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The tourists went home: who is actually left to fund Southeast Asia · SEA of Startups

• 0:00
  SPEAKER_00: This region sold the growth story for a decade and did not build the plumbing to get
• 0:05
  SPEAKER_00: the money back out.
• 0:07
  SPEAKER_00: Shallow public markets,
• 0:08
  SPEAKER_00: thin strategic buyers,
• 0:10
  SPEAKER_00: strategies of growth at all costs that just failed once the music stopped.
• 0:15
  SPEAKER_00: Founders and funds that optimized for the next round instead of the eventual exit.
• 0:20
  SPEAKER_00: Because the next up round felt great and the exit felt far away.
• 0:24
  SPEAKER_00: So put yourself in the shoes of a limited partner.
• 0:28
  SPEAKER_00: You're a pension fund or a family office or a sovereign wealth fund.
• 0:33
  SPEAKER_00: You put money into Southeast Asia venture back in 2019.
• 0:37
  SPEAKER_00: You were told at that time with a straight face and a beautiful deck that this was
• 0:41
  SPEAKER_00: the next China.
• 0:43
  SPEAKER_00: It is 2026 now.
• 0:45
  SPEAKER_00: Where are your distributions?
• 0:47
  SPEAKER_00: For a lot of these people, the answer is still trapped inside companies.
• 0:51
  SPEAKER_00: The LPs who backed this region did not get paid back,
• 0:55
  SPEAKER_00: so many of them rotated over to somewhere else,
• 0:58
  SPEAKER_00: whether it's Japan, Korea, Australia, or back to the US or Europe.
• 1:03
  SPEAKER_00: The funds that stayed climbed up to growth and moved into bricks and mortar,
• 1:07
  SPEAKER_00: concrete, or picked up the government's checkbook.
• 1:13
  SPEAKER_00: So last week,
• 1:14
  SPEAKER_00: one of the firms
• 1:15
  SPEAKER_00: that taught this region what seed capital even looks like quietly admitted
• 1:21
  SPEAKER_00: that it will not raise another Southeast Asia fund.
• 1:25
  SPEAKER_00: 500 Global,
• 1:27
  SPEAKER_00: the people who showed up in KL in Jakarta in Bangkok more than a decade ago,
• 1:33
  SPEAKER_00: when honestly almost nobody in the valley could find these cities on a map,
• 1:37
  SPEAKER_00: let alone wire money to them.
• 1:40
  SPEAKER_00: They ran the accelerators.
• 1:41
  SPEAKER_00: They wrote the small early checks.
• 1:43
  SPEAKER_00: Nobody else was really writing at that time period.
• 1:47
  SPEAKER_00: For a lot of founders in the region,
• 1:49
  SPEAKER_00: a 500 check was the first time a real Silicon Valley name said yes.
• 1:56
  SPEAKER_00: Flash forward and DealStreetAsia reported on the 31st of August
• 2:02
  SPEAKER_00: that they are not raising another dedicated Southeast Asia fund.
• 2:08
  SPEAKER_00: Future bets here come out of the global pool,
• 2:11
  SPEAKER_00: a smaller local team mostly managing and winding down what they already own,
• 2:17
  SPEAKER_00: it seems.
• 2:18
  SPEAKER_00: Now, to be fair,
• 2:19
  SPEAKER_00: and I'm going to be fair all the way through this episode to the extent that I can,
• 2:24
  SPEAKER_00: you know, Kylie pushed back a few days later.
• 2:28
  SPEAKER_00: He said 500 is still committed to the region,
• 2:31
  SPEAKER_00: still managing the existing funds, still looking at new mandates.
• 2:35
  SPEAKER_00: And Honestly, I believe him.
• 2:37
  SPEAKER_00: He's tied to the region, obviously, much more so than I am because I wasn't born here.
• 2:42
  SPEAKER_00: And honestly, both things can be true.
• 2:44
  SPEAKER_00: You can be genuinely committed to a region and still decide that you won't raise
• 2:50
  SPEAKER_00: a dedicated fund for that region.
• 2:52
  SPEAKER_00: So hold that thought because that gap between what people say
• 2:57
  SPEAKER_00: and what they will actually write a check for,
• 2:59
  SPEAKER_00: the gap is pretty much the whole episode.
• 3:03
  SPEAKER_00: And here's where why I'm not treating this as a 500 story,
• 3:08
  SPEAKER_00: even though that's the kind of the lead in, because it's it's not one firm.
• 3:13
  SPEAKER_00: You know,
• 3:13
  SPEAKER_00: if we rewind back and look at Y Combinator,
• 3:16
  SPEAKER_00: for example, the most famous accelerator on the planet, the premier of the premier.
• 3:22
  SPEAKER_00: In 21 and 22, their batches swelled to like 400 companies.
• 3:27
  SPEAKER_00: It was founders from everywhere, checks everywhere, the whole world invited.
• 3:33
  SPEAKER_00: Then under Gary Tan, they cut the batch back to roughly 100.
• 3:38
  SPEAKER_00: They stepped back from the late stage and they pulled back from the rest of the world.
• 3:43
  SPEAKER_00: The winner batch 23 was about 21% international.
• 3:48
  SPEAKER_00: The batch right before it was 42, cut in half.
• 3:52
  SPEAKER_00: And today, something like 80% of the batch is an AI company, as to be expected.
• 3:58
  SPEAKER_00: So look at what those two decisions have in common.
• 4:01
  SPEAKER_00: The biggest early-stage machine in the U.S.
• 4:05
  SPEAKER_00: and one of the most important funds that this region had,
• 4:08
  SPEAKER_00: a decade apart, both looked at the whole wide world and came to the same conclusion.
• 4:14
  SPEAKER_00: Smaller, closer to home, and pointed straight at AI companies.
• 4:20
  SPEAKER_00: That is the tide going out.
• 4:24
  SPEAKER_00: Two canaries in the same coal mine singing the same note.
• 4:28
  SPEAKER_00: And today, I want to talk about what the tide leaves behind here in Southeast Asia.
• 4:36
  SPEAKER_00: Not the headline...
• 4:38
  SPEAKER_00: You started a company to build a product, not to run a back office.
• 4:55
  SPEAKER_00: But here you are.
• 4:56
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• 5:02
  SPEAKER_00: That is compliance.
• 5:04
  SPEAKER_00: It's not clarity.
• 5:05
  SPEAKER_00: It will not tell you if you run out of cash in March.
• 5:09
  SPEAKER_00: It will not tell you what one new hire does to your runway.
• 5:14
  SPEAKER_00: And it will not answer the question every investor asks.
• 5:18
  SPEAKER_00: Where's this business heading?
• 5:20
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• 5:25
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• 5:32
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• 5:37
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• 5:42
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• 5:48
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• 5:50
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• 5:54
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• 5:58
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• 6:05
  SPEAKER_00: That's yourcfo.tech.
• 6:10
  SPEAKER_00: Now,
• 6:11
  SPEAKER_00: let me start with the number everyone is celebrating because that number is part of
• 6:17
  SPEAKER_00: the tell.
• 6:18
  SPEAKER_00: So global venture capital just had a record six months,
• 6:24
  SPEAKER_00: around $510 billion in the first half of 26.
• 6:25
  SPEAKER_00: That is more than all of last year in half the time.
• 6:33
  SPEAKER_00: If you only read that one headline you start thinking ah we're living through
• 6:38
  SPEAKER_00: the single greatest funding boom in the history of the industry.
• 6:43
  SPEAKER_00: Now Put on your skeptical hat and I'm going to ask you to put that on with me
• 6:51
  SPEAKER_00: because this is the number that actually matters.
• 6:55
  SPEAKER_00: That boom is not really a full-blown boom.
• 7:00
  SPEAKER_00: It's a handful of companies wearing a trench coat labeled Global Venture.
• 7:07
  SPEAKER_00: Artificial intelligence took roughly 77% of all global venture dollars in that half year.
• 7:14
  SPEAKER_00: And two companies,
• 7:16
  SPEAKER_00: namely the ones that we all are familiar with,
• 7:18
  SPEAKER_00: OpenAI and Anthropic, between them raised somewhere around $217 billion.
• 7:25
  SPEAKER_00: Maybe my figure might be out of date at this point.
• 7:29
  SPEAKER_00: But let me say that a different way so it lands.
• 7:32
  SPEAKER_00: Two companies...
• 7:34
  SPEAKER_00: Essentially in California, took about 43% of all startup funding on the planet Earth.
• 7:43
  SPEAKER_00: In the US on its own, venture was about $412 billion and 86% of that went to AI.
• 7:52
  SPEAKER_00: Now, if you say the caveat out loud,
• 7:54
  SPEAKER_00: because I promised I would and because the whole brand of the show is really
• 7:59
  SPEAKER_00: that I do not read you a number without telling you what is wrong with it.
• 8:05
  SPEAKER_00: These figures move around depending upon who is counting and what they choose to count.
• 8:11
  SPEAKER_00: So you'll see different reports have slightly different numbers.
• 8:14
  SPEAKER_00: So let's just call them directionally correct in regards to intention.
• 8:18
  SPEAKER_00: And you will see AI called 77% globally,
• 8:23
  SPEAKER_00: 86% in the U.S.
• 8:24
  SPEAKER_00: And the definition of AI company right now is starting to become pretty generous.
• 8:30
  SPEAKER_00: Anybody with an API wrapper and a login screen is an AI company.
• 8:36
  SPEAKER_00: Out here in Asia, we're throwing in data centers sometimes with these.
• 8:39
  SPEAKER_00: We're throwing in the chip companies.
• 8:41
  SPEAKER_00: Are they AI if they're producing the hardware for it?
• 8:44
  SPEAKER_00: But that's getting beyond the point.
• 8:46
  SPEAKER_00: Here's the thing.
• 8:48
  SPEAKER_00: Every version of the number essentially is telling you the same story and
• 8:51
  SPEAKER_00: the story does not change.
• 8:53
  SPEAKER_00: The money right now seems to be concentrating more than it has in the past to
• 8:59
  SPEAKER_00: the U.S.
• 9:01
  SPEAKER_00: and inside the U.S.
• 9:03
  SPEAKER_00: it's definitely concentrating towards AI and inside of that AI it's concentrating
• 9:09
  SPEAKER_00: to like four companies primarily those two that I already mentioned.
• 9:15
  SPEAKER_00: So If a fund manager gets on a stage and tells you venture is back,
• 9:22
  SPEAKER_00: ask them the simple question, back where?
• 9:25
  SPEAKER_00: Because if you strip out those few mega rounds in San Francisco,
• 9:29
  SPEAKER_00: the rest of the planet is not really in a boom.
• 9:33
  SPEAKER_00: Some are starting to recover, but it's definitely not a boom.
• 9:36
  SPEAKER_00: The rest of the planet is actually being a little bit starved.
• 9:40
  SPEAKER_00: The oxygen got pulled into one room,
• 9:43
  SPEAKER_00: and the unfortunate news for a lot of us is we're not in that room in San Francisco.
• 9:49
  SPEAKER_00: We're out here.
• 9:51
  SPEAKER_00: And here is the part that should sting for anyone building here because it is
• 9:57
  SPEAKER_00: a change from the old story.
• 9:59
  SPEAKER_00: This is not the usual complaint where American money ignores us
• 10:03
  SPEAKER_00: because they do not understand us.
• 10:05
  SPEAKER_00: This time the U.S. money has something better to do at home.
• 10:10
  SPEAKER_00: So ask yourself honestly,
• 10:13
  SPEAKER_00: why would the capital that has that choice get on a 14 hour flight to underwrite
• 10:21
  SPEAKER_00: a logistics startup in Kuala Lumpur when they can walk three blocks
• 10:27
  SPEAKER_00: from their office and put a check into a frontier lab or a new model
• 10:32
  SPEAKER_00: that might be worth a trillion dollars?
• 10:36
  SPEAKER_00: Honestly, they would not, and they are not.
• 10:39
  SPEAKER_00: That is not a slight against Southeast Asia, it is gravity.
• 10:43
  SPEAKER_00: The returns moved, so the money moved.
• 10:46
  SPEAKER_00: Capital is not loyal, and it never was.
• 10:52
  SPEAKER_00: Even the money that does show up in our numbers is not always what it looks like.
• 10:57
  SPEAKER_00: You will hear that Singapore now captures something like 78%
• 11:01
  SPEAKER_00: of all Southeast Asian startup funding, 78%, one city.
• 11:07
  SPEAKER_00: But be careful with that figure as well because a chunk of it is not activity.
• 11:12
  SPEAKER_00: It is address.
• 11:14
  SPEAKER_00: It is companies born elsewhere that domicile a holding company in Singapore for
• 11:19
  SPEAKER_00: the tax and for the safety.
• 11:21
  SPEAKER_00: And then the raise gets counted as Singapore.
• 11:24
  SPEAKER_00: So the real picture is often much more complicated and even more distorted than
• 11:29
  SPEAKER_00: the numbers suggest.
• 11:31
  SPEAKER_00: When you strip out the holding company effect and the infrastructure deals,
• 11:35
  SPEAKER_00: the amount of genuine early stage founder-led money actually landing across the rest
• 11:41
  SPEAKER_00: of this region, it's really thin.
• 11:43
  SPEAKER_00: Thinner than most of the conference panels may tell you.
• 11:48
  SPEAKER_00: Which brings me to the question the rest of this episode is really about.
• 11:55
  SPEAKER_00: If the tourists have gone home to chase AI and the money that stayed is huddled
• 12:01
  SPEAKER_00: in one city,
• 12:03
  SPEAKER_00: then who exactly has left the fund,
• 12:06
  SPEAKER_00: the next founder in Manila, in Ho Chi Minh, in Kuala Lumpur, in Bangkok?
• 12:16
  SPEAKER_00: So...
• 12:17
  SPEAKER_00: I went looking for who is actually raising money to invest in this region.
• 12:24
  SPEAKER_00: Not investing, raising, because that is a leading indicator.
• 12:28
  SPEAKER_00: And almost nobody talks about it.
• 12:30
  SPEAKER_00: It's a very hush hush.
• 12:32
  SPEAKER_00: And honestly,
• 12:33
  SPEAKER_00: what I look for may not be the full scope of things because a lot
• 12:37
  SPEAKER_00: of it is non-public by regulation and often by design.
• 12:43
  SPEAKER_00: A fund that cannot,
• 12:45
  SPEAKER_00: when you take that,
• 12:47
  SPEAKER_00: you have to think about the fundraising because essentially a fund
• 12:51
  SPEAKER_00: that cannot raise cannot write checks next year.
• 12:55
  SPEAKER_00: No matter how confident it sounds or how nice that website looks,
• 13:00
  SPEAKER_00: It has to raise in order to invest.
• 13:03
  SPEAKER_00: And here's what you will find.
• 13:05
  SPEAKER_00: And it will stop you when you start looking at it.
• 13:08
  SPEAKER_00: Because in the first half of 2026,
• 13:11
  SPEAKER_00: I did not see a single dedicated Southeast Asia fund reach a final close.
• 13:18
  SPEAKER_00: Not one.
• 13:20
  SPEAKER_00: Only one Southeast Asia-focused venture fund closed it all in that window.
• 13:25
  SPEAKER_00: And as of August,
• 13:27
  SPEAKER_00: no Southeast Asia-headquartered venture manager had reported a final close for
• 13:32
  SPEAKER_00: the year.
• 13:33
  SPEAKER_00: Now, maybe that data set is incomplete.
• 13:36
  SPEAKER_00: Maybe some of the paid sources that I'm not subscribed to will differ, but I don't have access.
• 13:41
  SPEAKER_00: But I can tell you from the word on the street, it's tight.
• 13:46
  SPEAKER_00: So let me translate that out of finance language.
• 13:50
  SPEAKER_00: The machine that raises the money that then funds the founders,
• 13:54
  SPEAKER_00: that machine has basically stalled for the year.
• 13:58
  SPEAKER_00: Now think about how a fund works.
• 14:01
  SPEAKER_00: A general partner goes to family offices, pension funds, high net worth individuals.
• 14:09
  SPEAKER_00: The bigger ones will touch on the sovereigns and the larger size,
• 14:13
  SPEAKER_00: maybe some corporates, this and that.
• 14:16
  SPEAKER_00: That is the raise.
• 14:18
  SPEAKER_00: And it can take a year or two or sometimes three.
• 14:22
  SPEAKER_00: Then they spend the next few years deploying it into startups.
• 14:26
  SPEAKER_00: So if nobody is closing a fund in 2026, that is not just a bad year.
• 14:32
  SPEAKER_00: That is going to be a hole in the checks that founders will feel in the next years.
• 14:39
  SPEAKER_00: The drought you see today is actually a leading indicator that's telling you what
• 14:44
  SPEAKER_00: the future is going to hold.
• 14:47
  SPEAKER_00: Regional venture deal value is already down.
• 14:51
  SPEAKER_00: And now the tank that is supposed to refill it is running close to empty.
• 14:57
  SPEAKER_00: This is the stat I wanted you to keep in your pocket.
• 15:01
  SPEAKER_00: The next time you're at an event and someone talks glowingly about the region's bright future.
• 15:07
  SPEAKER_00: And bright futures are funded in advance.
• 15:09
  SPEAKER_00: And right now almost nobody is funding the fund.
• 15:14
  SPEAKER_00: And before you tell me this is just the small tourist players washing out
• 15:19
  SPEAKER_00: and good riddance, look at the biggest name of all.
• 15:22
  SPEAKER_00: You know, Peak 15, which used to be part of the Sequoia, generally well regarded.
• 15:31
  SPEAKER_00: They raised $1.3 billion.
• 15:34
  SPEAKER_00: I think it was announced in February of this year and fantastic news.
• 15:40
  SPEAKER_00: But You know, it's primarily an India seed fund.
• 15:45
  SPEAKER_00: It's an India venture fund and an Asia-Pacific fund, not a Southeast Asia fund.
• 15:51
  SPEAKER_00: And they moved partners around.
• 15:54
  SPEAKER_00: It's not showing the stretch as it once had.
• 16:00
  SPEAKER_00: So the biggest name that ever carried the brand in this part of
• 16:04
  SPEAKER_00: the world raised money and pointed almost none of it specifically at Southeast Asia.
• 16:11
  SPEAKER_00: India, yes, has its own dedicated funds.
• 16:14
  SPEAKER_00: Asia Pacific, the big blurry bucket, yes.
• 16:17
  SPEAKER_00: Southeast Asia has its own thing?
• 16:20
  SPEAKER_00: Worth its own fun with its own partners?
• 16:23
  SPEAKER_00: Apparently not.
• 16:25
  SPEAKER_00: That is what I mean by the herd thinning.
• 16:27
  SPEAKER_00: It is not always a dramatic exit and a farewell blog post.
• 16:31
  SPEAKER_00: Sometimes it is just a fund,
• 16:33
  SPEAKER_00: very quietly taking the word Southeast Asia off the label and hoping nobody notices.
• 16:40
  SPEAKER_00: I noticed I'm honestly a bit guilty as well because we added Japan and in order
• 16:46
  SPEAKER_00: to be able to function that we swapped out Southeast Asia for APAC.
• 16:52
  SPEAKER_00: Now, let's shift here a little bit.
• 16:57
  SPEAKER_00: Why has the money that was so in love with this region a few years ago gone so quiet?
• 17:04
  SPEAKER_00: Here, I am not going to let us off the hook because a big part of this we did to ourselves.
• 17:10
  SPEAKER_00: The answer is a three-letter acronym that decides who in this industry keeps their job.
• 17:16
  SPEAKER_00: DPI.
• 17:18
  SPEAKER_00: Distributions to paid in capital.
• 17:20
  SPEAKER_00: In plain English, it means one thing.
• 17:22
  SPEAKER_00: Of the money the investors gave to the fund, how much did that fund actually give back?
• 17:28
  SPEAKER_00: Not on paper, not in a markup.
• 17:31
  SPEAKER_00: In my bank account, in real dollars, I can spend a return to my own investors.
• 17:38
  SPEAKER_00: And the honest answer in Southeast Asia is it's not much and not lately.
• 17:44
  SPEAKER_00: Exit value fell about 32% last year.
• 17:48
  SPEAKER_00: Down to something like $4 billion for the entire region.
• 17:51
  SPEAKER_00: Almost every good exit this region ever produced is still clustered back in 21 and 22.
• 17:58
  SPEAKER_00: Since then, it has been quiet.
• 18:00
  SPEAKER_00: Not slow.
• 18:02
  SPEAKER_00: Quiet.
• 18:03
  SPEAKER_00: So put yourself in the shoes of a limited partner.
• 18:07
  SPEAKER_00: You're a pension fund or a family office or a sovereign wealth fund.
• 18:12
  SPEAKER_00: You put money into Southeast Asia Venture back in 2019.
• 18:16
  SPEAKER_00: In 2021,
• 18:18
  SPEAKER_00: you were told at that time with a straight face and a beautiful deck that this was
• 18:22
  SPEAKER_00: the next China.
• 18:24
  SPEAKER_00: It is 2026 now.
• 18:25
  SPEAKER_00: Where are your distributions?
• 18:28
  SPEAKER_00: For a lot of these people,
• 18:29
  SPEAKER_00: the answer is still trapped inside companies that can't go public because
• 18:33
  SPEAKER_00: the local markets are too shallow and cannot find a buyer because
• 18:37
  SPEAKER_00: the strategic acquirers are just not there for it.
• 18:41
  SPEAKER_00: Or they're still bleeding cash and having to right size or growth is slowed down.
• 18:46
  SPEAKER_00: Your money is alive technically.
• 18:49
  SPEAKER_00: It is just not coming home.
• 18:51
  SPEAKER_00: You do that to an investor once, they call it bad luck.
• 18:54
  SPEAKER_00: You do it across a whole region, across a whole vintage of funds, multiple vintages of funds.
• 19:01
  SPEAKER_00: They start to remember.
• 19:03
  SPEAKER_00: And when they sit down to decide where the next allocation goes,
• 19:07
  SPEAKER_00: they do not come back to the market that locked up their money for 10 years
• 19:11
  SPEAKER_00: and sent them a newsletter about potential.
• 19:14
  SPEAKER_00: They go where the exits are actually happening.
• 19:18
  SPEAKER_00: And that is precisely what is going on.
• 19:21
  SPEAKER_00: Capital is rotating into what people now call developed Asia.
• 19:26
  SPEAKER_00: Japan is leading it.
• 19:27
  SPEAKER_00: There's tons of money going into Japan.
• 19:29
  SPEAKER_00: Korea and Australia are picking up a lot of attention.
• 19:33
  SPEAKER_00: And why?
• 19:34
  SPEAKER_00: Clear exits,
• 19:35
  SPEAKER_00: better governance,
• 19:37
  SPEAKER_00: stock markets that actually function and let an investor get their money out.
• 19:41
  SPEAKER_00: A little bit of nuance to that when you start talking about some of the issues with
• 19:44
  SPEAKER_00: the Japan market, but nonetheless.
• 19:47
  SPEAKER_00: So follow the full picture.
• 19:49
  SPEAKER_00: U.S. money went home to chase AI.
• 19:52
  SPEAKER_00: Chinese cross-border money got fenced off by geopolitics.
• 19:56
  SPEAKER_00: And the LPs who are still committed to Asia are drifting north and east toward liquidity.
• 20:02
  SPEAKER_00: To the places that pay them back for it.
• 20:05
  SPEAKER_00: Now, I do want to be very careful here because it would be very easy to stand
• 20:10
  SPEAKER_00: at this microphone that you can't see because it's off screen.
• 20:15
  SPEAKER_00: To stand at this microphone and sound like a victim of this game.
• 20:20
  SPEAKER_00: This region sold the growth story for a decade and did not build the plumbing to get
• 20:27
  SPEAKER_00: the money back out.
• 20:28
  SPEAKER_00: Shallow public markets,
• 20:30
  SPEAKER_00: thin strategic buyers,
• 20:32
  SPEAKER_00: strategies of growth at all costs that just failed once the music stopped,
• 20:37
  SPEAKER_00: founders and funds that optimized for the next round instead of the eventual exit
• 20:42
  SPEAKER_00: because the next up round felt great and the exit felt far away.
• 20:47
  SPEAKER_00: The tourists did not only leave because AI got shiny,
• 20:51
  SPEAKER_00: they left because we did not pay them back.
• 20:54
  SPEAKER_00: That is a much harder sentence to say out loud on a show than blaming San Francisco.
• 21:01
  SPEAKER_00: But it is the true one.
• 21:03
  SPEAKER_00: And if we cannot say it, we are never going to fix it.
• 21:08
  SPEAKER_00: So here's the part that I hope is going to genuinely be useful.
• 21:12
  SPEAKER_00: If you were building or investing here right now,
• 21:15
  SPEAKER_00: and I hope that you are,
• 21:17
  SPEAKER_00: the funds that stayed did not just calmly keep doing early stage,
• 21:21
  SPEAKER_00: Southeast Asia the way that they used to.
• 21:24
  SPEAKER_00: And honestly, almost none of them did.
• 21:27
  SPEAKER_00: They each walked through one of three doors and you need to know
• 21:32
  SPEAKER_00: which door your investor walked through because it tells you honestly,
• 21:36
  SPEAKER_00: which they will ever fund, whether they will ever fund a company like yours again.
• 21:41
  SPEAKER_00: Door number one, They moved up the stage curve.
• 21:45
  SPEAKER_00: Late stage is quietly reviving,
• 21:48
  SPEAKER_00: growth stage, because late stage is where the perceived safety is.
• 21:51
  SPEAKER_00: It's easier to understand the track record.
• 21:54
  SPEAKER_00: You have more numbers.
• 21:55
  SPEAKER_00: You have more traction.
• 21:56
  SPEAKER_00: It resembles stock picking.
• 21:59
  SPEAKER_00: Bigger companies,
• 22:00
  SPEAKER_00: real revenue, an established business that is unlikely to go to zero next quarter.
• 22:05
  SPEAKER_00: And the flip side of that safety is brutal for every early founder.
• 22:10
  SPEAKER_00: If the money moves up,
• 22:11
  SPEAKER_00: then to get an early check,
• 22:13
  SPEAKER_00: you now have to prove more earlier for a smaller amount at a lower valuation than
• 22:20
  SPEAKER_00: the person who raised two years before you.
• 22:23
  SPEAKER_00: The bar went up and the check went down at the same time.
• 22:27
  SPEAKER_00: And the clearest example of this is not a tourist.
• 22:32
  SPEAKER_00: It's one of the well-known,
• 22:34
  SPEAKER_00: well-regarded firms in Southeast Asia,
• 22:37
  SPEAKER_00: which is Monks Hill,
• 22:38
  SPEAKER_00: Singapore-based,
• 22:39
  SPEAKER_00: a firm that spent more than a decade preaching the gospel of early stage.
• 22:44
  SPEAKER_00: This year, they restructured.
• 22:46
  SPEAKER_00: They closed their Jakarta office,
• 22:47
  SPEAKER_00: which we touched on some of the issues over there,
• 22:51
  SPEAKER_00: ending more than 10 years on the ground there.
• 22:53
  SPEAKER_00: They pulled the team back to Singapore, and they're moving to growth stage.
• 22:58
  SPEAKER_00: So sit with that because it's not a one-off.
• 23:01
  SPEAKER_00: It's the more public one.
• 23:03
  SPEAKER_00: It is the entire thesis of this episode compressed into that firm.
• 23:09
  SPEAKER_00: A respected local name, not a fly-in, fly-out fun, did two things at the same time.
• 23:16
  SPEAKER_00: They moved up away from the early stage founder towards growth.
• 23:21
  SPEAKER_00: And they retreated geographically back to the safe city of Singapore.
• 23:28
  SPEAKER_00: So when the people who spend 10 years telling you that early stage was
• 23:33
  SPEAKER_00: the future decide that the future is actually growth,
• 23:37
  SPEAKER_00: that's not necessarily California losing interest in us.
• 23:40
  SPEAKER_00: That is the herd thinning from the inside.
• 23:42
  SPEAKER_00: That is right here at home.
• 23:45
  SPEAKER_00: Then door number two, they went physical.
• 23:49
  SPEAKER_00: If the money is not going into your app,
• 23:51
  SPEAKER_00: it's going into concrete and steel and cooling systems and power,
• 23:55
  SPEAKER_00: data sensors in Johor,
• 23:57
  SPEAKER_00: electric vehicle fleets, ports, warehouses, infrastructure, chips, cafes.
• 24:05
  SPEAKER_00: This is the real story hiding behind some of the big headlines pouring into Southeast Asia.
• 24:11
  SPEAKER_00: A lot of that is not venture capital backing a founder with an idea and a new software design.
• 24:18
  SPEAKER_00: It is infrastructure money backing and building with 20 year contract.
• 24:23
  SPEAKER_00: It absolutely counts in the regional funding total from funding in general,
• 24:29
  SPEAKER_00: but it does almost nothing for the software founder here locally.
• 24:34
  SPEAKER_00: Trying to raise a sea ground.
• 24:36
  SPEAKER_00: Two completely different kinds of money dressed up as one number.
• 24:41
  SPEAKER_00: Then you take door number three.
• 24:42
  SPEAKER_00: And this is the big one for where I sit.
• 24:45
  SPEAKER_00: They started deploying the government's money against the government's map.
• 24:49
  SPEAKER_00: Sovereign and state capital spending on industrial policy.
• 24:53
  SPEAKER_00: You have it in Malaysia where it's putting real money behind sovereign AI cloud.
• 24:57
  SPEAKER_00: You have the prime minister that just topped up small business lending.
• 25:01
  SPEAKER_00: Uh...
• 25:02
  SPEAKER_00: You have Indonesia with Danantara.
• 25:04
  SPEAKER_00: You have the whole Tomasik and the subsidiaries of that we've talked
• 25:11
  SPEAKER_00: about last time, the recent deal with Vertex.
• 25:14
  SPEAKER_00: You have the Kazana Orbit.
• 25:16
  SPEAKER_00: This is capital that answers.
• 25:17
  SPEAKER_00: I'm not knocking state capital in a drought.
• 25:19
  SPEAKER_00: The state stepping in is genuinely a good thing.
• 25:21
  SPEAKER_00: And I would rather have it than not in the ecosystem.
• 25:45
  SPEAKER_00: But be honest about what it is and what it is not.
• 25:49
  SPEAKER_00: Government money is good at survival.
• 25:51
  SPEAKER_00: It is good at working capital and infrastructure,
• 25:53
  SPEAKER_00: keeping small businesses alive through a hard year as a backstop.
• 25:58
  SPEAKER_00: It is not and it never was designed to be patient, slightly crazy, high risk experts.
• 26:04
  SPEAKER_00: And the moment we start pretending that the state lending and venture capital are
• 26:07
  SPEAKER_00: the same thing.
• 26:23
  SPEAKER_00: We get a region full of subsidized companies that survive forever and scale never.
• 26:29
  SPEAKER_00: So to say it plainly and put it on the slide in bold,
• 26:34
  SPEAKER_00: you know, microfinance top up is not a seed run.
• 26:37
  SPEAKER_00: Sovereign Infrastructure Fund is not an early stage investor.
• 26:40
  SPEAKER_00: Let's not blur some of those lines that are going out there.
• 26:45
  SPEAKER_00: So Let me make an attempt to try and pull this together because I've kind
• 26:49
  SPEAKER_00: of gone here and there with this episode.
• 26:53
  SPEAKER_00: And I do want to leave you with the thing that I actually believe in
• 26:56
  SPEAKER_00: because I do not want this to sound like a eulogy
• 26:59
  SPEAKER_00: because I've been preaching such negativity through this.
• 27:01
  SPEAKER_00: But I think it's an honest approach considering some of the news
• 27:04
  SPEAKER_00: that has come out recently that we do have to take into account.
• 27:09
  SPEAKER_00: And here's what happened.
• 27:11
  SPEAKER_00: The tide of global capital went out.
• 27:14
  SPEAKER_00: It left.
• 27:15
  SPEAKER_00: It went out because AI at home offered a better return than a flight
• 27:19
  SPEAKER_00: to Southeast Asia ever could.
• 27:21
  SPEAKER_00: The LPs who backed this region did not get paid back,
• 27:25
  SPEAKER_00: so many of them rotated over to somewhere else,
• 27:28
  SPEAKER_00: whether it's Japan, Korea, Australia, or back to the US or Europe.
• 27:32
  SPEAKER_00: The funds that stayed climbed up the growth and also some of them moved into bricks
• 27:39
  SPEAKER_00: and mortar, concrete, or picked up the government's checkbook.
• 27:42
  SPEAKER_00: And the early stage founder,
• 27:43
  SPEAKER_00: the one that's getting started,
• 27:45
  SPEAKER_00: the person this entire show exists for,
• 27:48
  SPEAKER_00: is left standing on the beach wondering where everybody went.
• 27:54
  SPEAKER_00: So here's the reframe.
• 27:56
  SPEAKER_00: This is the part I want you to actually carry out of this episode.
• 28:01
  SPEAKER_00: The money that just left was renting people.
• 28:05
  SPEAKER_00: It was never building.
• 28:06
  SPEAKER_00: You cannot build a durable home for founders on rented money.
• 28:10
  SPEAKER_00: We spent a decade optimizing this whole region for capital that was never truly committed to it.
• 28:16
  SPEAKER_00: Capital that was always going to leave the second something shinier appeared back home.
• 28:21
  SPEAKER_00: Hot money.
• 28:22
  SPEAKER_00: Well, something shinier appeared and it left.
• 28:26
  SPEAKER_00: That is not a tragedy.
• 28:28
  SPEAKER_00: That is information.
• 28:30
  SPEAKER_00: It's painful, useful information about who was ever really here for us.
• 28:37
  SPEAKER_00: The trap now is to sit on that beach after the tide is rolled out and wait for
• 28:43
  SPEAKER_00: the hot money to come back.
• 28:46
  SPEAKER_00: To keep copy-pasting the Silicon Valley playbook,
• 28:50
  SPEAKER_00: running the same growth at all cost script,
• 28:52
  SPEAKER_00: and just hoping the tourists return with their checkbooks.
• 28:56
  SPEAKER_00: They are not coming back on your timeline.
• 28:59
  SPEAKER_00: And even if they do, they will leave again the next time California has a better idea.
• 29:05
  SPEAKER_00: If your entire plan depends on other people's money staying interested in you,
• 29:10
  SPEAKER_00: you do not have a plan.
• 29:12
  SPEAKER_00: You have a hope.
• 29:14
  SPEAKER_00: The opportunity,
• 29:15
  SPEAKER_00: and I mean this as somebody who is still writing checks in this region on purpose,
• 29:20
  SPEAKER_00: is that a smaller,
• 29:21
  SPEAKER_00: more patient,
• 29:22
  SPEAKER_00: more locally owned base of capital might actually be healthier than
• 29:26
  SPEAKER_00: the tourist money that just walked out the door.
• 29:29
  SPEAKER_00: Money that is here because it believes in this place,
• 29:32
  SPEAKER_00: not because the place was briefly fashionable at a conference.
• 29:36
  SPEAKER_00: Founders who build for real revenue and a real exit from day one
• 29:41
  SPEAKER_00: because there is no other option,
• 29:43
  SPEAKER_00: because there is no giant growth round coming from San Francisco to bail out
• 29:47
  SPEAKER_00: a business that does not work and just keeps burning money.
• 29:51
  SPEAKER_00: That is a harder region to raise money in.
• 29:54
  SPEAKER_00: I will not pretend otherwise, but it is far better region to build a real company in.
• 30:00
  SPEAKER_00: And this is exactly why I keep saying what I say about the Philippines and about the markets.
• 30:06
  SPEAKER_00: The founders who learned to grow on their own cash flow in a market that was never fashionable.
• 30:21
  SPEAKER_00: Those are the ones still standing when the tide is out.
• 30:25
  SPEAKER_00: That is not a consolation prize.
• 30:27
  SPEAKER_00: In this environment, that is an edge.
• 30:30
  SPEAKER_00: So back to where we started this entire thing.
• 30:34
  SPEAKER_00: 500 stepping back.
• 30:35
  SPEAKER_00: Why stepping back?
• 30:41
  SPEAKER_00: When the tourists leave, the question is not who is sad to see them go.
• 30:46
  SPEAKER_00: The question is who is still standing here,
• 30:49
  SPEAKER_00: willing to write the first check into the founder that nobody
• 30:52
  SPEAKER_00: in San Francisco will ever get on a planet to meet.
• 30:56
  SPEAKER_00: That is the whole game now.
• 30:58
  SPEAKER_00: And honestly, it is the game I would rather be playing.
• 31:01
  SPEAKER_00: Because the people who stay and the founders they back through this are going
• 31:07
  SPEAKER_00: to own what gets built there next.
• 31:11
  SPEAKER_00: Not rent it.
• 31:12
  SPEAKER_00: Own it.
• 31:15
  SPEAKER_00: That's the show.
• 31:16
  SPEAKER_00: That's my rant.
• 31:17
  SPEAKER_00: If this made you think differently about who is really funding this region, do two things.
• 31:22
  SPEAKER_00: Send it to one founder who needs to hear it and send it to one investor who needs
• 31:26
  SPEAKER_00: to be challenged by it.
• 31:28
  SPEAKER_00: I'm Kevin.
• 31:29
  SPEAKER_00: This has been SEA of Startups.
• 31:31
  SPEAKER_00: Real, raw, relatable.
• 31:33
  SPEAKER_00: We'll see you next week again.
• 31:35
  SPEAKER_00: And that does it for this episode of SEA of Startups.
• 31:38
  SPEAKER_00: If you've enjoyed what you've been listening to,
• 31:40
  SPEAKER_00: please give it a like, give it a review, subscribe to our channel.
• 31:44
  SPEAKER_00: A little bit of feedback goes a long way in allowing us to keep
• 31:48
  SPEAKER_00: on putting out these kind of episodes.