3 Insights from Doing 200 Deals in Southeast Asia

Although it is now at the forefront of technological innovation as well, the roots of the company were in understanding a local pain-point (matching taxis with customers), and providing a solution that was built with the local consumer at the forefront.

Understanding and capitalizing on the opportunities that lie in innovative execution is fundamental to successful investing in Southeast Asia.

Investment decisions need to be made with very little information

I’m always amazed by the amount of data points that my colleagues in San Francisco have at their disposal when making investment decisions. They have, among others, information from Crunchbase, AngelList, the Valley ecosystem, university alumni networks, comparables and benchmarks to vet the founders and their companies.

Investing in Southeast Asia is a completely different ballgame. Most entrepreneurs are first-time founders with no experience running startups so referrals from the ecosystem are not helpful. Founders in the region also don’t use platforms like AngelList or Crunchbase and there’s no good regional alternative. Benchmarks and comparables are similarly unhelpful as the Southeast Asian market is significantly different to the Valley.

A great example of this in our portfolio is Mediaload, an online media company in Cambodia akin to Buzzfeed in the US. The founder is a local Cambodian, went to a local university there and had no real touchpoints with the wider tech ecosystem in the region. Furthermore, we had never invested in Cambodia and had little understanding of the ecosystem.

Fortunately, we were able to bring ourselves up to speed and understand and assess his talent, potential, and achievements to make a calculated investment decision. Mediaload is now the third most popular website in Cambodia (behind only Google and Youtube) and has expanded to Myanmar and Vietnam. We were fortunate to not let incomplete and imperfect information paralyse our decision-making.

Investors should guide founders away from predatory terms

Investment terms in emerging markets are often prejudicial to founders because of the dearth of available capital. This was true in Southeast Asia when we started investing in the region four years ago and, although significantly reduced, continues to some degree today.

It was not uncommon for us to see other investors asking for personal guarantees from founders, for participating liquidation preferences many multiples over, or for ad-hoc redemption rights. Although these terms were favorable to us as investors as well, we actively sided with entrepreneurs to push back (and sometimes kick out) investors that were predatory.

Investors looking to get their money back from a venture investment fundamentally misunderstand the asset class. The venture scale returns come at the cost of high-risk and if investors are not ready to lose their money they shouldn’t invest. Furthermore, it hurts the growth and development of the ecosystem by penalizing founders for taking risk and not letting them move on from failure.

We’ve also localized and standardized the 500 KISS Documents that are so widely used in the Valley to Southeast Asia and they are now industry standard here as well.

We’re very proud of the fact that the volume of investments that we’ve done in the region and our adamance to stick to terms that are founder-friendly have changed the way that deals are done for the better.