Inside Singapore's Leading Venture Capital Firm - Chua Kee Lock, CEO of Vertex Ventures

Chua Kee Lock is the Group President and Chief Executive Officer of Vertex Holdings, a Singapore-headquartered global venture capital investment holding company. He also serves as Managing Partner of Vertex Ventures Southeast Asia & India and as Chairman of the Vertex Growth Fund.

Under his leadership, Vertex has grown into a global network of venture capital funds investing in early-stage and growth-stage technology and healthcare companies.

As of today - Vertex Holdings has USD 6.8B assets under management and 300+ active portfolio companies. Some of the notable startup successes under their belt include Grab, Patsnap, Nium and Instarem.

TIMESTAMPS:
00:00 Intro & Trailer
01:11 Kee Lock's Exposure to US Tech Ecosystem
05:55 Importance of Technical Expertise in VC
07:56 Revolut Ad
09:22 Revitalizing Vertex Ventures
13:34 Why Was Kee Lock Chosen To Run Vertex?
14:46 Avoiding the Traps of Silicon Valley
17:57 The Importance of Discipline in Venture Capital
21:10 The Decentralized Model of Vertex Ventures
26:40 Advantage of Decentralization
28:42 How It Was Like To Invest In Grab
31:15 How To Evaluate Founders
35:48 Grading Anthony of Grab
39:58 How VCs Value-Add
42:47 Future of Startups in SEA
46:03 Where Can Singapore Innovate And Lead?
49:10 Future of Technology
52:33 Disruptive Technologies On The Horizon
54:34 How Singapore Can Prepare
55:10 Preparing for a Globalized Future
56:12 Advice To A Fresh Graduate


Full transcripts of episodes can be found here:
https://www.ykeith.com/tag/podcast/

Keith 00:00:46

Today I'm joined by the legendary venture capitalist and veteran, Kee Lock. He's the CEO of Vertex Holdings and is known to be one of the early veterans of the venture capital industry in Singapore. It is with my great privilege that I get to speak to him today. Kee Lock, thank you for coming on.

Kee Lock 00:00:58

Thank you.

Keith 00:00:58

I want to take us back to 1985. You went to Silicon Valley and you were there right at the heat where the venture capital industry in the US was blossoming. Can you help me see what you saw back then in those years?

Kee Lock 00:01:12

That was the beginning of venture capital activities in many ways. Although the venture capital industry in the US started in the 1950s or 60s, that was the beginning of the technology phase because of the beginning of personal computers and software coming of age. There were a lot more venture capital firms trying to invest in disruptive innovations, and it was a very exciting time.

Keith 00:01:37

What did you see as a young Singaporean going into such a foreign space and industry? What were some of the things that surprised you and that you learned from?

Kee Lock 00:01:42

Well, in the beginning I was actually a student at Stanford. I was under the National Steel scholarship. So the beginning part of that involvement was mostly doing internships for Transpec. Transpec was one of the early pioneers of venture capital firms in this part of the world. We had an office in Silicon Valley and I got the opportunity to work for them during the summer.

You're doing a master's degree in robotics and every day your friends and students or cohort are talking about this new idea or that new idea. That's one of the first things you learn in Silicon Valley. Everybody seems to want to be an entrepreneur. Then when I started working for Transpec, you see a lot more excitement in terms of ideas. In that wave of the 1980s, you see a lot of fabulous IC semiconductor ideas, software ideas, and ideas related to personal computers. Every day there'd be somebody trying to create something new. As an investor, you're always trying to back the right innovative idea with the right amount of money and the right amount of investors.

Keith 00:02:51

What were some of the industry trends that you were seeing that made you think, wow, America is really at the forefront of innovation?

Kee Lock 00:02:56

In our business, in terms of investing, it's important to remember that there are essentially four stages. First is about creating a network, looking for the right idea, the right things to back, the right entrepreneur, and the right team of people. That first stage involves creating as much network as possible, which means the ecosystem has to be relatively healthy.

The second part of venture capital essentially involves, after you identify some potential new idea as an exciting idea, performing sufficient due diligence. You question yourself whether this makes sense, whether this product makes sense, whether this market makes sense, or whether the people are capable of delivering the right solutions. You have to go through that whole due diligence deliberation, yourself or together with your more senior colleagues, to come to the right conclusion.

Assuming the conclusion is to invest, then you have to go through the whole documentation phase of legal documentation. Subsequently, you invest in the company. Stage three is after you invest in a company. In any startup, whatever can go wrong always will eventually go in the wrong direction. As an investor, of course, you don't say I'm too young, I'm an associate. My mentor, who is a much older partner, will be sitting on the board, working with the entrepreneur, figuring out how to steer the company in the right direction. That stage is equally important because it takes about five, seven, eight years to build companies. You need to raise many rounds of financing thereafter.

The last one, which is equally important, is that at some point you need to figure out when to exit because you need to generate returns for the investors.

Coming back to your question, one of the very early things you discover in Silicon Valley is that because of the fact they were able to develop that ecosystem very quickly, partly because there were a lot of immigrants and a lot of sophisticated venture capitalists, that networking, that context, that relationship is very vibrant. In Singapore in the early days, we didn't really have that because we didn't have that funding ecosystem. We didn't have a lot of people willing to start companies. Even if you wanted to get people to help you do certain things like building software, it was very difficult to find such people. One of the biggest important ingredients of any venture capital is to have that whole ecosystem of early stage investors, entrepreneurs, and the whole support system around it.

Keith 00:05:32

One of the interesting things I've read about Silicon Valley history is that the early wave of venture capitalists were very engineer heavy, meaning a lot of them were deeply involved in science or the rise of the semiconductor within the US. You yourself were an engineer by training. I wanted to understand, what about your background as an engineer gave you insight as to how technology would develop?

Kee Lock 00:05:58

Engineering is important because if you're investing in the technology sector, the very first principle is you have to be knowledgeable. I mean, somebody will come to you with some basic idea about building something, and you have to have the basic knowledge and basic science to understand whether this is doable or sensible.

Just to give an example, somebody will come to you and say, I'm going to build a time machine and it's going to cost you $10,000. This time machine will allow you to jump back in time anytime, jump forward anytime, and it's going to be portable. The idea looks fantastic. The addressable market is probably billions. All of us would love to buy one machine at $10,000, even $100,000 we'd pay for it. But if you've studied science, you know that Einstein said E equals MC squared. It's impossible to travel at the speed of light in today's technology. So somebody comes to you with that idea, and as a guy with a bit of science background, you naturally say this is not humanly possible.

The same thing applies to semiconductors, software, and so forth. Having some basic knowledge of science is important. Now, it's not always necessary that you have to come from an engineering background per se. There are some equally fantastic venture capitalists who are not scientists, not from an engineering background, but somehow they have the intellectual curiosity to study, to learn, to ask enough questions. There are enough professors, enough technical people around the world that if you have enough network, you should be able to reach out to them and ask them for advice. Ask them, is it possible to travel at the speed of light? Ask a physics guy and they'll say this is never going to work. Then voila, there's no need to spend time.

You don't necessarily need to know that, but if you know where to find that information, which is one very important makeup of a good venture capitalist, they must always be able to find the right information through your network, through your contacts. Ask the right questions, try to find the right answers for whatever you're trying to invest in.

Keith 00:09:22

What might be useful is for you to take us back to the early days of Vertex when you started not only Vertex, but also to a certain extent helped shape the early beginnings of Singapore's venture capital market. What was lacking back then that needed a venture capital model to be introduced within our market?

Kee Lock 00:09:39

Well, maybe there are two parts to that question. I'll talk about the Vertex fund first. Singapore's venture capital industry we can talk about later.

Vertex's history is actually much longer than most people are aware of. Vertex actually started off in 1988 as part of Singapore Technologies or Chartered Industries. Originally, Vertex was a corporate venture capital arm of Singapore Technologies and I think it did reasonably well until the 2000-2001 bubble and lost almost a billion US.

The second phase of Vertex was a hibernation phase where between 2001 to 2008, it was essentially restructured out of Vertex and put directly under Temasek. It was then put under a credit department or credit team of people. Those team of people, as credit risk management people, look at venture capital as risk management. Naturally, everything we do is risky, so the whole mindset was different. There were two different periods which I really can't comment about.

The only time that people like myself or Bennis started getting involved was actually in 2008 when they decided to restart Vertex. After some conversation, I decided to join them. Together we built the team and over time we started expanding the structure and developed the capability around the world. This is the business of knowledge. Knowledge is with people. So the very first important thing in rebuilding Vertex in 2008 was finding the right people, finding people who are able to execute, people who share the same common belief and values with us. That is the whole process we had to go through in rebuilding Vertex from 2008 onwards.

Keith 00:11:32

When was there a necessity to bring it back out of hibernation? I think most people, if they look at it, would say yeah, you should just leave it there. What do you think were the conditions back then? This is 2008, during the financial crisis. Starting a venture capital firm during that period might not be the most obvious thing to do.

Kee Lock 00:11:44

Well, that one probably has to be asked of Qi Huan. She was the one who was instrumental in reviewing this initiative. This is exactly the same question I asked her. Why do you want to restart something that's already been hibernated for such a long time?

She explained that the massive portfolio at that point in time of $700 million was somehow heavily influenced by technology disruption. But in those days, they were not very much involved in early stage venture capital investment activities. At the same time, as a big organization, they shouldn't probably be diving in without understanding what's happening. So they decided that since there's this vehicle, Vertex, even though it was hibernated, it's still probably something worth restarting. The important thing now was to find the right person to try to restart these activities. If they were able to demonstrate that this is something very compelling, that you can generate good returns and can back good companies and understand what this disruption is all about, perhaps you can scale it over time.

I think you can see that Temasek over the past 10-15 years has been very active in the technology sector. I think that's one of the things they really learned, what this sector is all about, perhaps some part thanks to us, some part to themselves. Eventually, they scaled their technology investment portfolio up substantially over time.

Keith 00:13:24

You were selected as the person to run point on this. Maybe it's weird for me to ask you this, but what do you think you brought to the table? I'm not asking you to toot your own horn, but obviously they picked the right person. So what do you think you brought to the table?

Kee Lock 00:13:36

Honestly, that question probably should be asked of them. But I think maybe because I was an entrepreneur as co-founder of a company. Back then I was mostly involved in technology investments. I had manageable experience building some companies, some of which are listed companies. So that skill set perhaps was something they were looking for in any of this kind of experiment.

Quite often, you need to bring some outside element in because sometimes if you try to do something internally, there's this group thinking. If you're all internal, you tend to do what is internally acceptable. If you bring somebody from outside, so long as they're qualified, they tend to do things very differently. Sometimes the things you do will be completely not what you expected. It could be wrong, could be right, but at least you achieve the goal that you're looking for.

Now, were they really very sure that I was the right one? Probably not. But I think over time we've demonstrated we can achieve the right result, and I think that's where everybody became more confident.

Keith 00:14:48

As you kickstarted this newly revitalized Vertex Ventures coming out of the financial crisis and heading into this era of the boom of internet technology companies, maybe if one was to date it, it would be about 2010-2011 when we started to see this renaissance or emergence of new age technology companies. You were critical in building Vertex's portfolio in those technology companies. How do you avoid some of the traps of Silicon Valley venture capitalists when investing in technology companies? I think a lot of people back then just followed the hype. Someone's investing in this, let's just get in as fast as possible, maybe sell off to the next person. It's pretty much a momentum business. But for you restarting this, you cannot just follow the crowd. You have to have a different hypothesis. How was your hypothesis then?

Kee Lock 00:15:31

You touch upon a very interesting point about the venture capital business. This is a business that superficially looks quite easy because we all talk about success. Ultimately, it appears to be spray and pray. You just spray enough companies, hopefully hit one, make a lot of money. If you spray 100 of them, 99 die, and one makes all the money that justifies raising more money in the future.

But I think this is probably the furthest from the truth. If anything else I learned from the early days of investing, it's about being very thoughtful about what you're doing. Firstly, it's about the product. What is their innovation? What are they trying to do? Is it that disruptive? What pain points are they trying to solve? Are they really solving something really important, or is this something that's good to have?

I always remind my colleagues that good to have and must have are two different answers. Must have is you must have it. Good to have, you can have alternatives. That is the first very important thing.

The second very important thing is after you solve all this problem, how big is the market? If you've solved all this problem and the market is only you and me, that's quite meaningless. That is an equally important question to answer. Firstly, is this disruptive enough? After you solve it, is it big enough?

The third most important thing, a lot of the time, is actually the people. The people building it, do they really know how to do it? If they're trying to come together to build this software company, do they really understand what they're building? What makes you understand that they're going to build that? Recently I've repeated this thing, you know, assessing people by itself is another different thing. That's another long conversation. A lot of times, most of us make the fundamental mistake of assessing people, but let's put that aside first.

All these put together, you have to spend time to understand this. From that, you make the right choice and make the right investments. From there, you will generally generate good returns.

Venture capital, because of the fact that we look glamorous and a lot of times we all talk about all the good companies that we've invested in, but there are equally a number of companies that we invested wrongly because of wrong product, wrong people, or wrong market. We explain it in that manner.

Keith 00:18:01

The FOMO, fear of missing out, steps in. So whenever there's a hypergrowth time like 2021, everyone rushes like crazy. Of course today the market is in a recalibration period and everybody's more risk averse. They try not to invest as many as possible. If they see more people investing, they think if Kee Lock invests, I must invest. Now it's if Kee Lock invests, maybe I don't invest. Those are the reverse logic.

I think the venture capital industry is very highly misunderstood. The market will always go through boom and bust, and unfortunately we are in that recalibration time today.

Kee Lock 00:18:45

How do you stay true to your North Star? I think a lot of venture capitalists would say similar talking points. They'll say we invest in the businesses that we truly believe in and things like that. But often we see that there's a mimetic desire being played out. They follow the hype train. I go in at Series A, then I can hopefully sell off to Series B and things like that. So as someone who's running this big firm where you're really expected to deliver returns, how do you resist that temptation to jump in?

Keith 00:19:15

I think as a group, because we are a decentralized format, each of us looks at it but we share common knowledge among ourselves regularly. We all sense each other's markets. Whenever there's a bubble going on, many of us will have been through many cycles. Myself, 1985, late 1980s, there was actually the fabulous IC Internet bubble. We all saw it. The software service bubble, we also all saw it. So every cycle of bubble, if you're long enough in this venture industry, you've seen all these cycles before. You should have enough lessons learned to know that in every cycle there's always this period of time where many people who frankly should not be in the industry are rushing in, and fear of missing out is driving their decision process.

As an investor, you have to be disciplined. Take our Series A company as an example. We looked at 150-200 companies per month during 2020-2021. We looked at an equal number of deals as what we're doing today, networked as many as we can, but we still invested in one company per month. But many of our other similar players in the industry were doing one or two companies per day, a couple of companies per week. Those are the unfortunate environments that get created in any boom market.

As a VC firm, generally many of us have been through that before as a group. The fact that we also have a structure where we always share information and share ideas among ourselves means we tend to naturally benchmark to each other. We'll share the information. "Hey look, there's a bit of a bubble going on in this market. Are you seeing that?" So naturally we say, "Oh wow, this is interesting. That market is seeing a bubble but we're not seeing it."

To answer your question in a short version, it's about discipline, being mindful that this is a business of investing in the right idea. It's also equally important not to back the wrong idea. Therefore, if you do not do much due diligence and not deliberate in your review, and just go in and do anything that you see and invest in, naturally you will be trapped and end up investing in 100 or 200 companies, many of which will fail unfortunately.

Kee Lock 00:21:42

I mean, in Singapore and Southeast Asia, Vertex is known to be one of the rare few players because of discipline. We are very disciplined.

Keith 00:21:50

But that's not... I mean, that's what everyone says. Everyone says that they're disciplined.

Kee Lock 00:21:56

No, it's very difficult. You're right. I'll tell you, in 2021 when we were investing, to be fair to everybody, every week on our Series A team, because I'm more involved in that, we have a call on Wednesday. We'll be listening to every market. Indonesia, Thailand, Vietnam, Singapore, Malaysia, everybody will be talking. "So and so just invested three deals yesterday in one breath." We have one third or one fifth of our team, and we have a relatively large team of 20-22-23 people. Many of these young associates or senior partners are actually quite on the ground, very connected. They're running opportunities, showing a lot of opportunities to us.

We were all asking, "No, this deal doesn't make sense. The company, the idea is at best marginal. Why are we even spending time? And they're asking for $50 million valuation."

"Oh, Kee Lock, so and so firm thinks this is cheap."

I'll give you one example. There's one company, an Indonesia company, and we thought the idea was quite compelling. They were trying to build something that we thought the gap still exists in Indonesia. We spent a good bit of time with them. The entrepreneur came and saw us and presented the idea to us. We were trying to make the final decision whether or not to go for it. By that time, even though typically our due diligence takes two-three weeks, we'd already spent one month on this. We knew at that point there were 10 other guys queuing up behind us trying to wait on this. The entrepreneur was also very smart. They know that a lot of firms react very positively when they say that Vertex is seriously in the final stage.

We didn't want to delay the entrepreneur even though we had our own process. So we had that meeting with them in our office in Singapore and said, "Look, we will come back to you within half an hour with our decision."

After we debated, we went back to them and said that we're okay to invest $3 million pre-money at $12 million valuation, which by then we thought was a high valuation because we think they can try the idea with sufficient reason.

The entrepreneur was disappointed obviously. He was expecting much, much higher numbers. Some firm they met two days later offered $22 million valuation to invest $5 million. We more or less said there's no point wasting anymore time. Two reasons. First, the valuation is way out of whack, almost double. We said there's no reason we can do this number. Second, this company's idea is still very much recent and in development. For us to invest $12 million, we always thought it was very high, but nevertheless we were prepared to try with $3 million. But somebody's prepared, together with a few other investors, to try $5 million, which we thought was too much money for the idea they're trying to build.

We firstly concluded that it was too much money, too high valuation, and no point wasting time on this one. So we didn't do that. Unfortunately, the company went under subsequently.

I quite often keep reminding the guys, we've all seen this before. We've all seen many, many cycles before. We've all seen this kind of FOMO effect before. We need to tell ourselves to slow down, slow down, don't rush.

I remember they would say in a nice, positive way, "Maybe this is a different century. This is a different generation. We're now dealing with the speed of light. People are moving faster. So therefore what you understood to be the way investing in technology should go about is different. Now today is about doing investing at the fastest pace and trying to make sure you invest in as many as possible and trying to make sure you don't miss out on any good idea."

Which I reminded everybody, in our business it's important to invest in good ideas, but it's equally important not to back bad ideas. But this part about bad ideas is always forgotten. But when bad times come, everybody remembers this.

Keith 00:26:14

Something that you noted that was very interesting is that you talked about the decentralized model and how the discipline is built as almost an inbuilt mechanism because you have people from different markets cross-referencing information with you. I think maybe that's one of the benefits of such a decentralized model where maybe other global VC firms or other VC firms don't have that organizational advantage.

Kee Lock 00:26:40

Our advantage largely came about because when we restarted Vertex, one of the things that's very important, remember I talked about stage one being networking and finding the right company. I can't really fly in and fly out of the US every day to invest in the US. I don't have the right network. Even if I spend one month there, I may speak Mandarin, but my network there will probably be equally poor. And how do I be a good advisor to the entrepreneur if I'm only available once a month or twice a month?

So therefore this decentralized model came about because we recognized that venture capital is a global business but it's a local connection. You must be able to have a good, strong local team seeing the opportunity in the right sector, invest in the right company, help the entrepreneur build the company over time. But at the same time, because we all share the common name and we all share the same investor called Vertex Holdings, we're all naturally inclined to share information among ourselves and help each other whenever necessary.

Because of that information sharing among ourselves, naturally we will learn certain things. A lot of people ask us about Grab, how we discovered this company. It actually came about because our China team, during one of the sharing sessions with the Southeast Asia team, told them, "We really kicked ourselves very hard because we missed Didi Chuxing." This was the early days of ride sharing in China. They said they kicked themselves very hard because they missed round A, wrong B, wrong C, and whatever number of rounds they missed.

When they were sharing the information with our Southeast Asia team, some of the partners said, "Hey look, we have not seen any of this yet. Maybe we should go and spend time looking for it. Maybe there could be some good entrepreneurs trying to build something that makes sense. Maybe we can help them build it up over time."

Because of the fact that they learned this lesson from China, they went about looking for this. Had they not learned this lesson from the China team, I don't think they would have even bothered to go and look for this.

Keith 00:28:44

I'm going to put you on the spot. You just talked about the fact that a good venture capitalist must look at three things: market, look at the pain point, and look at the people. When Grab came about, this was a day where Uber was pretty much dominating the world. How do you assess them and say, "Okay, well based on these three criteria that I have, this is going to be something that I'm going to invest heavily in"?

Kee Lock 00:29:04

Part of the question we ask, besides the question of product, market, and people, is that everybody's familiar with Didi and Uber. One is very established in China, one is very established globally. The natural question to ask is when will they, what would it take them to come down to this market and build this?

Fortunately, in the Southeast Asia market, while we always like to talk about 600 million population, this is actually a very divided market in many different ways because of culture, regulation, language, religion. Everything is so different. The thesis, which turns out Anthony Tan, kudos to him, he's the one who did all the work. He was able to selectively grow over time and very quickly build out strong enough presence in all these markets so that subsequent entrants, even Uber who came in subsequently, were not able to overtake them, not able to compete against them. Therefore, you saw Uber eventually had to sell off the business to Grab.

So that was one of the questions we had to convince ourselves about. Is there sufficient barrier to entry that, assuming the team executes well and is able to execute, this is sufficient barrier to entry? That's one of the advantages of Southeast Asia. Everybody always complains that Southeast Asia is 600 million people but different cultures, different religions, different everything. But this is one of the beauties of this market. If you are truly able to build a business which is visionary in focus and capability strong enough, this is a tremendous barrier to entry. And Uber is one example that demonstrates that.

Keith 00:30:51

You actually talked a little bit about the product and the market. I want you to maybe talk a little bit about the people because maybe it was a good idea and maybe within Southeast Asia there were other ride-hailing apps as well that were coming in. One example is Gojek. There were other smaller players around. Maybe you were correct in choosing the product in the right market, but the people element is equally important as well. So maybe take me through the first few meetings with Anthony and the team.

Kee Lock 00:31:21

The mistake a lot of us commonly make is that we always assess entrepreneurs purely by ability. That means you graduated from NUS and with a PhD from MIT. Voila, you should be able to build an excellent startup. Ability actually is the most basic level. Ability only tells you what they can do.

Quite often, a lot of venture capitalists or even a lot of us make the mistake of assuming that is the end of the assessment. To me, actually there are two other things equally important that we always have to spend time understanding. What is the motivation? Why is this person doing this? Is he motivated by building something new? Is he just looking to have a lifestyle? Or is it because they're trying to create a social impact? Or are they purely driven by financial returns, which by the way, nothing wrong with that too?

Last but not least, we also try to understand what is this person's attitude in dealing with investors? How is this person in terms of their thought process when there are differences? We all don't really know the future. It's always okay to disagree, but it's important to discuss the issues openly and keep an open mind and come to the right conclusion. What is this person's attitude on that? Or is this person always thinking he or she must be right and the rest of us must be wrong?

It's okay that you know all the answers, but most of us don't know anything. I always tell the entrepreneur, if you're building anything truly disruptive, you and I have not seen it before. So you cannot tell me that you know the answers because I also don't know the answers. The only person who knows the answer is the guy who has traveled in a time machine and can tell me what the endpoint was.

So these are the three things we always spend time assessing, whether it's Grab or any other entrepreneur we try to back. We always try to make the assessment on these three elements and try to come to some agreement whether we think this entrepreneur or this team meets all these three criteria at a minimum score.

Now, quite often it depends on team pattern recognition and people's ability to assess the team or the capabilities. Still, occasionally we make mistakes in assuming that ability is a key factor. Why do you do this? Why do you take all this risk? How do you look at failure if you fail? Is that okay? So those are the three elements you need to assess properly, and that's something we spend time trying to understand in all companies.

Keith 00:34:02

Is there a right mix where you think, given the portfolio of companies and talent that you're exposed to in terms of ability, motivation, and attitude, that you think maybe a startup founder should have that gives them a higher chance or odds of success?

Kee Lock 00:34:09

He or she may have certain capabilities but something else is lacking. But it's okay, so long as you understand that and you can get them to recognize that, then it's for them to solve it. As an entrepreneur, I'll say, "Hey look, I think you are great in coming up with ideas, but you are terrible in terms of financial control. As this company scales, you're going to be in trouble." So long as they understand that, they will know what to do in terms of recruiting the right people.

We don't need them to get 100 points for every single thing. If everybody gets 100 points in everything, I think there's probably nobody who can even meet that. So it's to firstly understand where they are on all this. Depending on your firm, for me there are certain things that are absolutely a no. If the person has no integrity, then I say there's no need to spend time even if this is going to make a lot of money. No point. I say your life is too short to be worrying about what is going on tomorrow. So let's not waste time on this.

So there are certain things for me that are an absolute no. But in most cases, everybody has certain things they're very, very good at and something very, very bad at. But so long as they understand and we understand what the issues are, we'll be fine.

Keith 00:35:21

The reason why I asked about Grab just now was because I wanted to use it as a case study to understand a little bit more about what you saw in, for example, Anthony that was different. Because if you look at him now, I think a lot of people would say, "Wow, this guy has it all." The way he thinks about things, he's created truly a disruptive technology company. But maybe back then it wasn't as clear. So what were the kind of early signs or early tells where you felt like, "Okay, this was something that you could put serious money on that would eventually pay off"?

Kee Lock 00:35:45

Let's grade him accordingly. Ability, he of course hit it out of the park. Harvard MBA, did very well at Harvard. That shouldn't be any doubt that he can be a good entrepreneur. So for that, you should score 100 points out of 100 points.

The next two levels are the ones that we need to spend more time figuring out. Why is he doing this? This is a question we spent considerable time trying to understand. He comes from a family which is relatively well-to-do. He has his own personal investments. He owns some small restaurants in KL. At that time he was living in KL and recently married. Why does he need to do this? I mean, making $10,000 more is not going to make a lot of difference. What's really motivating him to do this? So that's something we spent quite a bit of time trying to understand.

Last but not least is trying to understand his attitude in terms of how he deals with partners. This is something that's very important because, like you say, this is a rather challenging business knowing that there's Didi Chuxing and Uber on the horizon. We expect the journey ahead is going to be a lot rougher.

After we invested in Grab, quite often we got calls from certain people saying, "Are you guys blind or stupid or which way? Don't you know there's Didi Chuxing and Uber there? They're going to come down and kill you guys tomorrow. And in Singapore there's ComfortDelGro. There's whatever name they can name to us. Are you guys out of your mind?"

We knew the journey ahead was going to be a lot tougher. So therefore we needed to understand what his attitude was in working with people like us. Does he keep an open mind when we ask difficult questions? Is he going to say, "You guys are all wrong, we are right"?

In that interview many years ago by Ravi of the Business Times, he asked me what was the turning point. Of course, there are many, many more points I checked. I told him one of the turning point, which he made the title of his article, was the decision of making the investment in Grab was because of how Anthony spoke to his mother.

That's not entirely the only point. If I'm interviewing you and I'm asking you, "Kee Lock, how do you handle differences?" You'll say, "Oh, I will listen to your opinion. I will disagree if I disagree, but thereafter, if I agree, I will completely follow through on that." That's what your textbook answer is going to be. But is that what you truly believe in? That's something we can't really rely on your textbook answer for. We need to come to a right conclusion. Is that how you really think about the issues?

Frankly, the motivation part didn't take us a lot of time. That attitude part took us a lot longer. We're trying to understand, ultimately, does this person have the determination and perseverance to build this company through?

Whenever we invest in early stage companies, quite often in the early days we'll have board meetings more often, once a month. Quite often they will call us in between board meetings and say, "Look, hey, we're thinking about this thing. What do you think?" But of course, I'm sure they've already had their own conclusion. But nothing wrong. We will listen to it and say, "I don't know, man. Are you really sure you know what you're talking about? This sounds like 90 degrees off tangent to what you're trying to achieve. If you think you can really build something out of this, but what about staying focused?"

So those are the questions we can only ask because we are, in a basketball sense, like a coach. We are not the player. You are the player. Both of us have not seen the game before. So we are trying to win the game together. For us as a coach, are you taking any common argument or criticism positively? Of course, we always have to deliver the negative message in a respectful manner and ultimately we can get this done.

Keith 00:40:03

A lot of people justify post hoc. So it's very hard to get the thinking you had when back then you were faced with a much more uncertain situation. What value does a venture capitalist like yourself or Vertex bring to the table to the startups you fund?

Kee Lock 00:40:10

Value adding to me is very much in areas that they need help. We do whatever we can to support them. Some startups, quite often the entrepreneur needs help in recruitment. They need to recruit certain types of people. We obviously have more experience about where to find the people. We will tell them these are the possibilities. Sometimes we even show them the list of candidates that they could consider. So these are one part of value adding.

The other part of value adding which is quite important a lot of times is that the product may be ready, they may be ready to launch to the market, and now they're thinking about all the possible options to launch it. They may need some connections to get to know certain people that we may know directly or indirectly. That is important value add for us that we could say, "Oh, you want to know so-and-so company? No problem. This guy, we should give you the right connection and you can probably explore the opportunity together."

So this value adding is very important for the initial stage of the build-up of a startup. Because they're naturally trying to build a company as fast as possible and they may not necessarily have all the connections and all the solutions. As a venture capitalist, besides money, you also must find a way to help them.

Keith 00:41:34

Maybe that's where the decentralized model where you have GPs in different parts of the world helps a lot, especially when you talk about internationalization.

Kee Lock 00:41:40

Correct. That's our give and share because we can always help them to refer to the right guys to ask them the questions. They could support them. Sometimes also it's for deal referrals to each other. They'll say, "Oh, these guys are talking about this deal. Maybe you guys are better suited since the main market is that market." So sometimes we refer opportunities to each other. But I think the connectivity and connection is important.

Keith 00:42:08

The venture capital industry is actually all about trying to accelerate the future. If we really think about it, a lot of it is like how do we bring solutions to maybe very real pain points as fast as we can to the market.

I wanted to ask, you know, Singapore is such a small market, and as you pointed out, Southeast Asia is such a fragmented market. People talk about the 600 million, like what you said, but often as we found out in the past decade, the 600 million people don't live in a single cohesive market and that makes it very hard to scale a startup. Then what is Singapore's role in the future of shaping Southeast Asia's economic future? What's your take today?

Kee Lock 00:42:52

I'm sure you know the data. I think 2024, the Southeast Asia market as a whole, Singapore should represent 70% of the funding. I think we got to where we are, we must give credit to the Singapore government. We started off many years ago with NSTB, National Science and Technology Board, whereby essentially they tried to seed the venture industry for a period of time. Unfortunately, there was a bit of failure, so they actually stopped for a period of time. Subsequently, we started with National Research Foundation, which kickstarted about 18 years ago.

There was rejuvenation, I guess, because a lot more people who experienced the first wave subsequently returned and started their own venture firms. In that period of time, there were a lot more people prepared to try new ideas. A lot of younger people who no longer aspired to work for big companies were prepared to try new ideas. Also, Singapore being a society was very open to any people who are willing to try ideas in Singapore. So we are more welcoming. A lot more entrepreneurs are prepared to come here and start businesses and even start venture firms. So that created a tremendous momentum, a critical mass, which you can see no matter what, we still continue to maintain that.

Now today, of course, we're in the recalibration time. The market is probably one third of what it used to be. Nevertheless, we still maintain our leadership largely because of this funding availability.

I think the challenges are twofold. One is the exit market. I think the exit market is a challenge for Singapore because a lot of our Southeast Asia market, when we think about exit, we have to go to the US or Hong Kong stock market because this is the only way to create returns for your investors. So that's the first challenge we are having. But of course, we all saw what MAS is trying to do in terms of providing equity funding development funding to the Singapore Stock Exchange. Hopefully this is going to reinvigorate the market in the exit market in Singapore maybe five to six years time.

Now, the second problem, which was sort of partially solved for a period of time when the market was in FOMO mode, is the early growth opportunity funding gap. It's easy to fund Series A, you get $2-3 million. But then when the company starts trying to scale the product towards product market fit, that's when you need to spend a lot of money on marketing, a lot of money to scale your team. That's when you're talking about $10 million, $20 million, $30 million, or some even $100 million. In this Southeast Asia ecosystem, this is the gap that we still have, and especially in this market, I think this gap will continue for a period of time until maybe our market becomes more complete.

What it takes for that probably will require more exits, more proven examples of companies that can be a couple hundred million or billion dollars. So that part will need to happen in the next six to seven years, I hope.

Keith 00:45:54

Were there any areas of technology that you think Singapore is uniquely suited to kind of disrupt on the global scale, or are we just meant to play that role of being the financing capital of Southeast Asia?

Kee Lock 00:46:02

As an ecosystem in the information technology sector, I wouldn't say we can disrupt per se. I think if we just look at Southeast Asia alone, it would probably be foolish for us to think that we can build the next AI company out of Singapore in terms of new models and everything. That takes a lot more capital. So put that aside.

I think for the Southeast Asia market to build a good startup, a good disruptive startup in this market, the capital is available. Singapore is small enough for entrepreneurs to build a test market in this market, and with this test market, they could potentially scale over time.

So it's a unique position for us. Capital availability, and the market is big enough for us to do some experiments. Also, with the neighbors being relatively open to all new ideas, you can probably roll out your ideas over time easily, although the fragmentation, as you point out, continues to be a problem. So therefore it's important to realize that you need to make some adjustments culturally or in terms of the regulations in each of the markets. But I think most people in Singapore understand the cultural language, the regulation differences. They know how to do all these local adaptations.

Keith 00:47:21

If you look at your portfolio of startups now, what industries do you think they aggregate in, or what industries are you most excited about in terms of investing and developing in the coming few years?

Kee Lock 00:47:28

Financial technology sector, there's still a lot of innovations in this part of the world. There are still a lot of people underbanked and underserved in this part of the world, so this continues to be a pain point that needs to be addressed and solved. So I think this is a sector which you'll continue to see a lot of innovations.

AI and all these open source tools, a lot more companies know how to apply this technology much better, so they reach revenue stage much quicker.

The other thing is probably with all this China-US bifurcation, the technology bifurcations, and as a result of their tensions, you're seeing a lot more people considering when they are building a company, it's no longer just building a company out of the US to address the whole world. They have to think about geopolitical situations.

For supply chain issues, semiconductor components especially, you may have to think about where is the best location to locate your startup. Is Singapore the better place to start this business, or is it better to try in whatever other location? The fact that we have a much more clear intellectual property protection system, the government generally is very supportive of many of the startups here, so I think entrepreneurs feel comfortable to start in this place, especially given the fact that the geopolitical complications are already making things very difficult in the globalized world.

There's a lot of opportunities, be it components, be it manufacturing, even software. You will see some of these startups that will start to locate around Singapore.

Keith 00:49:10

If we were to zoom out a little, and here's where maybe you don't take the Vertex Singapore hat but the Vertex Holdings hat where you zoom out, because you have presence all over the world, not just in Southeast Asia and Singapore, all the way to India, Israel, etc. You really have a sense of where technology is moving towards. Where are the main sectors? I know now there's a lot of talk about AI, for example, but outside of AI, are there any other sectors that you think, "Wow, there's a huge opportunity or white space where VCs like yourself are going to go in there and fund to help develop the next wave of startups"?

Kee Lock 00:49:45

Quantum computing, which is part of quantum communication, this technology is highly disruptive. If one day this computing ever comes through, all this encryption that we have is probably rubbish, not going to be really working. So this sector, there's a lot of investments in this sector. Quantum communication, of course, there are a lot more startups in this area.

Cybersecurity continues to be a major area. This is one of the things that our Israeli team is excellent in. They've invested in many, many cybersecurity companies over the years and backed many of the leading companies in Israel. This continues to be a tremendously important sector, especially with AI technology now making cybersecurity even worse than ever before.

I talked about briefly about semiconductors. I mean, everybody talks about semiconductors as if this is the end, but actually it's the beginning because of the fact that, especially with this bifurcation of technology, a lot more ideas are coming out. Everybody's trying to rush to be the technology that addresses a lot more solutions in many different ways.

I mean, we talk about simple things like vacuum cleaners. It used to be a simple thing moving around, but now those simple mobile vacuums actually have a chip inside which is extremely intelligent. Those chips are being supplied by selected companies, and there's a lot of innovations around there, how to map out things and so forth. There are even some companies, some of our China colleagues funded a company that even came out with a swimming pool washing machine or cleaning machine for swimming pools. It essentially crawls around the swimming pool in a very interesting manner, and this is all managed automatically, autonomously by AI chip and by machine. No human is involved.

So there's a lot of these robotics and innovations happening in many parts of innovation. Globally, many, many things are happening. Our Japanese team just recently started, and the Japanese government, with its drive to catch up in many areas, semiconductor especially, is putting a lot of money into some of the universities. Japanese universities are very innovative. There are some very interesting materials, semiconductor materials, being discovered in Japanese universities that could push the boundary of some next generation semiconductor chips of the next generation.

So there are many, many different things happening around the world. One of the things we do is share information collectively. All the partners will once in a while call each other, you know, besides saying how are you doing, they will ask what are you seeing in your market. Hopefully from that, they will learn from each other.

Keith 00:52:35

With the examples you've given, you've pointed out Japan, China, India, Israel, the US. You have such a huge view of the world, where the different kinds of technologies are emerging. My question would then be, what is something that you think the news underrates or underreports today that I think historians will look back on? What is something you're looking at right now in terms of maybe technological development that you think, "Wow, this will maybe change the game and we don't even know it yet"?

Kee Lock 00:53:05

Quantum communication, I think is probably underreported. The impact on that is probably going to be a lot more than what people will eventually discover.

I think our hype is mostly around the large language models. I think that is scratching the surface of AI technology. A lot of people did not realize Google released this thing, DeepMind AlphaFold. I'm sure you saw that. AlphaFold is essentially trying to provide a 3D structure of a protein based on the amino acid sequences, essentially showing how the 3D folds happen. It's important. Now the latest one they released, besides that, they also will help you to predict the interaction with DNA, RNA, other molecules. If this goes as far as it should, next time the problem of diseases is going to be a lot quicker to be resolved.

So AI, while we all talk about all this hype, which I think is a lot of noise, there's a lot more development in this manner which is intelligent in many ways helping us solve problems. These are probably underreported and not recognized by many people. This is an area which I think the impact is for us to get to live a better life in the future.

Of course, if I go on, this will probably take another half an hour more.

Keith 00:54:33

What's something that Singaporeans should be learning or should be trying to take note of so that we can better prepare ourselves for the future?

Kee Lock 00:54:39

I don't think this is something that Singaporeans are very good at. We have all along been taught that we are a small country. Our survival is our connectivity to the rest of the world. We are the small little country. The market is everything outside Singapore. Something that I think in this current generation is probably very relevant, it's very important. So long as we continue to think that way, realizing we are a small country but we are an important element to participate around the world, and we must be active participants and try to recognize where are all the opportunities, trying to improve ourselves and improve our productivity, I think ultimately we will get there.

Keith 00:55:21

So similar to, I guess, the Vertex story is a microcosm of the Singapore story because Vertex might have started in Singapore, but it's very global in its nature.

Kee Lock 00:55:28

Vertex is relevant also because it has a global relevance. Correct, exactly. We do this by being local but at the same time global. We are locally connected, and the local team is run by the local team who each of them decide and determine what is best for the market. At the same time, we share the information across the global network to make sure every one of us knows that something is happening in the market that could be relevant to our market one day. Let's not try to ignore those developments.

Keith 00:55:58

Same way that Didi informed your decision for Grab, right?

Kee Lock 00:56:04

Correct, yeah. Don't ignore the data from other markets.

Keith 00:56:10

If you have a piece of advice to a fresh graduate entering the working world today, what would that piece of advice be?

Kee Lock 00:56:15

I guess to be intellectually curious. One of the challenges I find for many of us, including me maybe in the early days, is we look at university as the end. Actually, the university is the beginning of learning everything that's happening today. We're talking about AI. A couple years later, it's going to be something else different. I mean, you jump back a bit more, big data was a big thing. Everybody was talking about big data. You jump back a bit more, everybody's talking about something else. So there's always something new happening.

Cloud computing, when cloud computing first came out, all of us were like, "What the heck is that?" So we had to spend time understanding that, spend enough time to read, read enough articles, read enough, watch enough videos, watch enough YouTube. There are enough people who tell you what's going on. Continuously learn something, and then learn and relearn, and hopefully you'll get to that point.

Keith 00:57:06

With those timely words of advice, Kee Lock, thank you for coming on.

Kee Lock 00:57:06

Thank you.