Gobi Partners originally started in 2002 in China. Today they have about 250 investments across Asia with 40 per cent of them based in Southeast Asia (SEA). In a fireside chat with Kay Mok Ku, the Managing Partner at Gobi Partners SEA, we learned more about their investment philosophy and what to look forward to in a post-COVID-19 world.

Getting to know Gobi

• “VC is meant to bridge a gap, be it for a sector, an underserved market, or even gender”. This is what essentially drives Gobi’s investing philosophy.
• In SEA, they have three seed funds focussed on Singapore, the Philippines, Malaysia, and Indonesia. For Vietnam, they are tied with Grab Ventures.
• Their main fund is a growth fund. The growth fund is typically in sectors that have reached maturity; in the last decade it has been mostly mobile internet-based in SEA.
• For seed funding, they are keen on upcoming sectors such as supply chain fragmentation (COVID-19 has clearly ruled it out as an important issue), 5G enabled services, IoT, robotics, etc.
• They are lead investors in the majority of their deals and typically ask for a board seat.
• Their average ticket size is US$1-2 million for seed stage and growth is US$3-5 million. They also usually do follow up investment in their portfolio.
• They made 30 investments in the last two years and target for 10 this year. So far they have completed less than half of that target.
• Timing, market, and team — they focus on these traits in a startup.
• In 2021, they are thinking of going back to series A and focus on deep tech.

Also Read: Travelio secures US$18 M Series B funding round led by Pavilion Capital, Gobi Partners, to serve temporary housing demand

Coping with COVID-19

• Pre-pandemic was growth mode — now it’s all about survival mode. Its all back to basics. E-commerce, logistics, gaming are doing well. The pandemic in a way disrupted the landscape.
• The market is doing the job of cutting the competitions. All the startup has to do is focus on surviving.
• This is not a good time for exits but opportune time for collaboration.
• Fundraising will be challenging to figure how to survive, even it means considering hibernating.
• The gaming industry will never go away but its hit-driven, like movies. Localising games is a bigger opportunity in SEA.
• Down rounds are usually more prevalent during market downturns, so Kay Mok advises investors that the fact the company is able to raise at a lower valuation and survive, is better than the competitor who held onto its valuation and failed as it could not raise.
• What is more important– a new concept or a big market? Kay Mok says you need both and more. A new concept for a small market will not attract VC funding; a big market with an existing concept has no defensive moat so VCs will be concerned. You need more than both because execution is key!
• Maybe VCs will become more like influencers, and founders will select the best influencers they would like on their boards. In a de-globalised world, we may see more Chinese investment coming into Southeast Asia, as well as other emerging markets, given the barriers, they will increasingly face in developed Western markets.
• US tech market is dependent on foreign talents, whereas Chinese tech hubs such as Beijing and Shenzhen utilize the best talents from all over China. If the US does not shut itself from global talent, it still has a good chance to maintain its lead over China. However, if the US shuts itself to talented immigrants, all bets are off.

Good to know

• They have a focussed fund in Pakistan but not in any other countries in Indian subcontinent.
• But they are open to Indian entrepreneurs who are serving SEA audience.
• They have a TAQWA tech fund that looks for innovation in the Muslim market which will expand to the Middle East, Africa.
• Indonesia is as good as three markets combined in SEA.
• Gobi invests in startups outside of Asia who want to enter Asia markets. For supply-side, deep tech deals they look for expansion possibility into Southeast Asia. For demand-side focused and those that require an understanding of local market conditions, it might be harder to justify.

Pro tip

• Reading martial arts novels (that Kay Mok Ku really enjoys) is a great way to learn how to do business in China.
• The best VCs are the ones that behave like The Godfather. They spend most of their time listening rather than talking and they are very decisive once they make their decisions.
• An effective coach/board member generally has to have a broad interdisciplinary experience, be a good listener, and provide well-reasoned opinions for founders, especially if they have no other co-founders. Using a Chinese military concept, a VC is more like a commander to a commander than a commander to a soldier.

Resources

• Find out Kay Mok Ku’s views on the prop tech sector: Can SEA’s proptech come back to its pre-COVID-19 glory? Experts speak
• You can view the full recording of the webinar and know his thoughts on e-payments, the tourism industry, deeptech, and Indonesia here:

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