Endgame with Gita Wirjawan - Patrick Yip - Founder-Investor Relationship: A Sincere Guide

Episode Date: February 28, 2023

Founding Partner of Intudo Ventures—Patrick Yip—discloses the secret ingredient to winning investors’ hearts, the key to longevity, and how his company has been connecting local startups to global investors. #Endgame #GitaWirjawan #PatrickYip ----------------- SGPP Indonesia Master of Public Policy March 2023 Intake: admissions.sgpp.ac.id [e-mail] https://wa.me/628111522504 Other "Endgame" episode Playlist: https://endgame.id/season2 https://endgame.id/season1 https://endgame.id/thetake Visit and subscribe: https://youtube.com/c/SGPPIndonesia https://www.youtube.com/@VisinemaPictures

The sincerity part comes in, right? I think if you meet a founder who are all of great pedigree, they can BSU, like, you know, in one meeting, right? But to consistently do it throughout the three to four months process that we spend with them throughout different situations and things like that, I mean, you've got to be either like damn good or, you know, or I'm really missing something here, right? This is Endgame.

Hello, T'amon, Hi, Patrick Yip. He was Pimpinan and founder of Intudo, a Wattu Venture Capital firm.

Patrick, thank you so much for coming here. Thank you for having me. The pleasure is all mine. Tell us a little bit about your background, your childhood. Yeah, sure, sure. So, I was born and raised in Hong Kong 1980.

My parents lived in Indonesia from in Indonesia for many years, moved to China in the 60s. I was born and raised in Hong Kong, 1980. I grew up there, spent some time in Australia in a boarding school in Sydney when I was 10, and then I moved back to Hong Kong to finish high school. Then right after high school, I moved to Boston. I spent about eight years in Boston. So I did my undergrad in BU, majored in finance, and then I worked in finance in Boston again. And then I went to Babson for my business school. Then right after Babson, I came back to Jakarta.

So that was in 2005, May 2005. So, yeah, it's been, you know, 17 years being back here. Why Babson? Yeah. I mean, I've heard a lot of great things. I mean, they're really good in entrepreneurship and all that. That's right. That's right. Honestly, that was the only school I applied to. Yeah, because of that. And one of the distinguishing factors was that a lot of the faculty there had their own businesses. So they're really teaching, you know, what they learn on the job. They have their own businesses and things like that. So I really enjoyed that part. So that's why Babson was the only choice. It was a good couple of years.

Was entrepreneurship something that you were keen on doing? Yeah, yeah. I thought, you know, I'd start a business right away after Babson, but that didn't happen for many years until in Tutu, I guess. Yeah, so we were going to start this, you know, pet cafe. Okay. Yeah. You can still do it. I can still do it. Yeah, yeah, yeah. I can still do it. We'll see. We'll see. And then you came out here. So, yeah, so I came back 05. I worked at GE. I still remember

Pa Rida, you know, who's at Inna right now, you know, he was the region head for GE. It's the job, then, then,

CEO-in-Nia, J-Megan-Bahari Sa-Songko and all that, GE. And then I moved on to investment banking at UBS. Learned a great deal there.

And then afterwards, I worked for the CP group in Jakarta again. And then, so I did corporate finance and, lot of sort of family office for the, for the owner of the group in Indonesia. And then afterwards, I helped Goldman Sachs set up a private equity and venture arm in Indonesia. In the beginning,

looking at private equity deals. So growth equity deals in the consumer sector, in healthcare, in TMT. And then afterwards, the latter part of my time with Goldman was, that's when a lot of the venture activity got hot. So for me, I felt that I really had that front row seat to witness a lot of the rise in the early days of the ecosystem, built a great network in the founder community, et cetera. Yeah, it was there for about two and a half years. And then afterwards, together, a couple of friends started to invest in the ecosystem together, you know, both direct into companies as well as into funds that had a more regional focus.

And then when in 2016, my college roommate introduced me. me to Eddie, who I know you spent some time with. Yeah, that is the Jodo part of our relationship. So together with Eddie and our founding advisor, Tim, you know, the three of us started to invest in the ecosystem, again, investing in funds, investing in startups. And that I think that period of time gave us a lot of learnings and observations and identified sort of this white space to really try to build a platform that would be differentiated from what the market was offering.

and hence sort of how Intudo was born. Was it that obvious for you to explore the venture space as opposed to the private equity space? Yeah, you know, it wasn't obvious because, look, what I liked about the private equity process and the post-investment monitoring was that, you know, they didn't spray and prey, right? Private equity funds, you know, much like Ankora back in the day, et cetera, just concentrated portfolio. You take active sort of participation in the company. you sit on the boards of these companies and you sort of add value, you know, via your influence at the board level, right? So I think I really like that part of private equity investing. Yeah. And I knew I wanted to sort of transition some of that into this asset class of startup

because I think back in the day, early, early days in the ecosystem, I witnessed a lot of the players. I think they sort of blanketed the market in terms of investing. So they kind of adopted a more, of spray and prey or an index fund approach to startup. And I certainly honored that because I think early days in the ecosystem when it was still small, when you spray and prey, you'll certainly get a couple of winners, right, in your portfolio. But now, you know, when we came into the market, which was, you know, circa 2017, the market was a lot more mature. Founders were a lot more sophisticated. You can't just, you know, win with capital and then just spray and pray, right? So I think it's a marriage of the two, right? Some private equity like discipline into a space that's genuinely

quite, you know, traditionally quite, quite risky in the past. You know, there's all these statistics out there that says, hey, you know, out of 10 companies, only one really makes it and things like that. So it's a power law game and we wanted to maybe have a little bit more influence in the trajectory of the business that we invest in and therefore, you know, came out with this way of investing. Yeah. You came out with the name in Tudor. Yeah. Explain. Yeah, yeah. We really like that name. So look, I think we're really trying to build the firm to last and to really endure, right? So it should never be based on, you know, my last name, Eddie's last name or whatever, right? Like I think we wanted to make sure that it's set on a set of foundation that could carry through sort of generational transfer. So we had an exercise where Eddie and I just looked at, you know, he says five words. I say five words. What are our key core values in both personal life and professional life. And these three words were the ones that we both kind of overlapped with.

And yeah, so Integritas, Toulouse, and Jodo. So the acronym came together called Intudo. And that has basically dovetailed into a lot of how you philosophized your investment pieces, right? Yeah. Before we deep dive, I want to, I want to. to bring up a recent phenomenon called FTCS.

Right? What's your observation about what might have happened? If you take a look at the backers of FTCS, these are some of the greatest names. Yeah. That, you know, have embraced

probably the most sound investment philosophy. Yeah. But what slipped? Sure. Look, I think with FTCS and in general, the whole sort of crypto space, and we certainly have a few, you know, commitments and investments in that space as well, I think a lot of that funding, you know, it was during a time where the market was very exuberant, right? And not only in the crypto space, we're in the recent past, we've also seen examples of other companies where, you know, there has been sort of bad actors in the space. So, you know, what happened with FTCX is. certainly unfortunate. But I think what has transpired since then, obviously, you know, I think the whole space will actually go through a lot of transformation where I think regulators will really, really step in and regulate it much more rigorously, which I think bodes well for the

entire ecosystem, sets the standard a little bit higher. It sets the moat of this business a little bit higher. So, you know, you can't just come in with, you know, sort of, you know, very, very laxed compliance and things like that. And no, no functioning board and things like that. So I think that won't fly anymore. So I think the players that will really remain, you know, it's the survival of the fittest, right? So that's where I think we're really proud of our portfolio company, like Bintu, for example, where I think on the compliance side, you know, every coin that gets transacted, sort of the reserves to liabilities ratio are all there, et cetera. So I think, and we've seen this play out in other asset classes as well, not just only

crypto, right? Whenever there's a new asset class that surfaces, you know, I think the regulations around that industry gets formed along the way. And, you know, there has been bad actors in other asset classes before and it has, you know, better the industry after after these happenings. You know, from the get-go, everybody would have known this was unregulated, right? It's just perplexing to find out that the diligence that would have been done by some of these big names that would have been backing FTX was not the kind of diligence that I would have seen these guys being involved in. Because, you know, typically they would have been involved with the kind of rigor.

You wouldn't believe it. It's just so way out there. Yeah. And they would, they would, you know, try to figure out where the commas, the periods, the semicolons, everything. Yeah. And it's just beyond logic. Yeah. Do you think there was something else that cost us?

Was it just a typical hurt mentality if you knew that not a big? big guy would have been in there, okay, let's check off the box. We can just piggyback off whatever diligence they would have undertaken or was it something else. I do see this as something that could be of a huge lesson to a lot of people in this part of the world, right? Yeah. Yeah, I think sometimes we do hear funds talk about cap table strength, which basically is, you know, you invest in the company based on whoever's on the cap table pre the round that you come in or the round that you're coming into, right? So we've certainly heard a lot of funds operate that way, right?

So they invest alongside big brands. So I think, yeah, maybe that has something to do with it. But getting back to my earlier point, I do feel, I think the crypto space, you know, at least the past couple of years, you know, before May or before April this year, it has been very active and it's been exuberant, right, the entire market. So maybe that has something to do with it as well. But I do feel back to what I was saying, I think every new entrance of an asset class or a new business model, the regulation gets formed along the way, right?

And I think this is just a process that we have to go through. Explain a little bit about how you make a decision on investing. Yeah. Yeah. So I think for us, so I apologize, I forgot to mention this. So Intuda, we're an Indonesia-only fund. So the reason I'm mentioning this again is that so we do, we've built a very deep network of Indonesian partners, Indonesian LPs that we really leverage, you know, before and during our investment process. So what I mean by that is so a lot of the Indonesian LPs in here, they all have diversified businesses. They all have. come from different industries. So we do pride ourselves in doing a lot of thorough channel checks on the ground before we make the investment. So our investment process usually takes, you know, three to four months, you know, before we invest. So we're not the fastest investor, to be honest, but we are thorough in a sense that we do look for sort of empirical evidence on the ground

to make sure there's truly a product market fit. And that's why it involves us taking them to see, you know, company A, company B, you know, owner A, owner B or whatever. And then we get that chance to really work with the founder during this period. And it's a good observation lesson for us, right? You know, can this person handle pressure? You know, can they negotiate? If they get feedback from the potential end user, how do they take that feedback and do they pivot? Do they crumble?

You know, all these things, right? Because I think founder nowadays, they all went to the right schools, you know, the right work experience, they all present very well. All their projections look like this. I wonder why. It's a hard job. I mean, so I think for us to verify that is to see them in multiple situations, right? So, you know, see them under pressure and things like that. So that's our process. It's really to go through and look for that product market fit. And for us, every one of our company has struck a commercial deal with an Indonesian partner of ours before we make the investment. So I think that's where the sincerity part or the, yeah, exactly, the sincerity part of our

process comes in where I think we deliver all that upfront. So it's not like, hey, you let us invest and then we'll deliver ABCD, right? So I actually deliver that up front. And that's something I think a lot of founders really appreciate about us before we invest. Explain a situation where you would have tested. have not noticed the founders being under pressure. Yeah, I think... Without mentioning names.

Sure, sure, sure. But after I say this, I think if he listens to this, he will know. So we invested in this logistics company where he was obvious, you know, he was a country manager of a fast-growing startup, a global player. He grew the teams here really fast. And then he wanted to build sort of a marketplace business. for trucks, first of all, right? And then when we took him to see, you know, all these FMCG, you know,

many of them are LPs and off-fund, a lot of these FMCG founders, you know, during these meetings, he came up with the idea and said, hey, I want to build this marketplace model, but not realizing that a lot of the conglomerates here have their own distribution companies. They have their own fleet of trucks, bikes, you know, whatever, right? So then afterwards he, what I was admire about him is that I think he took that feedback and then hence built an enterprise business that served a more, you know,

a big client with already their own fleet of trucks but came out with their own transportation management system. So I think that took a lot of guts. That took a lot of maturity. And it showed that he's not stubborn, right? I think a lot of founders maybe they have this idea of what they want to build, but if they're too stubborn about it,

you know, regardless of whether the product fits the market, they still want to build it. But where in this case, I was, I think he showed a lot of maturity and really pivoting their product and basically build out a new sort of a revenue stream to the business. And that's where I kind of knew that we could go far with this guy. The philosophical attributes, integrity, Toulous, and Jodo. Or integrity, sincerity, serendipity.

Which one of these three attributes would you put more premium? one when you make a decision or before you make a decision? I definitely like, and again, maybe Eddie has a different answer, but for me, for me, I like Toulouse a lot and I like sincerity a lot. I think that that quality is something that I respond to very well. I relate better. I connect better with people with that quality, just a lot more genuine, a lot more authentic. I find that's easier to work with because I think in our business, and sorry if I go off on a tangent a little bit, I hear a lot of fund managers think of deals as a bet, right? I made a bet in this space or is my Metaverse bet or whatever,

or I want to own this asset and things like that. But I think when we invest, we talk about making a commitment. Right. So I have learned in the past sort of six years, it is an intensely personal business, right? And the point that I'm getting to is that we need to be able to connect with the founders that we make a commitment to, right? It's not just a bet or like an asset that we own, right? It's not that transactional. So to go far, a holding period, a fund life is eight years as, you know, and then, you know, a holding period for any companies, you know, usually about five years, et cetera. So I think for us to go far, to go along with each of these founders, I think that that foundation needs to be set. And that's why I think all these three values being,

you know, having integrity, I think that's table stakes, being sincere about, you know, how you go about it, how you go about building your team, recruiting people, how to solve problems along the way, I think those are the things that we can rely on in a relationship that will extend in five to six years. What's sort of a remedy or even a reset that you go through when you discover down the line that this person is not off the kinds of qualities that you would have thought earlier? Yeah. In terms of his or her possessing integrity, sincerity, and serendipity.

Yeah, yeah. And look, I think what we what we see in the beginning and how a founder may or may not change over time, that is something that is quite, quite hard to ascertain at the point of interaction, right? But once we're in, we're in, right? Like, we're in it. Yeah, right? You can't, like, founders can unfound a company just like we can't uncommit a commitment, right? So I think it's really hard. So I think for us, what we stick to is being on the ground, I think we have resources that can corral together to support a management team through transitions. I think that's one thing we pride ourselves in. So I think all our founding teams, all nine of us, Eddie's based in the U.S., but the remaining nine of us are all based here. I think we corral together to build a support system for companies to go through different growth cycles, right? So I think a company does transition from being a more founder-led business into a more sort of team. or board govern company over time, right?

So I think the holes that we try to fill is really just continuously support on the business development side of things, given that we do have a deep network in Indonesia, on the commercial leads and things like that. So we try to de-risk commercial risk. We try to de-risk funding risk, and that's why we're very fortunate to have,

you know, quite a couple of dozen of global investors as LPs in our fund. I think they rely on us as that shepherd into the country where the eyes and ears on the ground. For example, I know Teresia was on this podcast before, we've done a couple of deals with her as well. So to really shepherd a lot of these global investors into Indonesia, right? So that's something we can support. Another thing we could support, obviously, is on HR side of things.

So that's where the human capital comes in. And under this, we do have two sort of different programs where we have a returnee program that bring back a lot of Indonesians. We call this Bullcom, right? And then we have a Bumi program where we locally source. a lot of Indonesian, either professionals or graduate students, and we help them plug them into our portfolio company. So I think our remedy or our value add to the investment process during our holding period, we really distill it into these three things. I also don't want to seem like we try to promise everything under the sun, right? It is a partnership after all. We are a financial

capital provider, but I think we're just tacking on these value ad so that it could complement at what we saw in the founding team, right? So that's... I want to drill down a little bit on what we picked up from, you know, Dresia. Yeah. The role of women, right, to what extent have you been backing women founders? Yeah.

Because, you know, she makes this compelling argument, right? that from an IRR standpoint, it's compellingly much more pronounced, much more profound to the extent that you have diversity, particularly gender diversity. Yeah. Right. And I'm just curious how that links up with your investing philosophy. Sure, sure. I think we look, and I certainly have a lot to learn from Thericia on this, right?

So I think, and there's been plenty of studies to show that, you know, diversity, whether it's in gender or race and anything like that does enhance return over time, over a long period of time. So I certainly have a lot to learn from her on that. But I think for us, we've gone about it in a pretty, in a pretty pragmatic way, to be honest. But I think we don't try to tokenize this concept, right? I think while we do have, I think, close to 30% of our founders are women, right? The likes of Levy, the likes of, you know, Eileen, Populix, etc. So we, yeah, so, yeah, So we do, you know, close to about 30% of our portfolio, have women as the co-founder in the founding team, right? But that's not something we, like I said, we don't want to tokenize it because we do feel,

I think every founder, whether it's, you know, men or women, I think, you know, we view their capabilities just strictly based on merit, what they can produce. But I do feel, at least on our Intudo founding team, we also have built that diversity into our investment process. process as well. That's something we've enjoyed. I think having a balance, you know, male, female and of different age as well, right? I think that makes a good investments team with diversity. And the diversity, not only in that sense, but diversity in terms of, you know, introverts, extroverts, optimist, realist, you know, I think that makes a good investment team. So it's not just based on gender. Yeah. Another point, though. A lot of founders come to you with so much conviction, right?

To what extent do you have a bullshit detector? Oh, so we can swear a little bit on the show. Okay, okay. No, that's good. I can definitely be a lot more loose than... I mean, we got to make it interesting, right? Okay, okay. I mean, you probably get bombarded by so many of these guys, right?

We do. And that's where the, I guess, the sincerity part comes in, right? I think if you meet a founder who are all of great pedigree, they can BSU, like, you know, in one meeting, right? Right. But to consistently do it throughout the three to four months process that we spend with them throughout different situations and things like that, I mean, you got to be either like damn good or, you know, or I'm really missing something here, right? So I think that process is important. And only, only, I guess, you know, the test of time can tell, right? and that's why we feel, and this might sound a little bit corny, but you do have to be a little bit

romantic in this business where it is a very relationship-driven business, right? You do have to date a few times before getting engaged. It's not a couple of years at least. It's not love at first time, right? Yeah, exactly. Well, in our case, I think that three to four months is that dating period, right? And taking the founder to our network, our LPs in Indonesia, is akin to taking your sort of fiancé to meet your parents

or to meet your family members, right? I know it sounds, yeah. But that's the process. That's the process. It's definitely more art than science here. But throughout multiple interactions, throughout multiple situations, you do get to see them behave. And like I said, I think they'll lose the mask.

I think whatever conviction, maybe if it's falsely put there or whatever, I think they sort of lose that mask and the truth eventually kind of comes out over time. Conversely, though, how do you detect that somebody's actually a lot better than what he appears? Because somebody could come over to you just being the most timid, the most shy. Yeah. But he may have the best idea. He may have the best execution team. Yeah. That rarely comes out, right?

when you meet up with a person. Yeah, yeah. You know, you overrate or you underrate. Yeah. How do you manage that overrating and underrating risk? Yeah, sure. I view the founder's journey from, you know, whatever you call it, maybe from starting point to the ending point.

First of all, that path is not straight. And it would cause multiple detours. And it is a process of progressive discovery. And what I mean by that is, and the mental image I have in my mind is you kind of hop on islands, right? You hop on one island. Maybe your visibility from that island to that next point is, you know, that's why we have 20, 20 vision, right? You cannot see that far ahead, right? You can't see kilometers ahead of you, but you can see maybe, you know, a couple hundred yards ahead of you, right?

So, and then so you hop on one island to another and then it's a process of, you know, progressive discovery. So I think for me, I really enjoyed founders that, like I said, are a little more humble. I connect better with founders that are like that, that are really just brutally honest about what they know, what they don't know. And we discover along the way. And I think back to what I was saying earlier, I think when we make a commitment to a founder,

I think we're committing to them that, you know, we will discover together. We're partners together, you know, all the way, right? And but so I tend to don't relate too well to founders that has too grandiose of a view. Yeah, right? You know, the big picture. I mean, yeah, maybe you'll get there in year five, right?

But what we're concerned about is, you know, the next 18 to 24 months, right? And how our value, how our network can be additive to what you know, what you're good at, and become a powerful partnership, right? So I think that's the philosophy that we have in all our engagements to founders. You know, it's so tough to find people to just be able to say, I don't know. And I keep telling people, you know, to the extent you can already say I don't know, that's half the answer already. Right. Right. Right.

But a lot of guys out there, you know, they seem to think that they have to answer questions in ways other than just saying, I don't know. Right. You know, that to me is a bullshit detector. Yeah. You know, already. And you mentioned the word grandiose. Let's talk about the grandeur of, you know, the situation that we're going through right now. Sure.

Right. We've sort of like transitioned from easy money to not so easy money, right? What are the repercussions there? Sure, sure. Generally speaking, and then within your space. Yeah. If we dial back the clock, I think when we started Fund 1 back in 2017, it was a still during the era where free money, you know, governments, printing money, you know,

it was high times, right? As well as part of fund too. I think during that time frame, the founders that were raising, I think, were very, very confident, you know, for good or for bad, right? And raising capital for not too long of a runway, right? Because they think, you know, the rainbow, you know, somebody's going to, you know, fund them again at a high evaluation when when nine months of runway runs out and things like that. So a little bit more short-term-minded. And then I think the focus was a lot more on the top line growth, right? It was growth at all cost.

There wasn't any sort of thinking about building a sustainable business model or any care about like, you know, contribution margins and things like that. There was no talk of that in the series of discussions that we've had, right? And what has changed since then? And we saw that pretty evidently, you know, part of fund too, as well as well into Fund 3, is that this mindset shift, right? So I think founders now are cognizant of the fact

that the free money days are over. It's not growth at all costs. It's not just growth on the top line, but there needs to be ways to monetize right from the get-go. And they are now raising for longer runway. So we have this study that we showed during our AGM last month that at the entry points of our funds, we've seen round sizes increase

year over year, right? It dipped a little bit during 2020, albeit for a different reason back then, but for the most part of this year, round sizes kept going up, and we believe it's really for that reason. I think it's founders taking more dilution at the expense of making sure the runway is a little bit longer. So they all raised for 24 months now at least. And then within that 24 months, there is sort of a path to profitability there. So I think that has been the most stark difference between, you know, this couple of years versus the early days with Fun One. What happens to one or those that have not been able to race enough as to build this long runway

until the cloud's clear? Yeah. And what happens to or what happened to those guys that have. not been able to show the kind of agility that would have been necessary to pivot, to reskill, upskill, and all that good stuff. Yeah, yeah. What do you do? Yeah.

And that's what we spent the bulk of this year, more so in the second half versus the first half, is really to make sure that we can shore up capital to the companies that still have cash on the balance sheet, but make sure that the runway is at least 24 months, right? So that's what we've done for a lot of our portfolio companies this year. is just showing up more capital and making sure that there are ways to to find a path to profitability outside your domain though generally speaking what do you think would happen to those that would have not been able to build that readily for the next 24 months yeah look I think a couple of things obviously sort of you know I think shutting down is obviously one option but we we are seeing

more maybe M&A activities I think that's another option where in in in the general market, there are more vertically focused businesses that could act as a value add to a lot of more horizontal or more generalized marketplace businesses that could be part of their acquisition strategy, right? So we have seen a pretty active M&A market, more so for companies that are below 100 million, to be honest, not the mega deals that you see, but the more vertically focused businesses tack on to these either a super app or a global giant coming in that could come in via an acquisition that views them to be a pretty, you know, pretty reasonably priced asset as a

market entry point and things like that. So we've seen chatters of that as an option to this current environment. I want to bring up this topic of the two largest decoherons in Southeast Asia. Sure. They've gone through a pretty new levels of price discovery, right? Call it value crystallization. what's your take on them, grab and go to, in a context of, you know, the sort of existential crisis that they're going through and what you think they'll end up like. Yeah, you know, we can be very philosophical about this. Sure, sure, sure, sure. Yeah, back to what I was saying before, I've certainly really benefited from that front row seat from back in the day. So I think, you know, Go Jack, grab, you know, they all started sort of 2014, 15, that that's when they really ramp up during that time.

But I think now both companies have gotten to a scale where it's too important, right? I know the phrase of too big to fail. I try to be a bit more careful in saying that. But I think they have become too important to too many stakeholders, right? Whether it's sort of, you know, government, investors, shareholders, employees, as well as, whether it's merchants in the case of you know go-toe right you know the millions of merchants the drivers etc so

I do believe I think the two of them will find a way to coexist whether whether they merge or not I think that's certainly another conversation but I think for them to coexist to become sort of like a duopoly is certainly a possibility yeah I'm with you

I don't foresee a future where one of them is going to to stop existing, nor do I see them merging. I could be totally wrong on this, but at the rate that they're so immersed with the day-to-day activities of so many people, millions of people in this region, right? I would argue hundreds of millions. The stakeholders of these two entities I think would do whatever it takes to make sure that they continue to exist for the benefit of the masses.

Right. Right. And the stake is just too large. Yep. Right. And I think it would do great injustice for the duopoly to stop, you know, existing. Yeah. I think a monopolistic type of tendency is not going to be healthy.

Right. For the people of Southeast Asia. That's right. We've seen interest rates being increased, right, by more than 400 basis points in the last eight, nine months. we call this the sterilization of money, money is being sucked. You know, we go back to 2008, you know, the Western developed economies plus China. They've probably done quantitative easing worth more than $30 trillion.

By way of this interest rate hikes in the last few months, easily $4 to $5 trillion have been sucked out out of the system. inevitably, this would have had an impact on valuations across capital markets and pre-capital markets, including your space. I'm curious to your view on when things will turn. I think what we've learned this year is, I think in the context of Indonesia, the central bank, I think they only raise interest rates when core inflation, you know, breaches like 3%. Right.

So we've seen sort of two events of that, I think, in September and October, right? So I think that is certainly a trigger. Now, will we see more of that? I think maybe it'll go into sort of the middle part of next year, right? But what I wanted to address is I think this environment of, like you talk about the free money being sucked out of the ecosystem, et cetera, the impact that it has on the start. up space is that we do feel valuations, the correction of valuation, is something that's quite healthy for the ecosystem.

Absolutely. And this relates somewhat to what we talked about in the public markets where the correction will first start in the public markets. It dominoes into the growth stage rounds and then into the early stage rounds, right, which is mostly where we spend most of our time. So we do feel it is a healthy correction. If it does go into, say, you know, first quarter or at least the second quarter of next year, we will benefit from the fact that the entry points of our investment,

you know, you get diversification through vintages, right? So I think that the remainder of our third fund will benefit from this phenomenon. And that's something we're quite excited about. I'm actually in a camp that's a bit optimistic about 2003. Having seen the figures, if I take a look at how the central bank in the United States has increased interest rates by multiples of what they did in the 70s, right? In the 70s, they only jacked up interest rate by 100%, this time around by more than 1,000 percent in a period of eight or nine months.

And I think there's a bit of an overshoot by way of the following accounts. If I take a look at how money supply has gone up on a month-to-month basis, it's actually dwindled. You know, early last year, it went up by about 27% on a monthly basis. It dwindled to about 4% about two to three months ago. It dwindled to near zero just last month. And if I take a look at the inventories of the large wholesalers, the Walmarts of the world, the targets of the world, the Costco's of the world, they're at an unprecedentedly high level. And it's not being eaten up by purchasing power, which would not have reached pre-COVID level yet.

So there's inevitably got to be recalibration of pricing downward, not upward. So there is, I think, an overshoot in terms of interest rates being jacked up. So I do foresee a scenario in the first semester in 2023

where I think expectation of inflation is going to correct downward, not just inflation. And that's going to bring about, you know, lower interest rate environment, globally speaking. Right. Right. Right. So we just have to wait on what's going to happen in Ukraine, right, to see how things are going to pan out from a cost of money standpoint.

Yeah. But to the extent that things will renormalize, I see 2023 not as badly as some others. There's others. Yeah. And I think that's going to be good for pre-capital markets scenarios and capital market scenarios, right? I think it's going to be good for Indonesia in the sense that there is going to be equalization of all sectors. Right. You know, what we have seen in the last few months would have just been the uptick of certain sectors, particularly the commodities.

Commodities basically. The tech would have gone up until a few months ago. Right. But I hope for, and I'm sort of like comfortable. with the idea that things are going to get equalized more by mid part of next year. Yep. Is that the right way you're thinking? No, so I think that's exactly what we hope for as well.

When I mentioned having a good mix of people in the investments team, I think we do need that sort of optimistic view. But I think what we're also preparing for is also a longer sort of winter, right? So I think while we hope for the best, I think we're also trying to prepare for the worst. Exactly. Yeah. Now, let's talk about execution, right? What convinces you of the founder's ability or wherewithal to execute? Yeah, I think with founders, so during that process where we spend three to four months with our founders,

so besides just the observations that we pick up and things like that, But it's also how they take feedback from, you know, the people that we take them to see and how they take that feedback incorporate into the product that ultimately becomes an MVP, right, a minimum viable product. So I think for us, that takes sort of maturity. And also that that is a good sign that actually, you know, listens to the market and executes, right? So I think once they find that product market fit, then the capital that comes afterwards, then it's to scale. because for founder, I think it's easier to sort of come up with an idea and turn into a product, but it's another thing to turn a product into a company, right? Like, yeah, so I think that leap is much bigger than that first initial leap, right?

So I think for us, once they've found that product market fit, hopefully it's through a lot of our introductions, through a lot of our facilitation, that's what gives us conviction, you know, to really put in the time and go big with them. I want to take you back to the macro level again. If I, you know, I've been saying this numerous times, if I take a look at the banking to GDP ratio, if I take a look at the money supply to GDP ratio, if I take a look at the capital markets to GDP ratio,

they're at sub-50%, you know, in the 40-percentish ranges. Compare that with the Singapore's of the world. They've got money supply to GDP ratio of more than 200% now. Modern economies, they range between 125 to 250%. So at the end of the day, there is serious lack of money here in Indonesia, which presents an enormous opportunity for you guys. Because you're bringing the dough, right? And that dough is so attractive to the country.

Right. And how do we make sure that what you do is going to bring about the upticking of that needle from 40% to hopefully 100%. I've been making this point about how we need to basically improve upon our foreign direct investment. Yeah. Right. And if I take a look at the foreign direct investment on a per capita per year basis for Indonesia, Thailand, Vietnam, Malaysia, and the Philippines, we're at about $100 to $400 to per capita per year basis. We compare ourselves these four or five countries to the Singapore's of the world. They're at about $19,000.

They're like what I call the LeBron James of FDI. Yeah, yeah, yeah. you play a big role in moving the needle from $100 to hopefully $1,000. I don't think we're going to be able to get to $19,000 because of our population size. But tell me, something inspirational. Yeah, yeah. No, I'll do my best. So, look, I think one of our playbook, besides being very hyper-local,

which we spoke of pretty intensively, extensively just now, is that we also couple it with a global angle to our operational. And what I mean by that is, you know, thanks to Eddie's network globally, we have brought on board, you know, many global investors as LPs in our fund, right? So I think the goal here is that, you know, we, in Tudow, we take on the early stage risk in these Indonesian opportunities. We help them scale. And once it hits a certain scale, the follow-on capital is done by them.

So here's a pretty interesting stat that we shared during our EGM is that I think, you know, between sort of 2014 and mid-2017 or 2018, there were only 26 deals being participated by foreign investors into Indonesian companies. You know, Go Jack, Docopedia, just to name a few, right? But just in the past four years, so circa 2018 to most part of this year, that number has gone up almost 5x, right? So I think what that signals is I think Indonesia, you know, being the right place, right time, the market opportunity, you know, sort of the talent pool, getting, you know, more distributed,

et cetera, we feel that it has become an investment destination that's worthy of a lot of these global investors coming in. So our job and bringing a lot of these global investors as our LPs is that we act as that shepherd to bring them into these deals or companies that we invest in at a later stage, right? So there have been a lot of our fall-on capital that are done by our LPs. So I think we do it in our very, very small ways. But it matters. But it matters. You know, small, but it matters, right?

Yeah, we do it in our own small ways. Not like Ina. You know what I mean? I think I think Ina is doing a much bigger job than us. But I think in our own small ways, I think we try to shepherd a lot of global investors, you know, sort of educate them about Indonesia, you know, tell them what we see on the ground. It's not like just what they read on research reports, right? I think all those statistics about, you know, rising middle class, you know, increasing disposable income.

I think that is all, you know, facts out there. I think the perspective that we share with them on the ground as Indonesians, as your partner on the ground, we hope to give them a lot more insight so that they could be a lot more comfortably investing in this country. It's not as difficult today as it would have been five to ten years ago to tell the story about Indonesia. Right. And I speak from experience. Yeah, there you go. Exactly. And what we need right now to get to the next level is just scale. Yeah.

Right. We've got, I think, good stories. We just need to scale those stories up. Yeah. Right. And speaking of scale and technology at the same time, if we were to take a look at how the GDP per capita of Southeast Asia has grown in the last 30 years. It's grown by about three times compared to China's 10 times in the same period. But I'm optimistic that we're going to be able to grow better in the next 30 years because we've seen tangible evidence in the last few years of productivity boosting.

Just by sheer application of low tech onto three sectors, aviation, financial services, and marketplace. This is just with a simple gadget. And you've seen productivity going up by multiples of five to seven times, right? Not to mention those other sectors that would not have been disrupted. So I see Indonesia as a place where I think we're going to see massive usage and enabling of low-tech. I'm not foreseeing Indonesia as a creator. and user of high tech in the next five to 10 years. But just by sheer application of low tech for purposes of using and enabling,

for deepening those three pre-existing sectors and the other sectors, inclusive of agriculture, education, healthcare, tourism, property, energy, all that good stuff. Oh, boy. We're exactly of the same view. So I think back to the earlier point about how, Indonesia, you know, we do have these sort of manufacturing. I mean, it's 20% of our GDP, but we do have a lot of these old school or low tech businesses that with technology, you just enable something to be done faster, you enable something to be done better. That in and of itself is a massive

opportunity, right? So for us, we never view tech as a standalone sector or an industry, but it's also, it's merely just enabling function to a lot of businesses. So that's why I think for us, we do focus a lot on the early stage investments that we make, you know, it focuses a lot on B2B because of that reason. You know, there's there's been reports about what sort of economic delta that would accrue from the five major disruptions. Call it AI. Blockchain.

Genomics. Energy storage. Robotics. Some would even argue. we're talking about $100 to $200 trillion worth of economic delta in the next 10 to 15 years. It's outrageous, right? But, you know, that's a debatable view. But what's not as debatable is the extent to which AI is going to make up the whole lot.

And AI arguably will make up about half of the whole delta that's going to take place. So assuming $200 trillion worth of economic delta, half of that is an AI. $100 trillion in the next 10 to 15 years, that's like 100 times our GDP, man. Right, right. So if I get approached by anybody that's just starting up a company, I tell them you figure out how you can use AI. Incorporate, yeah, exactly. You want to do agriculture, you want to do education, you want to do health care, you want to do logistics. Just figure out how you can attach AI.

Yeah, yeah. Exactly. Do you see preponderance of some of these, you know, ideas? Yeah. I think in, I think a couple of things you mentioned. I think with genomics or in the healthcare space, especially in diagnostics, in I think energy transition. I know it's a huge pillar for us going forward as well. Certainly, I think the application of AI is important. But I think another one is, which we haven't made a commitment to, is in the climate space, right? I think climate change, climate tech is something that is, I think, on a lot of people's minds and attention these days, right? With so many variables in weather, changes and things like that, that's something that's made for, for AI, like machine, right?

Like machine learning and AI. I certainly think that's more applicable in those sectors. Open AI. They came up with this, I think the new level of artificial intelligence where you can just type in, you know, I aspire to be a visionary leader like Elon Musk or Steve Jobs. And I want to make sure that my path to becoming a leader will be in line with my spirituality. And I want to make it happen in the next five to seven years. this was founded by Sam Alvin from Ycom

alongside Peter Thiel Elon Microsoft just made a big investment it looks like it could take the lunch away from Google it's a chat form but the way I look at it

it's going to dislocate not just a blue collar but it could very easily dislocate the white collar Yeah. I mean, that's AI in a making. Oh, my God. Right? And I, unfortunately, or fortunately, Indonesia, you know, employees and involves white collar that are involved in this kind of task that could be duplicated, replicated,

artificially. I mean, you can, you. You can even ask, it's like chatting. Who do you think will win the 2024 election in the United States? He'll give you a two-page analysis using demographics, ideology, the economy, whatever. It just looks very intuitive. And to me, that is a scary proposition. And it's already staring at us.

It's not something like, you know, in our imagination. It's coming. So I'm encouraging as many people as possible in Indonesia to just figure out how the hell are you going to be able to attach AI to whatever you do. From the moment you wake up to the moment you sleep. Because unless and until we do that, somebody else is going to take our lunch. Right. unfortunately so this

this takes us the last bit of our discussion right endgame for Indonesia 2045 yeah right where

we're we're coming I mean to the world I think we're forced to be reckoned with I think and you know I'll answer this in a long way

but I remember back in the U.S. studying when I say, hey, where are you from? Oh, I'm Indonesia. I'm from Indonesia. Is that near Bali? Like, I would feel like, you know, I'd get pretty pissed about that. But I think it will come a time where I think if our kids gets asked that again, there will be a sense of pride. It's like, wow, you're from Indonesia. Yeah, they're doing big things there.

Like, I think that is coming, right? I think that is coming. And whether it's 2045 or I think McKinsey said 2030, I mean, whatever, right? I mean, all these reports out there, but we're going to be a powerhouse. I think that is without a doubt, right? And I feel immensely proud to be here doing this at this time, right? Right place, right time, right? business model, right? So for me, I'm thrilled to be doing what I'm doing. I feel, even though in our

sort of modest and smallish ways, we're making impact on these 27 founders that we've made commitments to, you know, I hope I'm making impact to the Intudo team and that gets followed and gets permeated to the entire organization. Right. So I think that is what I'm excited about. I feel, And not just in startup space, by the way. I know we've been just talking about startup, but we're seeing, you know, Rich Brian, you know, for example, at Coachella, you know, we're seeing Echo Nugroho having collaborations with Louis Vuitton.

I mean, we're going to be like on the world stage. And it's only a matter of time. Whether it's 2045, 2040, yeah, it could be sooner than that at the rate that we're growing. Rich and Echo are two of very few. Indonesians who cared to speak English, to learn how to speak international languages. You're blessed. You're a beneficiary of an international education. I hit my head every day to try to figure out what would it take for 100 million Indonesians

to be able to speak international languages. Call it Mandarin, call it English, call it French, call it Spanish, call it whatever. Because at the rate that money is sitting outside Indonesia, we've got to be very cognizant of the fact that we have limited supply of money internally. So to hit on the money that's outside Indonesia, you got to communicate internationally. Yeah, yeah. And at the moment, I would guess maybe less than 5% to Indonesians speak English properly. Less than 5% of Indonesians travel internationally.

So take those numbers up to 100 million. Then we would become a powerhouse. I don't think we're going to become a powerhouse, just being the fourth largest economy in world. I think we would be a LeBron James if we can tell the story, right? We don't have that many storytellers. You are a storyteller.

You go to Silicon Valley, you tell the stories about what's happening in a good way in parts of West Java, parts of Sumatra and whatever. But we need a lot more people like you who are Indonesia-focused, We're focused on reaching out to attributes such as integrity, sincerity, serendipity, focusing on humility within founders that have the world with all to execute, that have the wherewithal to communicate, that have the wherewithal to whatever. So, man, it's an incredible story, but I think we've got to take the right steps. I do believe language is key.

You know, Rich Bryant would not be where he was, where he is if he wasn't focused in Klapagading on learning how to speak English, right? Echo would not be where he is if he didn't care to speak the language and how to connect the dots between where he is and the Louis Vuittons of the world. Right? So think about those guys in Pulorote who have greater ideas than some of the founders who've been backing.

They can't speak English. They don't know how to access you. They don't know how to access anybody else because there's not a whole lot of money in the eastern parts of Indonesia. That's a structural limitation. Yeah. Yeah.

Right? Yeah. So I think, Language is key. And I've seen it with my own eyes where in two to three months, somebody who didn't know how to speak English could speak English. Because he went through a vocational training. And he was able to get a job as a concierge at a three-star hotel. Not only was he able to put food on a table for a family of six, but all of a sudden he felt like Iron Man.

because he could break these new set of boundaries. Yeah. Right? He could become a much better person than he would have been ever. That's life-changing, man. Yeah. You can play that role. Yeah.

Trying, fuck. Don't you think? No, no, no. Look, I love what I do. Don't get me wrong. I love what I do. I think we're making impact. And we're seeing results in, we're taking small,

steps we're seeing the results. I would love to do it at a at a larger scale, but while still maintaining sort of sort of our values and qualities, right, we don't lose sight of that as well. So I think it's for us to figure out how to do it at a larger scale so that the impact can be broader. But no, I love, I love doing this. I love to be in a position to empower, to inspire founders and be partners with them, you know, over a journey of, you know, the next five to six years. You know, this may sound funny to you, but I'm in a camp that believes that serendipity is an acquired taste. It's not innate.

It's not innate. You can learn to acquire it. You practice. Yeah. Then you get serendipitous. I think you know so so I also learned this over time but I'm not I wouldn't call myself a super a superstitious person or anything like that but I've realized how to connect the dots and this is to you know I think Steve Jobs said this during the the graduation speech at Stanford many years ago

but but you only do it looking back right that's what he said but for for me I start to realize bit by bit along the way now right like hey for example, how I met this founder, how I met this contact, and trying to be a lot more present and make sure that, hey, something comes out of it, right? So it's like sort of a network effect. Maybe one dot leads to three more dots. And if you take that path and then leads to maybe five more dots or something like that. So I'm just trying to be more aware, more present.

And that's when, I guess, like, I guess fate and seredivity can play a role, right? And I wasn't like that before. It kind of, I learned it along the way as well. Yeah. Hopefully it's not too late. Yeah. We've talked about a lot of stuff. Do you have any final messages?

Just wanted to say thank you. But thank you for having me to allow me to share the story about Intudo, how we're building out the firm. You know, and then hopefully with your support and many other support, we can grow this into a larger platform over time. So it's really grateful to be here, Pat. Thank you. You've been a big supporter of Indonesia. You've been a big supporter of many great founders and many great thesis.

Keep at it. That's all I can say. Thanks, Matt. I appreciate it. Thank you. Okay. Thank you, ma'am. Teman, that's Patrick Gibb. Pimpinan and founder of IntudeaVentures.

Thank you. game. Yeah. Bring them into Indoch and so we're quite proud of that role. Even though we're doing it, we're not like enough, you know what? And most of the founders that you're back, I think they tend to be a little bit more. So, yeah, really good home. I think, yeah, a couple of Aldi, you know, we work with, I mean, I saw Aldi, I think I'm

I don't think I'm not, I do, matter it, but okay. So, Bahasa, it's like, it's like. It's my the form language. But I've heard it at long. I've always...