In our latest Growth Kung Fu interview, Jeffrey Paine, managing partner at Golden Gate Ventures shared a range of great insights, incl. his perspective of the types of startups that are currently in the Southeast Asian ecosystem.
If I was a startup founder what would I have to come with in order to convince you?
Jeff: It changes over time, right? So, now with four to five years of data, we can tell which companies will be big, which companies will be small or SMEs and which companies will fail. So, I would say the company needs to understand what they are. In SEA there are four types essentially. So, there is the type that, no matter what they do, they will die --.
This blog has been written based on the interview with Jeffrey Paine managing partner atGolden Gate Venture
What does that mean exactly?
Jeff: Unless they completely pivot to a consulting company, they will die. That means wrong idea, wrong market, wrong people, just everything wrong.
Then you have the ‘Global from Day One’ guys which is less than 10%. So, they are a global company, global app, global product but they happen to come from South East Asia. They are very few and far between; the dynamics change – you are now global, you have multiple competitors everywhere and with different levels of funding and sort of competitive landscape.
Then, the third one is ‘Regional from Day One’. They have aspirations to be in South East Asia. They have to start from one country before they go out and they kind of know what to do if they dominate one country. So, those are probably 20-30%.
Majority of them, and that’s the fourth, are actually ‘One Country plays’. So, number one in this in Thailand etc..
Some of them know that – some of them don't. The problem comes where they think they’re regional but they’re actually local. That's where the disconnect comes.
Some of them know that and go: “Oh, I’m happy with just one country, don’t care, don’t ask me to do anything, I just want to listen.” So, when you have these four types, the investors just need to know what to invest in.
So, maybe 80-90% of companies don’t raise money, or at least institutional money, because of this.
They raise money from friends and family and then they can’t raise money anymore. Then they will either die or they will take a loan and pivot to a consulting company.
Then, the ‘Global from Day One’ guys, our investors don’t know how to help them because we are a lot more local and a lot more regional. So, it’s hard to help them to go to the US or Europe. That’s why there's not a lot of them to begin with ,because it's extremely hard to be immediately in the top 5 of the world, it’s extremely hard to do that, but the outcome might be bigger so there are still investors willing to take a bet on it.
The last two are the ones that are tricky. Everybody wants a company to be regional because you have bigger market size, but the reality is very difficult to be regional and if you’re only one country then it’s too small and I might as well don't invest here because it’s an SME and you give a 3X return.
That is the problem. Investors may know what they want, but might not find the companies they want. Or the founders think they can be regional but they actually can’t be regional. That's where the disconnect comes in.