“We [VCs] are paid to listen.” – Don Valentine, Sequoia Capital
While there is an influx of capital and talent into Southeast Asia, the increasingly competitive innovation landscape is making it just as tough a race in the investment space. To rise above the noise, investors need to pay attention not just to market and innovation trends, but also founders and how they build companies. Being a great VC in Southeast Asia means knowing what makes great founders in the region.
1. Great founders are students of the playbook who have the know-how to make their own rules in home court.
Whether they received education US or China and were ex-Rocket Internet, Alibaba, or Amazon, these founders were behind-the-scenes of the growth and failures of companies in more mature markets and sectors. Having that depth of experience from US, China, India, or even bigger regional players provides an edge in innovating underserved sectors or localising existing innovation. While the first poses high barriers to entry and the second tough competition from larger players, both present an opportunity to create a strong moat for the business.
When Dino Setiawan finished his Stanford Sloan program after several years in the finance industry, he wanted to bring P2P lending to Indonesia but realized the market was not ready. It took another five years before he finally found an opportunity working with ex-Gojek product head Rama Notowidigdo and VP of Growth Windy Natriavi to build what is now MSME financing platform AwanTunai. By then he had experience building a fintech startup in Palo Alto and was already a well-versed fintech consultant at home. These experiences played well into providing him an edge in building AwanTunai.
2. Great founders are obsessed with localization in order to grow their business.
In order to develop and distribute products that work and are valued in local environments, great founders themselves have to be, in a way, “localized.” This means developing an affinity or familiarity with the local industry, often entrenched in idiosyncratic tradition and politics, and the willingness to work with these idiosyncrasies to move product. Great founders are obsessed with localization. They are willing to get their boots-on-the-ground regardless of the upfront costs because they understand the value of building strong relationships with customers and key industry stakeholders as the business scales across the region.
This approach is particularly useful in the rural economy, where many tech founders looking to bring in financial inclusion and more efficient supply chains are faced with practices and infrastructure (or lack thereof) that slow down the adoption of digital technology. It often helps to have had firsthand experience of the inefficiencies in the local industry.
When Linh Pham returned home from the UK after her degree in Cambridge and some time at Goldman Sachs as a technology analyst, she spent time working at her family’s fertiliser business. There she witnessed firsthand the inefficiencies in Vietnam’s vast trucking sector and found an opportunity in the high productivity that could come from improving the efficiency of loading and assigning trucks. She leveraged the network she had built and the experience she had gained to grow a platform that now matches all kinds of trucks to tens of thousands of shipments — LOGIVAN.
3. Great founders are tactical in short run growth to create better odds in the long run.
With all the hype around the region, variability across local markets, and global market uncertainties, Southeast Asia’s founders can’t afford to be reckless with growth. Great founders have a sense of clarity when it comes to profitability and it reflects in their decisions even pre-revenue. They focus on building loyalty with consumers while staying asset-light and efficient. Because they are tactical with growth, the impact they can deliver through their businesses has better chances of being more sustainable and long-lasting.
Carro’s growth into four markets is not purely a result of the amount of resources they pooled with every fundraise but clarity when it came to allocating those resources, from the key partnerships made in each market to their expansion into financial services for the automobile industry.
Not many startups can afford or sustain betting on long-term market share growth by burning heavy amount of cash. It is far more prudent (and profitable) to be the turtle that conserves its energy and uses it at the right time than the hare that runs out of energy at the most crucial moments.
Listening to great founders
Underlying these three characteristics is ultimately one: being unstoppable. Great founders in the region are unstoppable in the face of barriers to entry and goliath competition, local nuances present in markets, and the challenges of attaining profitability in such uncertain environments.
This means finding great founders is all about being unstoppable as a VC too — unstoppable in listening where these entrepreneurs come from, what seemingly insurmountable waves they are overcoming, and what North Star guides them.