In this episode, we have another special guest as we continue our series of inviting over venture capitalists on the show to document the increasing global interest in Southeast Asia. Sanjay Zimmermann, Principal at White Star Capital, comes on the show to share his insights on Southeast Asia having co-led the firm’s expansion into […]

S03E17: Exchanging learnings between the West and Asia with Sanjay Zimmermann from White Star Capital

In this episode, we have another special guest as we continue our series of inviting over venture capitalists on the show to document the increasing global interest in Southeast Asia. Sanjay Zimmermann, Principal at White Star Capital, comes on the show to share his insights on Southeast Asia having co-led the firm’s expansion into APAC, learnings from business models in North America and Europe across fintech, commerce, and SaaS, and his own experiences as a career venture capitalist.  

Highlights and Timestamps:

  1. 00:27 Paulo introduces Sanjay; 
  2. 02:49 Sanjay introduces White Star Capital and how they decided to deploy capital into Southeast Asia; “It’s been great to see just the different challenges and the different opportunities that all the companies are facing at all of these different stages. And so one day I’ll be talking to a company that’s much further stage, later in their process. Another day we’ll be talking to seed companies.”
  3. 07:15 Value-adds of a global investment firm like White Star Capital; “We work out of one fund that looks at the world as a whole. So it’s a global carry. You’ve got the full incentive from everyone on the team, no matter where they sit in the world, to be helpful with any given portfolio company that we’ll look at.”
  4. 10:10 Nailing unit economics and the demographic shift for fintechs; “For the first time ever, a lot of our consumer fintech companies in the past year started acquiring close to a third of their new customers via influencers and via these new channels that are really starting to emerge.”
  5. 13:12 Future of consumer ecommerce with enablers, D2C, and non-dilutive financing; “Essentially the big trend in D2C now or in consumer e-commerce startups has been around trying to find non-dilutive ways to raise money.”
  6. 15:50 Future of Work through SaaS solutions; “We think a lot about the future of work as a thesis there for SaaS, and we think about solutions, specifically low-code solutions that are helping anyone become a developer or build new software and build new kinds of tools.”
  7. 18:53 Uber as the Grab for North America and what the West is learning from Asia; “There really is a lot again for the world to benefit from having startups and firms and talented individuals from both sides of the world work together on these different solutions.” 
  8. 21:20 Thoughts on more SEA companies going global from day one; “Especially on the B2B front, in B2B software, we’re seeing more and more examples coming out of Singapore that are selling globally from day one and that really are building on the best-of-breed technology and have a solution that can address a global market concern from day one.”
  9. 23:23 Exit landscape in Southeast Asia: IPOs, M&As, SPACs, and secondaries; “We’re also seeing a lot more secondaries happen. And that’s a phenomenon that we’re seeing across the industry, but there are a lot more funds, large, multi-billion dollar funds that are being set up around the world to buy out secondary stakes.”
  10. 26:29 Learnings from the “Defining Entrepreneurship Around the World” project with Babson College; “Back in the day, I used to come with a notepad and a camera to get stories of entrepreneurs. Today, I’m doing the same thing…It’s just that now I’m able to come with a checkbook and a bit of experience and hopefully back some of these entrepreneurs.”
  11. 28:49 Rapid Fire Round; “And so really understanding oftentimes you feel like you’re more of a therapist or like a mental coach, to your founders than necessarily being like a sector expert and being able to really listen. And that’s why empathy is one of the key skills that is really important, when it comes to a VC founder relationship.”

About our guest

Sanjay Zimmerman is a Principal at White Star Capital, where he focuses on Canadian and South East Asian opportunities for the fund. Prior to joining White Star Capital in 2017, he spent a few years working in Investment Banking at Rothschild & Co in London working on cross-border M&A with the TMT team. Prior to banking, he produced a video series called ‘Defining Entrepreneurship’ in which he interviewed over 60 entrepreneurs across the world.

 

Transcript

Paulo: So for this episode, we have another special guest we’re continuing our series of inviting over venture capitalists on the show. Two episodes ago, we had Eric Archer from Monashees from Brazil. And in the last episode we had Rajive Keshup from global investment firm Cathay Innovation. And today we have another VC who’s working at a global investment firm as well. and we’re happy to have him here. I actually got to meet him last year, and we were talking about his views on Southeast Asia. And now that we’ve gone on this series, I thought it would be interesting to have him on…Happy to have Sanjay here! Sanjay, how are you doing?

Sanjay: Great. Thanks a lot to follow for having me on. It’s a real pleasure to be on the podcast and sharing a couple more views with you here over the next hour or so. 

Paulo: Awesome. And Sanjay is currently in Toronto, but he’s had his eyes on Southeast Asia for a while now, actually. I rewatched the video that you did with the New York Stock Exchange. that was back in early 2020, I think. And it’s funny. Cause like headline, there was a, 

Sanjay: It was the end of February 2020. And so I had just actually gotten on a flight. I was in Singapore. I had spent a year living in Singapore and I had just gotten on a flight from Singapore to come back to the US to see family and stopped in New York to do the interview at Cheddar and was talking about our views. We just released our Southeast Asia report. It was when we first publicly announced the interest at White Star to invest in the region. It was such a particular moment in time where having seen kind of the COVID-19 pandemic really start to take place across Asia and coming back to the US and it was just really starting to all unfold as well across North America at that point. 

Paulo: There’s a sort of dissonance there. The headline there was the first documented case in the US at that time when you were doing the interview. 

So now more than a year on and I just wanted to catch up with you on — since you published the report and did that interview — how your views have changed on our evolves and in Southeast Asia and what keeps you excited these days, being a venture capitalist.

Sanjay: So our story with Southeast Asia really started in 2019 or so when we started to think about deploying capital and investing into the region. In the summer of 2019, that’s when I made the move as well to Singapore to really explore that topic for us at White Star and also in parallel pursue an MBA at INSEAD. It all kind of fits together. It was pre-planned for over two years or so that that would be the soft entry path into the market that I could take. Also in collaboration with a venture partner that we’d hired out of Hong Kong and another venture partner in Tokyo, we started thinking more and more about Asia as a whole, and then where we wanted to invest and where we wanted it to play in Asia. In Southeast Asia, we came to the natural conclusion that that would be a great place for White Star to start making investments. 

Essentially since then, we released our report in early 2020 on the Southeast Asia landscape. The report was really a combination of work that the team put together in terms of really looking at all of the different countries that make up Southeast Asia. Often we talk about it as a region, as a whole, but there really are different countries in different pockets you really have to look at and Indonesia is a completely different animal to Vietnam, to the Philippines. And so we really tried to break down what are the key trends in each country? Who are the leading players, from an ABC standpoint, from an ecosystem standpoint. 

Since then, over the past year, obviously, a lot has happened in the world. A lot has changed. But I would say our views on the market are as bullish as they’ve ever been. And I’d say two reasons really behind not. One as we’ve seen throughout the whole world, one of the very few positive outcomes of the COVID-19 pandemic is that it’s really led to an acceleration in digital adoption and digital transformation. And that’s played out in Southeast Asia as well, where we’ve seen numbers as well from the SEA Economy report where e-commerce has continued to rise, continued to grow. It’s natural like they’re even beating the trajectory that they had set a couple of years ago. That’s one key driving factor. 

The other element is I think what has been interesting is we’re starting to slowly see more and more examples of liquidity events or exit events. That’s always been one of the large topics in such Digitas is really what’s the path to monetization or what’s the path to liquidity. SPACs were an interesting topic that came out throughout 2020 in 2021. And we’ve seen the Grab’s SPAC and also activity around several other players. I think it’s interesting because it is offering a new option. Is it the right option for all companies? Definitely not. But it is offering a new path to liquidity as well. And that’s great for pulling in more investors’ capital. 

In terms of what excites me about this role, one of the things that’s great is I’ve been at White Star for five years now. And we have three core funds as well as a digital asset fund and across those three funds, now we’ve got companies ranging anywhere from seed stage to IPO stage. We had two IPOs happen earlier this year. It’s been great to see just the different challenges and the different opportunities that all the companies are facing at all of these different stages. And so one day I’ll be talking to a company that’s much further stage, later in their process. Another day we’ll be talking to seed companies. It’s just giving a lot of diversity in terms of stages that we’re looking at. 

The other piece I think that’s been great is, and this is as a generalist fund at White Star, we’ve been able to spend a lot of time thinking about new sectors thinking about new areas that have merged following the COVID-19 pandemic to look at. And so we’re spending a lot of time learning and thinking about new topics and new areas that we could be making investments in. For example, one of the investments we made late last year was in a car subscription model out of Germany called finn.auto, which was a whole new concept of car ownership. Instead of having a lease or financing, you subscribe, you pay a flat fee and you have all the costs covered. And it’s actually cheaper for the end consumer because they benefit from bulk purchasing of car fleets and bulk fleet insurance. And so all of these new business models are emerging that I have to spend a lot of time thinking about and investing into. 

“It’s been great to see just the different challenges and the different opportunities that all the companies are facing at all of these different stages. And so one day I’ll be talking to a company that’s much further stage, later in their process. Another day we’ll be talking to seed companies.”

Paulo: A lot of exciting things that you’ve talked about and we’ll go through a lot of those as we go along with this conversation, and you mentioned this car subscription service. Insignia has also invested in Carro, which also launched a car subscription service as well in Singapore. 

And actually, some people might argue that Southeast Asia is several years, five to seven years behind some of these more developed markets, but you’re actually seeing them running in parallel with certain innovations because the learning curve is so much faster these days. And so speaking of a learning curve, you’ve been at White Star for five years. And White Star has had the advantage of having investments in all these different markets and the time having seen several of these startups, as you said, go from seed stage to IPO.

How does this affect your approach to investing in Southeast Asia? What is the value add that startups can get from working with a global investment firm like yourselves and for yourself as a VC, in particular, what do you bring to the table when looking at startups from the region?

Sanjay: That’s a good question. So I’d say that the biggest advantage that we bring for startups in Southeast Asia is, as you touched on, really the global perspective that we can offer. I’m sitting in Toronto today. We’ve got teams in Montreal and New York, London, Paris, Tokyo, Hong Kong, adding up teams also in Berlin. And so we’ve got really individuals that are in those different parts of the world that have access to really great networks. We try to be quite local in each of the regions that we are while keeping that global mindset. And one of the things quite particular about White Star, because there are a lot of global funds out there that are also investing into Asia, is that we work out of one fund that looks at the world as a whole. So it’s a global carry. You’ve got the full incentive from everyone on the team, no matter where they sit in the world, to be helpful with any given portfolio company that we’ll look at. So that’s one. 

And then I think beyond that too, what’s interesting is we actually have our teams covering Hong Kong, Tokyo, and we’ve got colleagues in New York that also cover South Korea. Having those individuals on the ground in those key APAC countries can be quite helpful as well in terms of opening doors throughout APAC.

The second element is really around the experience. As we’re talking about earlier, having seen companies across different stages, having invested in over 50 companies over close to the last half-decade we’ve really seen a lot of different situations. And one of the things that we decided when we kind of enter a new region, Is that we’re looking to back companies that are operating in sectors and industries that we understand really well. And that we’ve backed companies in the past in Europe or North America. So when it came to our first investment in Southeast Asia into Dahmakan in Malaysia, we had done quite a bit of work in the food space having backed Freshly in the US that is a meal kit operator with massive food production facilities spread across the US that got acquired by Nestle last year.

And having also backed Butternut Box which also has just opened and built their own food production facilities in this case for dog food that they provide on a subscription basis. We’ve really learnt a lot in terms of what are the skills that you need and what’s the operational and execution experience that you need to build these types of facilities and can be helpful in the operation of those specific sectors. 

“We work out of one fund that looks at the world as a whole. So it’s a global carry. You’ve got the full incentive from everyone on the team, no matter where they sit in the world, to be helpful with any given portfolio company that we’ll look at.”

Paulo: Now that you’ve begun talking about specific sectors, right. And sort of how the learning scan, have this sort of like a small cyst between the different regions and in particular sectors? And one of the reasons why we are inviting venture capitalists on our show is because it’s quite interesting to see how learnings from different markets can actually help founders here in the region.

So I’d just like to go through some of the sectors that you focus on, or at least that you sit on the boards of companies of. For example, like fintech, what are the learnings that you’re seeing from companies that you’ve invested in in North America and Europe that could be useful for founders in Southeast Asia.

Sanjay: We have done a lot of consumer fintech specifically, and I think that’s an area that is very relevant for Southeast Asia as well. So we backed one of the largest InsureTech players in Germany called Clark Insurance. We are also in a CreditKarma equivalent out of Canada called Borrowell. That’s the largest credit score player in Canada. We’re also in the North American digital loyalty player called Trop Loyalty. 

And so there are just a few of a couple of examples that we’ve done around consumer fintech and the biggest learnings that we have is it really boils down to nailing the unit economics when it comes to these players. One of the big issues with fintech for the longest time has been that it costs a lot to acquire users. The payback is 18, 24, to 36 plus months. And that often hurts consumer fintech companies in the long run in terms of fundraising when they can’t get those unit economics down to quicker paybacks and acquire customers in more efficient ways. So along the way of investing in these different startups, we’ve learned a lot about the different acquisition channels and marketing strategies to really lower the cost of acquisition and also different ways to cross-sell, upsell, integrate, and increase the LTV, playing on both sides of that equation.

For example, one of the observations that we’ve had over the last year is there has been this massive movement — we’ve seen it to certain extremes with the Reddit traders and the whole Robinhood movement — but there’s been this phenomenon, zeitgeist timeshift last year. Millennials and Gen Z suddenly want to talk about finances. Before, influencers on YouTube or Twitter would be talking about fashion, food, and sports. Finance was not the topic that they would talk about. That’s a huge role now, and we’re seeing a ton of them emerge. And we’re seeing this also happen across our digital asset fund where that’s been a bit more prevalent. For the last couple of years, they were always quick to adopt Twitter and all these different social media platforms to create content. For the first time ever, a lot of our consumer fintech companies in the past year started acquiring close to a third of their new customers via influencers and via these new channels that are really starting to emerge. So that’s a really powerful trend. 

“For the first time ever, a lot of our consumer fintech companies in the past year started acquiring close to a third of their new customers via influencers and via these new channels that are really starting to emerge.”

Paulo:  Those are really exciting stuff. And we’ve also seen them in our portfolio. Ajaib in Indonesia is really attracting this whole new class of retail investors, millennials especially. Imagine being a millennial and being able to participate in the Bukapalak IPO coming up soon. So that’s really just a whole new shift in the demographic adoption of fintech. Now I’d like to move on to another sector, which you guys have also done many deals on, which is e-commerce enablement: this whole D2C distribution of e-commerce.

I was wondering what are the learnings you’ve gotten from North America and Europe that could be applicable to Southeast Asia, and do you sort of see the same rise in D2C that we’ve seen in these more mature markets here in Southeast Asia?

Sanjay: Our story when e-commerce starts back to some of our first investments, back in 2014, we backed Dollar Shave Club in the US and then we backed another company called Adore Me back then as well as Freshly, which we talked about and Butternut Box in the UK. and so we initially started buying quite a few different e-commerce related place that we’re going direct-to-consumer that we’re doing subscription models and all of those things. 

And as we were doing those investments, we started also looking at the picks and shovels and the backend enablers that were really allowing the segment to grow, which is today a trillion-dollar plus segment when you think about e-commerce. So we started investing in companies like Packhelp for packages and boxes for e-commerce companies across Europe. We invested in another business called Chord Commerce more recently that is really around the whole headless e-commerce movement. And that’s helping companies across the world build their own headless e-commerce sites and manage them. We also invested in a company called Uncapped out of the UK, which is providing financing to fast-growing consumer companies. You can think about it similar to a ClearBank. 

Essentially the big trend in D2C now or in consumer e-commerce startups has been around trying to find non-dilutive ways to raise money. And there is so much data now that it’s being collected in so many ways that you can predict the future sales of these types of businesses that companies like on capital, providing the solutions to to offer debt and underwriting the CAC, which, when you think of these businesses, a lot of it is just spending on CAC, acquiring new customers. And if you can prove mathematically that every dollar you spend on marketing brings you $3 in new revenues, when you’ve got a certain margin level, so that translates to let’s say $2.25 in net profit, then it’s very easy as an underwriter for debt to underwrite that risk and say, “Hey, we’ll keep providing debt financing because we know you’ll make the money back as long as you spend it on acquiring new customers.” That’s a model that we’re seeing.

“Essentially the big trend in D2C now or in consumer e-commerce startups has been around trying to find non-dilutive ways to raise money.”

Paulo: Yeah. I mean it’s really interesting that you talked about all those like different financing and subscription models that I think I’m not sure if they might be a little bit too sophisticated yet for Southeast Asia but the region is only heading in one direction. And so it’s just a matter of getting in early and seeing it unfold. 

Another sector that I’d also wanted to discuss with you is enterprise SaaS. This is interesting in particular for Southeast Asia because SaaS has traditionally or historically not been such a hot sector. But now we’re seeing it emerge and investors became more interested, particularly because a lot of the global investors like yourselves have seen the playbook of how these companies could go global. And some of the companies out of Southeast Asia are also going global as well. We invested in one, Nimbly, that has customers around the world. What are your thoughts on that?

Sanjay: Yeah. When it comes to enterprise SaaS, we have spent a lot of time thinking about what are the segments that we want to be backing now over the next year or so with this fund. And we think a lot about the future of work as a thesis there for SaaS, and we think about solutions, specifically low-code solutions that are helping anyone become a developer or build new software, build new kinds of tools, because we’re seeing two trends essentially play out.

One is that there is a global shortage of software, talent, and developer talent. There just aren’t enough developers for the software that needs to be built around the world. That’s where low code solutions or even edtech players that are helping create a larger generation of developers are really helpful because there’s just almost an infinite amount of demand in terms of new products that want to be built. We hear it across almost all of our portfolio companies: the one area where recruiting is always difficult is around tech and engineering. We need to find ways to get more people there. So we’re looking at software solutions or SaaS solutions that enable anyone in the firm or people with less tech or engineering backgrounds to build programmable solutions.

The other element that we’re looking at is we’re seeing automation, especially in the form of RPA or robotic process automation, play a larger and larger role in the typical modern-day white-collar office job, and that’s really across sectors, whether that be an insurance firm, whether that be at just a typical P&G corporate. It is a topic that’s pretty prevalent and there are just so many different tasks that can be automated with the use of different tools that we’re looking to invest in SaaS players that can help with that. On a global level it’s such an interesting topic, when we think about all the hours of humanity that are spent doing these mind-numbing, repetitive tasks that can be automated in some shape or form. Some people think it’s going to be reductive in jobs, but I think it’s going to actually unlock a lot of new creativity and new ideas and new options and all that time and then raise the quality of life of individuals across different jobs. So we’re quite excited about that trend. 

“We think a lot about the future of work as a thesis there for SaaS, and we think about solutions, specifically low-code solutions that are helping anyone become a developer or build new software and build new kinds of tools.”

Paulo: Yeah, the future of work is really exciting. I had just had a podcast with Nimbly, the company I mentioned earlier, enterprise SaaS, with their CEO Daniel, talking about how they’re changing in frontline operations. And I think it’s really becoming possible these days because automation is not just an option on the table, but it’s becoming the priority for a lot of these like enterprises and more traditional companies to actually think about. 

So we’ve gone through the sectors and you sort of share like these overall trends that you’re seeing globally as a global investment firm. And that could have some implications for Southeast Asia in the long term. 

We’ve talked about the learnings that could happen cross border but I was also wondering if maybe about Southeast Asia startups learning from North American and European startups because of this time machine concept, but you also see the reverse happening and maybe you could share some examples.

Sanjay: The most striking example that struck me in the last couple of months is if you look at the Uber app today in North America, like the new revamp, it actually is a copy-paste now of Grab in terms of the super app model. Uber used to not be like that.

You used to open up Uber and it used to be, you get your location and you get driven there. Today, if you open up Uber, you see more and more all the different icons and different services. And having spent a year in Singapore when I opened it recently in the last month or two as the lockdowns have come down so I could finally leave the house and use the app again, I was thinking, “Wow, I know this model, how do I order the massage now?” That’s not a feature there yet, but the super app model is definitely something that we’ve seen emerge.

Another topic that we’re seeing emerge also across North America, especially in the last year, has been all around social commerce and live streaming shopping. These are all models that are coming from Asia that are really starting to take up demand.

But as we move hopefully past this pandemic and are able to reopen the borders and travel, there’s so much to be learned from both sides. There really is a lot again for the world to benefit from having startups and firms and talented individuals from both sides of the world work together on these different solutions. Because at the end of the day, a lot of the problems that they’re solving are really kind of human interaction, human interface kind of problems, and those tend to be similar. They are common problems. They tend to be similar no matter where you are in the world and having 7 billion-plus people think about those ideas, you’re going to come up, really great ideas in different parts of the world. And I think now that there’s past five, six years or so, as we’ve seen more and more activity in Southeast Asia, there’s been a lot more attention and a lot more VCs and investors like us spending time really sitting between the two worlds and trying to bring those ideas, the best ideas from both sides across from one to the other. 

“There really is a lot again for the world to benefit from having startups and firms and talented individuals from both sides of the world work together on these different solutions.” 

Paulo: I mentioned osmosis a while ago, but it’s not unidirectional. It’s really two ways and there’s a lot to be learned from both sides. I really liked the example of Uber’s becoming Grab now for North America. People were also saying a few years ago that the super app would never really come to life in your part of the world, but now it’s happening. So it’s really interesting to see this evolve. 

And speaking of localization, apart from localization, the trajectories for billion-dollar companies in Southeast Asia has typically always been to make the “X for Southeast Asia” and localize it for the region, that playbook, or really capture Indonesia as seen with Tokopedia, Gojek, and Bukalapak. So, these have been the two mental models that have dominated the region for some time, but we’re also seeing a third trajectory possibly to create billion-dollar companies. And that’s going global first, which arguably, is on face value intimidating for Southeast Asia, but that it’s becoming more and more possible. What are your thoughts on that one?

Sanjay: I agree. Especially on the B2B front, in B2B software, we’re seeing more and more examples coming out of Singapore that are selling globally from day one and that really are building on the best-of-breed technology and have a solution that can address a global market concern from day one. And I think we’re definitely going to see more and more of those in the years to come. And that’s an area that we can also be very helpful in terms of seeing a company that’s looking to sell into North America, into Europe, we can open a lot of doors there and are looking out for those.

That said, there still are so many opportunities to build unicorns that are focused on Indonesia itself or from such decisions. It’s natural that there are a lot of low-hanging fruit opportunities that are still there to be built,  that we’re going to see a lot of unicorns play out. And so natural that the first kind of core to of unicorns and large sheriffs have come out of really addressing the local market opportunities, but we’re going to see more and more global as well as the talent pools keep rising. And I was also, it takes an ecosystem. It takes a generation of founders to then recycle and come back and create those new companies.

“Especially on the B2B front, in B2B software, we’re seeing more and more examples coming out of Singapore that are selling globally from day one and that really are building on the best-of-breed technology and have a solution that can address a global market concern from day one.”

Paulo: It’s pretty exciting that these previous generation of unicorns are also producing the next generation of founders, potentially of future unicorn founders as well. And just to add a note on these trajectories that you’ve been talking about. I was talking to Anthony from igloo company in a previous episode where they’ve begun focusing more on North America and Europe emphasizing that it wasn’t really just going global for the sake of going global. It’s really where’s the product market fit and where are your customers really? 

Now I wanted to shift gears and talk about exits. You talked about the exit landscape in Southeast Asia but I also wanted to put it into the context as well of the exits that you’ve recently had with White Star. You talked about having just recently two IPOs. So maybe you could tell us your experience, seeing these companies from seed go to IPO and then the learnings from that applied to Southeast Asia as well.

Sanjay: So we did about 40 to 50 investments. We did about 18 or so in our first fund, which is a 2014 vintage. And out of that fund or out of our first two funds, essentially we’re happy or pleased to have created around $7 billion-plus businesses so far. And out of those we’ve had two IPOs. One happened here recently in Canada, a telemedicine company called Dialogue. We invested back in 20 17, 20 18 at the series and came to IPO earlier this year. They’ve seen of course tremendous growth, especially throughout the COVID-19 pandemic where suddenly you couldn’t go to the doctor anymore. and their solution was running a crucial part of health infrastructure here in Canada. 

We’ve also seen a number of our startups exit at billion-dollar plus valuations. For example, Freshly sold for US$1.5 billion to Nestle or Dollar Shave Club that sold for US$1 billion to Unilever. And that’s where we also try to work and have good relationships with large multinational corporations that often can become acquirers for these startups.  Those have always been the two traditional models for exit through IPO, through M&A, which we’ve worked here.

Now, this SPAC topic really came up in 2020, and it’s really a new path to bringing a company public where you’re able to share a lot more information, a lot more details on the company and have a seasoned management team from a SPAC really help bring that company public. It’s been a really interesting instrument. I think the jury is still out to see how many are going to take place in Southeast Asia and how they’re all going to perform. 

But I think as with any other instrument, you’ve got a couple of really great SPAC managers that are going to do some really great outcomes and nice investments in the region. What happened in 2020 is that there were just too many all of a sudden. Towards the end of the year, there were just way too many SPACs out in the market and that’s going to probably lead to some managers overbidding or making poor investments. And so you definitely will have all kinds of different performing SPACs when you think about it from an equity investor’s perspective.

Now, one of the hurdles, especially for later stages of growth financing, in the region is having that clear path to exit or to monetization. We’re also seeing a lot more secondaries happen. And that’s a phenomenon that we’re seeing across the industry, but there are a lot more funds, large, multi-billion dollar funds that are being set up around the world to buy out secondary stakes. And so that’s also providing liquidity. If you think about Southeast Asia, a lot of first-time funds were started around 2010, 2011, 2012. So a lot of these funds now are approaching the 10-year mark on some of their initial investments. And so being those, those exits materialize over the next two, three years will be really kind of crucial for the health of the ecosystem, but I think we’re trending the right way. 

“We’re also seeing a lot more secondaries happen. And that’s a phenomenon that we’re seeing across the industry, but there are a lot more funds, large, multi-billion dollar funds that are being set up around the world to buy out secondary stakes.”

Paulo: Before we head into the rapid-fire round, I actually wanted to go a completely different direction in this last question and ask you about that video series that I mentioned earlier when I introduced you, and ask you about, you know what are the learnings from that series that you did? 

I watched a couple of them and I’m pretty sure you talked to a couple of different people from each of those ecosystems and tried to learn more deeply about them. So what are the learnings from that? And I guess you’ve also been keeping tabs on those central cities being part of White Star. What are the changes that you’ve seen since then?

Sanjay: This was like a really good, exciting project that I got to work on while I was in college, where essentially I was going to different cities, different parts of the world. The title of the project was “Defining Entrepreneurship around the world.” And essentially I was given the task initially to write a research project, an essay about entrepreneurs, and I thought it’d be much more interesting to do it in a video format and bring those stories of entrepreneurs. That was kind of the idea of the project and it kind of stemmed from this passion for just meeting and talking to entrepreneurs and hearing their stories. And I knew early on as a student that VC was a path that I wanted to take.

And so it’s been kind of phenomenal, amazing to now fast forward, almost a decade later have come full circle, and be looking at these markets and looking at these regions like Southeast Asia again, but from the lens of an investor. And so the common joke that I have is back in the day, I used to come with a notepad and a camera to get stories of entrepreneurs. Today, I’m doing the same thing, so that hasn’t changed much.

I’ve stuck to my passion. It’s just that now I’m able to come with a checkbook and a bit of experience and hopefully back some of these entrepreneurs, but it’s been a true passion of mine and I’ve been very grateful to had the opportunity at white star to really invest not just in North America and Europe, but really across Southeast Asia and across, I really think the next decade of growth is going to be coming from there. And when I was living there for a year, I was convinced of the potential and I’ve been convinced of the potential for since 2011. So it’s been exciting to kind of come full circle on that, but thanks for watching those videos and bringing up a bit of the past, they’re all out there, if anyone wants to see them. 

“Back in the day, I used to come with a notepad and a camera to get stories of entrepreneurs. Today, I’m doing the same thing, so that hasn’t changed much…It’s just that now I’m able to come with a checkbook and a bit of experience and hopefully back some of these entrepreneurs.”

Rapid Fire Round

What are the top 3 skills of a VC?

Sanjay: Empathy, intellectual curiosity, and being a connector.

Advice for anyone looking to break into VC in Southeast Asia?

Sanjay: I’d say do it, this is number one. Don’t be shy, but basically, it’s great to have a bit of experience before jumping into it. Don’t jump into it right after school. But definitely jump into it after taking plenty of internships at different funds also to try it out. 

We’ve all been students once (and always are arguably) — most memorable class you’ve been in? 

Sanjay: Psychology  101. That’s probably the most useful class that will carry true for years to come. I’d say like 50% plus of elements that we deal with on boards or on different kinds of challenging or different elements which the companies have to face are often around psychological elements in terms of dynamics with founders, dynamics with teams, dynamics of how to enter the market. And so really understanding oftentimes you feel like you’re more of a therapist or like a mental coach, to your founders than necessarily being like a sector expert and being able to really listen. And that’s why empathy is one of the key skills that are really important when it comes to a VC founder relationship. 

“And so really understanding oftentimes you feel like you’re more of a therapist or like a mental coach, to your founders than necessarily being like a sector expert and being able to really listen. And that’s why empathy is one of the key skills that is really important when it comes to a VC founder relationship.”

If you were a founder today, what kind of company/product would you be building?

Sanjay: Something around immigration tech, something around kind of opening borders a little bit more. I’ve been working in North America, Europe and Asia, and I’d love it for the world to be a little bit more open and finding ways for technology to, to facilitate. There’s a company here locally based in Toronto that we’ve been looking at called Sherpa, that’s been doing a lot around facilitating the visa application process, building white label solutions so that you can get your visa at the same time when you book your flights and not having to deal with all those complex processes.

You’ve gone to many cities across the world — in which city would you want to (a) be born, (b) build a company, (c) retire? 

Sanjay: Yeah. So I’ll be born in Germany. That’s actually where I was born and the passport is super helpful to travel to a lot of countries. I’ll build a company in Singapore. I think the potential for Southeast Asia is huge and I’ll retire in Canada. For me, Canada will always be home. And I’ll probably retire back here. 

What do you do to de-stress / take care of your (mental) health? 

Sanjay: I played tennis. I play a lot of tennis, and played tennis in college. I play these days with my younger sister who beats me all the time, but that’s fine. I love playing with her. And it’s my, it’s my best de-stressor and keeps me healthy. 

NA and European Companies mentioned by Sanjay in the episode: 

  1. Finn.auto: “For example, one of the investments we made late last year was in a car subscription model out of Germany called finn.auto, which was a whole new concept of car ownership. Instead of having a lease or financing, you subscribe, you pay a flat fee and you have all the costs covered. And it’s actually cheaper for the end consumer because they benefit from bulk purchasing of car fleets and bulk fleet insurance.”
  2. Freshly: “We had done quite a bit of work in the food space having backed Freshly in the US that is a meal kit operator with massive food production facilities spread across the US that got acquired by Nestle last year.”
  3. Butternut Box: “And having also backed Butternut Box which also has just opened and built their own food production facilities in this case for dog food that they provide on a subscription basis.”
  4. Clark Insurance: “So we backed one of the largest InsureTech players in Germany called Clark Insurance.”
  5. Borrowell: “We are also in a CreditKarma equivalent out of Canada called Borrowell. That’s the largest credit score player in Canada.”
  6. Trop Loyalty: “We’re also in the North American digital loyalty player called Trop Loyalty.”
  7. Dollar Shave Club: “We backed Dollar Shave Club in the US and then we backed another company called Adore Me back then.”
  8. Adore Me: “We backed Dollar Shave Club in the US and then we backed another company called Adore Me back then.”
  9. Dialogue: “And out of those we’ve had two IPOs. One happened here recently in Canada, a telemedicine company called Dialogue. We invested back in 20 17, 20 18 at the series and came to IPO earlier this year. They’ve seen of course tremendous growth, especially throughout the COVID-19 pandemic where suddenly you couldn’t go to the doctor anymore. and their solution was running a crucial part of health infrastructure here in Canada.” 
  10. Sherpa: “There’s a company here locally based in Toronto that we’ve been looking at called Sherpa, that’s been doing a lot around facilitating the visa application process, building white-label solutions so that you can get your visa at the same time when you book your flights and not having to deal with all those complex processes.
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