Speaker 1: Welcome to COVID Time, a podcast series on Markets and
Speaker 1: Economies from Ds Group Research. I'm chief economist, welcoming you
Speaker 1: to our 98th episode.
Speaker 1: Today, we will put aside most of global macro. There
Speaker 1: will be a little bit of it, but mostly it
Speaker 1: will be not the usual global macro that we talk
Speaker 1: about because we will delve into the world of tech startups.
Speaker 1: PAA is co-founder of Grass, which was recently named by
Speaker 1: C B Insights to its annual retail tech 100 list
Speaker 1: showcasing the 100 most promising private retail tech companies in
Speaker 1: the world. According to Grass's website, it is a growth
Speaker 1: as a service technology solution provider using predictive A I
Speaker 1: to help enhance the growth of e-commerce businesses.
Speaker 1: Its proprietary platform integrates previously siloed e-commerce data, but more
Speaker 1: about them about all that from Prem in a second.
Speaker 1: But before Grass Prem founded several companies served at the
Speaker 1: board of several more and has been deeply involved in
Speaker 1: tech investment. Prem. Pat. Welcome to Kobe Time.
Speaker 2: Thank you very much, big fan. I started listening back
Speaker 2: in the early days of COVID and I haven't stopped.
Speaker 2: So pleasure to be here. I've
Speaker 1: spoken with your partner and some of your employees and
Speaker 1: that has made me a fan of yours as well.
Speaker 1: Um uh Prem uh we will talk a lot about
Speaker 1: your journey as a tech entrepreneur, uh grass the startup
Speaker 1: scene and so on. I really would love to hear
Speaker 1: about your in and all of that. But first, um
Speaker 1: we're discussing this in the middle of March. A few
Speaker 1: things have happened in the form of Silicon Valley Bank
Speaker 1: and a few other banks that have got under. So
Speaker 1: talk to us about its impact on the tech startup scene.
Speaker 2: Um Well, I mean, I think two lenses to it,
Speaker 2: I think uh as a depositor, it's really quite worrying
Speaker 2: that you can deposit money in, in uh in a
Speaker 2: bank that you trust and then one day wake up
Speaker 2: and not be able to withdraw. Right? Um That is
Speaker 2: obviously extremely worrying. Um I think the other lens is
Speaker 2: that um as a a technology startup,
Speaker 2: uh if this were to continue, um along with high
Speaker 2: interest rates,
Speaker 2: I worry about the venture capital ecosystem and the ability
Speaker 2: for other entrepreneurs and startups to, to raise money. Uh
Speaker 2: things have fundamentally changed since from 12 months ago, since
Speaker 2: we raised money at rest.
Speaker 1: Right? And so let's stay with that a little longer.
Speaker 1: So my understanding is two Fridays ago when the S
Speaker 1: U V issue was front and center. A lot of
Speaker 1: V C
Speaker 1: lobbied Washington DC. Very hard. And their point was that
Speaker 1: in S E V you have a lot of startups
Speaker 1: and tech companies with much more than $250,000 deposits and
Speaker 1: S E V going under without taking care of those
Speaker 1: depositors would be very, very problematic. What were you hearing
Speaker 1: from your peers? Or perhaps even you had some exposure
Speaker 1: to S E V? I mean, what was the mindset
Speaker 1: in those days?
Speaker 2: Fortunately, no good. We are D BS born and bred.
Speaker 2: Um No, I mean, I think, you know, everyone's worried about,
Speaker 2: uh
Speaker 2: what if they have made this mistake or what is
Speaker 2: the mistake? The mistake is they manage risk badly, right.
Speaker 2: Um I don't know where D Bs is my bank.
Speaker 2: I don't know where D Bs invests, right? Um And
Speaker 2: everyone is now worried it's fundamental, right? This is existential
Speaker 2: almost uh that if you have to now double click
Speaker 2: on where your bank invests and whether there's timing mismatch
Speaker 2: do your deposits. Um Are they at risk? Right. And
Speaker 2: that's really what is scaring everybody. Um I mean, I
Speaker 2: think that, you know, at a more macro level,
Speaker 2: we're sort of just seeing the after effects of the
Speaker 2: COVID hangover. Uh And, you know, we saw a prolonged
Speaker 2: period of zero interest rates. Uh We saw a lot
Speaker 2: of liquidity in the system. Uh We saw some uh
Speaker 2: fast and loose bets being made, uh during that, you know,
Speaker 2: uh 0% interest rate regime.
Speaker 2: Um And now you've got a fed which is basically
Speaker 2: taking up interest prices and interest rates fast. Right. And, uh,
Speaker 2: and, and, and you're going to see the after effects,
Speaker 2: not just in banking, but in every single sector. Um
Speaker 2: but I would have thought that, you know, banks would
Speaker 2: have been able to manage risk better. Uh long story short.
Speaker 2: Um And now I think you're faced with a sort
Speaker 2: of a question on whether, you know, banks that invested
Speaker 2: in crypto, for example, should they be back, stopped by
Speaker 2: the government or their depositors be back stopped? And uh
Speaker 2: Yeah, it's uh it's an interesting time. It's reminiscent of
Speaker 2: 2008 in some respects, hopefully nowhere near as bad. Uh
Speaker 2: where in 2008, a lot of it was banks and,
Speaker 2: and housing, right? And now it's sort of banks and technology.
Speaker 2: Um and uh
Speaker 2: I think that, uh you know, a lot of people
Speaker 2: have climbed all over venture capital. Um And I don't know, I,
Speaker 2: I have a fairly contrarian opinion.
Speaker 1: Right. Right. Now we're going to get into that in
Speaker 1: greater detail. Um, talking to people in Silicon Valley, which
Speaker 1: I'm sure you didn't during that time,
Speaker 1: was your sense that there were a lot of companies
Speaker 1: which only had business with S U V and therefore,
Speaker 1: if S V V collapsed, they would not be able
Speaker 1: to make payroll or was it exaggerated that actually companies
Speaker 1: had multiple
Speaker 2: banks. No, I think it was quite the opposite. I
Speaker 2: think TB was, was home not just to funds, um
Speaker 2: but also to their portfolio companies and
Speaker 2: uh hindsight's a, a great thing. But look at the
Speaker 2: end of the day startups, uh uh they've got a
Speaker 2: lot to worry about. It's a bit like, um you know,
Speaker 2: dancing between raindrops trying not to get wet and the
Speaker 2: last thing you need to worry about is managing multiple
Speaker 2: banking entities.
Speaker 2: Um So, yeah, I think most of them
Speaker 2: uh struggle with payroll. Um and uh are still worried
Speaker 2: about when the money and how it's going to come back.
Speaker 2: I don't think it's a straightforward process,
Speaker 1: the guarantee is there, but that doesn't mean that everything
Speaker 1: can be.
Speaker 2: And I think right now uh for startup founders, uh
Speaker 2: you know,
Speaker 2: I think 2020 2021 was very much about growth at
Speaker 2: all costs.
Speaker 2: Uh 2022 2023 very much about survival runway cash flow margin.
Speaker 2: Um And, and yeah, cash flow is cash flow. That's
Speaker 2: a good thing.
Speaker 2: I agree. I, I think at a fundraising level, uh
Speaker 2: we've raised 50 million bucks so far. Um Let me
Speaker 2: just put it this way. Uh 40 million, the 1st
Speaker 2: 40
Speaker 2: Uh much easier than the last 10. Um and um yeah, investors,
Speaker 2: their LPS everyone is looking at the unit economics um
Speaker 2: and profitability with a magnifying glass and that was not
Speaker 2: the case two years ago. I
Speaker 1: Mean, one wonders whether the
Speaker 1: good thing also has some downside, which is that you
Speaker 1: do want a lot of creative destruction and free uh,
Speaker 1: germination of ideas and very eager money. If that were
Speaker 1: to get constrained a little bit, maybe that
Speaker 1: put some dark cloud for the outlook that, you know,
Speaker 1: we won't have that many interesting things percolating through the
Speaker 1: system because the fear of failure would constrain money going in.
Speaker 2: Yes, I mean, look, uh
Speaker 2: I think if, if, if you look, if you total
Speaker 2: up all venture capital globally, right? It's
Speaker 2: uh 2021 was about $700 billion right? Uh uh
Speaker 2: But I think it's settling that, that $400 billion 400
Speaker 2: billion
Speaker 2: on a global GDP of 100 trillion, right?
Speaker 2: That is your investment and innovation. And if that dries up,
Speaker 2: um
Speaker 2: I think that,
Speaker 2: you know, innovation in its truest sense, whether it's climate change,
Speaker 2: whether it's health, whether it's commerce, whether it's financial inclusion.
Speaker 2: Um that was slowed out. Um So
Speaker 2: yeah, there's some larger, much larger implication than, than um
Speaker 2: short term blame. Right.
Speaker 1: Right. Now, which is, I think why we have seen
Speaker 1: regulators particularly in the us? Uh not necessarily go with
Speaker 1: the playbook of just letting people who have more than
Speaker 1: $250,000 under the bus because I think those are the
Speaker 1: concerns echoing through them to some extent, right from your journey.
Speaker 1: Are you, are we going to start talking about cricket
Speaker 1: or are we going to talk about something even before that?
Speaker 2: Um Yeah, I mean, we can start anywhere you like
Speaker 2: um how, where would you like to start?
Speaker 1: Well, tell us about your journey. What brought you to grass?
Speaker 1: What are going back to say 20, years?
Speaker 2: Oh man, loaded question. Uh
Speaker 2: So I guess my journey to borrow from Hollywood has
Speaker 2: been um
Speaker 2: I went from Mad Men and Maguire
Speaker 2: to today, Money Ball and Minority Report. I
Speaker 1: hope everybody got that. I got
Speaker 2: it right. So uh grew up in a um uh
Speaker 2: very much in a marketing family that was one job
Speaker 2: only all his life at Unilever mom worked at an agency,
Speaker 2: started off in, in, in advertising, moved into what embarrassed
Speaker 2: my father, which was something called sports marketing.
Speaker 2: Um and uh managing celebrities like the likes of Tendulkar
Speaker 2: and Ganguli. And um and he was embarrassed
Speaker 2: Until the movie Jerry Maguire came out and then it
Speaker 2: became the new sexy thing to do. Um and yeah,
Speaker 2: I ran that. I was fortunate had an exit uh
Speaker 2: early in my 20's. Um and then went on to
Speaker 2: found uh
Speaker 2: uh tech and digital marketing companies across India and Southeast
Speaker 2: Asia and the Valley um are now very firmly sconc
Speaker 2: in the world of data and artificial intelligence. Uh But
Speaker 2: with a marketing twist. Uh So marketing has run through my,
Speaker 2: I said the common thread, I guess that's run through
Speaker 2: my existence.
Speaker 1: Right? Listen, I want to talk about grass of course.
Speaker 1: But before that, so staying with that issue of your
Speaker 1: sort of journey over the last few decades, I see that,
Speaker 1: you know, you also advise a lot of companies and
Speaker 1: you also act as a direct investor in certain stuff.
Speaker 1: So those things are also with the marketing lens or
Speaker 1: you do some other stuff as well.
Speaker 2: Yeah, I mean, myself and my co-founder, we've been advising
Speaker 2: and investing in a multiple startups for a few years,
Speaker 2: but
Speaker 2: more often than not, it's startups that, you know, where
Speaker 2: we can add value uh that typically seed stage investments
Speaker 2: anywhere up to like half a million dollars. Um And yes,
Speaker 2: I would say marketing is the common thread because we're
Speaker 2: investing in companies that have some consumer facing business. Um
Speaker 2: uh advertising included.
Speaker 1: OK.
Speaker 1: All right. Let's talk about Grass and let's see how
Speaker 1: that sort of culminates everything that you've been doing the
Speaker 1: last two decades.
Speaker 2: Um Yeah. So Grass actually is a sort of an
Speaker 2: acronym for growth as a service, which is a nice
Speaker 2: play on. Um And uh they simply put where
Speaker 2: uh we help companies grow online. Um We help them
Speaker 2: grow topline and we help them manage margin. Uh And
Speaker 2: we use artificial intelligence and automation to, to do it.
Speaker 2: Uh So we take
Speaker 2: gut instinct out of the equation and, and we automate
Speaker 2: we automate their decision making via data.
Speaker 2: Um We're not your typical startup. Um
Speaker 2: You know, grass uh raised money in April 22. Uh
Speaker 2: we acquired two software companies. Um our thesis was that
Speaker 2: uh
Speaker 2: um
Speaker 2: retail
Speaker 2: and e-commerce and advertising are gonna become one and the
Speaker 2: same thing. Um And, and our thesis from two years ago,
Speaker 2: I think it's come true. Uh And we go into
Speaker 2: that in a second. Um And
Speaker 2: yeah, I think we're also
Speaker 2: geography is important unlike the US, which, you know, when
Speaker 2: you look at,
Speaker 2: you look at a country's GDP, uh you look at,
Speaker 2: let's say, at a global level, let's say the, the
Speaker 2: world does 100 trillion and, and GDP retail is probably
Speaker 2: about 30 trillion. E-commerce is probably six on that 30 trillion, right?
Speaker 2: Uh It'll vary by country region. Uh But we play
Speaker 2: in from Mumbai to Manila where you're looking at
Speaker 2: A combined GDP of about seven trillion. Um
Speaker 2: um
Speaker 2: 30% of that maybe is retail. Um but e-commerce is
Speaker 2: only $200 billion. Uh and so there's a lot of
Speaker 2: room for growth. Now, what's peculiar is that
Speaker 2: in this part of the world, unlike the US or
Speaker 2: China and the US
Speaker 2: to, to do well, online, you sort of, you know,
Speaker 2: you have Amazon, you have maybe Shopify and in China,
Speaker 2: you have Baba and you have G D dot com. And,
Speaker 2: but for some reason in India and Southeast Asia, you
Speaker 2: have a very peculiar um, scenario where you have, uh,
Speaker 2: some of the world's largest companies going head to head
Speaker 2: for two things. Uh, one is e-commerce wallet spend, the
Speaker 2: other is advertising dollars.
Speaker 2: And so you have, uh, Amazon that you have reliance,
Speaker 2: you have 10cent, you have Alibaba, you have the C group,
Speaker 2: you have Tiktok, you have Google, you have Facebook, you
Speaker 2: have all these juggernauts um playing in this arena.
Speaker 2: And so when players of that
Speaker 2: intelligence capitalization and sophistication play in the same arena, um
Speaker 2: the only people who lose out actually are the people
Speaker 2: selling online, the brands, the companies, the, the small and
Speaker 2: medium sized businesses.
Speaker 2: And so we're here to try and level the playing
Speaker 2: field uh via A I
Speaker 1: OK. I'm going to give you a hypothetical. It's not
Speaker 1: entirely hypothetical because I know the company. So this friend
Speaker 1: of mine, he's trying to set up as a fledgling company.
Speaker 1: Uh It's about uh sports content based out of Singapore,
Speaker 1: broadcast sports content, but he has to face ESPN S
Speaker 1: and the, you know, big TV networks of the world.
Speaker 1: And so if he were to come to you and
Speaker 1: say that, you know, I have, you know, some approvals
Speaker 1: from the regulators to capture local sports content,
Speaker 1: but I have no idea how to monetize this. You know,
Speaker 1: who in Singapore wants to watch like school sports or
Speaker 1: premier League of Singapore for football or something like that.
Speaker 1: Um Again, we have not prepared for this at all.
Speaker 1: I'm just completely extempore. What kind of, you know, sort
Speaker 1: of strategy would you help a company like that do?
Speaker 1: Because you're talking about smallish
Speaker 2: companies. So he's not doing e-commerce, he's doing content,
Speaker 1: right. But he wants to, hopefully, you know, get a
Speaker 1: subscription service and sell it to people and that sort
Speaker 1: of stuff or sell it to other large content managers
Speaker 1: in the world
Speaker 2: that so that I think is more sort of under
Speaker 2: or subscription services. And, and uh
Speaker 2: yeah, I mean, it's, it's, it's, it's not easy, it's
Speaker 2: not
Speaker 1: notice that already
Speaker 2: you're seeing. So you've got basically two, essentially two monetization models.
Speaker 2: You have
Speaker 2: uh subscription, uh and you have advertising and sometimes you
Speaker 2: have a hybrid. Um and advertising is obviously based on, um,
Speaker 2: it used to be based on eyeballs and how many
Speaker 2: people watch today. It's based on how many people buy. Correct. Right.
Speaker 2: Um So a little more difficult for a generic content
Speaker 2: operator like a Netflix to, to make the, um,
Speaker 2: to tie the, the, the loop between watching something and
Speaker 2: buying something, right.
Speaker 2: So that leaves the other business model which is subscription
Speaker 2: as a service or SAS. Um, look, the reality is,
Speaker 2: is that in India and Southeast Asia, um SARS has
Speaker 2: just started, um, you literally have, you know, a handful
Speaker 2: of companies that have uh exited uh IP O or
Speaker 2: in terms of acquisition.
Speaker 2: Uh But the important thing is that it has started,
Speaker 2: um you know, and uh it doesn't, the region doesn't
Speaker 2: have the depth of, say A US. Um
Speaker 2: uh But where,
Speaker 2: But it's, it only started 234 years ago, maybe five.
Speaker 2: and we're seeing a lot of innovation in the space
Speaker 2: uh in terms of our monetization model.
Speaker 2: Uh So my advice to him would be um you know,
Speaker 2: uh
Speaker 2: it's difficult uh content is just a very, very difficult business,
Speaker 1: very investment
Speaker 2: intensive, investment intensive, long payback periods and so be patient,
Speaker 2: find your niche, right? But you know how you say
Speaker 2: this and then you and then you have um
Speaker 2: what I thought was almost impossible where, you know, you
Speaker 2: have um
Speaker 2: influencers like a Mr beast who every time they put
Speaker 2: out something is watched more times than the Super Bowl.
Speaker 1: My 10 year old is an avid viewer, Kim
Speaker 2: Kardashian, another one. Every time she puts out something it's
Speaker 2: watched by more people than the Super Bowl or the
Speaker 2: IP L. So,
Speaker 2: uh you got to find that skate, right, right. Or
Speaker 2: you've got to go deep into a niche, I guess.
Speaker 1: OK. This might be a little closer to your heart.
Speaker 1: So I recently was in Bangladesh and we met a
Speaker 1: B2B company. Uh they are trying to become like the
Speaker 1: original form of Alibaba, which is bring brands to their
Speaker 1: marketplace and then connect these brands to retail stores in
Speaker 1: which they have uh good data and information about, you know,
Speaker 1: what is the demand side and they're trying to get
Speaker 1: like say a Unilever to Bangladesh and then market their products.
Speaker 1: They probably can benefit a lot from market intelligence and
Speaker 1: user data and so on. So your A I thread,
Speaker 1: how does that sort of feed in?
Speaker 1: So
Speaker 2: I'll, I'll tell you a story about how grass started and,
Speaker 2: and the moment at which I thought this is now
Speaker 2: something very real and worth pursuing. Um I was talking to,
Speaker 2: I'm not gonna name names but uh a very senior
Speaker 2: chief marketing officer of one of the
Speaker 2: F MC G companies in Asia. Um but he said
Speaker 2: to me, he said,
Speaker 2: if you ask me how many chocolates I sold today
Speaker 2: in Vietnam
Speaker 2: on how many different channels uh website marketplace, uh or
Speaker 2: how much chocolate was like in my warehouse
Speaker 2: or how much Facebook or Google or tiktok contributed towards
Speaker 2: the sale of that chocolate.
Speaker 2: He said it would take me the best part of
Speaker 2: two weeks to find the answer. And I was like, wow,
Speaker 2: if a company of this size, uh has that problem,
Speaker 2: I wonder what's happening with smaller companies. And so we
Speaker 2: went and asked, you know, dozens of, of ecommerce heads
Speaker 2: and CEO S and the response was identical, which is
Speaker 2: that it is almost
Speaker 2: are impossible for companies to put all the different data
Speaker 2: sources together. They're very much in silos.
Speaker 2: Um
Speaker 2: So that's problem. Number one, collecting the data. Problem number
Speaker 2: two is
Speaker 2: what do you do with the data? Right. Uh And
Speaker 2: that's really where
Speaker 2: data science um data engineering uh and A I come in.
Speaker 2: Um So I think India and Asia
Speaker 2: or Southeast Asia where at the start of the journey
Speaker 2: where companies are, are understanding the power of data um
Speaker 2: and putting it all together.
Speaker 2: Um But I would say if you had,
Speaker 2: If you were to ask me, I'd say less than 10%
Speaker 2: of companies uh in this region have understood, how important data,
Speaker 2: is
Speaker 2: how to put it together and what to do with it.
Speaker 2: Uh So it's very much the start of the journey.
Speaker 2: Um
Speaker 1: So I am a prime example of this complication. I
Speaker 1: recognize the value of data. But this podcast, for example,
Speaker 1: will go out on a podcast platform,
Speaker 1: Apple Google, Spotify, et cetera. It'll go out on youtube
Speaker 1: and there's ad V S website in which there will
Speaker 1: be some of my clients who will come and download
Speaker 1: the podcast or what the PDF version or the audio version,
Speaker 1: I can consolidate all this. I cannot. So for me,
Speaker 1: if you were to ask me a week from now,
Speaker 1: how did the podcast go? I'll be able to give
Speaker 1: you some isolated answers about how much download was done
Speaker 1: through the a specific class platform, but I will not
Speaker 1: be able to consolidate. It'll take me also hours, but
Speaker 1: you're
Speaker 2: not alone, you're not alone. Uh I mean, uh
Speaker 2: a lot of people won't admit it but they're in
Speaker 2: exactly the same position. I mean,
Speaker 2: I think that, you know, if you again, pull back
Speaker 2: for a second and you look at what's happened over
Speaker 2: the last 20 or 30 years, I think that,
Speaker 2: um
Speaker 2: You know, there have been sort of 3, 4 mass
Speaker 2: mega trends, right?
Speaker 2: Um I think thanks to uh Nokia and then Steve Jobs,
Speaker 2: I think uh mobile and, and mobile internet to be
Speaker 2: specific was the big theme
Speaker 2: in the 2000s, right? Um I think that
Speaker 2: somewhere in the the succeeding decade that mega trend became
Speaker 2: the cloud, right? Um And then
Speaker 2: I think the next trend is A I, I mean,
Speaker 2: there was a, there was smaller, maybe trends like crypto
Speaker 2: and web three and, and the metaverse and who knows
Speaker 2: how that will play out. But I think that A
Speaker 2: I is the next mega trend and you're seeing with
Speaker 2: T GP T and all that. Um But I think
Speaker 2: it all begins with putting all the data together and
Speaker 2: uh that's really what grass does. We're helping companies put
Speaker 2: their data together,
Speaker 2: we're helping them make decisions based on that data in
Speaker 2: real time. Um And uh we're taking gut instinct out
Speaker 2: of the equation and automating a lot of those decisions. No.
Speaker 1: So you are at the cutting edge because I think that's,
Speaker 1: that's a big hold right now. But even in my
Speaker 1: podcast example, technically speaking, it's all out there, but I
Speaker 1: don't have a neat set of API S or a
Speaker 1: consolidator out there to give me a full picture at
Speaker 1: any real time, a given moment.
Speaker 1: Um, OK, so that certainly tells us a bit about
Speaker 1: grass and you talked about your fundraising round. So congratulations
Speaker 1: on the 50 million fundraising. So given that
Speaker 1: companies right now are going to be struggling either in
Speaker 1: terms of higher cost for the availability itself. Give us
Speaker 1: a sense of the startup scene. Um maybe not just
Speaker 1: what's happening right now, but overall, you know, I mean,
Speaker 1: are you excited by South Asia and Southeast Asia startup
Speaker 1: scene right now?
Speaker 2: Yeah, look, I meet about 100 maybe 50 to 100
Speaker 2: founders every month uh across, you know, seven countries that
Speaker 2: we operate in. And uh it is hot.
Speaker 2: I mean, it is,
Speaker 2: oh,
Speaker 2: In the innovation that's happening is honestly, it's for me,
Speaker 2: I'm 48 years old. I haven't seen this, the volume
Speaker 2: of innovation happening at the startup level. Um
Speaker 2: But I think that what's happened over the last couple
Speaker 2: of weeks um is really worrying because if venture capital
Speaker 2: dries up, um
Speaker 2: what happens then um I mean, at the end of
Speaker 2: the day,
Speaker 2: I have a question for you, right? I mean, if,
Speaker 2: if you were a billionaire
Speaker 2: And maybe you are good one. But if you were
Speaker 2: a billionaire, would you rather put five, uh, put, put
Speaker 2: your money into a fixed deposit at five
Speaker 2: Or give it to a venture capitalist in the hope
Speaker 2: that he could return 20% IRR triple your money for
Speaker 2: in five years. It's, it's a tough call right now.
Speaker 2: And so my question to you is that
Speaker 2: I don't think most founders or if any founders have
Speaker 2: ever seen
Speaker 2: Um a global situation in which interest rates may remain
Speaker 2: between five and 10% for the next five years.
Speaker 2: What happens?
Speaker 1: Right.
Speaker 1: Prem I mean, I don't want to come across as
Speaker 1: utterly pessimistic because, you know, I am with the founder
Speaker 1: and I know founders tend to be optimistic. But in
Speaker 1: this particular instance, I have no way of sugar quitting
Speaker 1: the answer that the choice that you mentioned, I think
Speaker 1: the answer is very clear. It's the 5% um
Speaker 1: the zero rate environment enabled a lot of things that
Speaker 1: you and I I think will agree that, you know,
Speaker 1: whether there was access or not, it create an unleashing
Speaker 1: of capital to all sorts of projects. And that was
Speaker 1: even if there were excesses, it had an overall positive
Speaker 1: impact to your point that, you know, the scene became
Speaker 1: hot and there are all these, you know, dreamers and
Speaker 1: thinkers and entrepreneurs, bringing their thoughts and ideas together. And
Speaker 1: there was a capital of a flow of capital that
Speaker 1: was available for them. It's going to be difficult. Uh
Speaker 1: I spent earlier today talking about the impact of the
Speaker 1: S E V uh collapse. And we can talk about
Speaker 1: a wide range of impacts. But the bottom line is
Speaker 1: it translates into higher cost of capital.
Speaker 1: Uh and, and the higher cost of capital changes, a
Speaker 1: wide range of calculations in terms of R O E,
Speaker 1: in terms of margin and so on. But that takes
Speaker 1: me back to my question for you that when you
Speaker 1: look at entrepreneur, I
Speaker 2: Had one question, right? So
Speaker 2: the flip side to that is that valuations have halved, right?
Speaker 2: Uh
Speaker 2: It's a great time to be investing in, in, in
Speaker 2: younger companies, right? And so 5% versus a curated list
Speaker 2: of investments uh that could be the home run.
Speaker 2: It's not that easy a call, right? OK.
Speaker 1: So I I met an investor who's on that camp
Speaker 1: yesterday and that investor was basically saying that, you know,
Speaker 1: but it was not your typical, it was a family office.
Speaker 1: They've been successful, they have a lot of cash and
Speaker 1: they rather bluntly told me that they're waiting for the
Speaker 1: crash because they want to deploy capital and they want
Speaker 1: to buy a lot of things to your point because
Speaker 1: they felt that the valuations were excessive in recent years
Speaker 1: and they don't think the valuation adjustment is done, but
Speaker 1: they have a lot of dry powder and they will
Speaker 1: deploy it
Speaker 1: my response to them was that if there are many
Speaker 1: people like you, then maybe the valuation will not go
Speaker 1: down much further because people are sniffing around and looking
Speaker 1: for value.
Speaker 2: Yeah. Well, I, I mean, I hope,
Speaker 2: uh, one way or the other, I mean, I obviously
Speaker 2: hope that interest rates do come down, um, which allows
Speaker 2: LP S of investors and venture capital to, to, to
Speaker 2: be a bit more bullish. But I do worry. As
Speaker 2: I said earlier, I said, if venture capital as an
Speaker 2: ecosystem dries up, um I think it will have a
Speaker 2: fundamental effect on global innovation and
Speaker 2: innovation that, you know, it could be in health care,
Speaker 2: could be in climate change, it could be in science, commerce,
Speaker 2: financial inclusion. Um And that really is the worry um
Speaker 2: because if that dries up and that innovation evaporates or
Speaker 2: slows down, that's not good for anyone, I think.
Speaker 1: So, I just want to stay with that Southeast Asia,
Speaker 1: South Asia startups a little longer. Um given that, you know,
Speaker 1: you literally need hundreds of uh founders on a regular
Speaker 1: basis and you look at their books um or the
Speaker 1: playbooks rather um margin
Speaker 1: are, are these e-commerce businesses in South and South East
Speaker 1: Asia capable of showing the kind of margin that we
Speaker 1: have seen in the US tech startup system.
Speaker 2: Yeah, obviously, it's a
Speaker 2: startups have and so a very wide spectrum. But let
Speaker 2: me just sort of give you some examples um
Speaker 2: of India, Southeast Asia in the sector that I'm familiar with,
Speaker 2: which is, which is commerce, right? Um So it just
Speaker 2: so happens that
Speaker 2: the success stories, the local success stories are all have
Speaker 2: a common flavor to it. So Southeast Asia, you would
Speaker 2: probably say AC group
Speaker 2: uh go to um
Speaker 2: um grab um in India, um me uh maybe P
Speaker 2: T M, right? For parts of it.
Speaker 2: Um
Speaker 2: We've seen C group demonstrate profitability last quarter Q four.
Speaker 2: And that's great news. We need these local stars to,
Speaker 2: to shine because if they don't shine, then, you know,
Speaker 2: it makes things even more difficult for earlier stage startups.
Speaker 2: The flip side to that is, is that,
Speaker 2: and this again goes back to venture capital and the
Speaker 2: ecosystem is that
Speaker 2: you look at Southeast Asia and there is a hole
Speaker 2: and
Speaker 2: there are not that many exits,
Speaker 2: right? Not yet, not yet, right? Um And so you
Speaker 2: can't compare it to America because it's still early as
Speaker 2: a region. Uh and I E commerce as a discipline.
Speaker 2: Um But
Speaker 2: we need the local heroes to shine,
Speaker 2: right? Um And
Speaker 2: if you break up commerce, let's say, was selling whatever
Speaker 2: you want to sell ties, right? If you break up
Speaker 2: your P N L at the highest level,
Speaker 2: you'd find that the cost of goods would probably
Speaker 2: Be about 30%.
Speaker 2: Um You would find that logistics and warehousing and the
Speaker 2: last mile delivery would probably be about
Speaker 2: 20%.
Speaker 2: And then
Speaker 2: The last 50% would probably be advertising costs
Speaker 2: 50%,
Speaker 2: And that's where the game is being played now.
Speaker 2: Uh And that's why you're seeing a blurring of boundaries
Speaker 2: between Facebook, Google tiktok content companies, search engines, social media
Speaker 2: networks
Speaker 2: and commerce companies like Alibaba, Walmart Flip, Amazon, et cetera.
Speaker 2: Amazon to give you an example and don't quote me
Speaker 2: on this. But I, I'm, I'm maybe I'm off 5%.
Speaker 2: Um Amazon makes more profit from its ads business, which
Speaker 2: is five years old at best than it does from
Speaker 2: Amazon web services, which is a 20 year old business
Speaker 1: supposed to be the crown
Speaker 2: jewel, which is the crown jewel, but has a lot
Speaker 2: of
Speaker 2: uh Capex, correct. Advertising has no Capex. And so you'll
Speaker 2: see
Speaker 2: a lot of these guys look at Walmart's latest report.
Speaker 2: Um They have never seen the margin like they have
Speaker 2: in advertising, right? Uh If you look at Alibaba, if
Speaker 2: you look at the, the C groups, advertising is making
Speaker 2: up a huge component of profitability. Uh And why is that?
Speaker 2: Why have they all been able to do it is
Speaker 2: because
Speaker 2: they sit on the data, they know that they are more,
Speaker 2: has bought a B and C 21 days ago and
Speaker 2: is likely to purchase again. They know that has a
Speaker 2: family account and his wife buys D E N F.
Speaker 2: Uh And
Speaker 2: I would say that the power of balance over the
Speaker 2: next decade is going to shift from Google Facebook um
Speaker 2: To owners of 1st party data.
Speaker 2: Uh It could be
Speaker 2: retailers like Amazon Walmart could also be banks and credit
Speaker 2: card companies. Um
Speaker 2: I mean, the truth is, is that if you were
Speaker 2: a shareholder in Apple
Speaker 2: and you were sitting next to Tim Cook,
Speaker 2: May you would ask him Tim, where's the next $50
Speaker 2: billion dollars coming from? I know the answer.
Speaker 2: I'd say there's a 5050 chance he'd say it's advertised.
Speaker 1: I've been hearing in tech podcast for the last one
Speaker 1: year that when is Apple going to get in the business? Right. Yeah.
Speaker 1: And
Speaker 2: So I think that we've reached 2023 is the inflection
Speaker 2: point where commerce and advertising have become the same thing.
Speaker 2: I might be wrong and, and correct me if I am.
Speaker 2: But I think we've reached that stage now.
Speaker 1: And of course, all of those things are interlinked with
Speaker 1: the usage of data and getting intelligent insights and intelligent nudges.
Speaker 2: If you have the data, if you sit on the data,
Speaker 2: you can command advertising dollars. It's as simple as that
Speaker 2: because you can prove purchase right
Speaker 1: later in the podcast. I'm gonna ask you about this
Speaker 1: A I driven search will that, you know, disrupt and
Speaker 1: change the ad industry. But before I go there, um
Speaker 1: I just want to talk about this issue of
Speaker 1: the likely
Speaker 1: sort of, you know, the run with that we have
Speaker 1: ahead in terms of regulation, this banking system and problem
Speaker 1: the need for regulators to step in or questions about
Speaker 1: data privacy and the impact of social media interactions on
Speaker 1: mental health. All these things are being discussed at length
Speaker 1: in the political corridors of Washington DC and Europe elsewhere.
Speaker 1: So on, even China sell the tech regulation
Speaker 1: that Xi Jinping has undertaken has been in the guise
Speaker 1: of that anti monopoly behavior, privacy and so on. So
Speaker 1: how prepared is the tech startup scene to deal with
Speaker 1: this likely tightening of the regulatory oversight on the sector?
Speaker 2: So I think just to pull back again, I think
Speaker 2: at a more fundamental level, ask me as an entrepreneur,
Speaker 2: what would I choose between
Speaker 2: interest which a bank provides me on my deposit
Speaker 2: or safety
Speaker 2: safety
Speaker 2: every day of the week? Right. Right. And am I
Speaker 2: prepared to pay for that? Yes. Yeah. Right. So I
Speaker 2: think
Speaker 2: you got to ask yourself whether banking as a business
Speaker 2: model needs to change. Right. A little bit. And uh
Speaker 2: um
Speaker 2: Fundamentally the question is, do you want interest and return
Speaker 2: on your deposit or do you want 100%?
Speaker 1: Exactly.
Speaker 2: So I, I tell you as a, as an individual,
Speaker 2: I may gamble. I'm not gonna gamble with investor money. I'll,
Speaker 2: I'll take safety seven days out of seven. Right. Simple. Right.
Speaker 1: Um And so then if we want the Ecommerce system,
Speaker 1: the data that e-commerce companies use that to be also
Speaker 1: absolutely safe. And we start putting more and more safeguards
Speaker 1: around that and we make tech companies more liable for
Speaker 1: the data that they use. Um
Speaker 1: I mean, do you see that coming? And if it
Speaker 1: is coming, you know, how's that? I mean, are, are
Speaker 1: the other entrepreneurs ready to deal with that?
Speaker 2: Yeah. So privacy and data. Let's talk about that a
Speaker 2: little bit.
Speaker 2: What's your favorite restaurant in Singapore?
Speaker 1: Well, right now, yes. Uh the revolvers,
Speaker 2: but when you walk into a revolver,
Speaker 2: you, you like it, when, when the says, hey, here's
Speaker 2: your table, here's your, they say, oh, we might not
Speaker 2: have the chicken but we have this. I think you'll
Speaker 2: like it. You like that. Right. Right. Right.
Speaker 2: That's one side of privacy, right? And that's sharing of data.
Speaker 2: The other side is when it becomes creepy and, and
Speaker 2: uh advertising follows you around and things like that. Um I,
Speaker 2: I don't know what the answer is. Um I think that,
Speaker 2: you know, you ask my kids,
Speaker 2: our teenagers, they don't care about privacy like we do.
Speaker 2: Um And so
Speaker 2: the regulators unfortunately are more often than not people in
Speaker 2: the latter part of their lives. Um And they may
Speaker 2: not see it the same way as teenagers do. Uh
Speaker 2: But I think privacy is, is um
Speaker 2: um
Speaker 2: but
Speaker 2: it's, it's changing the definition of privacy. Um
Speaker 2: And,
Speaker 2: and time will tell, um we've seen what Apple has
Speaker 2: done to Facebook in the guise of privacy um,
Speaker 1: there's the opt in clause that they, after the year
Speaker 2: two years ago. Yeah. Yeah. Now it's, uh, every new
Speaker 2: app you open, you ask whether you want to opt
Speaker 2: in chances are that you're gonna say no, uh, which
Speaker 2: nine out of 10 people do and, and then that's
Speaker 2: affected the companies like Facebook's ability to serve your advertising. Um,
Speaker 2: and that's what's really caused the stock to implode. Um,
Speaker 2: privacy is a pretty big debate. I don't know which
Speaker 2: will play out.
Speaker 1: What about this issue related to national security? So India
Speaker 1: banned tiktok. The US is getting very tough on tiktok
Speaker 1: is under the guise that you know, their data may
Speaker 1: be used. American citizens data would be used by the
Speaker 1: Chinese government. Um You, your take feel free to be controversial.
Speaker 2: So yeah, I mean, I don't know what the answer is.
Speaker 2: Uh
Speaker 2: um I think what I do know is this,
Speaker 2: I think that India tiktok is uh
Speaker 2: never going to allow them. And if the US and
Speaker 2: Europe don't allow it, I think Tik Tok will double
Speaker 2: down on Southeast Asia, this region of 700 million people
Speaker 2: will become their primary play, play playground and it will
Speaker 2: become a force to reckon with both on content and
Speaker 2: ads and commerce. So watch out for Tik Tok and
Speaker 2: it's
Speaker 1: really been transformation, right? The way they deploy their technologies,
Speaker 1: it's phenomenal.
Speaker 2: It's a I at its very best like um Right.
Speaker 1: OK. Since you mentioned A I I, I want to
Speaker 1: talk a little bit about A I. Um Of course,
Speaker 1: the last three months, the flavor of the last three
Speaker 1: months has been chat GP T. Uh Even yesterday I
Speaker 1: asked Chad G V T using just 21 2021 data
Speaker 1: to give me a synopsis of Silicon Valley banks issues
Speaker 1: and problems. It was amazing. It was absolutely amazing that
Speaker 1: just using
Speaker 1: 15 month old data, they flag the duration risk, they
Speaker 1: flag the concentration risk and so on. Um so in
Speaker 1: terms of using a I for search and using a
Speaker 1: I for the kind of work that you are doing,
Speaker 1: where do you see the most compelling use cases?
Speaker 2: Again? Let me just step back and give you my
Speaker 2: because I, I'm not a tech guy, I'm a business guy.
Speaker 2: Here's my um
Speaker 2: definition or my understanding of, of A I. Um So
Speaker 2: imagine an Excel sheet
Speaker 2: with a billion rows and a billion columns
Speaker 2: and every cell moving in in real time.
Speaker 2: And I imagine a billion of those excels, right?
Speaker 2: The ability to
Speaker 2: extract the beta and pattern match
Speaker 2: is what we call machine learning, right?
Speaker 2: The ability to predict what will happen
Speaker 2: is A I,
Speaker 2: right? Uh Now
Speaker 2: GP T uh or open A I, the parent company.
Speaker 2: Um
Speaker 2: We've seen the, we've seen over the last few months.
Speaker 2: I mean, it's amazing what it can do. Um But
Speaker 2: it is, it's still text
Speaker 2: I think the next version
Speaker 2: uh probably would be a video
Speaker 2: or photography and we text image video, right? And that's
Speaker 2: uh I, I think that's gonna happen quite quickly.
Speaker 1: So I will ask you to make me a movie
Speaker 1: about such care hanging out with the party in 1997
Speaker 1: and I'll do
Speaker 2: it. Yeah. Or it can be uh give me um
Speaker 2: 40 minute episode of Demo in podcasting and doing an
Speaker 2: interview with the
Speaker 1: Yeah.
Speaker 2: Yeah. And it'll be then, you know, you have 30 seconds.
Speaker 2: So what is, what, what you believe is real, is
Speaker 2: going to change and what is actually real, what is certified?
Speaker 2: And I think that has impacts on education. I, I
Speaker 2: worry about, you know,
Speaker 2: my Children asking me, can I use GP T for
Speaker 2: this exam? How schools and universities will react? Um
Speaker 2: So I think it's a, it's a game changer and I,
Speaker 2: I also think that when a company like Microsoft puts
Speaker 2: $10 billion in it,
Speaker 2: it ain't looking for an extra term. It's looking at
Speaker 2: something substantially more, right? And I think that
Speaker 2: it's a very shrewd move because I think it's going
Speaker 2: to enable them Microsoft to compete with Google or the browser, right?
Speaker 2: Uh So it'll be Chrome versus whatever Google come up with.
Speaker 2: Uh It'll help Microsoft compete with Amazon for the cloud.
Speaker 2: Um And there's gonna be,
Speaker 2: it's gonna be a wild ride the next two years.
Speaker 2: Sounds
Speaker 1: like you've already picked a favorite MS F T.
Speaker 2: Yeah, I mean, you know, I think uh I've got,
Speaker 2: I tell my Children, I've got two kids. I say
Speaker 2: one of you
Speaker 2: is your, your future is in the hands of Amazon
Speaker 2: and the other, your future is in the hand of microphone.
Speaker 1: Um um Agree or disagree that the advent of the
Speaker 1: internet was subject to too light regulatory touch. As a result,
Speaker 1: we saw some of the negative aspects of internet proliferate
Speaker 1: in the last two or three decades and the issue
Speaker 1: that we were talking about privacy and so on uh
Speaker 1: and
Speaker 1: chastened by that experience, regulators will be very, very tough
Speaker 1: on A I companies that start rolling out these provocative
Speaker 1: things that you're talking
Speaker 2: about. Yeah.
Speaker 2: How are they gonna stop
Speaker 1: it?
Speaker 1: They will make companies level if your voice is being
Speaker 1: used in their platform to create a persona that is
Speaker 1: not yours
Speaker 2: and difficult one to police stack, right? Um It's uh
Speaker 2: um I mean,
Speaker 2: I'm not,
Speaker 2: we saw the senate hearings on Facebook and privacy.
Speaker 1: The senators did not wrap themselves in glory.
Speaker 2: Uh A I is gonna be infinitely more complicated uh
Speaker 2: because we're just starting on that journey. So how a
Speaker 2: regulator or a senator or a politician is going to
Speaker 2: be able to play out in their own minds? What
Speaker 2: is coming ahead?
Speaker 2: I, I, I don't, I'm not sure they're going to
Speaker 2: be successful,
Speaker 2: but yeah, I mean, as I said, earlier, I think
Speaker 2: A I is not a pretender, like some people say
Speaker 2: crypto and the metaverse were pretenders to the mega trend throne, right?
Speaker 2: I think A I is the real deal.
Speaker 2: And I think that at a fundamental level
Speaker 2: because it increases productivity.
Speaker 2: I, I think it's just gonna be an amazing, great
Speaker 2: thing for the global economy. OK?
Speaker 1: You're convinced that A I raises productivity and I think
Speaker 1: it's an easy case to make software services. How does
Speaker 1: it increase productivity or does it not always increase productivity?
Speaker 2: How does A I increase productivity?
Speaker 1: Well, that I think we will agree that, you know,
Speaker 1: potentially substantial. So just as software services or the subscription business,
Speaker 1: I can see it's very lucrative from the seller of
Speaker 1: that service. But is it always clear that the buyer
Speaker 1: of the service is seeing significant productivity enhancement?
Speaker 2: Yeah, I mean, I think so, I think at its
Speaker 2: most atomic level is
Speaker 2: you can,
Speaker 2: you can pay when you want to, you can pay
Speaker 2: on a daily basis, you can pay on a monthly basis,
Speaker 2: you can pay on an annual basis. That's really what
Speaker 2: soft you can eat as much as you can. You
Speaker 2: remember the old days of software where,
Speaker 2: you know, I B M and Microsoft and you were
Speaker 2: like buying physical servers and, and C Ds C Ds. Yeah.
Speaker 2: Um That's all changed because of a, now software is
Speaker 2: being delivered over the internet and you can pay uh
Speaker 2: when you want, you can switch it off when you want.
Speaker 2: And so a is just a sort of a monetization.
Speaker 2: I think um
Speaker 2: I think
Speaker 2: his
Speaker 2: might,
Speaker 2: that is that
Speaker 2: I will
Speaker 2: if it can become, if you can charge customers based
Speaker 2: on outcome,
Speaker 2: which is
Speaker 2: you are selling something.
Speaker 2: Um I offer you my software as a service but
Speaker 2: I say, listen, don't pay me every month,
Speaker 2: only pay me when it succeeds.
Speaker 2: Um Tough thing to say no to, right.
Speaker 2: Um I think that's what A I enables. Um I
Speaker 2: think that just the
Speaker 2: the ability to
Speaker 2: increase productivity to automate decision making.
Speaker 2: Um I think that's what A I delivers. Um
Speaker 2: And it has a another implication on labor uh which
Speaker 2: uh which no one wants to discuss. Um But the
Speaker 2: reality is is that
Speaker 2: um
Speaker 2: you know, most companies, uh I read this amazing article
Speaker 2: the other day about uh
Speaker 2: you have leaders who give vision in a company and
Speaker 2: then you have front line workers who execute on that vision.
Speaker 2: Um And in the middle, you have what is called
Speaker 2: process managers. I have read the article too.
Speaker 1: Yes, it's
Speaker 2: amazing. Yes. And that's going to and that is what
Speaker 2: A I will kill because process management is overhead. That
Speaker 2: isn't required because
Speaker 2: you will tie data into workflows and decision making and
Speaker 2: it will become instantaneous rather than hours and hours of
Speaker 2: meetings and, and, and things like that. Um And I
Speaker 2: think that
Speaker 2: at least in the short term uh is what's worrying
Speaker 2: people uh because it may fundamentally change uh employment and labor.
Speaker 1: Well, then my final question is related to that in
Speaker 1: your company right now. Is it fundamentally changing your notion
Speaker 1: of labor? And also how globalized are you? I know
Speaker 1: that your work is based in South and South Asia.
Speaker 1: But do you have staff sitting in Silicon Valley and
Speaker 1: Middle East elsewhere?
Speaker 2: Um
Speaker 2: How has it changed our company? Um
Speaker 2: We try and run a lean ship. I mean, we
Speaker 2: have 350 people across seven countries. Um
Speaker 2: But I can tell you that it is already changing
Speaker 2: our customers and, and how
Speaker 2: they perceive it. The customers are turning around to us
Speaker 2: and saying, um
Speaker 2: I had
Speaker 2: nine data analysts and with your software, I only need three.
Speaker 2: Uh we have customers who are saying, um
Speaker 2: I have staff who overlooks commerce on Shopify or Magento
Speaker 2: or Lazada or shop or flip card or tiktok. Um
Speaker 2: I don't need that many managers because with the also
Speaker 2: fair solution because I, I, I open my laptop, I
Speaker 2: look at your software at nine AM and by 9 15,
Speaker 2: I know exactly what I need to do and, and
Speaker 2: that's what the A I does,
Speaker 1: Right? Um so the final bit. Do you have employees
Speaker 1: around the world just beyond the seven core
Speaker 2: markets? No, our employees are in the our seven core
Speaker 2: markets and we have consultants and specialists and M L and,
Speaker 2: and data science who sit elsewhere. But our employees uh
Speaker 2: we're playing Mumbai to Manila until further notice, until
Speaker 1: further notice. Um
Speaker 1: Look, I mean, as I said, sometimes I take sort
Speaker 1: of pessimist end of the argument, that's why I really
Speaker 1: enjoy talking to our founders who have an optimistic bend.
Speaker 1: So while I do worry about A I and privacy
Speaker 1: and so on, I I see where you're coming from from. So,
Speaker 1: uh thank you very much for your time and insights.
Speaker 2: Thank you very much. Uh Good to meet you again.
Speaker 2: Big fan of the show. And how many episodes have
Speaker 2: you done? Now? We're at 98 98. Oh my God.
Speaker 2: It's adding. Who is the guest on the 100?
Speaker 1: It will be a surprise.
Speaker 2: All right. Well, thanks. Thanks very much for inviting me
Speaker 2: um
Speaker 2: and a great chat. Thanks very
Speaker 1: much. You know, I had a great time, learned a lot.
Speaker 1: Uh Thank you to our listeners as well. Koby Time
Speaker 1: was produced by Ken Delbridge, Violet, Lee and Daisy Sherma
Speaker 1: provided additional assistance. All 98 episodes of Coby Time are
Speaker 1: available on Apple Google, Spotify as well as on youtube.
Speaker 1: It is for information only and does not constitute any
Speaker 1: investment advice. As for all our research publications and webinars
Speaker 1: are concerned you can find them all by Googling D
Speaker 1: BS Research Library. Have a great day.