"On a fundamental basis, at the end of the day, I always say never let the tail wag the dog. VC is a starting function to allow the training of founders and give them the early risk capital, but the founders, the executive teams, and the CFOs are the ones who are fundamentally driving and generating value. So on average, if it takes 20 years for people to generate a billion-dollar company, then the primary source of capital should be private equity funds or open-ended funds, VCs that have decided to be open-ended, or family offices or government funds or debt." - Jeremy Au
"The fundamental rule of economics, which is comparative advantages, is that some countries are better at some things and some countries are better at other things. So how do you play to your strengths? Even though America is more expensive, it’s really good at R&D and at space rockets. So they can do a cheaper space rocket and a cheaper semiconductor design than somebody else. One of the shame of the decoupling of the US-China side is that suddenly, China is starting to say that it needs to learn all these things. This is a very important economic concept because suddenly when we're talking about Southeast Asia, we've seen that happen multiple times now, where US MNCs are fighting to enter Southeast Asia. A lot of them were hiring executives that were primarily expatriates or US-educated and maybe to some extent, it was a bit Singapore-centric as a result. All those things made these cost structures fundamentally more expensive in some ways, on a per person basis. And it’s a little bit less responsive to the local markets." - Jeremy Au
"Your initial pool of capital is underwriting a very small pool that will look more like an American type of startup. You make this assumption about America's strategy, and then suddenly you underwrite a different startup pool that’s more embedded into the regional economies. And you're starting to watch these people fall off. That's where your margin compression starts to happen, and there was a period where there’s relatively high multiples in that sense, then it got hot because the late stage came in and started people in Southeast Asia writing higher early-stage multiples. Now that the bear market is happening, most of them are gone now from the US side. And suddenly, the middle stage has started to realize that the early stage folks are starting to realize that. So everything's starting to recompress down as well. People are thinking about how they’ll fill up the cliff and build another mountain to make it a flat. Most people are lowering the height of this so it'll be a more gradual drop off." - Jeremy Au
In this episode, Jeremy Au speaks on regional VC returns skepticism, structural challenges, and value creation versus sucker trading consequences with Adriel Yong.
Keywords: Regional VC Returns Skepticism, Structural Challenges, Value Creation vs Sucker Trading Consequences, Adriel Yong, Southeast Asia, VC, Thought Leadership
