The Secrets to Investing in Emerging Technology Ecosystems

Emerging markets can be a daunting labyrinth for many technology operators and investors. Understanding the ins and outs of a new culture is challenging, and often the best practices and talents that helped investors find success in other markets are not transferrable.

Throughout the month of April Pinn Lawjindakul (Class 25), Investor at Lightspeed, hosts some of the most successful founders and investors of the last decade across China, India, and Southeast Asia in her miniseries “Secrets of Emerging Technology Ecosystems” on the Kauffman Fellows Podcast. In each episode, Pinn and her guests dive deep into the lessons they’ve learned, the best practices they’ve developed, and the cultural nuances of investing and operating in fast-growing emerging markets. Together they’re inspiring a new wave of investors and entrepreneurs to understand, build, and invest more in these exciting regions.

Click the links below to tune into each episode and catch a summary of Pinn’s mini-series below by flipping through an eBook summarizing some of the key findings from her conversations.

→ VIEW EBOOK HERE

• Nick Nash (Asia Partners): Buiding in Southeast Asia
• Jenny Lee (GGV): Selecting Emerging Market Companies
• Ritesh Agarwal (OYO): Building a Top Platform in an Emerging Market
• Vaibhav Gupta (Udaan): Building Unicorns for India
• James Mi (Lightspeed China): Learning from Mistakes
• Bejul Somaia (Lightspeed India): Transitioning from Operator to Investor

Kicking off the miniseries, Pinn welcomes Nick Nash, Managing Partner and Co-founder of Asia Partners, and Jenny Lee, Managing Partner at GGV Capital. Over the course of their conversations, Jenny, Pinn, and Nick explore why local teams are often the key to success in emerging markets, despite having to overcome biases that they're less talented, experienced, and innovative than their American/British counterparts.

Catch each episode below or on iTunes, Spotify, and Anchor.fm.

This season of the Kauffman Fellows Podcast is produced in partnership with Mighty Capital. Together, we unravel what truly makes a great VC investor.

Asia Partners Managing Partner and Co-Founder, Nick Nash, On Building Successful Business in Southeast Asia

In an eye-opening first episode, Pinn Lawjindakul sits down with Nick Nash, Managing Partner and Co-founder of Asia Partners. Previously the Group President of Sea, Greater Southeast Asia’s leading internet company, Nick’s extensive experience in the region allows him to offer unique insight into why high-caliber teams have frequently failed in Southeast Asia.

Tune in and catch some of our favorite soundbites below!

https://open.spotify.com/episode/08MIKTrSmQClVMnq0J0i4S

On factors that made Sea a success

The company was a raging success during Nick’s time there, and he credits the company culture and underdog mentality with giving them an advantage.

“One of the most important aspects of our culture…was that we always felt that we were a very poor company. Whenever anybody thought that we had a big budget to spend, that person was very clearly spoken to and said, ‘Look, we really don’t. We have a bunch of different mouths to feed inside the organization; we’re going to distinguish ourselves based on the skill and the creativity with the way we do things.”

In that sense, having a tight budget was viewed as an asset, not a drawback.

“Nothing sharpens the mind more than frugality. A thick wallet is inebriation for the entrepreneurial mind. And a thin wallet is a great way to have a clear head.”

On valuable insights for people moving from investing to an operating role

Nick noted that people working in a professional services environment, often with a high billing rate, often develop a “selling” mentality that includes “premature gravitas.”

“You know, the expectation internally, if not so much externally, is that there has to be a certain demeanor, a certain tone, certain stylistic aspect. But I have often felt that there’s often a trade off between gravitas and substance. Not always, but when you see [someone in] Silicon Valley wearing turtlenecks and t-shirts, sometimes it’s a reflection not just to being counterculture, but of actually trying to focus a lot more on the substance; let the product speak for itself or let the results speak for themselves a little bit more than the words speaking for themselves.

I always recommend people in professional services to go work in a real operating company. Because when you unlearn a little bit, or some of the habits of speech, some of the habits of interpersonal conduct, and interaction, and you come to be judged by not how you talk, but what you do. It’s super important. Actually, later on, you can pick up some of those rhetorical skills, again, perhaps perhaps not, a lot of them have a value and a purpose and in moving groups, leading groups and whatnot. But if you can combine the rhetorical skills or professional services, with the substantive doing skills of operations, Boy, that’s a neat combination. That’s a powerful chemical reaction. I’m always puzzled how few people make that leap.”

On why high-caliber teams have failed in Southeast Asia

Many companies have struggled with operations in Southeast Asia, though they’ve been successful elsewhere. What have they missed? Showing up and taking an interest in the countries you want to succeed in, he said.

“The secret sauce is humility. At the end of the day, what is business? Business is people doing useful things for other people. And depending on how useful it is, and depending on how nice they are, and professional they are about it, the customer is willing to let them have a little bit more gross margin.

At the end of the day, gross profit, or the percentage of your revenue that’s gross margin, is the single best sign. People are really happy to let you do something for them if it’s beneficial and useful. So if you immerse yourself in the culture, you show great respect to the real Southeast Asia, then you can’t help but have your customers be your coaches.”

Listen to the full episode above on Spotify or over on iTunes.

GGV Managing Partner, Jenny Lee, On How She Selects Emerging Market Companies

Pinn’s incredible second guest is Jenny Lee, Managing Partner at GGV Capital, a global venture capital firm that invests in local founders. Best known for her focus on startup innovation in areas such as edtech, fintech, robotics, and AI, Jenny joins Pinn for a conversation on the differences between investing in the emerging markets versus the US/UK, the skills she looks for in local founding teams, and the number one mistake she sees experienced investors make when investing in new ecosystems.

Tune in and catch some of our favorite soundbites below!

https://open.spotify.com/episode/0Rl5ot9B29dSlfHqTzuXUI

On the major differences between investing in emerging economies and more developed ones like the US and UK

Jenny has been investing in China for about 20 years and has seen the talent pool emerge as a key factor in the entrepreneurial growth in Southeast Asia.

“When we first went to China to make investments in China, the entrepreneurs and CEOs that we met didn’t know how to read a term sheet, or understand preferred share structures. Today, they are very mature, very sophisticated, I would say on par with the US in terms of the talent pool.

And it’s not just from the ability to work with venture capital, but also all the way we have seen that China has now emerged with a lot of unicorns and super unicorns, some of whom have surpassed even the US startups in terms of the talent pool. And so what that does is that the talent pool is a lot more mature.

If you look across the talent pool, you will find fewer serial entrepreneurs just because of the stage of development, and therefore the quality, the depth of the management team tends to be quite a big difference.”

On her philosophy for choosing talent for her investing team

As entrepreneurs in emerging markets may not have access to resources that are taken for granted in the US and China, what facets can an investor look at to get a sense of the people behind the startup? Jenny mentioned that it’s crucial that the founder and leadership team be able to learn quickly and demonstrate charisma.

“So I think the ability of CEOs or founders to quickly learn the salient points of each of the models that are out there and be able to digest, synthesize, and come up with a brand new, different way to monetize.

Secondly, I think that there’s so much information out there, and it means that you can learn from the playbook that has happened before. So a CEO who is sitting in Indonesia doesn’t mean that he or she cannot learn from the rest of the world, knowing how certain things or models are taken up in the US, looking at what has happened in China.

And when you’re early on and you haven’t raised a lot of money, that’s only your own charisma. So the founding team’s charisma, their passion. And charisma can be characterized by the passion around the project, or the company, the product that you’re trying to build. It can sometimes be just your vision to try and change the world in certain directions.”

For a founder, charisma is crucial in recruiting the team that can learn, grow, and succeed.

“Can you early on in the cycle of your startup get a team together that shares the same level of passion and vision. And sometimes you have nothing else to offer them other than your ability to bring them together and promise them a great future with the stock of a company that just got started.

So I think in the early days, ability to learn, and then ability to influence with the right personality and charisma. When companies are in their mid to late stages…it’s not just about the team. The team’s ability to execute should translate into real numbers, whether it’s the business model, whether it’s the growth rate, all that becomes really important.”

On why successful global companies have failed in Southeast Asia

While Southeast Asia is referred to as if it were homogenous, it’s actually 11 countries with substantial diversity. A “one size fits all” approach is not likely to work.

“I think number one is the local and cultural difference. If you just use an example of ride sharing, the local dynamics are different, the local situation, the local transportation mode, and vehicles are different, the regulatory framework is different, the need is different, the ability to pay is different. Now, while you can say that the ride-sharing business model is similar, it doesn’t mean that just exporting a US model is going to work.

I would say every single model we have seen, the successful companies are the ones that really send the best people to the ground. And sometimes the first people are from the ground, versus trying to hire someone from the US who has never been to Vietnam, has never been to Thailand, he’s never been to Indonesia and said, just go figure this out. That may not work.

You may be better off actually hiring someone local, who understands those nuances. And then have senior management commitment to listen and make changes. While most companies like to have one product to take on the world. It’s not easy, right? If you want to be a global company, you may need to have multiple products for each market, versus one product fit for the world.”

Listen to the full episode above on Spotify or over on iTunes.