>> MARK FITENY: Good afternoon, and welcome to the afternoon session of the J.P. Morgan Tech Exchange 2021. I'm Mark Fiteny. I run our consumer Internet investment banking business globally. And I recently in 2019 moved out to Asia to spearhead our new economy and our APAC TNT business out here. It's a really interesting point in time in southeast Asia, and joining me, we've got two great investors who are going to talk about how economic development, technology transformation, and cultural change are working together in confluence in one of the most dynamic parts of the world, southeast Asia. So with me, we have Patrick Grove. Patrick founded Catcha Group in 1999. He built an extensive track record of founding, building, acquiring, listing, and scaling both private and public companies in southeast Asia. And today he is widely recognized as one of the leading entrepreneurs in the region. He has founded and taken numerous companies from start-up to IPO in Australia and southeast Asia, including digital ventures. Most recently, he has taken Catcha Group, where we J.P. Morgan were privileged to be his partner. And he's been the recipient of numerous awards, including the world Economic Forum global leader of tomorrow, Asia's best young entrepreneur, the Australia unlimited global 50 and Asian entrepreneur of the year. Also joining me, we've got Khailee Ng from 500 Startups, a venture capital fund with the mission to uplift people and economies around the world through entrepreneurship. And they've backed more than 2500 companies, more than 6,000 entrepreneurs in 77 different countries. 500 Startups is one of the earliest Silicon Valley VCs to expand into southeast Asia back in 2014, and Khailee has personally led 180-plus investments in southeast Asian tech start-ups. As an entrepreneur prior to being an investor, he was the founder of Groups More, which was sold to Groupon. He's a thought leader, and you can find his industry views in Bloomberg, Tech Crunch, "The Wall Street Journal," and Fortune. So, with that introduction, it would be great to get into the Q&A of today. Maybe we can start with Khailee. Just give us all a sense of the macro drivers for the tech sector in southeast Asia. >> KHAILEE NG: Yeah. I think with the larger -- the drivers of the tech sector around the world, they apply to southeast Asia, but in ways which are compelling relative to other markets. Three powerful things drive this. The first is the Internet user growth has surpassed both U.S. and China. The second one is the percentage of those who use smartphones actually making purchases online has also surpassed both U.S. and China. And the third one is that the population just at raw demographics of population percentages under 40 also is more than U.S. and China. So with the confluence of these things, like younger people coming online super fast and a lot of them ready to make purchases off their phones, folks are seeing countries, even like Indonesia, once seen as emerging, 90% smartphone penetration. These things are happening very quickly. So I think for the immediate term right now and also for the long-term, southeast Asia and its tech disruption will create a lot more economic opportunity. And relative to U.S. and China, it's getting very sizable. >> MARK FITENY: So then, Patrick, amidst that macro backdrop, how do you think about the investment thesis for southeast Asia? >> PATRICK GROVE: Thanks for having us. J.P. Morgan, thanks for having us. And Khailee, always a pleasure to share the stage with you. So, I mean, I would add on to what Khailee said, like great points. I'm so bullish about southeast Asia. I feel very blessed to be in this part of world. Number one, and Khailee touched on it, the number of online users that we have in southeast Asia today is mind-blowing. It's somewhere between 550 to 650 million users. That is a big number. But when you put that in context, that is double the number of online users in America. That is double the number of online users in Europe. So when you think about southeast Asia as a hub, as a region, it's already bigger than America and bigger than the EU. So it's massive. And to echo the point, the number continues the grow. The U.S. kind of flatlined. EU has flatlined. This continues to grow. Number two, which I see on the ground and I'm sure Khailee does, too, and I'll say this a few times. It's the velocity of disruption. It's the rate at which online players are disrupting offline players. And so disruption is happening in every region of the world, but how does that happen? If you pick a random category in the U.S., that's three to four years into their disruption, that's the rate in which they're disrupting the incumbent player. When you look at the leaders in southeast Asia, I don't mean the big three that everyone talked about. We look at the top 30 companies in southeast Asia in the tech space, and you look at their year on year growth rates. They have these incumbent players or nondigital players. They're typically growing anywhere from 50 to 100% year on year. So what that means is not only we have more users, but the rate at which we have the offline companies is dramatic. So when you add that all up together, that is an incredible compelling proposition, and I think thirdly, and this was not the case kind of ten years ago, the caliber of entrepreneurs in southeast Asia is dramatically different. And I really put that into three buckets. Number one is you have the ecosystem of ex-500 employees. So you have all of these kind of ex employees who are now wanting to be entrepreneurs. Secondly, Chinese mainland entrepreneurs who grew up in southeast Asia to become entrepreneurs. You have a lot of Indian entrepreneurs. So when you go back to ten years ago, there was no high caliber entrepreneurs. There were a lot of young guys who wanted to do something great, but now you've got very experienced individuals and teams who are out there. And that's also been why you see these companies growing faster than they would in other parts of the world. >> MARK FITENY: Got it. And Khailee, you've studied the patterns of disruption as you've looked at other emerging economies. As you compare and contrast with China ten years ago, what similarities and differences do you draw as you think about southeast Asia? >> KHAILEE NG: Yeah. I think one of the most interesting times that China had was after the BAT went public and got them to the size it did, what happened to the Chinese ecosystem after was nothing short of just fantastic. There was literally 160 unicorns came after the BAT went public in China alone. And there's multiple reasons why this would happen. But how that mirrors southeast Asia now is that al Alibaba, Tencent in China, southeast Asia has this big three right now, the GSG, as we like to call it. So you're seeing some of these mirror effects happening. After the GSG achieves its size, a lot of GSG staff who may have additional liquidity may choose to invest in entrepreneurs from the network. Or maybe some of the staff members may also choose to create a start-up of their own. But the expanding competition between GSG amongst each other will further drive more capital, more digital, and more spending and Internet economy. That's increasing the total market opportunity for start-ups to grow and bloom. Now, the second thing that's interesting is that China and southeast Asia, they don't evolve independently. The BAT themselves, they're very active in funding a lot of the GSG. They were active in acquiring and expanding to southeast Asia. Chinese cap has been flooding in as well. So in a lot of ways, when we studied the BAT, they not only have invested in 915 start-ups. 55 unicorns in China were also invested by BAT alone. And when we mirror back to the GSG, we believed that in the first chapter of the play to first act, GSG will continue to war with each other. However, I think there will be a second phase that will come where they may also choose to start investing in the ecosystem directly. And so, in short, we see BAT having this like -- causing kind of like a -- a tech ecosystem in China. We see GSG the same way. But we also see the doubling effect of having the BAT and a lot of Chinese tech companies also correlate and feed into this growth as well. We think that although right now southeast Asia has 11 unicorns, a lot of popular estimates and other studies would also suggest that another 20 unicorns will be ahead of us in the next few years. It's an exciting time. A big part of me believes that 20 unicorns is a very low estimate as well. >> MARK FITENY: Got it, got it. And Patrick, you commented on the uptick in the caliber of the entrepreneur. What is the outcome in terms of the innovation that we're seeing, be it product innovation, be it technology innovation. How are you seeing the innovations that are coming out of that higher class of entrepreneurial talent? >> PATRICK GROVE: That's a good question, Mark. I think what I see, I look at the history -- we can put it into two buckets. The very first bucket was probably the year 2000 to the year 2015, and the first wave, they were cutting and pasting. They were taking ideas from the west and bringing them to southeast Asia, and that's all they did. I think around 2015, we started to see an evolution where the better entrepreneurs and the better companies and the companies with greater velocity, they were no longer taking their ideas from the west. They were taking their ideas from the east. So the U.S. was no longer the inspiration. If you look at what happens now, I think he's done an amazing job. They would be more influenced by China, thinking about his business and the strategy. And you see today, what he's built today, they were struggling to explain to the American investor market, like, what is a super app? Because they have not seen that in America before. So, at that point, I think the first phase was cut-and-paste from the west. The second phase, we talked about 2015. I think it continues until about 2025, is where entrepreneurs will innovate or copy -- sorry, not innovate, they will emulate from China. And you're seeing that in GST. I think when you dig deep at the innovative things that you're doing, a lot of them are ideas inspired by China. I think we'll see this continue for the next five years. This is exactly what happened in China. Probably starting five years ago. Chinese entrepreneurs five years ago, they ran out of ideas from the west to copy, and they're like, we're going to build great companies. We actually need to innovate. I think you'll start to see that happen in southeast Asia. I think you're a good three, four, five years from now. I think right now, it's still quite lucrative to look north and see what's working. Back to my earlier point, which is why I think you see a lot of mainland Chinese prayers coming to this part of the world to build businesses. >> MARK FITENY: Khailee, as you then translate that to the consumer behavior, you talked about this rising class of digital mobile citizen that is young and mobile first. As you think about the consumer behaviors and the fact that they are formative rather than substitutional, how do you think about that backdrop and what opportunity that creates for the companies designing products and services for those people? >> KHAILEE NG: No, that's a great -- I'll dial into that. Because everything that Patrick says is really happening on the ground, as we see, and how that translates to -- I've got a shortcut in mind. There's lending and spending, learning and earning, living and giving. Very basic human needs that everyone around the world has. You can use that to explain fin-tech, ed-tech, e-commerce, and health. But how southeast Asia translates a lot of innovation, apart from being mobile, that's another dimension of being social first as well. I'll give you two real examples. It really is so interesting. Firstly about stock trading. So, a lot of the local stock exchanges have been struggling over the years to get millennial participation in buying and trading stocks. Like southeast Asia. But we have a portfolio company called Stock Bit, who has raised like a 50 million-dollar round. [audio breaking up] Really active on Stock Bit. That's because it's mobile first. It's not only mobile first, it's very social. They're like a combination of Robin Hood, if you will. It's almost like a social game, that you can do much more. You can save and do a lot of stuff. Mobile first, but also social first. I'll give you one other last -- I've got many examples. I'll give you one more that is super interesting. A lot of folks are looking at tech with like companies. Huge, huge ed-tech company. And, of course, like southeast Asia has received a ton of investments as well. But one of the similar acquisition sources for a lot of these ed-tech companies surprisingly is actually Asians who sell, kind of like a direct marketing -- an app, an education app. So it's not just oh, I'm going to get users from Facebook. No, I'm going to give you a program, if you refer your friends, by literally going door to door, direct sales agents requiring different families to pay for this tuition app. You start to see that hey, this is a little bit different. It's mobile first. It's social first. Recognizing that southeast Asia is inherently super social. And, yeah. So I think that kind of combination, and you put the dimension on to all the known business models to learn and earn, live, and to give, to lend and to spend. You can see and use it as a rubric for innovation. >> MARK FITENY: And Patrick, as you laid out statistics on the massive size of the population ready to engage and embrace digital behavior, southeast Asia is not homogeneous region. It's got a bunch of different countries, a bunch of different languages. How do you think about the implications of solving for either hyperlocal or panregional, and what does that mean for the up and coming digital company? >> PATRICK GROVE: Yeah, I think that's a question, right? It's something we dealt with our entire career. You know, building a business across seven countries, multiple languages, multiple user interfaces, little tweaks. It's complex. But because it's complex, that's why tremendous value is able to be created. And if you think about that, you're seeing more and more and more that this is the one part of the world where local champions are more kind of not beating the U.S. players to try to come into this market. If you think of most categories in Europe, it is traditionally the U.S. players that are winning in those categories, not the local European players. If you look at southeast Asia -- and this goes back to why southeast Asia is such an incredible investment opportunity. The local players are more often beating the U.S. players. [Indiscernible] ended up acquiring Uber and buying a business that has gone way beyond Uber's business model. If you look at the trajectory of the market caps, it is very likely that if you extrapolate the market cap to those two players, Grab will be bigger than Uber in the next two or three years. But the point is that the local player won in that category, and then another category like e-commerce. Amazon is the number one e-commerce site in the world. They're number one in 50 countries in the world. But they are not number one, number two, or number three in any southeast Asian countries, right? Whereas they're pretty much number one in every single European country, number one in most other countries in the world, but not in Malaysia, Thailand, in Philippines. They're in Singapore. Who knows what their market share is. So when you think about who is winning at e-commerce in southeast Asia, e-commerce is a huge, huge category. It is local players. It's shopping. And so when you think about this, this dynamic of local players winning and growing and getting funded and this whole cycle of just growing and growing and growing and winning their category, you're seeing this play out more and more in every single vertical in the technology space. It's not just ride hailing. It's not just food delivery. It's not just broad horizontal e-commerce. Whatever tech category you can think of. The odds are, and this is similar to what we to, the odds are is that the local entrepreneur is beating the U.S. or Chinese business model that they're somewhat based on more often than not. When you think about it that way, then this is an incredible part of the world they're investing in, because you know when you back the local player, the odds are that the local player is going to win and they're going to win big. >> MARK FITENY: Got it. And another stark contrast that I'd like to draw out, if you think about an acute issue with technology companies, either at scale or rapidly scaling in the rest of the world, regulation is a challenge, either the existence of it, or the threat of it. If we look at southeast Asia, the regulatory environment has been much more favorable. So, Khailee, maybe you can give some commentary on how you see regulation being a facilitator of innovation acutely in southeast Asia. >> KHAILEE NG: You know, it's funny, talking about regulation, I think a couple years ago, we would say the first phase of regulation is that a lot of folks and regulators didn't know what was going on and didn't take much of that seriously. As a result, innovation just bloomed. But what happened in the second phase is they didn't kind of cram in. They realized they have to compete with one another for favorable regulation. Like, how quickly Singapore, Malaysia, and Indonesia rolled out equity crowd funding laws, for example. All of them are competing to see who would be first, to allow equity crowd funding. Like we're the first in Asean or southeast Asia to do it. A lot of the companies, they have a choice to debase in one country, another, and so they would bring to one country or another. There's a lot of healthy competition amongst the governments to be the friendliest to the biggest start-ups to come in. So that has resulted in a collaborative spirit to the extent that even for fin-techs, some of the traditional banks are saying, hey, why is the regulator more friendly with the fin-techs that move us? Like, how about us, right? Because they have a role to play to encourage innovation and they have to compete with one another. Last thing I'll say, I'll just give a sample story. Like, one of our portfolio companies, which will be listed very soon, they're like a huge commerce player in Indonesia. I think it was two years ago, their birthday party, had some special guests. They had President Jacoby and eight others. So this is, like, absurd, right? But, of course, the government has an agenda to want to collaborate. They want to get their help in distributing a lot of essential government services. And during COVID, that was a great move. It was the backbone for Indonesia getting through COVID. So, I think it's kind of a collaborative spirit with start-ups that is what is really helping a lot of the start-ups get ahead in southeast Asia. I think that's the right spirit to really co-create the future for this region. >> MARK FITENY: And you both have commented on the chain reaction that happens when you have entrepreneurship and the talent that builds a company and has been through that scaling phase, being able to re-apply the learnings and best practices. Patrick, you've invested heavily in cultivating a community of entrepreneurs. How do you think about the ecosystem for mentorship, for capital formation, for technology resources, the kinds of things that we've seen in Silicon Valley. How is that proliferating in the region? >> KHAILEE NG: Keep going to Patrick for advice, that's what's happening. >> MARK FITENY: If you're the maven, they'll come to you. >> PATRICK GROVE: This lighting is really helping. I have a lot of gray hair. They need to see someone with gray hair or no hair. So I get that call a lot. And I'm happy to do it. It's one of the things -- you know, when I was a young entrepreneur, there was really no one in this part of the world to go to. Core didn't exist. There was no mentors. Really no VCs 15 years ago. So it was very hard to get mentorship. And so it's something that, you know, myself and my partner want to give back as much as we can. And so ironically, when I think about mentorship like this, you have an event -- to become a prolific investor. I don't think Khailee's aim was to be a VC. I think Khailee's aim was to share as much as he could. It just so happened that becoming a VC was the way to monetize what Khailee wanted to do. I think about what we do -- we're SPAC promoters and our tag line is the entrepreneurs behind the entrepreneur. And it's exactly to your point. We've successfully taken six companies public. It's not easy to do that. It's not fun to do that. And honestly, back to my point earlier about the velocity about which some of these companies are growing. 100% to 200% a year, the last thing you want to think about is how do I IPO my company. So we sat there and said, this is a unique thing that we are experts at. We can offer that mentorship in many different ways. I think you're going to find more and more that the older entrepreneurs are those with the gray hair or no hair. We'll gladly offer up their services. Because at the end of the day, we all want the ecosystem to grow. We know that southeast Asia has got amazing prospects for all the reasons that we talked about before. And look, if there's anything that we can do to help another entrepreneur, that is a phone call that I would take any day of the week. >> PATRICK GROVE: And with five minutes left, I -->> MARK FITENY: I want to make one grandiose question that I'm going to ask you both. If you're looking five years out, ten years out what is one big prediction for how southeast Asia is going to either change itself or change the world through technology? We'll start with Khailee. >> KHAILEE NG: Yeah, I think it's to showcase, like -- it's to showcase an example of how governments, corporations, and innovators, financiers actually work together. So I think the historical narrative maybe in other parts. The world is the narrative of capitalism is antagonist's intentions. But here in southeast Asia, we had like a really fast start with a lot of good actors collaborating with one another. So I see like the digitizing the next billion involves really laying the groundwork for ESG for thinking about being a good corporate citizen and having that installed into a start-up from an early age. That's what we're focused on doing. We realize that VCs like ourselves, it is very -- it's very profitable as well to align all of investments and our founders to be on the right side of history, to be a good corporate citizen, and to be a good collaborator of corporate citizens. In fact, all of our portfolio segments moving forward, they require an ESG policy of their own. So it's a small step. Just a small step on a longer journey. But the big grandiose vision is they will show the world what innovating for the next billion looks like. How do you uplift people the right way with technology and finance. >> MARK FITENY: Great. Patrick, that's a tough one to follow, but I'm going to ask you to do it. >> PATRICK GROVE: I think the next five to ten years are going to be absolutely explosive for southeast Asia. I'm going to give you one stat, and it's going to sound like I'm making it up, but I've been doing some quick math in the head. If you look at the market cap of all the top ten China Internet players about ten years ago, it was about 300 billion U.S. Tencent, Alibaba, et cetera. You add up the market Capps of those players today, it's about 3 trillion U.S.caps of those players today, it's about 3 trillion U.S. It's gone up by 10x. So GSG and say the next ten players. I think it's a figure of just under 300 billion. So I'm kind of putting myself out there. That 300 billion is going to grow way beyond 3 trillion, and it's not going to take ten years. I think in the next five, six, seven years, you're going to see the combined market cap of all the southeast Asian tech players hit 3 trillion for all the reasons we said earlier. Vaster velocity, better entrepreneurs, more capital, more mentors. Governments are going to actually help the ecosystem. I think it's going to be absolutely explosive. >> MARK FITENY: I think it's great. We've got the confluence of social purpose, and the ability to drive something that is truly transformational, and compounds upon itself. Appreciate both of the panelists coming in today. Appreciate the partnership with both of the institutions and your portfolio companies. We're super excited to have you. And it is a remarkable point in time for southeast Asia. Thanks for joining us at the tech. >> PATRICK GROVE: Thanks, everyone. >> KHAILEE NG: Thank you very much, Mark. Thanks.
>> MARK FITENY: Good afternoon, and welcome to the afternoon session of the J.P. Morgan Tech Exchange 2021. I'm Mark Fiteny. I run our consumer Internet investment banking business globally. And I recently in 2019 moved out to Asia to spearhead our new economy and our APAC TNT business out here. It's a really interesting point in time in southeast Asia, and joining me, we've got two great investors who are going to talk about how economic development, technology transformation, and cultural change are working together in confluence in one of the most dynamic parts of the world, southeast Asia. So with me, we have Patrick Grove. Patrick founded Catcha Group in 1999. He built an extensive track record of founding, building, acquiring, listing, and scaling both private and public companies in southeast Asia. And today he is widely recognized as one of the leading entrepreneurs in the region. He has founded and taken numerous companies from start-up to IPO in Australia and southeast Asia, including digital ventures. Most recently, he has taken Catcha Group, where we J.P. Morgan were privileged to be his partner. And he's been the recipient of numerous awards, including the world Economic Forum global leader of tomorrow, Asia's best young entrepreneur, the Australia unlimited global 50 and Asian entrepreneur of the year. Also joining me, we've got Khailee Ng from 500 Startups, a venture capital fund with the mission to uplift people and economies around the world through entrepreneurship. And they've backed more than 2500 companies, more than 6,000 entrepreneurs in 77 different countries. 500 Startups is one of the earliest Silicon Valley VCs to expand into southeast Asia back in 2014, and Khailee has personally led 180-plus investments in southeast Asian tech start-ups. As an entrepreneur prior to being an investor, he was the founder of Groups More, which was sold to Groupon. He's a thought leader, and you can find his industry views in Bloomberg, Tech Crunch, "The Wall Street Journal," and Fortune. So, with that introduction, it would be great to get into the Q&A of today. Maybe we can start with Khailee. Just give us all a sense of the macro drivers for the tech sector in southeast Asia. >> KHAILEE NG: Yeah. I think with the larger -- the drivers of the tech sector around the world, they apply to southeast Asia, but in ways which are compelling relative to other markets. Three powerful things drive this. The first is the Internet user growth has surpassed both U.S. and China. The second one is the percentage of those who use smartphones actually making purchases online has also surpassed both U.S. and China. And the third one is that the population just at raw demographics of population percentages under 40 also is more than U.S. and China. So with the confluence of these things, like younger people coming online super fast and a lot of them ready to make purchases off their phones, folks are seeing countries, even like Indonesia, once seen as emerging, 90% smartphone penetration. These things are happening very quickly. So I think for the immediate term right now and also for the long-term, southeast Asia and its tech disruption will create a lot more economic opportunity. And relative to U.S. and China, it's getting very sizable. >> MARK FITENY: So then, Patrick, amidst that macro backdrop, how do you think about the investment thesis for southeast Asia? >> PATRICK GROVE: Thanks for having us. J.P. Morgan, thanks for having us. And Khailee, always a pleasure to share the stage with you. So, I mean, I would add on to what Khailee said, like great points. I'm so bullish about southeast Asia. I feel very blessed to be in this part of world. Number one, and Khailee touched on it, the number of online users that we have in southeast Asia today is mind-blowing. It's somewhere between 550 to 650 million users. That is a big number. But when you put that in context, that is double the number of online users in America. That is double the number of online users in Europe. So when you think about southeast Asia as a hub, as a region, it's already bigger than America and bigger than the EU. So it's massive. And to echo the point, the number continues the grow. The U.S. kind of flatlined. EU has flatlined. This continues to grow. Number two, which I see on the ground and I'm sure Khailee does, too, and I'll say this a few times. It's the velocity of disruption. It's the rate at which online players are disrupting offline players. And so disruption is happening in every region of the world, but how does that happen? If you pick a random category in the U.S., that's three to four years into their disruption, that's the rate in which they're disrupting the incumbent player. When you look at the leaders in southeast Asia, I don't mean the big three that everyone talked about. We look at the top 30 companies in southeast Asia in the tech space, and you look at their year on year growth rates. They have these incumbent players or nondigital players. They're typically growing anywhere from 50 to 100% year on year. So what that means is not only we have more users, but the rate at which we have the offline companies is dramatic. So when you add that all up together, that is an incredible compelling proposition, and I think thirdly, and this was not the case kind of ten years ago, the caliber of entrepreneurs in southeast Asia is dramatically different. And I really put that into three buckets. Number one is you have the ecosystem of ex-500 employees. So you have all of these kind of ex employees who are now wanting to be entrepreneurs. Secondly, Chinese mainland entrepreneurs who grew up in southeast Asia to become entrepreneurs. You have a lot of Indian entrepreneurs. So when you go back to ten years ago, there was no high caliber entrepreneurs. There were a lot of young guys who wanted to do something great, but now you've got very experienced individuals and teams who are out there. And that's also been why you see these companies growing faster than they would in other parts of the world. >> MARK FITENY: Got it. And Khailee, you've studied the patterns of disruption as you've looked at other emerging economies. As you compare and contrast with China ten years ago, what similarities and differences do you draw as you think about southeast Asia? >> KHAILEE NG: Yeah. I think one of the most interesting times that China had was after the BAT went public and got them to the size it did, what happened to the Chinese ecosystem after was nothing short of just fantastic. There was literally 160 unicorns came after the BAT went public in China alone. And there's multiple reasons why this would happen. But how that mirrors southeast Asia now is that al Alibaba, Tencent in China, southeast Asia has this big three right now, the GSG, as we like to call it. So you're seeing some of these mirror effects happening. After the GSG achieves its size, a lot of GSG staff who may have additional liquidity may choose to invest in entrepreneurs from the network. Or maybe some of the staff members may also choose to create a start-up of their own. But the expanding competition between GSG amongst each other will further drive more capital, more digital, and more spending and Internet economy. That's increasing the total market opportunity for start-ups to grow and bloom. Now, the second thing that's interesting is that China and southeast Asia, they don't evolve independently. The BAT themselves, they're very active in funding a lot of the GSG. They were active in acquiring and expanding to southeast Asia. Chinese cap has been flooding in as well. So in a lot of ways, when we studied the BAT, they not only have invested in 915 start-ups. 55 unicorns in China were also invested by BAT alone. And when we mirror back to the GSG, we believed that in the first chapter of the play to first act, GSG will continue to war with each other. However, I think there will be a second phase that will come where they may also choose to start investing in the ecosystem directly. And so, in short, we see BAT having this like -- causing kind of like a -- a tech ecosystem in China. We see GSG the same way. But we also see the doubling effect of having the BAT and a lot of Chinese tech companies also correlate and feed into this growth as well. We think that although right now southeast Asia has 11 unicorns, a lot of popular estimates and other studies would also suggest that another 20 unicorns will be ahead of us in the next few years. It's an exciting time. A big part of me believes that 20 unicorns is a very low estimate as well. >> MARK FITENY: Got it, got it. And Patrick, you commented on the uptick in the caliber of the entrepreneur. What is the outcome in terms of the innovation that we're seeing, be it product innovation, be it technology innovation. How are you seeing the innovations that are coming out of that higher class of entrepreneurial talent? >> PATRICK GROVE: That's a good question, Mark. I think what I see, I look at the history -- we can put it into two buckets. The very first bucket was probably the year 2000 to the year 2015, and the first wave, they were cutting and pasting. They were taking ideas from the west and bringing them to southeast Asia, and that's all they did. I think around 2015, we started to see an evolution where the better entrepreneurs and the better companies and the companies with greater velocity, they were no longer taking their ideas from the west. They were taking their ideas from the east. So the U.S. was no longer the inspiration. If you look at what happens now, I think he's done an amazing job. They would be more influenced by China, thinking about his business and the strategy. And you see today, what he's built today, they were struggling to explain to the American investor market, like, what is a super app? Because they have not seen that in America before. So, at that point, I think the first phase was cut-and-paste from the west. The second phase, we talked about 2015. I think it continues until about 2025, is where entrepreneurs will innovate or copy -- sorry, not innovate, they will emulate from China. And you're seeing that in GST. I think when you dig deep at the innovative things that you're doing, a lot of them are ideas inspired by China. I think we'll see this continue for the next five years. This is exactly what happened in China. Probably starting five years ago. Chinese entrepreneurs five years ago, they ran out of ideas from the west to copy, and they're like, we're going to build great companies. We actually need to innovate. I think you'll start to see that happen in southeast Asia. I think you're a good three, four, five years from now. I think right now, it's still quite lucrative to look north and see what's working. Back to my earlier point, which is why I think you see a lot of mainland Chinese prayers coming to this part of the world to build businesses. >> MARK FITENY: Khailee, as you then translate that to the consumer behavior, you talked about this rising class of digital mobile citizen that is young and mobile first. As you think about the consumer behaviors and the fact that they are formative rather than substitutional, how do you think about that backdrop and what opportunity that creates for the companies designing products and services for those people? >> KHAILEE NG: No, that's a great -- I'll dial into that. Because everything that Patrick says is really happening on the ground, as we see, and how that translates to -- I've got a shortcut in mind. There's lending and spending, learning and earning, living and giving. Very basic human needs that everyone around the world has. You can use that to explain fin-tech, ed-tech, e-commerce, and health. But how southeast Asia translates a lot of innovation, apart from being mobile, that's another dimension of being social first as well. I'll give you two real examples. It really is so interesting. Firstly about stock trading. So, a lot of the local stock exchanges have been struggling over the years to get millennial participation in buying and trading stocks. Like southeast Asia. But we have a portfolio company called Stock Bit, who has raised like a 50 million-dollar round. [audio breaking up] Really active on Stock Bit. That's because it's mobile first. It's not only mobile first, it's very social. They're like a combination of Robin Hood, if you will. It's almost like a social game, that you can do much more. You can save and do a lot of stuff. Mobile first, but also social first. I'll give you one other last -- I've got many examples. I'll give you one more that is super interesting. A lot of folks are looking at tech with like companies. Huge, huge ed-tech company. And, of course, like southeast Asia has received a ton of investments as well. But one of the similar acquisition sources for a lot of these ed-tech companies surprisingly is actually Asians who sell, kind of like a direct marketing -- an app, an education app. So it's not just oh, I'm going to get users from Facebook. No, I'm going to give you a program, if you refer your friends, by literally going door to door, direct sales agents requiring different families to pay for this tuition app. You start to see that hey, this is a little bit different. It's mobile first. It's social first. Recognizing that southeast Asia is inherently super social. And, yeah. So I think that kind of combination, and you put the dimension on to all the known business models to learn and earn, live, and to give, to lend and to spend. You can see and use it as a rubric for innovation. >> MARK FITENY: And Patrick, as you laid out statistics on the massive size of the population ready to engage and embrace digital behavior, southeast Asia is not homogeneous region. It's got a bunch of different countries, a bunch of different languages. How do you think about the implications of solving for either hyperlocal or panregional, and what does that mean for the up and coming digital company? >> PATRICK GROVE: Yeah, I think that's a question, right? It's something we dealt with our entire career. You know, building a business across seven countries, multiple languages, multiple user interfaces, little tweaks. It's complex. But because it's complex, that's why tremendous value is able to be created. And if you think about that, you're seeing more and more and more that this is the one part of the world where local champions are more kind of not beating the U.S. players to try to come into this market. If you think of most categories in Europe, it is traditionally the U.S. players that are winning in those categories, not the local European players. If you look at southeast Asia -- and this goes back to why southeast Asia is such an incredible investment opportunity. The local players are more often beating the U.S. players. [Indiscernible] ended up acquiring Uber and buying a business that has gone way beyond Uber's business model. If you look at the trajectory of the market caps, it is very likely that if you extrapolate the market cap to those two players, Grab will be bigger than Uber in the next two or three years. But the point is that the local player won in that category, and then another category like e-commerce. Amazon is the number one e-commerce site in the world. They're number one in 50 countries in the world. But they are not number one, number two, or number three in any southeast Asian countries, right? Whereas they're pretty much number one in every single European country, number one in most other countries in the world, but not in Malaysia, Thailand, in Philippines. They're in Singapore. Who knows what their market share is. So when you think about who is winning at e-commerce in southeast Asia, e-commerce is a huge, huge category. It is local players. It's shopping. And so when you think about this, this dynamic of local players winning and growing and getting funded and this whole cycle of just growing and growing and growing and winning their category, you're seeing this play out more and more in every single vertical in the technology space. It's not just ride hailing. It's not just food delivery. It's not just broad horizontal e-commerce. Whatever tech category you can think of. The odds are, and this is similar to what we to, the odds are is that the local entrepreneur is beating the U.S. or Chinese business model that they're somewhat based on more often than not. When you think about it that way, then this is an incredible part of the world they're investing in, because you know when you back the local player, the odds are that the local player is going to win and they're going to win big. >> MARK FITENY: Got it. And another stark contrast that I'd like to draw out, if you think about an acute issue with technology companies, either at scale or rapidly scaling in the rest of the world, regulation is a challenge, either the existence of it, or the threat of it. If we look at southeast Asia, the regulatory environment has been much more favorable. So, Khailee, maybe you can give some commentary on how you see regulation being a facilitator of innovation acutely in southeast Asia. >> KHAILEE NG: You know, it's funny, talking about regulation, I think a couple years ago, we would say the first phase of regulation is that a lot of folks and regulators didn't know what was going on and didn't take much of that seriously. As a result, innovation just bloomed. But what happened in the second phase is they didn't kind of cram in. They realized they have to compete with one another for favorable regulation. Like, how quickly Singapore, Malaysia, and Indonesia rolled out equity crowd funding laws, for example. All of them are competing to see who would be first, to allow equity crowd funding. Like we're the first in Asean or southeast Asia to do it. A lot of the companies, they have a choice to debase in one country, another, and so they would bring to one country or another. There's a lot of healthy competition amongst the governments to be the friendliest to the biggest start-ups to come in. So that has resulted in a collaborative spirit to the extent that even for fin-techs, some of the traditional banks are saying, hey, why is the regulator more friendly with the fin-techs that move us? Like, how about us, right? Because they have a role to play to encourage innovation and they have to compete with one another. Last thing I'll say, I'll just give a sample story. Like, one of our portfolio companies, which will be listed very soon, they're like a huge commerce player in Indonesia. I think it was two years ago, their birthday party, had some special guests. They had President Jacoby and eight others. So this is, like, absurd, right? But, of course, the government has an agenda to want to collaborate. They want to get their help in distributing a lot of essential government services. And during COVID, that was a great move. It was the backbone for Indonesia getting through COVID. So, I think it's kind of a collaborative spirit with start-ups that is what is really helping a lot of the start-ups get ahead in southeast Asia. I think that's the right spirit to really co-create the future for this region. >> MARK FITENY: And you both have commented on the chain reaction that happens when you have entrepreneurship and the talent that builds a company and has been through that scaling phase, being able to re-apply the learnings and best practices. Patrick, you've invested heavily in cultivating a community of entrepreneurs. How do you think about the ecosystem for mentorship, for capital formation, for technology resources, the kinds of things that we've seen in Silicon Valley. How is that proliferating in the region? >> KHAILEE NG: Keep going to Patrick for advice, that's what's happening. >> MARK FITENY: If you're the maven, they'll come to you. >> PATRICK GROVE: This lighting is really helping. I have a lot of gray hair. They need to see someone with gray hair or no hair. So I get that call a lot. And I'm happy to do it. It's one of the things -- you know, when I was a young entrepreneur, there was really no one in this part of the world to go to. Core didn't exist. There was no mentors. Really no VCs 15 years ago. So it was very hard to get mentorship. And so it's something that, you know, myself and my partner want to give back as much as we can. And so ironically, when I think about mentorship like this, you have an event -- to become a prolific investor. I don't think Khailee's aim was to be a VC. I think Khailee's aim was to share as much as he could. It just so happened that becoming a VC was the way to monetize what Khailee wanted to do. I think about what we do -- we're SPAC promoters and our tag line is the entrepreneurs behind the entrepreneur. And it's exactly to your point. We've successfully taken six companies public. It's not easy to do that. It's not fun to do that. And honestly, back to my point earlier about the velocity about which some of these companies are growing. 100% to 200% a year, the last thing you want to think about is how do I IPO my company. So we sat there and said, this is a unique thing that we are experts at. We can offer that mentorship in many different ways. I think you're going to find more and more that the older entrepreneurs are those with the gray hair or no hair. We'll gladly offer up their services. Because at the end of the day, we all want the ecosystem to grow. We know that southeast Asia has got amazing prospects for all the reasons that we talked about before. And look, if there's anything that we can do to help another entrepreneur, that is a phone call that I would take any day of the week. >> PATRICK GROVE: And with five minutes left, I -->> MARK FITENY: I want to make one grandiose question that I'm going to ask you both. If you're looking five years out, ten years out what is one big prediction for how southeast Asia is going to either change itself or change the world through technology? We'll start with Khailee. >> KHAILEE NG: Yeah, I think it's to showcase, like -- it's to showcase an example of how governments, corporations, and innovators, financiers actually work together. So I think the historical narrative maybe in other parts. The world is the narrative of capitalism is antagonist's intentions. But here in southeast Asia, we had like a really fast start with a lot of good actors collaborating with one another. So I see like the digitizing the next billion involves really laying the groundwork for ESG for thinking about being a good corporate citizen and having that installed into a start-up from an early age. That's what we're focused on doing. We realize that VCs like ourselves, it is very -- it's very profitable as well to align all of investments and our founders to be on the right side of history, to be a good corporate citizen, and to be a good collaborator of corporate citizens. In fact, all of our portfolio segments moving forward, they require an ESG policy of their own. So it's a small step. Just a small step on a longer journey. But the big grandiose vision is they will show the world what innovating for the next billion looks like. How do you uplift people the right way with technology and finance. >> MARK FITENY: Great. Patrick, that's a tough one to follow, but I'm going to ask you to do it. >> PATRICK GROVE: I think the next five to ten years are going to be absolutely explosive for southeast Asia. I'm going to give you one stat, and it's going to sound like I'm making it up, but I've been doing some quick math in the head. If you look at the market cap of all the top ten China Internet players about ten years ago, it was about 300 billion U.S. Tencent, Alibaba, et cetera. You add up the market Capps of those players today, it's about 3 trillion U.S.caps of those players today, it's about 3 trillion U.S. It's gone up by 10x. So GSG and say the next ten players. I think it's a figure of just under 300 billion. So I'm kind of putting myself out there. That 300 billion is going to grow way beyond 3 trillion, and it's not going to take ten years. I think in the next five, six, seven years, you're going to see the combined market cap of all the southeast Asian tech players hit 3 trillion for all the reasons we said earlier. Vaster velocity, better entrepreneurs, more capital, more mentors. Governments are going to actually help the ecosystem. I think it's going to be absolutely explosive. >> MARK FITENY: I think it's great. We've got the confluence of social purpose, and the ability to drive something that is truly transformational, and compounds upon itself. Appreciate both of the panelists coming in today. Appreciate the partnership with both of the institutions and your portfolio companies. We're super excited to have you. And it is a remarkable point in time for southeast Asia. Thanks for joining us at the tech. >> PATRICK GROVE: Thanks, everyone. >> KHAILEE NG: Thank you very much, Mark. Thanks.
Southeast Asia saw a surge in the use of digital services like e-commerce, food delivery and online payments following the COVID pandemic, with as many as 40 million people from six countries coming online in 2020.
So what are the implications of this drastic transformation, and what are the rising tech names to watch?
Speakers:
Patrick Grove, Co-Founder & Group CEO, Catcha Group
Khailee Ng, Managing Partner, 500 Startups
Moderator:
Mark Fiteny, Head of New Economy Investment Banking, Asia Pacific and Global Head of Consumer Internet Investment Banking, J.P. Morgan
