S1E3 | Opportunities In SE Asia And India | Ben Mathias

Vertex Ventures has been investing in South East Asia and India long before it became fashionable (!) so we know a thing or two about which sectors are on the rise. Tune in to learn how we view the key sectors of Supply Chain, Consumer, and Fintech.

Discussion Topics: Opportunities in SE Asia and India

• Differences and learning from corporate and VC
• Companies are having to turn profitable overnight – and they can
• It’s the golden age of VC in South East Asia and India
• Opportunities in Supply Chain
• Opportunities in Consumer
• Differences between South East Asia and India
• Opportunities in Fintech
• Opportunities in Open Banking

Transcript: Opportunities in SE Asia and India

Elise Tan: Hi, I’m Elise Tan, and I’m your host for this episode of Hard Truths by Vertex. I’m really glad to have Ben Mathias on the show today. Ben Mathias is the managing partner at Vertex Ventures, Southeast Asia, and India. I get to know Ben over the past year, and I find him to be a really humble person, despite his profound experience in venture capital, and technology companies in Silicon Valley. So today, we are going to uncover his brilliance, his insights, and hard truths about start-ups, VC investment, and life. So Hi Ben.

Ben Mathias: Hi, Elise. Thank you for having me here on the show.

Elise Tan: I’m really happy too and how have you been these days?

Ben Mathias: I’m really happy too and how have you been these days? Well, it’s been a busy few weeks here in Singapore, we had a couple of conferences. So I am looking forward to the weekend.

Elise Tan: I’m sure I remember that you have been in back-to-back conferences. So I’m really happy that you spent the time today to speak with us. So, I know that you have a wealth of experience in Venture Capital, but before that, you actually switched from being in a corporate. So, do you want to let us know a little bit about how that happens? How did you change from being an executive at a technology company into being in venture capital?

Ben Mathias: Quite by accident actually. It so happened that one day I was having lunch with a college senior of mine, Kittu Kolluri, and Kittu was somebody I have looked up to and was in touch with for several years. He had just sold his third company, I believe and had switched from being an entrepreneur to becoming a venture capitalist. So he had just joined NEA. And over the course of the lunch, he asked me if I would be interested in talking to NEA and my first response was that I had absolutely no background on venture capital.

So Kittu said, it’s okay if you don’t have the background, as long as you are a cultural and personal fit for the firm, we will teach you the business. They were looking for somebody to start the India operations for the firm. And so I went in and I talked to the partners and everything worked out and I joined NEA initially working at the Silicon Valley office, and a year later, I moved to Bangalore and opened their India office.

Elise Tan: That sounds so exciting. And I was reading about NEA so they raised nearly 24 billion in total under AUM, that was in 2020. So it’s a really huge company, you know, doing lots of interesting investments. So I think that’s such a fantastic opportunity to join such an established VC firm, with a switch. Would you feel a bit worried at the time that you may not be able to maybe live up to the expectations? Tell us more about that.

Ben Mathias: Well, I had tremendous mentors at NEA. So Kittu Kolluri for one, Mark Perry, who is now a retired venture capitalist was a great mentor, and Ravi Vishwanathan, who now runs NewView Capital was another mentor. So I learned a lot at the firm and I was there for almost nine years. And then in 2015, I happened to have breakfast with Joo Hock from Vertex. Now I had just led the investment into FirstCry at NEA and coincidentally Vertex had done the previous round. So Joo Hock was in Bangalore, and he reached out and asked me if I could meet for breakfast.

And that conversation turned out to be one about opportunities at Vertex. And Vertex is just getting ready to spin out the Southeast Asia and India fund into a separate independent fund. And I came to Singapore. I met with Kee Lock (CEO, Vertex Holdings), I met with our chairman and Deputy Chairman and things worked out and I ended up joining as the third managing partner for Vertex Southeast Asia, and India in 2015.

Elise Tan: Wow, it must be really exciting times. And I want to also go back to the time that you made the switch from being in corporates and then into venture capital. So firstly, how did your family respond to the career switch, and later on very quickly to a location switch?

Ben Mathias: Gosh, my family and friends all thought I was crazy.

Elise Tan: Yes, you are changing your career at the age of 38.

Ben Mathias: That’s correct. So in that respect, it was a crazy thing to do. As you said, at the age of 38, I was changing to a completely different career, and even more difficult I was changing to a completely different geography. Now, India was a place I’d grown up and I lived there as a child and as a student. I had never worked a single day in India. Since the age of 22 India was just a vacation spot for me. So moving from to different career to a different country was kind of a difficult thing to do. But we did have a lot of close family and close friends in India so we did have a support system.

So when we moved back, it wasn’t that difficult. And bear in mind, the country was going through tremendous optimism at the time. This was 2007 and it was 15 years after the major financial reforms that had been done by the government in 1992, and the country was seeing the benefit of those reforms. So there was tremendous economic growth, there was a lot of optimism in the country, and a lot of people were moving back from the United States and from other parts of the world. So it was a good time to go back to India and get set up.

Elise Tan: Yeah, I think logically, your change definitely makes sense. But I just want to ask you, what is the hard truth about transitioning from corporates to VC?

Ben Mathias: Well, transitioning from corporates to VC, it’s a very different world. In a corporate, first of all, you have a team that works for you. And you have clear lines of delegation. You can delegate things to your team, and if things don’t happen, you can assign them to somebody else. If somebody doesn’t do their job, you can fire them. Here is a VC or an individual contributor, you basically are responsible for the work that you do and the decisions you make, and you have very little leverage over the outcome.

Now, the only time you have leverage is when you make an investment decision. So you do the best you can to evaluate the founder, to evaluate the market, to evaluate the company, and its differentiation. But once the money goes in, you are totally dependent on the founding team, and what they do. Authority doesn’t hold any longer. Now, in the corporate world, you have authority, you have authority over your team, and you can basically give instructions, give orders and things happen. Within the VC world, it’s influence that is important. Authority doesn’t matter.

You have to be able to influence your founders, and the only way to do that is to build that relationship with the founders that they trust you, they look up to you and they would value your opinion and your advice. So it’s a very different world, being in the corporate world versus being in the venture capital world.

Elise Tan: And I think that in terms of mindset, and personality, that was something you have to shift as well, right? So tell us more about that and why it’s a hard truth?

Ben Mathias: Well, my personality did have to go through a change in 2006, when I switched from the corporate world to the VC world. Now in the corporate world, you interact with people in your comfort zone, so you interact with the people whom you work with, maybe you interact with your customers, maybe you’ve got to deal with potential new clients. In the VC world, you’re talking to new people, every single day. You have founders coming to pitch to you, sometimes on a given day, you may meet three different sets of founders.

In a given week, you could meet 10 different sets of founders. And some of them may make sense, and some of them may not make sense, but you have to be able to interact with them and first of all, you have to treat them with respect because they are at the end of the day doing something that they believe in. So it is a skill set that has to be developed. The other thing about being a venture capitalist is that you are networking all the time. You have to network, and you have to build relationships because you never know when a relationship may be important.

I’m looking at a company today; I need to do diligence on it. I suddenly recall, hey, three years ago, I met somebody that was doing something similar. Let me give her a call and get her feedback. Now, three years ago, when I met this person, I didn’t know that I might need to use that contact in the future. So I did have to go through a personality shift, I had to become a lot more interactive, and I had to become a lot more of a people person because, at the end of the day, the VC business is a people business.

Elise Tan: Definitely. And I think as a firm, we truly believe that it’s a people business and also it’s about nurturing leaders in whichever field, whichever areas that they choose to solve the problem in. And I think that’s what really motivates me as well in coming to Vertex working every day. I also want to share one hard truth we definitely have to have a good memory you mentioned how you remember a meeting that was three years back, and you never knew how you could actually accommodate a usable conversation afterward. So that’s something that strikes me. What is something that you have to learn and unlearn?

Ben Mathias: Well, so the main thing you have to learn when you become a VC is something called critical thinking. Now, again, in an operator role, let’s say you are responsible for sales or you’re responsible for customer success, your role is very clearly defined, and you know exactly what your metrics are. As a VC you’re looking at different companies every day, and you may look at something as diverse in the morning, you may look at a new direct-to-consumer brand in the afternoon, you may look at something that is a new technology solution for climate change, and the next day you may look at the next greatest payment solution, all three are very different businesses.

Now everything seems attractive initially, founders obviously make a very good pitch, and they make a very compelling value proposition, and the thing that you have to learn is critical thinking. So I always tell this to people who work with me at Vertex, don’t think about why you should invest in this company, you think about why you should not invest in this company because that’s when all the critical thinking comes out. Think of all the things that could go wrong and how would you mitigate that. And that’s when you finally identify that one in a hundred companies that you are so compelled with, that you really believe that you have to invest in.

Elise Tan: I think that is the beauty of this business because on one side entrepreneurs are really brimming with optimism. And for us, you know, I’m not saying that we are on in terms of pessimism, but the thing is, we do give them another perspective. And I want to hear the lessons that you learned in the corporates. How have you been able to apply over here?

Ben Mathias: Well, so some of the things I learned in the corporate world, of course, I left the corporate world 16 years ago in 2006. But interestingly enough, a lot of the tenets hold good even today. There are some fundamental things that regardless of whether you’re in 2022, 2012, or 2002, hold true. So let me share three of them.

So the first one, of course, most important for any company, is the customer always comes first. The most important stakeholder in your business is the customer. I used to work for a software company that was doing very innovative things and it was very successful, but somewhere along the way, they ignored the voice of the customer. Now, when the chips are down, the customers abandon the company. So never lose sight that the customer always comes first.

Number two, your employees always need to feel challenged. Now, you can pay your employees a lot of money, but if they don’t feel challenged, if they don’t feel they’re doing something interesting, they will leave. So that’s the second thing.

The third thing here is the executives need to stay engaged with the team. Now, of course, when you’re a startup, everybody’s in one room, the founders are in the same room, as the developers, as the finance people. As the startup grows, and as they get more money, there is a tendency to build a C suite, and all the executives will be on one floor and everybody else will be on a different floor.

Now what happens in that situation is that the C-level execs lose touch with the people in their teams. The CFO needs to be with the finance team, the head of sales needs to be with the sales team, and the head of operations needs to sit with the operations team. So never lose touch with the team.

Elise Tan: Thank you for sharing the advice and also the hard truths. I must say that you know, for the past year, we have been interviewing as many as 20 of our portfolio founders, and I’m really true to see that customer centricity is one of the most important things they stress, and I think this is like what Ben Mathias mentioned, is really important without the customers, there’s no business.

I also noticed that you joined NEA in 2007, and this is just before another global financial crisis. And right now we are talking about a slowdown in VC funding and a potential economic downturn. So we would like to hear more about what it was like back then in the VC and startup environment did you see any similarities between what was happening now and then?

Ben Mathias: Well, I’ve actually lived through three crises. The first one was in 2001 when I was working on the other side, I was in a technology company at that time, and then of course, in 2008, and now 2022. I see 2022 as being very similar to 2001, and the reason is that both are somewhat caused by the private markets, and by the bubble in the startup environment. And in both situations, companies have been overfunded companies that didn’t need that much money. So you’ve had entrepreneurs that went out to raise 10 or $15 million, but investors told them to take $100 million.

Now, when you give a company $100 million, and they only need 10, they will find ways to spend that 100. But they will spend it inefficiently, and at the end of the day, they will build businesses that are not sustainable. I use the example of Lake Mead in the United States. Now Lake Mead has been drying up and the water level has been receding and now that the water level has come down so low, you can actually see skeletons at the Lake Mead, and that’s what’s happening today when the capital has dried up, you can actually see businesses that were built inefficiently without a proper foundation, those businesses are being exposed.

So the companies today that are actually doing well, are the companies that could not raise a lot of money last year and the year before. And because they’ve had less capital, they built more efficient businesses, more capital efficient businesses, they’ve figured out ways to get profitable.

So today, they are growing and they are profitable. We have companies in our portfolio where the founders couldn’t imagine why people do not want to fund me, whereas everybody else is getting 50, 100 million dollars. And we kept telling them, don’t worry about it, focus on your business fundamentals, focus on your unit economics, which is what they did. Now, these companies today are, in some cases, almost $100 million in revenue and profitable and don’t need any capital.

Elise Tan: Tell us more about which are these companies.

Ben Mathias: Sure, I can give you a couple of examples of companies that I personally am involved with. So one of them is a company called Kissht. Now, Kissht is a digital lending company in India, which gives short-term loans, and three to six-month loans. Unfortunately, for them, a little more than two years ago, they were all set to close around, and then that investor backed away for some reason. And after that, it was very difficult for them to raise any financing because their reputation was sort of clouded because everyone knew that they were going to raise money from this investor and that didn’t happen.

So everyone thought there was something wrong with the company. Now the founders took this in their stride, they said, we don’t have the capital, but let’s work on our business so that we get profitable. And that’s what they did, they built a business, and they tweaked their business models so that they could still grow without the fundraising. They became profitable. Today, they’re a significantly large revenue company. I don’t want to mention the number because it’s confidential, but they are profitable, and growing very well. And now there are a lot of investors wanting to invest in them. 

Another example is Ace Turtle. Ace Turtle went through a similar situation, at the time of COVID, some of their business took a hit, but they turned that to their advantage. Once COVID hit, they actually changed their business model, and a lot of offline brands that were earlier dependent on them just for technology, came to them and said, take over our entire business, and manage the stores, manage the marketplaces, and that really transformed their business. So they used a bad situation and converted it into a good situation, and they also are growing and profitable.

Elise Tan: Thank you for sharing these stories. I really love these stories because like you say, they managed to turn their business around, they managed to look at what other opportunities were on the horizon and make it something profitable. So I love to hear these stories about our portfolio companies. You have shared quite a bit about your career switch, you have also shared your experience from the past financial crisis and also distilled the insights and hard truths for entrepreneurs these days.

So I would like to actually go into more of the venture investing side. So for you, I think that you have such a unique position, because you look at opportunities, not just in India, but also Southeast Asia. So, I love that because when you look at industry across these different regions, we start to see a lot of different data points and we get an even more comprehensive picture of how the markets are doing, and how the founders can actually operate across these different markets. So I also want to first ask you, what are you excited about in Southeast Asia and India for the next few years or even the next decade?

Ben Mathias: Boy, I am very excited right now and I do believe the next decade will be the golden age of venture capital in this region. Let me tell you why. So first of all, this region, Southeast Asia plus India together is a $7 trillion economy. And it is important from the point of view that any startup that gets created in this region eventually expands geographically to cover the entire Southeast Asia and India. Some of the fastest-growing economies in the world are in this region, India, Indonesia, Thailand, Philippines.

So if you project this out in the next 10, 15 years, this could be a $15 trillion economy, Southeast Asia plus India, which is on par with the United States, with China, with the EU. So any startups getting created today will be building businesses for this $15 trillion economy. Now, if you look at some other macro facts, we have 1.3 billion internet users, and active internet users in this region are the total number of US plus China put together, we have that number.

In the last few years, we’ve been adding 200 million internet users per year. So if you forecast the growth in the next few years, we will reach 2 billion internet users, which is higher than all the rest of the countries put together. Now, these internet users are primarily millennials, and Gen Zs, 56% of our population is either a millennial or a Gen Z. So these are digitally savvy users. These are people who do most of their shopping online.

These are people who are very active on social media. And these are people who do their payments digitally. So the situation is very, very ripe for innovative startup companies to target these consumers, and also for SMEs to transform themselves by adopting digital technology. So I am very, very excited. This is a great time to be investing in this region.

Elise Tan: Wow, 1.3 billion Internet users I think that sounds really exciting and I’m really happy to see what kind of startups they are coming out to serve these consumers. So, Ben, I was looking at your work experience and I realised that your corporate experience has been in technology companies that are serving supply chains. So I would like to start with the supply chain vertical, tell us more about what is going to happen in this vertical across Southeast Asia and India.

Ben Mathias: Yeah, actually 10 years of my corporate experience was in the supply chain. I worked for two different supply chain companies and that is, of course, in the US where we built technology to make supply chains, primarily US-oriented supply chains or eventually global supply chains more efficient. Now, in this part of the world supply chains, for the most part, are unorganised because they consist of small manufacturers that are fairly fragmented.

There’s a lot of coordination that’s needed between these manufacturers, the stockists, the distributors, the retailers, and the consumers. And a lot of this happens manually through email, through phone calls, through SMSs. And I remember reading a McKinsey study recently, which said that less than 2% of Companies have visibility in their supply chain beyond one or two nodes. Now, this is an opportunity for any company that is building technology or building infrastructure to enable supply chains.

So we’ve actually backed companies like Janio which is an integrated cross-border logistics platform, operating in several countries in Southeast Asia, providing e-commerce logistics, freight forwarding, customs clearance, and servicing goods over $2 billion annually. We’ve also backed a company called Aruna that is trying to revolutionise the fisheries supply chain. They’re actually working with more than 36,000 small fishermen in Indonesia, many of these small fishermen have maybe one boat, two boats, but they are now getting supply chain visibility all the way to their end customer, they’re able to pick who they want to sell to, pick the prices that they want to sell their product to completely transform that industry.

In the past, we were investors in Express Bee which is now the second-largest e-commerce logistics provider in India. We were the Series A investor there. So I believe there is a tremendous opportunity for innovation in supply chain management in this region.

Elise Tan: Thanks for sharing that. And to me, the supply chain is so key in Southeast Asia and India, because what we are talking about is not one, you know continental mass. We’re talking about places that need a boat to reach to navigate between the different islands and all that. So can you tell us a little bit, for example, in Indonesia, we have so many islands, in the Philippines, there’re so many islands, how can the supply chain be quickly enhanced and especially in this kind of market?

Ben Mathias: Well, the fact that you have so many islands makes the problem even more difficult to solve. But it’s not unsolvable. And the innovative companies figured out a way of using technology to basically give visibility to supply chains that could basically sit across multiple islands, multiple countries, multiple continents, it’s a tech problem at the end of the day. Yeah, Indonesia, as you said, is, I think 18,110 (22,000) islands, but that’s exactly what Aruna is doing.

Aruna fishermen are fishing across these 18,110 (22,000) Islands, and what the company has been able to do is integrate that supply chain. So it is possible with the right founders, the right technology, and the right business model, you can actually provide supply chain visibility across all these islands. And both Aruna and Janio are doing exactly that.

Elise Tan: Yes, I really love the story of Aruna. I interviewed Utari, who is one of the co-founders of the business and he was telling us about how they really go to each of the villages, educating the fishermen and the family, and giving jobs to the fishermen’s wives. I think all this is great in terms of also alleviating poverty, and increasing the livelihood of the locals in these markets.

So I’m really looking forward to how technology is going to transform and uplift lives. I also want to ask you about consumers because obviously, you have been on the board of many consumer companies starting with FirstCry, and then we have Kapiva as well, so quite a few. So tell us about opportunities in this area.

Ben Mathias: Yeah, I mentioned earlier about millennials and Gen Z. Now, these are new-age consumers. So a couple of things about these New Age consumers. One is they are the future earners of tomorrow, 10 years from now, they will be the people earning the highest income. They are increasingly aspirational, which means they want to buy new things because their standard of living has been going up, they want to try out new brands, and at the same time, they are value-conscious.

So there is an opportunity here for new brands to be created that appeal directly to this age group. And the way that they would appeal is by engaging directly with them. Now, this age group, as I mentioned, is very, very social media engaged, they would basically buy new brands that they identify with, and they would get that identification on social media, they will watch influencers that they trust, they will get the opinion of those influences. So the use of social media, the use of the creator economy is going to be critical here for the consumer economy.

And we are seeing the brand you mentioned, Kapiva, Kapiva has taken a 2000-year-old medical formulation, which traditionally in India has been something your grandparents gave you and forced you to have as a child, it was a bitter medicine that only your grandparents believed in.

Today, they have been able to package that and market it to people in their twenties, and all it takes is coming up with the messaging that appeals to that generation, coming up with something that they can identify with, and Kapiva is growing double-digit growth every month. So that is what the New Age consumer is going to be looking for, and I think it’s a tremendous opportunity for startups that are building new brands, that are willing to sell these brands, directly to consumers using technology.

Elise Tan: I love that you use the example of Kapiva because here in Singapore, you know, we have something called a traditional Chinese medicine. So I was just imagining how can TCM be popular, how can TCM be catering to the younger crowd, and I think this is actually a big challenge and I’m glad Kapiva has done it so well. I also want to ask you in terms of looking at the consumer market, is there going to be a difference between India and Southeast Asia? Because for me, I think it’s a question of curiosity, because we have very different levels of internet penetration, and we have very different ways of interacting with social media. So just wondering, would there be any difference that you foresee?

Ben Mathias: Not much difference, to be honest, I think these are very similar markets. Again, the population is very young, the population is very social media savvy, and the population spends a lot of time online. So the types of consumer companies we are seeing both in Southeast Asia and India are very similar. So we’ve invested in Kapiva in India, and we’ve seen similar companies in Indonesia, not obviously based on Indian formulations, but we’ve seen health food companies in Indonesia. We have invested in FirstCry in India. We have invested in Tickled Media. So very similar types of businesses.

So the trends that we see the good thing about being a Southeast Asia and Indian venture capital firm is that we can learn from each other. If we see a company in India that we may have evaluated, we may see a similar one six months later in Thailand. And we can use the learnings that we got from the evaluation of the company in India to evaluate the company in Thailand.

Elise Tan: Yes, and I actually especially love our weekly Wednesday meetings, where everyone from different markers is at the table and we are discussing from our different perspectives, how would the company look like you know, if they were to, from one market expand to another? Now what is the opportunity as a whole, I would like to actually go into FinTech because Fintech is such an important vertical in this part of the world. So tell us more about the opportunities across Southeast Asia and India.

Ben Mathias: Well, in terms of FinTech, I would say this region has really leapfrogged the rest of the world. We have gone straight from cash to phone payments. So we’ve leapfrogged that credit card era. And today in this region, India, for example, 40% of all mobile payments worldwide, happen in India. I think number three is Thailand. So Southeast Asia and India have definitely leapfrogged the rest of the world, there is tremendous innovation happening in FinTech. And let me just talk about two areas of innovation since we don’t have time to cover them all.

So, the first one is digital lending. And given the large population there is a large need for credit both from consumers as well as from SMEs. Now, realise that in this region, 60% of the people are either unbanked or underbanked, and most FinTechs today, are actually targeting that 40% that are banked. So there is an opportunity for digital lenders to target the underbanked who need credit, and this is both SMEs as well as consumers. So take the example of Kissht in India, which has built a very successful business as I mentioned earlier, just lending to the underbanked, or SCB Abacus in Thailand, which has also built a very successful business lending to SMEs in Thailand. So that is number one, digital lending.

Now the second thing I want to talk about here is open banking. Now what does open banking refer to? So this refers to the unbundling of banking services so that banks and financial institutions that manufacture financial products can sell them directly on consumer-facing platforms. So what do I mean by that? Let’s say I go buy a TV on Amazon, and I want to get that financed now at the checkout on Amazon, I can click a button and say yes, I want to get this, I want to pay for this in installments.

Now, there is a bank at the other end and this could be a bank I’ve never heard of, and I don’t even care to know which bank it is, but there is a bank at the other end that has given me that loan. And that bank is now accessing me through Amazon, without me having to step into the branch at all. Or let’s say I go on a travel website. Let’s say I go to Traveloka, and book a rental car to travel between cities and I get insurance for that rental.

It may be some stodgy old-world insurance company that is selling you that insurance, but that insurance company has now accessed me through the travel website. So there is a democratisation of the whole financial services infrastructure that is happening because of what we call open banking. Now, let me mention a couple of other very important developments.

So you may have seen in the news that the five largest central banks in Southeast Asia have agreed to create a common QR code infrastructure that is very exciting, and let me tell you what that means. So what that means is that if I have a DBS account here in Singapore, I can go to Thailand, and make a payment in Singapore dollars using my DBS app, it doesn’t have to get converted to US dollars and then back into Thailand currency. It is a direct payment, from my Singapore currency to the Thailand currency.

Now this is going to transform digital payments in these five countries. A similar thing happened in India a couple of years ago, few years ago, when UPI came out, and now everyone in India, even a small vegetable vendor on the street, basically asks for payment on the phone. Nobody accepts cash anymore. So I think the whole concept of payments, the whole concept of banking is going to transform in the next few years. So FinTech is a big area of focus for us here at Vertex.

Elise Tan: Thank you for sharing all this. I would like to also mention the example of SCB Abacus because recently, we actually interviewed Dr. Sutapa, who is the co-founder of SCB Abacus. I realised that the money lender app actually allows SMEs to get a loan within 90 minutes.

And to me, that is super fast and is great, because now we are looking at giving more liquidity to our sellers, who are in small enterprises, and then allowing them to do more business than before. And this really gives us a lot of opportunities for emerging markets to grow even faster. So I also want to ask you how the landscape is going to change in Southeast Asia and India.

Ben Mathias: So there are a large number of MSMEs, medium to small businesses in Southeast Asia and India. I think it’s about 110 million in India and 70 million in Southeast Asia. And in Southeast Asia, for example, these 70 million SMEs contribute to 67% of employment. Now COVID led to a very extraordinary shift in consumer behavior, because people stopped going to their neighborhood stores, and they started buying online.

So the SMEs realised that they had to transform in order to survive and so a very bad situation and COVID actually turned into a very good situation for the SMEs because by transforming digitally, they are now able to compete against the large e-commerce companies. So I’ll give you a couple of examples of companies in our portfolio that are helping with this transformation. So we invested recently in a company called Fairbanc in Indonesia. Now, Fairbanc digitized supply chain financing for merchants, without the need for collateral.

So small merchants typically don’t have the credit history to get working capital loans. Now using Fairbanc, Fairbanc actually goes up to the supply chain and gets the anchor member of that supply chain. Let’s say it’s a large consumer products company, a multibillion-dollar consumer products company that wants to be able to sell more through the neighborhood store. They’re happy to provide the collateral through Fairbanc, so it’s a win-win because the neighborhood store, the Warung in Indonesia can get the working capital, and the large CPG company can actually sell more.

Another example in India that we recently invested in is a company called ChattyBao that’s building a WhatsApp-based interface for the neighborhood Kirana store to be able to sell its product to consumers. So a consumer that is living 100 meters away from the store, instead of actually going to the store can send a WhatsApp message that gets sent to ChattyBao Technology and the tech enables the fulfillment, the payment, and the delivery of that product. So a couple of examples, I think, SMEs are transforming very rapidly and they have to, and they are.

Elise Tan: Yes, I think it’s so wonderful that we are investing in these companies that are going to empower the lives of MSMEs, you know, the owners, and also their families. And this is how we’re going to create impact as venture capital. Thank you so much, Ben, for sharing the insights, and obviously sharing your brilliance and this thing the hard truths for us in terms of venture capital, in terms of startups, and also life in general.

Ben Mathias: Thank you, Elise. It was fun chatting with you.

Our Guest: Ben Mathias

Ben Mathias is Managing Partner at Vertex Ventures South East Asia and India. Prior to joining Vertex Ventures, he was Partner at NEA. Before joining the world of VC, he held leadership positions at E2open and i2 Technologies.