Regional VC Returns Skepticism, Structural Challenges & Value Creation vs. Sucker Trading Consequences with Adriel Yong - E403

BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders and Venture Capital VC

English - April 04, 2024 21:00 - 51 minutes - 47.5 MB
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Previous Episode: YC Request For Startups: Southeast Asia Viability, Hidden Comparative Advantages & Geographical Business Model Traps with Jeff Lonsdale - E402

Next Episode: Thailand: Pheu Thai Pro-Business Reform, Cannabis, LGBTQ & Gaming Legislation, and Fintech Market Study Optimism - E404

Adriel Yong, Head of Investments at Ascend Angels, and Jeremy Au frankly discussed the public's skepticism about Southeast Asia's venture capital (VC) landscape. They contrasted USA VC exit outcomes vs. the reality of regional exits: smaller at around $0.1-0.5B (refer to Cento Ventures report), taking longer than 10 years (vs. closed fund lifecycle requirements) and weaker trade sale + IPO pathways (NYSE/ NASDAQ vs. IDX, SGX, SET). Portfolio math models thus need to be updated in light of the young ecosystem's structural market challenges, resulting in the current funds' moves towards earlier-stage deals with lower pricing risk, secondary sales, deploying venture debt, and more disciplined investing with tighter economic and control terms. They contrast this to the small-cap private equity model and the usage of debt leverage for revenue multiple expansion. Founders must decide on profitability over growth, conflicting with VC mandates that are disempowered by minority ownership norms. They also discuss the Series B death valley/cliff, reverse human capital arbitrage (hiring expensive talent to solve low-margin markets, vs. cheap labor to attack high-margin markets), why VCs have to up their game at actual value creation (rather than trading on momentum), and how founders can better plan their fundraising with an honest view of reality and behind-the-scenes incentives.

Watch, listen or read the full insight in English at https://www.bravesea.com/blog/vc-returns-suck

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