes out the entire thing.
• 20:12
  SPEAKER_02: Yeah.
• 20:13
  SPEAKER_02: Yeah.
• 20:14
  And when you have big names like them who aren't rookie
• 20:17
  investors and they're
• 20:19
  SPEAKER_02: leading it,
• 20:20
  that's when people slack because they really have these big
• 20:23
  names and it's like,
• 20:24
  SPEAKER_02: oh,
• 20:25
  SPEAKER_02: you've done no work.
• 20:25
  SPEAKER_02: I guess I don't have to.
• 20:26
  SPEAKER_02: And you know what this reminds me of?
• 20:28
  SPEAKER_02: Dating.
• 20:29
  SPEAKER_02: You know,
• 20:29
  SPEAKER_02: when someone tells you exactly who they are,
• 20:31
  but you're so invested in who you want them to be that you
• 20:35
  ignore all the red
• 20:36
  SPEAKER_02: flags.
• 20:36
  SPEAKER_02: Except here, the red flags are worth 600 million.
• 20:39
  SPEAKER_02: So it's a very expensive red flag to begin with.
• 20:42
  SPEAKER_02: Yeah.
• 20:43
  SPEAKER_00: Yeah.
• 20:44
  SPEAKER_00: Yeah.
• 20:44
  SPEAKER_00: We can,
• 20:44
  we can extend that dating analogy and extend it to fisheries
• 20:47
  because they literally
• 20:48
  SPEAKER_00: got catfished.
• 20:51
  SPEAKER_02: There you go.
• 20:53
  SPEAKER_02: It's a fishing situation.
• 20:54
  SPEAKER_00: Yeah.
• 20:55
  SPEAKER_00: Yeah.
• 20:55
  SPEAKER_00: Yeah.
• 20:56
  SPEAKER_00: I had to do that connection.
• 20:57
  SPEAKER_00: Yeah.
• 20:58
  SPEAKER_02: That's a good one though.
• 21:00
  SPEAKER_00: Yeah.
• 21:00
  SPEAKER_00: Yeah.
• 21:01
  SPEAKER_00: Yeah.
• 21:01
  SPEAKER_02: Yeah.
• 21:02
  SPEAKER_02: Yeah.
• 21:03
  SPEAKER_00: And,
• 21:03
  SPEAKER_00: you know,
• 21:04
  SPEAKER_00: it's this,
• 21:05
  SPEAKER_00: this,
• 21:05
  SPEAKER_00: this ecosystem operates on trust and once it's lost,
• 21:08
  SPEAKER_00: it's lost for good.
• 21:09
  SPEAKER_00: And like, it's very hard to earn that back.
• 21:12
  SPEAKER_00: And like,
• 21:13
  SPEAKER_00: Again,
• 21:14
  coming back to the impact on the ecosystem is the large capital
• 21:18
  providers that were
• 21:19
  SPEAKER_00: in this likely are going to have no trouble raising subsequent money.
• 21:24
  It's the trickle-down impact across the lower layers through
• 21:28
  the ecosystem,
• 21:29
  SPEAKER_00: the folks that are doing B rounds,
• 21:31
  SPEAKER_00: A rounds,
• 21:32
  SPEAKER_00: pre-A,
• 21:32
  SPEAKER_00: seed,
• 21:33
  SPEAKER_00: pre-seed.
• 21:34
  It's those folks that rely more so on the high net worths and
• 21:38
  the family offices
• 21:40
  SPEAKER_00: that are going to be the most impacted.
• 21:42
  And there's unfortunately some damage because other investors
• 21:47
  dropped the ball.
• 21:48
  SPEAKER_02: Yep, no doubt.
• 21:49
  SPEAKER_02: And it's going to take years and years to repair for a while.
• 21:52
  SPEAKER_02: And short of saying, it's like virginity.
• 21:55
  SPEAKER_02: I mean, you only lose it once and everyone remembers.
• 21:58
  SPEAKER_02: So let's see.
• 22:00
  SPEAKER_02: And given how Southeast Asia,
• 22:01
  SPEAKER_02: like I said,
• 22:01
  SPEAKER_02: is so nascent,
• 22:02
  I'm not sure how long this would take to repair and how it will
• 22:05
  affect in terms of
• 22:07
  SPEAKER_02: will it prolong the venture winter?
• 22:09
  SPEAKER_02: I remain skeptical about it.
• 22:18
  SPEAKER_00: E-fishery isn't the exclusive party that's committing frauds.
• 22:22
  SPEAKER_00: We've got them all over the place,
• 22:24
  SPEAKER_00: as we talked about,
• 22:25
  SPEAKER_00: because there's kind of a fraud universal playbook in a sense,
• 22:30
  SPEAKER_00: yeah?
• 22:30
  SPEAKER_00: Yeah.
• 22:31
  SPEAKER_02: Yeah, yeah, it is.
• 22:32
  SPEAKER_02: So let's look at Vietnam.
• 22:34
  SPEAKER_02: Strong Milan.
• 22:35
  SPEAKER_00: Oh, man.
• 22:37
  SPEAKER_02: Yep.
• 22:37
  SPEAKER_02: Convicted of $12.5 billion fraud.
• 22:41
  SPEAKER_02: Vietnam's biggest ever.
• 22:43
  And she basically turned a private bank into a personal ADM
• 22:46
  through shell companies.
• 22:48
  SPEAKER_00: Yeah,
• 22:48
  that one was crazy if the stories are accurate in regards to
• 22:52
  like wheelbarrows of
• 22:53
  cash and like some of like the crazy stories there and like
• 22:58
  just the sheer percent
• 22:59
  SPEAKER_00: of GDP that this scandal occupies,
• 23:02
  SPEAKER_00: which is like,
• 23:04
  SPEAKER_00: wow.
• 23:05
  SPEAKER_00: What was the punishment?
• 23:08
  SPEAKER_00: Assume an e-fishery has any similarity into consequences of Vietnam.
• 23:15
  SPEAKER_00: What did she get?
• 23:17
  SPEAKER_02: a death sentence.
• 23:19
  I mean,
• 23:20
  Vietnam literally gave her the death penalty of white collar
• 23:23
  crime.
• 23:23
  SPEAKER_02: And that's sending a message you can hear from space.
• 23:27
  SPEAKER_00: Yeah.
• 23:27
  SPEAKER_00: Yeah.
• 23:28
  SPEAKER_00: So note to self, do not commit any sort of financial fraud in Vietnam.
• 23:32
  You shouldn't have committed anywhere,
• 23:34
  but it sounds like Vietnam's quite harsh.
• 23:36
  SPEAKER_00: But they did have,
• 23:37
  SPEAKER_00: they did have,
• 23:38
  I know there was a caveat to that story because you could
• 23:41
  essentially buy your way
• 23:43
  SPEAKER_00: out of the death penalty and
• 23:46
  SPEAKER_00: If you were able to return some cash,
• 23:49
  SPEAKER_00: and I don't remember the specifics of it,
• 23:51
  SPEAKER_00: but I remember reading because like when that penalty came down,
• 23:56
  there was these stories about reaching out to a bunch of
• 23:59
  different financiers
• 24:01
  because she had a lot of personal assets that were kind of
• 24:04
  shielded from some of
• 24:05
  SPEAKER_00: the fraud.
• 24:06
  And so then started to try and liquidate portfolios to try and
• 24:10
  buy her life back.
• 24:13
  SPEAKER_01: Wow.
• 24:13
  SPEAKER_00: I could see this remembering.
• 24:15
  SPEAKER_00: So like maybe we'll have to hit the edit button a little bit later.
• 24:21
  But I'm pretty sure there was something in there about like if
• 24:24
  you could return funds.
• 24:25
  SPEAKER_00: So like let me rephrase it so it doesn't sound like buy your life back.
• 24:29
  SPEAKER_00: Although like it is to an extent.
• 24:32
  SPEAKER_00: It's more of like reimbursement.
• 24:33
  Like if you can recoup the losses because of the fraud,
• 24:37
  then the penalty is less harsh.
• 24:40
  SPEAKER_02: That's a smart way of doing it.
• 24:41
  SPEAKER_02: I mean, I'm going to give it to her.
• 24:43
  SPEAKER_02: It's a very creative way of trying to reimburse yourself back.
• 24:45
  SPEAKER_00: I don't think she was ever able to come up with that money.
• 24:48
  SPEAKER_00: Like who's going to underwrite that?
• 24:49
  SPEAKER_00: That's a lot of money.
• 24:50
  SPEAKER_00: Yeah.
• 24:57
  SPEAKER_02: But it's,
• 24:58
  SPEAKER_02: I mean,
• 24:58
  SPEAKER_02: the thought of even doing that,
• 24:59
  SPEAKER_02: there's an intention there,
• 25:00
  SPEAKER_02: so I'll give her that.
• 25:01
  SPEAKER_02: At this point, anything works, right?
• 25:03
  SPEAKER_02: You just got to do everything to get you your life back.
• 25:06
  SPEAKER_02: And then there's Castle in US, fashion rental sell-up.
• 25:09
  Founder Christine Hunsiker raised $300 million by claiming $440
• 25:13
  million in revenue.
• 25:15
  SPEAKER_02: Actual revenue?
• 25:17
  SPEAKER_02: $15.7 million.
• 25:17
  SPEAKER_02: That's times 25 times.
• 25:20
  SPEAKER_02: She even forged botched signatures to raise more money.
• 25:22
  SPEAKER_02: It's crazy.
• 25:23
  SPEAKER_00: Yeah.
• 25:23
  SPEAKER_00: So,
• 25:24
  SPEAKER_00: I mean,
• 25:25
  SPEAKER_00: if you're going to lie,
• 25:26
  SPEAKER_00: commit to the lie,
• 25:27
  SPEAKER_00: I guess,
• 25:27
  SPEAKER_00: you know,
• 25:28
  SPEAKER_00: so like you're going to if you're going to commit the fraud,
• 25:30
  you might as well commit like you can't you can't really half
• 25:34
  ass your your your
• 25:35
  SPEAKER_00: fraud,
• 25:36
  SPEAKER_00: your white collar crime.
• 25:37
  SPEAKER_02: Yeah.
• 25:37
  And not really the moral of the story that I would be hoping to
• 25:40
  take out of it.
• 25:41
  SPEAKER_02: True, but this is what gets me.
• 25:44
  SPEAKER_02: Every one of these cases,
• 25:45
  SPEAKER_02: even from the case of Tyrannos and Enron,
• 25:48
  SPEAKER_02: if we go back all the way back then,
• 25:50
  SPEAKER_02: they follow the same pattern.
• 25:51
  SPEAKER_02: You have charismatic founders,
• 25:53
  SPEAKER_02: you have compelling mission,
• 25:54
  SPEAKER_02: inflated metrics,
• 25:55
  SPEAKER_02: and investors who wanted to believe so badly,
• 25:57
  SPEAKER_02: they forgot to verify.
• 25:59
  That's when they really had their walls down and things started
• 26:02
  to happen.
• 26:04
  And it's like we are hardwired to fall for the same con,
• 26:06
  just with different window dressings.
• 26:07
  SPEAKER_02: which is so true.
• 26:08
  SPEAKER_02: That's why window shopping works.
• 26:09
  SPEAKER_00: So what do you say the common thread is that leads to all these crumbles?
• 26:15
  SPEAKER_02: Governance failure every time,
• 26:16
  SPEAKER_02: you know,
• 26:16
  SPEAKER_02: whether it's fish,
• 26:17
  SPEAKER_02: whether it's fishy,
• 26:18
  SPEAKER_02: whether it's fish in Indonesia,
• 26:20
  SPEAKER_02: real estate in Vietnam or fashion tech in New York,
• 26:23
  SPEAKER_02: or even like the case of Toronto.
• 26:25
  The moment you stop asking uncomfortable questions,
• 26:29
  you're only halfway to getting burned.
• 26:31
  SPEAKER_02: That's all there is.
• 26:31
  SPEAKER_02: I mean,
• 26:32
  SPEAKER_02: that's why I find it like,
• 26:33
  where do you exactly draw the line of being your authentic self
• 26:37
  and really...
• 26:38
  putting it faking it to a meal kit because some parts to get
• 26:42
  what you want you kind
• 26:43
  of have to inflate it a bit i'm not saying all the time but you
• 26:47
  kind of have to put
• 26:48
  it out there but then again authenticity is pretty much the
• 26:52
  buzzword is overused
• 26:53
  right now and how do you draw that line i it comes down to that
• 26:56
  again what are your
• 26:57
  values what are they like what's your authenticity like do they
• 27:00
  really align with
• 27:01
  SPEAKER_02: your bigger picture if not then what
• 27:03
  That's also another question of going deep into the founder
• 27:06
  themselves as to where
• 27:08
  SPEAKER_02: they are,
• 27:08
  SPEAKER_02: how strongly they hold these values.
• 27:10
  SPEAKER_02: Because if they do,
• 27:11
  SPEAKER_02: then perhaps they're more,
• 27:13
  SPEAKER_02: they will be more stubborn,
• 27:14
  SPEAKER_02: I guess,
• 27:14
  SPEAKER_02: in a way to uphold their own values or rather walk their talk.
• 27:19
  SPEAKER_02: Not stubborn, stubborn is on the right word, sorry.
• 27:24
  SPEAKER_00: We talked about how frauds happen globally.
• 27:28
  There's tons of scandals that have happened every single inch
• 27:32
  of the globe,
• 27:32
  SPEAKER_00: anywhere where there's a startup ecosystem.
• 27:35
  And it happens,
• 27:36
  as you said,
• 27:37
  governance failures are generally the common thread across it.
• 27:41
  SPEAKER_00: Let me ask you,
• 27:42
  because from a cultural standpoint in regards to Southeast Asia
• 27:46
  specifically,
• 27:47
  SPEAKER_00: when you think of these failures,
• 27:50
  when you think of these breakdowns in trust and these
• 27:54
  fraudulent activities,
• 27:56
  SPEAKER_00: how does this play out in Southeast Asia?
• 27:58
  Is there a different flavor because of the culture of Southeast
• 28:01
  Asia relative to,
• 28:03
  say,
• 28:03
  the U.S.
• 28:04
  SPEAKER_00: or otherwise?
• 28:05
  SPEAKER_00: Yeah.
• 28:09
  SPEAKER_00: My question is more of like,
• 28:10
  SPEAKER_00: I don't want to be the white guy saying,
• 28:12
  SPEAKER_00: hey,
• 28:12
  SPEAKER_00: this is how East Asia is reacting to it.
• 28:14
  SPEAKER_00: So I'm just asking from a cultural context,
• 28:17
  SPEAKER_00: is there a different flavor to the reaction to be sort of frauds,
• 28:23
  SPEAKER_00: breakdown and trust?
• 28:25
  I think generally,
• 28:26
  from where I stand,
• 28:28
  Southeast Asia,
• 28:29
  it's very conservative.
• 28:30
  SPEAKER_02: Then again, it's like, ha, I cannot go into that again.
• 28:36
  SPEAKER_02: It's so dangerous.
• 28:37
  That would be the common denominator that a lot of people will
• 28:40
  keep saying.
• 28:41
  SPEAKER_02: Because BC as well,
• 28:43
  SPEAKER_02: yes,
• 28:44
  SPEAKER_02: it has a boom,
• 28:45
  SPEAKER_02: but in terms of its growth,
• 28:47
  SPEAKER_02: it's still pretty much stuck at certain booms.
• 28:48
  SPEAKER_02: It's not like the states whereby it's going all out, whereby...
• 28:52
  so many startups or pre-seed or seed stage to get funded so
• 28:56
  much easier compared to
• 28:58
  SPEAKER_02: in Southeast Asia.
• 28:59
  SPEAKER_02: Southeast Asia is like, yeah, we're wit and see.
• 29:02
  SPEAKER_02: It's very trust-focused.
• 29:05
  SPEAKER_02: So it's very relationship-based.
• 29:07
  SPEAKER_02: And I say it in a sense that you have to build that relationship,
• 29:10
  SPEAKER_02: not under-the-table relationship,
• 29:11
  SPEAKER_02: just putting it out there.
• 29:12
  SPEAKER_02: Yeah.
• 29:13
  SPEAKER_02: So it's a lot of that that we have to cultivate.
• 29:17
  SPEAKER_02: So it takes longer for investments to go through.
• 29:21
  SPEAKER_02: And once trust is broken, it's very hard to earn that back.
• 29:23
  And again,
• 29:24
  when you're,
• 29:25
  to a certain extent,
• 29:25
  dealing with Asians,
• 29:26
  I can't speak for all.
• 29:28
  SPEAKER_02: Don't come at me again.
• 29:29
  SPEAKER_02: But as a person, it takes it very hard for me to rebuild that again.
• 29:34
  So coming from that point,
• 29:36
  safe to say some of us,
• 29:37
  we do share the same sentiment.
• 29:40
  But I think this applies to the whole human race that once
• 29:45
  trust is broken,
• 29:45
  SPEAKER_02: it's very hard to build up.
• 29:47
  SPEAKER_00: That's very true.
• 29:49
  SPEAKER_00: I do think in the States that there's an easier bounce back.
• 29:52
  SPEAKER_00: You know,
• 29:53
  like Adam Newman raised money again for the same investors that
• 29:58
  like they crashed
• 29:59
  SPEAKER_00: in Spectacular Failure.
• 30:01
  SPEAKER_00: He got his own TV show made out of the story.
• 30:03
  SPEAKER_00: Yeah.
• 30:04
  SPEAKER_00: And he still got funded again.
• 30:05
  SPEAKER_00: I don't see that ever happening in an ASIO market.
• 30:09
  SPEAKER_02: Yeah.
• 30:10
  SPEAKER_00: Yeah.
• 30:11
  SPEAKER_00: But there is one data point.
• 30:14
  if there's any data nerds listening into this that like wanted
• 30:17
  wanted want to try
• 30:18
  and like dig out dig out and create this number i would love to
• 30:22
  see scandals
• 30:25
  relative to successes the number of scandals that have happened
• 30:29
  relative to the
• 30:30
  SPEAKER_00: number of successes and like put that as a ratio because like
• 30:35
  Is it the aspect that because in the US there's just so many
• 30:39
  success cases that
• 30:41
  these handful of like FTX and Theranos and these ones that
• 30:45
  we've talked about,
• 30:47
  that they're just like such a small portion relative to these
• 30:52
  massive successes and
• 30:53
  SPEAKER_00: a lot of these exits.
• 30:55
  SPEAKER_00: Like Figma just went public.
• 30:57
  Like there's already these news stories of like investors
• 31:00
  making almost 2000X their
• 31:03
  SPEAKER_00: money,
• 31:03
  SPEAKER_00: like billions in profit dollars.
• 31:06
  SPEAKER_00: Like the carried interest alone creates a billionaire.
• 31:09
  SPEAKER_00: We don't have those success cases in Southeast Asia.
• 31:12
  So it would be interesting to see a data point around and maybe
• 31:18
  even factoring in
• 31:20
  dollar value of the scandals relative to the dollar value of
• 31:23
  the successful outcomes.
• 31:26
  SPEAKER_00: Have we made more money than we've been defrauded of?
• 31:31
  SPEAKER_02: Yeah.
• 31:32
  SPEAKER_02: It kind of gives you a different spin and different perspective.
• 31:34
  SPEAKER_00: It would be interesting to see some of those numbers.
• 31:38
  We need to talk to somebody that's a little bit more resourced
• 31:41
  and access to some
• 31:42
  of this info to see whether or not we can get one of these news
• 31:45
  outlets to jump on
• 31:47
  SPEAKER_00: that.
• 31:48
  Well,
• 31:48
  I guess it'd be helpful if you could speak to journalists to
• 31:51
  that extent.
• 31:51
  SPEAKER_02: But getting journalists help,
• 31:52
  I just saw an article this morning on LinkedIn about how
• 31:55
  journalists themselves get
• 31:56
  SPEAKER_02: burned,
• 31:56
  SPEAKER_02: even when they're trying to get the truth out of it.
• 31:59
  SPEAKER_00: I saw the same.
• 32:02
  SPEAKER_00: That's why I did the disclaimer at the beginning.
• 32:04
  SPEAKER_00: I was like, we're just doing commentary.
• 32:09
  SPEAKER_00: But what we read in the newspaper,
• 32:11
  we're making no claims that any of this is fact-based and that
• 32:14
  you should be making
• 32:15
  SPEAKER_00: any decisions on this.
• 32:16
  SPEAKER_00: So please do not send me a cease and desist order.
• 32:20
  SPEAKER_02: Yeah, exactly.
• 32:23
  SPEAKER_02: And again,
• 32:24
  SPEAKER_02: in some ways,
• 32:25
  SPEAKER_02: I feel like you're kind of putting our lives on the line as well,
• 32:29
  SPEAKER_02: right?
• 32:30
  SPEAKER_02: Like saying all these things,
• 32:31
  but you just never know because some people can just take it
• 32:33
  and spin it another
• 32:34
  SPEAKER_02: way and get us into trouble.
• 32:35
  SPEAKER_02: I don't know.
• 32:36
  SPEAKER_02: I'm just putting it out there again, too.
• 32:38
  SPEAKER_02: So there's one, two.
• 32:39
  SPEAKER_02: And I think that could be a potential episode follow-up, honestly.
• 32:43
  SPEAKER_02: It'd be quite interesting to see that.
• 32:44
  SPEAKER_00: That data point,
• 32:45
  I would love to just kind of riff on that because I would
• 32:48
  imagine that the relative
• 32:50
  SPEAKER_00: percent of scandals to successes in the U.S.
• 32:53
  SPEAKER_00: is quite small.
• 32:55
  Whereas I would imagine that the relative portion of scandals
• 32:59
  in dollar value terms
• 33:00
  especially is high relative to the exit values that we've seen
• 33:06
  in success cases.
• 33:08
  SPEAKER_00: And I think that's a challenge in a nascent ecosystem because,
• 33:11
  SPEAKER_00: again,
• 33:12
  it's breaking these trusts when we need to bring more high net
• 33:17
  worths into the
• 33:18
  SPEAKER_00: circle and not scaring them off.
• 33:20
  SPEAKER_02: That's a good one.
• 33:21
  SPEAKER_02: Yeah, totally.
• 33:22
  SPEAKER_02: We'll definitely sit on that and think about it and do it.
• 33:25
  There's a bit of a shift right now in what's happening on the
• 33:28
  other end of the
• 33:28
  SPEAKER_02: world whereby with the AI coming really fast,
• 33:32
  SPEAKER_02: maybe to put it very straightforward,
• 33:35
  SPEAKER_02: like Mark Zuckerberg,
• 33:36
  SPEAKER_02: he's investing in individuals instead of companies.
• 33:39
  SPEAKER_02: He tried to buy over OpenAI's Mira for $1.5 billion and she said no.
• 33:45
  So I'm not sure will that ever ripple to this end because we do
• 33:48
  have a few pretty
• 33:50
  SPEAKER_02: good,
• 33:50
  SPEAKER_02: outstanding people who are doing things here.
• 33:55
  that but i see that trend going as well and it's so fast things
• 34:00
  are happening there
• 34:00
  whereby people are buying over each other it's like oh my gosh
• 34:04
  and here's like
• 34:04
  SPEAKER_02: we're still trying to make it work with trust you know um which of you
• 34:10
  yeah so like the u.s ecosystem operates on just kind of
• 34:14
  different math right and
• 34:15
  like it's it's it's it's a much more mature ecosystem and it is
• 34:20
  it is true i mean
• 34:21
  there's that when you when you trace it back from the end
• 34:24
  scenario when you start
• 34:25
  talking about liquidity um the availability of public markets
• 34:30
  the activity of mna
• 34:31
  SPEAKER_00: all of that it creates a different dynamic in regards to the startup and
• 34:36
  SPEAKER_00: But then when you layer on some of the regulatory aspects of it,
• 34:40
  you get some of these funky things that happen in regards to
• 34:45
  how acquisitions are
• 34:46
  SPEAKER_00: done.
• 34:47
  SPEAKER_00: Because like the massive players,
• 34:50
  SPEAKER_00: your Google,
• 34:50
  SPEAKER_00: your Meta,
• 34:51
  SPEAKER_00: these sort of companies,
• 34:52
  SPEAKER_00: they're under such a microscope.
• 34:55
  Like the reason why Figma went public is because the Adobe
• 34:58
  acquisition went bust
• 35:00
  SPEAKER_00: because they couldn't get it through.
• 35:01
  SPEAKER_00: Now,
• 35:02
  SPEAKER_00: mind you,
• 35:02
  SPEAKER_00: the stock did a big pop,
• 35:03
  SPEAKER_00: but like maybe that's just hype again because the first time like a super
• 35:08
  SPEAKER_00: well-known great company.
• 35:11
  SPEAKER_00: But is it above where its value ought to be?
• 35:13
  SPEAKER_00: Is it going to take a few years to actually grow into that?
• 35:15
  SPEAKER_00: Great company, by the way, a phenomenal company.
• 35:18
  SPEAKER_00: But there's just a completely different dynamic there.
• 35:22
  SPEAKER_00: And we just haven't gotten there.
• 35:25
  SPEAKER_00: You can kind of look in the interim steps of where we'll go through.
• 35:31
  Maybe it'll be a little bit more like the way the India market
• 35:34
  has developed.
• 35:34
  SPEAKER_00: Maybe it'll be a little bit more like the China market has developed.
• 35:38
  SPEAKER_00: There's not just like one flavor in regards to the way it goes.
• 35:42
  SPEAKER_00: There's like...
• 35:43
  SPEAKER_00: There's a rhyme to it, but there's not a replication.
• 35:47
  SPEAKER_00: And so somehow I think we need to figure out how to navigate the path.
• 35:51
  But breaking of trust is problematic,
• 35:54
  especially in markets that are high trust environments.
• 35:58
  What's the researcher that did all those like cultural factors
• 36:03
  of like power
• 36:03
  SPEAKER_00: distance,
• 36:04
  SPEAKER_00: trust factor,
• 36:05
  SPEAKER_00: all of those sort of things like
• 36:07
  SPEAKER_00: Asia's very high on power distance and very high on trust factor.
• 36:11
  SPEAKER_00: And so like maybe there was an aspect of don't question the boss,
• 36:15
  SPEAKER_00: you know,
• 36:15
  SPEAKER_00: like no whistleblower because don't question the boss.
• 36:18
  SPEAKER_00: Boss knows.
• 36:22
  And then you get into the trust side of things and like that
• 36:25
  there's a very high
• 36:26
  SPEAKER_00: risk aversion because of the necessity of it.
• 36:28
  SPEAKER_00: There's a very different risk culture.
• 36:30
  SPEAKER_00: And so it is a completely different environment.
• 36:34
  SPEAKER_00: But again, I kind of circle back to this.
• 36:36
  SPEAKER_00: We need more participants in the startup investment space.
• 36:42
  SPEAKER_00: We need to be encouraging people to come into the fold.
• 36:45
  Those high net worth individuals that are sitting on massive
• 36:48
  fixed deposits earning
• 36:49
  SPEAKER_00: 2%,
• 36:50
  getting a negative real rate of return because inflation is
• 36:54
  above what the rate of
• 36:55
  SPEAKER_00: return is,
• 36:55
  SPEAKER_00: but they still love seeing that pile there.
• 36:58
  SPEAKER_00: We need those people to put it in something that is,
• 37:01
  SPEAKER_00: it is a high risk asset class,
• 37:03
  SPEAKER_00: but it's,
• 37:04
  SPEAKER_00: it's not a sure failure.
• 37:06
  SPEAKER_00: You're not going to like,
• 37:07
  SPEAKER_00: if you run a portfolio strategy,
• 37:09
  SPEAKER_00: if you put in the work,
• 37:11
  SPEAKER_00: you have the ability to actually get great,
• 37:13
  SPEAKER_00: great rates of return.
• 37:15
  SPEAKER_00: And we need that innovation because with AI as well,
• 37:20
  SPEAKER_00: I was talking about this just the other day.
• 37:24
  The barriers to entry across global markets is going to start
• 37:29
  decreasing because
• 37:31
  one of the things that Southeast Asia has is that the go-to
• 37:34
  market is very nuanced
• 37:35
  SPEAKER_00: because it's not homogenous.
• 37:37
  SPEAKER_00: There's a lot of nuance.
• 37:39
  But you know what AI is getting much better at is filling in
• 37:44
  all of those personal
• 37:45
  SPEAKER_00: touch sort of roles,
• 37:47
  SPEAKER_00: incredible chatbots,
• 37:49
  SPEAKER_00: voicebots that are getting better and better and better.
• 37:52
  And if they're this good today,
• 37:53
  how are they going to be in one year,
• 37:54
  two year?
• 37:55
  SPEAKER_00: And so if we're not building,
• 37:57
  SPEAKER_00: if we're not advancing our startup ecosystem,
• 37:59
  SPEAKER_00: we have the risk of being left behind.
• 38:02
  SPEAKER_00: And in order to advance, we also need the capital.
• 38:04
  SPEAKER_00: So by shooting ourselves in the foot with all of these scandals,
• 38:09
  SPEAKER_00: Okay, that's my soapbox.
• 38:11
  SPEAKER_00: Sorry, I did my rant.
• 38:14
  SPEAKER_00: I know we only have a few minutes left,
• 38:16
  SPEAKER_00: so we've got some other things on the docket,
• 38:18
  SPEAKER_00: but maybe we can push that to another week.
• 38:21
  Maybe we can jump in and we can talk about some lessons learned
• 38:25
  and do our wrap-up.
• 38:27
  SPEAKER_02: Okay, so let's take a step back.
• 38:31
  SPEAKER_02: So everything I've discussed today, fraud,
• 38:34
  SPEAKER_02: This aren't just Southeast Asian stories.
• 38:36
  They are universal human parents playing out with regional
• 38:39
  characteristics.
• 38:42
  SPEAKER_02: So we have like fraud is borderless.
• 38:44
  SPEAKER_02: Why?
• 38:44
  SPEAKER_02: Because we have e-fishery.
• 38:46
  SPEAKER_02: And then we have on the other end of the world, Terranos.
• 38:47
  SPEAKER_02: And then we have Castle.
• 38:48
  SPEAKER_02: We have Enron, different products, same playbook.
• 38:50
  Charismatic founders,
• 38:51
  compelling missions,
• 38:52
  inflated metrics,
• 38:54
  and investors who forgot to verify.
• 38:56
  SPEAKER_02: And the comebacks...
• 38:58
  also universal and the regional differences well let me you
• 39:03
  know trust networks in
• 39:04
  asia are tighter more relationship based and when trust breaks
• 39:09
  well well you know
• 39:11
  the damage spreads faster like covid because everyone knows
• 39:14
  everyone and when we
• 39:17
  build through demonstrated integrity it also compounds more
• 39:21
  powerfully so that's i
• 39:23
  SPEAKER_02: think it's both extremes i said
• 39:25
  SPEAKER_02: and you're going to spread some business.
• 39:27
  SPEAKER_00: Yeah,
• 39:28
  SPEAKER_00: I mean,
• 39:28
  SPEAKER_00: the stakes are high,
• 39:30
  SPEAKER_00: you know,
• 39:30
  SPEAKER_00: when you have these scenarios and they're spectacular falls,
• 39:35
  SPEAKER_00: but we do have the ability for some comebacks.
• 39:38
  SPEAKER_00: We didn't get a chance to get into some of these stories,
• 39:41
  but like we'll circle back to some of the positive side of
• 39:43
  things coming back.
• 39:45
  SPEAKER_00: It's like a lot of this is like going through your bad breakups.
• 39:49
  SPEAKER_00: We're going through these difficult times where
• 39:52
  you're no longer you're you're a little bit jaded you're no
• 39:55
  longer falling for the
• 39:56
  pickup lines the cute face all of that you start you start
• 40:00
  appreciating more of
• 40:01
  like the little things and we we need to do the work we need to
• 40:04
  like actually
• 40:05
  actually you know not just be swiping left and right and we
• 40:09
  actually need to like
• 40:10
  get a little bit more into it sorry try to try to try to
• 40:14
  personalize the the life
• 40:16
  SPEAKER_00: lessons there
• 40:17
  SPEAKER_02: No, but, you know, sometimes we've got to heal ourselves first.
• 40:19
  SPEAKER_02: We've got to look within, you know, to not get a bit philosophical.
• 40:23
  SPEAKER_02: But that's just life, right?
• 40:24
  SPEAKER_02: I really committed to this dating analogies today.
• 40:28
  SPEAKER_02: Like, human behavior is human behavior.
• 40:30
  SPEAKER_02: You know, whether it's romance or venture capital, let's put it that way.
• 40:32
  SPEAKER_02: I'm just going to put it out there.
• 40:34
  SPEAKER_02: But then, you know, there's something profound here.
• 40:36
  In the world of fake news,
• 40:38
  fabricated metrics,
• 40:39
  and manufactured authenticity,
• 40:42
  SPEAKER_02: Maybe what we're really craving in business and life is pure,
• 40:46
  SPEAKER_02: basic honesty and the courage to say,
• 40:48
  SPEAKER_02: hey,
• 40:49
  SPEAKER_02: this is where we really are.
• 40:50
  SPEAKER_02: This is what we actually achieve and here's what we're going to do next.
• 40:54
  SPEAKER_02: If you really go down to the depths of it, that's the real disruption.
• 40:58
  Radical transparency in an age of creative storytelling where
• 41:02
  hype versus reality
• 41:03
  SPEAKER_02: is when hype wins,
• 41:05
  SPEAKER_02: really.
• 41:06
  SPEAKER_00: That would be nice just to like say it as it is.
• 41:10
  SPEAKER_00: Don't get caught up in having to sugarcoat everything.
• 41:13
  SPEAKER_00: And like,
• 41:14
  SPEAKER_00: I can tell you from my perspective,
• 41:15
  SPEAKER_00: dealing with portfolio companies and as an investor,
• 41:18
  SPEAKER_00: like,
• 41:19
  SPEAKER_00: give me the good,
• 41:19
  SPEAKER_00: bad and the ugly.
• 41:21
  SPEAKER_00: I can take it, you know, like.
• 41:24
  SPEAKER_00: What doesn't kill you makes you stronger.
• 41:25
  SPEAKER_00: So let's actually talk through the warts and all of that.
• 41:32
  SPEAKER_00: If there's no problems,
• 41:33
  then I realize that that's the problem because clearly you're
• 41:36
  not telling me
• 41:37
  SPEAKER_00: everything because every company has a thousand problems.
• 41:41
  SPEAKER_02: So what's the takeaway for our listeners on top of that,
• 41:44
  SPEAKER_02: whether you're a founder,
• 41:45
  SPEAKER_02: an investor,
• 41:46
  or just someone trying to navigate a world full of polished
• 41:49
  narratives and hidden
• 41:50
  SPEAKER_02: agendas?
• 41:51
  SPEAKER_00: Do the work.
• 41:52
  SPEAKER_00: Verify.
• 41:54
  SPEAKER_00: Don't just trust.
• 41:56
  SPEAKER_00: You shouldn't be doing this follow the leader.
• 41:58
  SPEAKER_00: You can follow somebody, but you've got to verify.
• 42:03
  SPEAKER_00: Don't just trust.
• 42:04
  SPEAKER_00: No matter how compelling that story,
• 42:06
  SPEAKER_00: how impressive the backers are or noble the mission sounds,
• 42:12
  SPEAKER_00: you've got to go out and count the fish feeders.
• 42:14
  SPEAKER_02: Yeah,
• 42:14
  SPEAKER_02: and when you mess up,
• 42:15
  SPEAKER_02: own it completely and focus on fixing it rather than explaining it away.
• 42:20
  And the market might forgive a lot of things,
• 42:23
  but it never forgives being lied to.
• 42:26
  SPEAKER_02: And at this point, authenticity isn't just nice to have anymore.
• 42:31
  SPEAKER_02: It's a accommodative advantage.
• 42:32
  SPEAKER_02: You know, I can't stress it any further.
• 42:34
  SPEAKER_02: The more in line you are with your inner self,
• 42:38
  the easier it is to move around because you hold your values
• 42:41
  true to yourself.
• 42:41
  SPEAKER_02: And that stands out to me, even as a person, you know.
• 42:45
  SPEAKER_02: And I guess,
• 42:46
  SPEAKER_02: you know,
• 42:46
  SPEAKER_02: here's my personal takeaway,
• 42:47
  SPEAKER_02: you know,
• 42:48
  SPEAKER_02: whether it's a startup,
• 42:48
  SPEAKER_02: a relationship,
• 42:50
  SPEAKER_02: I guess your relationship in this mix now,
• 42:52
  SPEAKER_02: or just your daily life,
• 42:53
  SPEAKER_02: you know,
• 42:53
  SPEAKER_02: the people who consistently tell the truth,
• 42:55
  SPEAKER_02: especially when it's uncomfortable.
• 42:57
  SPEAKER_02: I think that's the other ones that you want to bet on long term.
• 43:01
  SPEAKER_00: Yeah, I couldn't agree more.
• 43:03
  SPEAKER_00: I mean,
• 43:04
  SPEAKER_00: as we know,
• 43:05
  SPEAKER_00: trust builds slowly,
• 43:06
  SPEAKER_00: it breaks faster,
• 43:07
  SPEAKER_00: compounds beautifully when it's growing.
• 43:10
  SPEAKER_00: But like I said, when it breaks, it breaks spectacularly.
• 43:12
  So manage your reputation,
• 43:15
  choose your reputation carefully and act accordingly.
• 43:20
  SPEAKER_02: And that's our show.
• 43:20
  SPEAKER_02: You know,
• 43:21
  Southeast Asia keeps reminding us that behind all the numbers
• 43:25
  and narratives are
• 43:26
  SPEAKER_02: very human stories about character choices and consequences.
• 43:31
  SPEAKER_02: Yeah.
• 43:31
  SPEAKER_02: So the three Cs, not Singapore's five Cs.
• 43:35
  SPEAKER_00: Yeah, we've still got some work to do in the region.
• 43:38
  SPEAKER_00: But we'll tackle some more of the stories in the next week.
• 43:42
  SPEAKER_02: Yeah.
• 43:43
  SPEAKER_02: Till then, we're just going to keep it real.
• 43:45
  SPEAKER_02: And again, remember, verify, don't just trust.
• 43:48
  SPEAKER_02: And maybe,
• 43:49
  SPEAKER_02: just maybe,
• 43:50
  we just got to root for the quiet ones who under-promise and
• 43:53
  over-deliver.
• 43:54
  SPEAKER_00: There we go.
• 43:55
  SPEAKER_02: Yep.
• 44:06
  SPEAKER_02: And that's a wrap.
• 44:08
  SPEAKER_02: If that didn't give you existential crisis about trust and due diligence,
• 44:13
  SPEAKER_02: I guess you weren't paying any attention.
• 44:15
  SPEAKER_02: So what did Kevin and I just unpack?
• 44:18
  SPEAKER_02: A masterclass in how entire ecosystems get drunk on their own narratives.
• 44:25
  SPEAKER_02: E-fishery wasn't just one bad founder.
• 44:28
  SPEAKER_02: It was investors chasing ESG halos so hard they forgot basic math.
• 44:35
  SPEAKER_02: A culture that rewarded storytelling over spreadsheets.
• 44:38
  SPEAKER_02: Verify.
• 44:40
  SPEAKER_02: Don't just trust.
• 44:43
  And that applies to no matter how compelling the ESG story or
• 44:48
  impressive the beggars are.
• 44:49
  SPEAKER_02: In the next episode, Chi Zhuk Wong...
• 44:52
  SPEAKER_02: one of the most well-rounded humans I have met in Asian tech.
• 44:58
  SPEAKER_02: He's helped founders scale across Hong Kong and Singapore,
• 45:01
  SPEAKER_02: worked inside Huawei,
• 45:04
  SPEAKER_02: former student of NYU and Tsinghua,
• 45:07
  SPEAKER_02: and somehow finds time for biohacking.
• 45:11
  SPEAKER_02: After everything we discussed about trust,
• 45:15
  SPEAKER_02: Qichu represents something different.
• 45:19
  SPEAKER_02: Less spectacle, more substance.
• 45:23
  SPEAKER_02: Less hype and more heavy lifting.
• 45:25
  SPEAKER_02: I'm Kim Yeo and this is the Sea of Startups.
• 45:30
  In a world of polished narratives,
• 45:32
  radical transparency isn't nice to have.
• 45:36
  SPEAKER_02: It's survival.
• 45:37
  SPEAKER_02: See you in the next one.