Qin En Looi, a partner at Saison Capital, discusses the venture capital landscape, particularly in emerging markets like Southeast Asia, India, and Latin America. Saison Capital, backed by Credit Saison, focuses on early-stage investments and has $150 million in assets under management. The firm has seen three exits and emphasizes the potential of web3 and decentralized finance (DeFi). Looi highlights the efficiency and cost advantages of DeFi, citing examples like Thala, a decentralized currency exchange, and Helix, which tokenizes private credit. He also notes the geopolitical implications, such as near-shoring to Mexico, and the positive impact of the recent Fed rate cut on private investments. NB This episode contains general information and should not be considered financial or investment advice.
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About Qin En Looi, Partner at Saison Capital
Qin En Looi is a seasoned venture capitalist with a wealth of experience in fintech, B2B commerce, and web3 startups. At Saison Capital, he leads pre-seed and seed investments and advises multiple Southeast Asia-based web3 startups. His previous roles include co-founding Glints, the leading talent ecosystem in Southeast Asia, and earning recognition from Forbes 30 Under 30. Qin En is also the creator and host of the successful podcast “Parents in Tech.”
Timestamps for EP256
- Introduction (0:00)
- Venture Capital Terminology and Investment Strategy (3:19)
- Evolution of Venture Capital and web3 (5:49)
- Qin En Looi’s Journey into Venture Capital (9:56)
- Investment Focus on web3 and Decentralized Finance (12:29)
- Helix and the Future of Private Credit (20:02)
- Geographic Expansion and Global Opportunities (26:34)
- Concerns About Geopolitical and Economic Tensions (33:59)
- Impact of Fed Rate Cuts on Private Investments (36:40)
- Final Thoughts and Future Outlook (39:27)
Takeaways
- web3 Opportunities in Emerging Markets: Southeast Asia and Latin America are ripe for blockchain and decentralized finance innovations, with venture capitalists looking to capitalize on these growing markets.
- Blockchain and Financial Inclusion: Qin En argues Blockchain technology offers faster and more efficient financial services, helping to increase financial inclusion in underserved regions.
- Decentralized Finance (DeFi) as a Game Changer: Qin En argues DeFi platforms such as decentralized exchanges are transforming traditional financial models by enabling permissionless, trustless transactions.
- Private Credit on Blockchain: According to Qin En, tokenizing real-world assets like private credit offers new ways to reduce costs and increase liquidity, opening up more investment opportunities.
- Geopolitical Risks and Global Expansion: VC firms like Saison Capital are navigating geopolitical tensions by expanding into new markets such as Mexico, taking advantage of nearshoring trends.
Links relevant to the conversation
Saison Capital: https://www.saisoncapital.com/
Information on United States-Mexico-Canada Agreement (USMCA) which replaced NAFTA:
https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement
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Transcript: The Future of VC: Blockchain, Web3, and Emerging Markets w/ Qin En Looi, Partner, Saison Capital – EP256
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Qin En Looi 00:03
No one knows how things could be, right? I think there’s just so much uncertainty at the end of the day. I think our role is to understand what is happening, to be able to respond to it quickly, where we can and for the rest part, you know, just just sort of like, accept that this is sort of an environment that we’re in.
Gene Tunny 00:29
Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode. Please check out the show notes for relevant information. Now on to the show. Hello and welcome to the show. This episode, I’m joined by chin N Louis, a partner at Saison capital, an early stage venture capital fund based in Singapore. Chin en shares some great insights into venture capital investing, particularly the opportunities in emerging markets like Southeast Asia, India and Latin America. He discusses the focus that Sazon capital has on web three and decentralized finance, and he argues that blockchain technology can enable faster, more efficient financial services and increase financial inclusion. Righto, thanks to Lumo coffee for sponsoring this episode. This grade one organic specialty coffee from the highlands of Peru is jam packed full of healthy antioxidants. There’s a 10% discount for economics explored listeners. Details are in the show notes. Without further ado, let’s dive into the episode. I hope you enjoy it. Hinan, welcome to the program.
Qin En Looi 01:56
Thank you for having me. Oh, it’s
Gene Tunny 01:58
very good. And yeah, keen to chat about your your VC firm, so you’re based in Singapore, and, yeah, doing all sorts of interesting things. Can you just tell us a bit about the business, please?
Qin En Looi 02:10
Absolutely. So I’m a partner at Saison capital. We are early stage venture capital fund that is backed by a large Japanese traditional finance institution called credit. Saison, I’m very proud that we are one of the few early stage funds that is built for speed, and also one of the few early venture funds that can directly invest in digital and crypto assets.
Gene Tunny 02:31
Gotcha, so you mentioned you’re backed by a Japanese financial institution, so it’s providing you with the capital in to invest. Is that what you mean? Do you have other investors or clients?
Qin En Looi 02:44
Exactly? It’s only a single LT fund, so I only have one LP to report to, and sort of one shareholder. And that gives us a lot of flexibility that a typical fund would not be able to I’ll give a specific example. So for season capital, we are not just active direct investors, direct in the sense that we invest in startups, but we also are able to invest in other early stage venture funds. To date, we have done 1818, venture capital fund investments that really helps us to build an understanding globally of what the landscape, the investment landscape is shaping up to be, right?
Gene Tunny 03:21
Got you. So there’s some terminology I want to get make sure I understand. So LP, that stands for limited partner. Is that right? Yes.
Qin En Looi 03:30
And LP is the individual or the shareholder who contributes capital to a venture fund. So at the end of the day, most venture capital funds do not manage their own money, like say, a family office. Venture capital fund is essentially an asset manager in the very particular asset class. So a LP, a limited partner is who provides, is the individual institution that provides capital for the venture funds,
Gene Tunny 03:58
gotcha, and there are also general partners. Is that correct? The GPS?
Qin En Looi 04:04
Yes. So GPS, are people like myself who run the fund, gotcha, gotcha.
Gene Tunny 04:09
And do you disclose your assets under management, or how much you you invest on behalf of clients? Or is that? I mean, if that’s confidential, that’s fine. I was just interested in the scale of of your operation? Yeah,
Qin En Looi 04:21
absolutely. So we have 150 million US dollars assets under management. But what we like to say is that this is also a evergreen Fund, in the sense that every year we can always request for more budget from our parent company if needed. Because, once again, we are not set up like the typical venture fund where, you know, you go out, you raise, it’s a closed end fund, right, whereas ours is a bit more of an open ended Fund, which means that we can always just take on additional capital from our parent company,
Gene Tunny 04:50
yeah, gotcha right. And with, with venture capital, I mean, it’s a tough game, isn’t it, because you. Like, I’ve listened to Tim Ferriss talk about this on his show. And, I mean, essentially, you know that a lot of the things you’re investing in not necessarily get the ROI, I mean, the you know, because a lot of them, it’s experimental, or it’s very novel, but you’re relying on just one of them to to to hit it big, and, you know, go to the IPO, or to have the to have the buyout, and then you get that outsized return. Is that essentially the the VC strategy is that the top of is that your strategy? Or how do you think about the your investment strategy?
Qin En Looi 05:37
Yeah, I mean, Gene, what you said is exactly sort of the textbook definition how venture has been over the past few decades. But to be honest, I think we are today at an inflection point right where I feel like venture capital really has to evolve, and we have to find new ways to create value. So exactly to a point the old ways, it’s making a whole bunch of investments, expecting most of them to fail, but those that succeed deliver exceedingly like we call those home runs, right? They deliver incredible, phenomenal returns that more than make up for it. And usually those exits come in the form of, like you said, IPOs or trade sales. That model started in the US. It has, it has and still works in the US. But I think what very quickly people are realizing is that in many parts of the world, especially in the parts that we operate in, in Southeast Asia, in India, in Latin America, that’s starting to pose a challenge, primarily because these IPO, these MNA routes, are not as deep, right in terms as compared to the US. In the US there’s the rich capital markets. There are many corporations with large war chests that can deliver those kind of returns, but hey, you don’t find many of that over here, right? Some of the largest corporations across these markets are very traditional companies that probably don’t appreciate the tech multiple and also the same thing we see on public markets, some of the largest companies, largest tech companies that went public coming out of Southeast Asia, their outcomes are not as desirable. So I think really where we are today, it’s a very interesting position where dpi, which is basically the money that’s actually returned to LPs, the money that’s actually returned from venture funds to to their investors, is at an all time low, and many people are sort of questioning the value of this asset, plus, and we really hope to be part of the conversation that reinvents what that looks like.
Gene Tunny 07:36
Gotcha, did you say dpi, is that dividends paid to investors? Yes, that’s right. Okay. Oh, good. That makes sense, right? And where are you in your, in your evolution as a as a fund or as an in VC? Is it early days? Have you had any exits of any of your the companies you’ve invested in? Has there been an exit? Where are you in that sort of journey?
Qin En Looi 08:00
Yeah, we’re still relatively early as a fund, having started just investing in 2020 but the good news is that we have already seen exits, right? We, in fact, we are three exits that have happened, that have delivered great returns for us. But look, I think for many of our portfolio, it’s still the early days, especially because we often invest before the Series A round. So generally we’re considered earlier stage investors. And you know, the cycles of these take more than 10 years. But I think you know what, what excites us? It’s really where, sort of the broader web three and digital asset industry comes in. Because essentially, we see that space as accelerating liquidity and return timelines, right? You can see what you want about the crypto, about the web three space. You know, a lot of people love it, a lot of people, even more people hate it. But what is undeniable is the ability to generate liquidity for investors at unparalleled speeds. Right? Exactly to your question around, have we seen exits? Have we seen returns? Those three exits that we have in the in the non web three space are more exceptions, rather than the norm, whereas in the web three space, generally, we see exits at, you know, between year three to year five of the company’s life cycle. So practically, as investors, our approach to to approaching the web three, the digital asset investment space, it really comes driven from, you know, there is opportunity there, but the more importantly, there’s also liquidity. Yeah,
Gene Tunny 09:26
yeah. Okay. Well, I’ll ask you about that in a moment, just before we get there, I think some, you know, many listeners would be interested in your story. How did you get into VC in the first place? Because it seems just you’re relatively young, and you know, obviously doing very well. So what’s your story? I’d be interested.
Qin En Looi 09:45
Thank you. To be honest, I would never imagine myself being a being a VC, but my story started 11 years ago. I was the first generation of venture backed founders in Southeast Asia. I often joke with. The Founders I work with now, don’t talk to me about valuations, because I did my startups seed valuation and post money valuation at $1.5 million today, seed rounds are $1.5 million but the valuation I raised 1.5 million right? So 11 years ago, together with two other co founders. We co founded glins, which today is the largest recruitment platform in Southeast Asia, the largest tech enabled recruitment platform. The company today is a series D company. There’s very small, $80 million and I was with the company for the first five years. So really, sort of going through that zero to one journey, expanding out of Singapore to the Southeast Asia region was a phenomenal journey. Made plenty of mistakes, but also took away plenty of lessons. After building glints, I went off to BCG, both on the classic consulting side, but more interestingly on the venture building side. So that was when in 2020 2021, when BCG, digital ventures today is called BCG X was really supporting corporates to build startups. Did that for almost three years before Cezanne reached out and say, Hey, do you want to cross the table and become an investor? I thought, why not? Why not step back into the startup ecosystem, albeit in a different role? And it has been a great journey since I remember joining in 2021 right at the peak of the bull market, both in the web to web three sense when due to getting done, it’s insane, right? I remember those days when you you meet a founder for the first time, like over or over call like this, and they tell you, Look, we need you to commit by tomorrow. And so those are the crazy days. And of course, we rode the wave down. But, you know, with with the current environment we’re in, starting to see a bit of recovery, overall, excited, right? And I think I count myself fortunate to sort of see a bit of a cycle, because that really helps me to shape my perspectives.
Gene Tunny 11:57
Yeah, absolutely, wow. It’s a good yeah, good story, yeah, I’ll have to look up glints. Did you say it is B, L, i n t, s, that’s right. Great. You said Southeast Asia. So you’re talking about Manila and Jakarta, like Indonesia, Philippines, right? Yes, yes.
Qin En Looi 12:14
Indonesia remains our largest market, but we also have presence across Philippines, Malaysia, and even, actually, a bit of East Asia, so Taiwan and Hong Kong too,
Gene Tunny 12:24
yeah. What I’ve noticed about Indonesia, when I’ve spent some time there and done some work over there, is just, they’re very good with the apps, like they had, I remember they had, yeah, but like, 10 years ago, they seem to be even more advanced than, you know, further along in their, you know, relationship with apps and, you know, using, was it go Jek or something? I’m trying to, yeah, I thought, and you could get a scooter and they deliver stuff, although that was really great. So they seem to be more savvy than some of us here in Australia. So that was, that’s great, okay, and you mentioned web three and exits from there, and you talked about the ability for it to generate liquidity. What sort of web three? What broadly are we talking about with web three? What types of businesses have you invested in, and what ones were exited? Or was there an exit?
Qin En Looi 13:16
Yeah, you know, when we started the web three journey, we wanted to take on the approach where we don’t know what we don’t know. So the right way to do it is to really learn as much as possible. We ended up investing, and we started out as very sector agnostic, investing, everything from the infrastructure you’re talking about, wallets, tooling to, of course, the applications. We did games, we did decentralized finance, we did real world assets. So we did, in short, a whole bunch of stuff. Now, kind of after about one and one or two years into that journey, we started to to figure out what our thesis was, and our thesis became the focusing on finance applications, on web three, broadly, they can be divided into two categories, decentralized finance, as well as real world assets or tokenized assets. So these are two, even though both are sort of finance related, both couldn’t be further apart. Decentralized finance, as the name suggests, is the idea where everything is permissionless, everything is trustless, everything is anonymous, whereas real world assets is really about bringing some of these real financial assets onto the blockchain, serving very different audiences, but I think both have created great investment opportunities for us. Gotcha. And
Gene Tunny 14:34
can you give us an example of both the defi and the tokenized assets, just so we can understand what, yeah, what are you talking about? Please, absolutely.
Qin En Looi 14:44
So, for example, one of the things that we invested in defi is what we call decentralized exchanges. Simply put, it’s, it’s a money changer business, right? Imagine today you interact with a blockchain ecosystem, and you want to, you know, get some. Currency, or in this case, get some tokens to spend, whether on products or services. You need to swap, right? It’s just that. How? Let’s say, when I go to Malaysia, I go to the US, I cannot just use my Singapore dollars. I need to swap to the native currency. So decentralized exchanges essentially provides a way for you to swap, or basically the money changer business. But what’s really interesting is not just from a customer point of view, say me swapping my Singapore dollars to US dollars, but actually the ability for you and I to both also be the money changer, right? And all of this is facilitated by the blockchain, by the smart contracts. So let’s say today I have two pools of capital, two pools of tokens, two pools of currency, let’s say Singapore dollars and US dollars. In the web, two world, I need a license to be a money changer, right? Otherwise I could go to jail. But decentralized finance works such that I can without asking anyone for permission, without anyone knowing who I am, I can deposit both my Singapore and my US dollars, the equivalent in tokens, of course, and essentially earn fees becoming a money changer, right? So I think that’s really sort of one of the cool and interesting things about decentralized finance. It really lowers the barrier to a lot of these, these applications and these use cases. So one of the more successful ones that we have done is called Tala. It’s T, H, A, L, E, it’s a decentralized exchange on one of the faster growing blockchains called Aptos apt us, right? So, you know, really sort of figuring out, where are the different each blockchain is almost like a new country we try to invest in, almost like the infrastructure of each of these new countries, right? For example, this new country coming out, you want to be investing in the airports, the railroads. That’s essentially what we have done, and that’s what we see decentralized finance as an example. Now, in the real world asset, that’s something that’s a bit more interesting, I think, something that’s a lot more relatable. We’ve invested in companies that essentially use the blockchain to reduce costs and increase access. Right? One of those companies is helix, H, E, L, i, x. They come from a very strong financial background, having dispersed more than 400 million US dollars worth of private credit. To date, most of this business remains in Southeast Asia. So the question is, how can we offer Southeast Asia credit opportunities to the world, right? And what they’re really doing is they’re using the blockchain to increase inclusion, to reduce the cost of distribution, and they have done that very successfully. And we’re super excited to back there.
Gene Tunny 17:33
Gotcha Okay, I want to ask follow ups on both of those. So both, yeah, really compelling examples with the defi, with parla Taylor, T, H, A, L, E, Tala Gotcha. Okay. How does it compare in terms of efficiency, in terms of cost to the users, relative to traditional methods, absolutely.
Qin En Looi 18:03
So I think that’s one of the things, right? Aptos, as with many other blockchains out there, are, like the modern blockchains that make it really, really cheap. We are talking about a fraction of a cent to do any transaction on the blockchain. So really, that’s one. Secondly, you have instant settlement, which I think is insane, right? Today I saw a stat. I saw a study that says, on average, it takes 18 hours to move us dollars through the SWIFT network, which is insane, because that’s pretty much the time of the longest flight from Singapore to New York. So you’d be better off putting the money, the cash, on the plane and flying it over. People call it crazy, but that’s that’s how long it genuinely takes to move fiat money today, as compared to, for example, Tala apton. So broadly, many of these, what we call high throughput blockchains, where settlement is less than one second, right at the cost that is a fraction of a cent is like point that’s like, you need to put five zeros behind the decimal point. And that’s, that’s the cost. So I think really that’s that’s some of the speed and efficiency advantages, but I think more than that is also the idea of it’s trustless, right? What I mean by that is that the blockchain, it’s public, and it’s immutable. Once you do a transaction, it cannot be reversed. And there gives a lot of sense of security that the traditional world does not have today. If I open up my Robin Hood, I open my bank app, it says I have, let’s say, $5,000 I don’t really own that 5000 right? It’s actually an IOU from the bank telling me that if I want to withdraw $5,000 they would pay it back to me. We saw what happened last year with Silicon Valley Bank. Clearly, you know, these centralized institutions do fail sometimes, yeah? And so that’s really sort of the benefit of decentralized finance, yeah,
Gene Tunny 19:47
gotcha. Okay, I might be getting confused between the different different companies. So you mentioned there’s a currency exchange, yeah? So that that’s Tala. Is it? Tela, exactly, and what’s, what’s helix again, sorry, Jan, I just forgot. Sure.
Qin En Looi 20:05
No problem. Helix is bringing Southeast Asia private credit onto the blockchain. Ah, gotcha,
Gene Tunny 20:10
right, private credit onto the blockchain. Okay, and you mentioned you were expanding. You’re making it more inclusive, and just interested in more about it, like who’s What do you mean by private credit? You mean companies with spare cash or high net worth individuals who are willing to lend that money out. Is that correct? Yes, okay, yes, exactly.
Qin En Looi 20:32
So private credit, it’s a simple model of today. You are high net worth individual, or you are a company you you want to generate yield that is above the risk free rate, but not take too much risk, right? So private credit opportunities generate generally anywhere from 10 to, let’s say, 15% APY, not the best, but it’s a lot safer, right? Than, let’s say public equities out there. So, so the model private credit, it’s essentially debt and lending, right? You lend to other companies. And, of course, you, you, you are senior in terms of the the repayment stack. So should anything go wrong? You get paid back first, as compared to, let’s say, the equity shareholders, yeah,
Gene Tunny 21:14
yeah, gotcha. Okay. And so helix, what it what does it do? It matches the the the lenders, with the borrowers, is that what’s going on that
Qin En Looi 21:24
and what they’re doing, it’s a few things, right? I think, first and foremost, often, what creates a lot of fees, it’s the fund administration, right? You need different parties, different different people, different vendors, to come on board, to attest to, to do many things, to audit and all of that. What helix is doing is, by bringing a lot of these processes on the blockchain, you can actually save a lot of that middleman costs, and these savings get passed on to your ad investors. So firstly, what helix is doing, it’s at least on the back end, reducing the costs of investment. That’s one. Now, the second thing that they’re doing is exactly like you mentioned, they’re bringing it onto the blockchain so that the current, you know, there’s this 100 and $20 billion worth of stable coins on the blockchain today, right? Many of them are sitting idle. They are not generating any you so what helix is doing is bringing these 10 to 15% yield that is has been proven. There’s a track record. It’s regulated in Singapore by the Monetary Authority of Singapore, and he has a $400 million track record with zero defaults. All of these benefits of such this particular financial product, they are bringing it onto the blockchain, so that if today you are a stable coin holder, you can directly access and invest in this opportunity.
Gene Tunny 22:48
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Gene Tunny 23:23
Now, back to the show. So you mentioned I’ll have to look this up. So you said $400,000,000.00 defaults, exactly. I mean, this is immediately. I’m sort of asking, just thinking, how is that even possible? How can you have zero defaults? What’s what’s going on here? I mean, what’s the how do you ensure the people who borrow the money have an ability to pay it back? Is there? Is it fully collateralized? Is it? I mean, what’s what’s going on here? Yeah,
Qin En Looi 23:57
absolutely. I think first, first things, first for us as not Saison capital, but our parent company, credit Saison, our primary business is in lending. So we understand risk. We understand all these factors very well. The Golden principle lending, it’s any fool with money, can lend it out. The hardest part is always collecting it back. So to answer your question, yes, in fact, the way helix does it is through multiple layers of security. For example, helix does not lend directly to consumers. It does not directly lend to the small and medium companies. Instead, they lend to fintechs, and these fintechs do the lending to consumers or SMEs. So what it means is, yes, there’s a middleman, but this middleman also takes first loss responsibility. So today, helix, let’s say, lends to FinTech company, a FinTech company, a lens it out. Of course, there are always losses and all of that, but helix will often sit senior, which means, let’s say the first 20, 30% of. Of let’s say the pool is a million dollars for for the sake of argument, the first 200 to 300k of that pool is actually contributed by the company itself, the FinTech itself, the what we call the originator, right? And this is what we call the junior tranche. So if there’s any losses, it comes from the junior tranche. Now where helix sits, it’s on the senior trench. It sits above that. So essentially, there’s a way to do it, and if you do enough due diligence and you structure it properly, there are ways such that the senior guys enjoy a youth that and enjoy no losses, no defaults. Of course, the bulk of the returns comes in June, right? You’re talking in junior. You’re talking about a lot higher returns. You’re talking about 2030 could sometimes even reach 40% yield. But of course, higher risk, higher reward, and the junior piece is usually taken by the companies itself to prevent moral hazard. So where helix comes in is offer senior secured capital, and usually there’s a there’s quite a generous buffer below them the interest, zero defaults, right?
Gene Tunny 26:02
Okay, yeah. I mean, I don’t mean to be skeptical, but I always, you know, just the economist in me. I guess economists are naturally skeptical of this sort of thing, and they go to too good to be true. And just thinking about, yeah, what’s the I mean, I because I was in the treasury here in Australia during the financial crisis, and yeah, I just remember, yeah. You just, you just know how things can go wrong. Everything sort of collapses at once. So just sort of naturally, yeah, naturally, a bit, a bit skeptical, but yeah, it sounds fascinating. I have to look more into it. It’s, yeah, it’s incredibly amount of innovation that is occurring out there, and you seem to be at the forefront of it. Where are these companies that you’re investing in located? I mean, are they in Southeast Asia, or are they in the States or Europe? Where are they? Yeah,
Qin En Looi 26:56
I would say about half in Asia and half in Western markets. Western markets heavily being concentrated in the US. That’s one of the things that we love about web three, right? Everything is sort of so global. Really, anyone from anywhere can can build successful companies. Some of the largest companies in the space are also built entirely remote and distributed teams. So yeah, we take a very global approach. I travel around a lot. As a result, I make a trip to the US at least twice every year to make sure that we stay on the pulse. But that is also actually where investing in other early venture funds helps, right? Because we are LPs, we are investors in those funds. We work very closely with those GPS with those venture capitalists to expand our due flow and our network access. Gotcha.
Gene Tunny 27:43
Do you have any investments in Australia? Do you are there
27:52
any? Yeah,
Gene Tunny 27:53
I’m interested, because I think things have started improving here. I mean, for years, the view was there really wasn’t, there wasn’t a lot of opportunities for startups you had to go to over the Silicon Valley. And so that’s why there was a colleague of mine at Treasury, Anthony Goldbloom, who he, I guess he got an angel investor here to help him out, but then he had to go and, you know, raise money over in Silicon Valley, and you get work with some great people there, and they ended up selling that company, Kaggle, to Google. So he did really well. But yeah, I mean, that’s, I always remember he had, you know, he essentially had to go over there to get things moving. I just wondered, to what extent, you know, now, how things have evolved. And because there are a lot of people here, they’re more angel investors, more people willing to take a chance on startups. So, yeah, I was just wondering if you had any, if you hadn’t in any investments in Australia, but yeah, that’s fine, yeah, if you, if you, hopefully, you’ll find some, some good ones, right? Oh, so we’ve talked about web three. Are there any other areas of interest, any other I don’t know what do you call them, thematics or verticals that you’re that you’re investing in? Yeah,
Qin En Looi 29:14
I mean the planning. But maybe I can share the biggest one outside of web three. It’s actually our geographic expansion into Latin so 18 months ago, our parent company opened up offices in Sao, Paulo, Brazil and also Mexico City. I think we’re super excited about the opportunity to create more awareness about Latin America, traditionally, especially for folks in Southeast Asia and Australia, it has been a really long and far journey, right? It’s we’re separated by more than 30 hours of flight, one that I took not too long ago and will be taking again next month. But look, I think for us, we see massive opportunities in Latin America. Brazil’s FinTech ecosystem is truly, I would say, cutting edge. The Central Bank was number one central bank. In the world. They are probably the first that would launch blockchain in the financial industry at scale. So I think really sort of for us as not just web three, but I would say broadly FinTech investors, we are spending a lot of time and attention in Latin America,
Gene Tunny 30:18
right? Okay, that’s interesting. I like to look more into that. Yeah, that’s a hot tip, I think, if you’re, if you’re seeing those opportunities there, and I mean, that could help their general economic development and catch up to to the the more, you know, the more advanced economies. I mean, I guess the Yeah, because I think yeah, they generally do need to do a bit of, a bit of catch up to the the advanced Western economies. So that’s that’s really fascinating. I have to, have to look more into that. Okay, Jen, this has been a fascinating conversation. Yeah, I’ve learned a lot of it’s a sort of conversation I have, and then I think, Oh, gee, I’m gonna have to go away and do hours of research on this, lots of really cutting edge stuff. What’s I might just final question about the whole sort of geopolitical and an economic, geo economic, I suppose, situation, to what extent are you? Are you concerned about the broader trends or the developments in the world? I mean, i It seems that we’re, you know, at one of the riskiest sort of times in in world history, for a long time, since probably the early 80s, really, if you think about the probability of a major global conflict, you know, is that, is that something you think about as, as Vc investors, or you just try and do that, you know, you just sort of, oh, put that to the side. We’ll just do the best we can. I mean, how are you thinking about the global situation? Yeah,
Qin En Looi 31:54
no, no, it remains super important, because at the end of the day we, I mean, venture, it’s a very small asset class in a broader world of the whole economy, right? And I think the way we see it, it’s, you know, we have to see where the tide is turning. We have to see where the wind is blowing in order to know what’s next. I think you’re right, right? All these tensions, all these geopolitical issues, are creating a lot of risks. I think some we just have to accept, some we have we can mitigate, and some we can even turn into opportunities. For example, I mean, just going back to the Latin America expansion, right? I mean, Brazil was obvious choice. It’s the largest country in Latin massive FinTech ecosystem. So it’s almost like a no brainer. The question is, why Mexico? Right? Mexico, it’s not, not nowhere close to to that, but actually, sort of, our decision to invest in Mexico heavily also actually came from, a result from this geopolitical tensions right in the past, China, Asia, is a huge sort of manufacturing and and and sort of production place for Western countries, especially the US, but we’re seeing a reversal of the trend because of these tensions to what we call near shoring right. So a lot of these key production is moving to Mexico, which, in turn, is kind of stimulating the whole sort of country, the whole economy. And hence, that’s why we’re there. So I think, I mean, that’s just one very, you know, small and perhaps example, but it just shows that, yes, it matters. I think to a large extent, a lot of these are risks that we just need to be on the lookout for. There’s not much we can do about it, but that presents opportunities. We won’t hesitate to go after it. Yeah,
Gene Tunny 33:34
it’s good point about Mexico. So Mexico, I’m trying to remember the name of the trade relationship that has with the US and Canada. It used to be called NAFTA, but they read, Trump renegotiated, I think, and got a new name. I have to put it in the show notes, but I thought that was a good point. I should ask. I mean, what about China? I mean, this is something that is, you know, I ask a lot of guests about this now, because where Australia is so heavily, well, China’s a major our major trading partner, I suppose, in terms regarding our exports of our commodities, it’s just extraordinary. And there’s the growing tension, it seems that, you know, a lot of people in the United States are concerned about policy under Xi Jinping. They’re concerned about growing, you know, China’s sort of ambitions for Taiwan. And, you know, there’s this, this growing. This is view that seems to be that the Americans appear to have, that there were in this strategic conflict. And so we’ve sort of shifted from it’s, you know, China’s, uh, entry into the global economy is amazing. And this the whole sort of globalization thesis. We’re moving away from that, and it’s more sort of decoupling now. So I’m just wondering how you think about that. What are you seeing regarding the, you know, this whole sort of issue of the US, China tension? You have any thoughts on that? Yeah,
Qin En Looi 35:01
I think at a high level, look, I don’t think this conflict is going to get resolved anytime soon, right? There clearly is two superpowers, and they sort of always want to one up each other. We’re already seeing it at various levels, right? I think, sort of the way I think about it, it’s sort of the way Singapore has been playing it, which is increasingly difficult, but you know, I think so far, Singapore has done a great job, which is to remain neutral, right, to be friendly, I think. And it’s not just on that political level, but even, I think for us as a venture asset class, at the end of the day, I think we make the most noise as compared to many other asset classes, but we are very small, right? So I think it’s important to to understand the world, the circumstances that we sit in, and try, I would say, try not to take sides, right? Because you don’t want to end up on the wrong side of the equation. No one knows how things could be, right? I think there’s just so much uncertainty at the end of the day. I think our role is to understand what is happening, to be able to respond to it quickly, where we can, and for the rest part, you know, just just sort of like, accept that this is sort of an environment that we’re in. So yeah, I think that’s sort of that sort of broadly my take on it, to remain neutral as much as possible,
Gene Tunny 36:18
right, right, fair enough. Shannon, it’s been a Yeah, fascinating conversation. Any final thoughts before we wrap up? Anything you think you know is worth talking about as at 21st of September, 2024 any anything on your mind, anything you’re you’re concerned about, anything you’re excited about that we haven’t touched on?
Qin En Looi 36:38
Yeah, no, I think you know, with sort of the Fed announcing the 50 basis points rate cut just two days ago. Look, I think that, hopefully that the tide has turned. I think especially for private investment classes, the private credit, private equity, venture capital. I think this is much needed news and optimism for us, because even though the public markets have somewhat picked up a little since last year, the private markets have remained relatively challenging. So to all the founders and also to all the investors out there who are operating this space, I would say, get you know, remain optimistic, remain encouraged. We can look forward to better days in the very near future,
Gene Tunny 37:17
right? Oh, okay, could you just expand on that? I’m interested in that. So how do you see it as a as affecting the firms, the startups, the venture funds? How do you see that, that 50 basis point cut? I mean, I’ve got a sense of how it will and I’ve got my own views, but yeah, just if you can expand on that, how you see it as as beneficial? Please.
Qin En Looi 37:39
Yeah, yeah. Look, I think in a, I mean, fast forward back to when it was zero interest, right? I think capital was cheap. A lot of capital flowed into these private classes. What has happened, whereas with sort of the bear market, is essentially, firstly, the cost of capital became a lot more expensive, and more importantly, the risk free rate increased, whereas the returns on these private classes have went down. So it became a point where many investors, many large institutional investors, have figured out that, firstly, they are over allocated in private assets, right? They are way over allocated. That’s one. Secondly, the risk return profile just doesn’t seem to add up, right? You’d rather do something that’s a lot more liquid, something, let’s say, in the public equities or even in fixed income, right, where the yield, the risk reward is a lot more attractive than these private classes. So what has happened as a result over the past two, three years is basically a dear, absolute sort of, I wouldn’t even say decline, a crash in available funding to for the LPS have towards venture capital, especially, right? And so this has a trickle effect when LPS don’t give money to VCs, VCs don’t give money to founders, and then startups unable to grow. So I think, sort of, with this shift, with with the rate cuts, at least it gives a bit more optimism. It won’t solve the problem entirely, right, but at least it gives some optimism to money coming back in to these private asset classes.
Gene Tunny 39:12
Very good, okay? Thank you. Jay Powell, very good. And Chennai, thanks so much. This has been terrific. You’ve given us so much great information and so many amazing insights. And yeah, all the all the best with your investments in the coming years. And yeah, hopefully I’ve got a chance to catch up with you again. This has been terrific. Likewise. Thanks a lot. Jean. Okay, thanks. Janine, righto, thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com or a voicemail via SpeakPipe. You can find the link in the show notes. If you enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main. Ways that people learn about the show. Finally, if your podcasting app lets you, then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week. You
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Credits
Thanks to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts and other podcasting platforms.