VC founder: AI isn't a bubble — but its founders need to think globally

0:00This episode of Beyond the Valley is sponsored by the Singapore Week of Innovation and Technology by Enterprise Singapore. Investors are always on the hunt for the next big opportunity, especially when it comes to tech. Over the past decade, an increasing amount of that attention has shifted toward Asia. At the heart of this story is Singapore, a small city state that's become a major gateway for companies and investors looking to tap into Asia's booming tech market. But how did Singapore build this reputation and what makes it such a critical player in the global tech landscape?

0:38Hello and welcome to Beyond the Valley. I'm Arjun Karpal and this is the third episode in the three-part series exploring Singapore's rise as an Asian tech hub. From serving as a home to major investors to becoming a key outpost for the world's biggest tech firms, I'll unpack how Singapore has carved out its role in an ever-changing industry. My guest for this episode is a global tech investor based out of Singapore who's been in the city-state for more than a decade, Magnus Grimland, CEO of Antler. Magnus, thanks so much for joining me today. Thank you. Great to be here. So, Magnus, I just want to start with your experience in this region because you moved out here in around 2012 and you co-founded Zalora, this online fashion retailer.

1:21That was more than a decade ago. When you made that move, what excited you about the region? For a while, I've been wanting to build something. And we saw this huge opportunity here where the e-commerce customer experience was really bad. Like it was much worse than when I was in college a decade earlier. And on top of that, you're in an environment with 600, 700 million people, the fastest digitalization the world has ever seen, the fastest middle-class growth, very stably growing economies. So you knew this was a huge opportunity. So we left to set it up here. And obviously, we faced some challenges you wouldn't have in some other markets, right?

2:00You couldn't plug into an existing logistics network in the same way, payment systems and so on. So there was a lot of infrastructure work on top of this building an e-commerce business. So from that experience, I mean, how has that shaped or helped you to move into investing? Well, so what was very exciting is that, you know, we sold the company back in 2015 to Global Fashion Group. And as we went through that, a lot of the people we have worked with left to set up the next generation of great businesses in the region, right? So you have Nadim and Kevin, who built Gojek,$23 billion IPO out of Indonesia.

2:38They used to work for us. We had, you know, Shopee. Chris Fang built Shopee, used to be part of Solora. Stashaway, Lockard, Aura, Shopback, like really great companies coming out of Solora. And on top of that, across Global Fashion Group, we operated all over the world in South America, in Europe, in the Middle East and other places. And we saw the same thing there, like Tabby out of the Middle East, which is one of the fast growing businesses there. Hosom Arab who built that used to be part of our team and Faraz who runs Noon. So we had this tremendous access to amazing founders all over the world and saw two things really.

3:17A, there's this high concentration of talent in informally successful businesses. And you see that everywhere. Like the PayPal map is a great example. Or you go to Stockholm with Spotify. Or you go to London with Revolut, wherever it might be. So we saw that hands-on. And the other thing you saw is that innovation is becoming more decentralized, right? The concentration of innovation value creation in Silicon Valley has been reducing every year over the last decade. And you know when we started building Solora, I think there was 38 cities in the world that built a unicorn. Now there's more than 200, right?

3:50So we saw those two things. We have access to great talent and we're like, hey, we're on the back of founders in building great companies all over the world. And what was behind the decision to set up shop here for your investment firm Antler in Singapore? Well, so first of all, Singapore is a great place to build, right? Regulatory is great, easy to set up a company, easy to access capital, great place to access talent. great global connectivity so in itself is a great place but we did evaluate the or do we do this first in the u.s do we do this first in the uk do we do this first somewhere else but the added advantage was that i built my last company out of here so we knew the ecosystem here really really well right we could access great founder talent we knew the vcs was a great way to get going but the ambition was always to be global so we're headquartered here now but if you look at the global team uh they sit all over the world somewhere in the us some in europe some are here and we're now you know active in in 27 locations globally how would you assess the the current uh ecosystem in in asia because it's such a diverse set of countries right around the region and i'm you know you you look at china and that's got its own internal ecosystem companies vcs uh you look at somewhere like india again very very different and then you look across kind of southeast asia so many different countries with different systems and so so much fragmentation so so what what is it like building a company here and investing here well so first of all your observation i think is is great that and there's that gives so many opportunities right in china you can really build anything like in within certain technologies they're they're leading in the world right now you go to india you you know there's close to like a million than engineers being educated every year like there's the biggest pipeline engineers in the world very fast growing economy is stable the public markets are becoming great.

5:39I think you have the process there where the first wave of tech companies were building mostly for India and now they're building for the world. You go to Japan, where you have a very advanced economy, where you can also build everything, very liquid markets, like the public markets there behave a little bit similar to what you see in the US. You go to Korea, where you have world-leading companies being built across very different industries from Blackpink and Netflix shows to very advanced technology, shipbuilding and so on. And then in Southeast Asia, you have very different places with very different type of talent, right?

6:18Like in Vietnam, you have a tremendous amount of tech talent. Indonesia, a very big market. In the Philippines, you have a culture which is very close to the US. In Malaysia, you can attract incredible talent in the same way as you can here. in Singapore, obviously it's one of the most favorable kind of business environments in the world, right? So you have this plethora of opportunities so I think if you want to build here in the region you've got to kind of acknowledge that and take advantage of those different strengths, right? So for example, we built Celora, we set up our tech team in Vietnam, we set up the headquarter here, we have a big part of the team in Malaysia, we have a big part of the team in the Philippines Indonesia was our biggest market and you use these differences as an advantage.

7:04Now, the tricky part is obviously the cultures are different all across, right? So it's a little bit more difficult than just launching into big US market. But those issues we have in Europe as well, right? Like the culture in France, the way you buy things and the way you brand things and also regulation is different than in Germany and so on. Yes, sure, it's getting better. Europe is getting more unified. But you see the same in Asia, right? So when we built, it was more fragmented. We had to have a quite tailored operation to each country. Now you can more and more access all of Asia as one market when it comes to certain things because regulation is getting unified and there are a lot of cooperation between the governments.

7:45So I think that we're entering into a really, really interesting time here in the region where within some technologies for probably the first time in a long time, the leading companies are coming out of here on top of obviously accessing a market which is the fastest growing in the world with you know if you can include India and China it's you know half of the world's population. I'm going to exclude China for a moment out of my next question because you know I know that the founders there are instantly have a go global mindset and they want to be global companies but for other founders in the region are they beginning companies with that mindset as well to go global, given, you know, already Asia is a big market if you put all the countries combined.

8:29But yes, it's fragmented. So you've got to deal with those difficulties. But you know, are they looking towards the US? Are they looking towards Europe to expand? They definitely are. And if you think about, I know we're talking about China, but if you think about China, you don't have to go very far back before that mindset was just building for China, right? So it's quite new that these companies are truly going global, except for hardware and manufacturing and so on. So it's the first time you've seen truly global Chinese software companies. And you're seeing the same trend start to happen here.

8:59Korea has been a quite insulated startup ecosystem. You go there, you have your own Maps app, you have your own ride-hailing app, your own e-commerce app. Incredible technology. And on chat apps, for example, they were leading in the world before almost anyone else. But they built for Korea. And same in Japan. And most of the successful companies so far in Southeast Asia has been companies building great platforms for the region, like Grab, for example. That has changed a lot over the last few years. And you see it in our portfolio, right? And it's also one place where we can be very helpful being a truly global VC, being present in 27 locations globally.

9:36We can help founders with that globalization journey. And we see the most exciting companies in the Antler portfolio are companies who go global from day one and we see this out of the region right we had you know aerol over back there in 2019 it's now the world's largest easy marketplace they're operating in every single market in the world and they were formed out of here we just backed this incredible process engineering company ai out of singapore and their first customers are in europe the first companies are in the us so we are really encouraging the founders here now to you know not think that they should only build for the region and be worried about global competition.

10:13You can build world leading companies out of here. People are working insanely hard, incredible talent. And I think those are going to be the best companies being built out of the region going forward. And so that's exciting. And it will add a lot of value to the world. Like suddenly I have another two billion people building great products for the rest of the world. Yeah. So what, you know, from the investment perspective, what are you excited about? What themes are you investing into and what are the opportunities you see uh from yeah a vc perspective yeah so um always a little bit kind of wary to answer that question because we we have this philosophy that we back great teams we try to find the people are building the future instead of uh predicting the future so i don't spend a tremendous amount of time thinking about you know what's going to happen in this field what's going to happen in this field where are you going to have the most value creation what we think a ton about is like who are the best founders in the world how do we get access to them and how do we become a really good partner to them as they're building their business so if you look at the antiportfolio we do everything from really deep tech companies that are doing ai on edge chip design space technology new medicines you name it to technology enable companies where technology is important for scaling but it's not the core of the business right so so we see really great opportunities across sectors obviously a big part of this is the current platform shit we're going through, which we'll probably get to later, AI.

11:40It creates these opportunities across industries in a way we haven't seen in a long time. So that's how we think about it. But, you know, personally, obviously, there are areas I'm excited about. I'm very excited about the healthcare space. I think it's insane we live in a world today where, you know, hundreds of millions of people still don't have access to basic healthcare, right? When I finished college, me and some friends we went to northern Africa to do development project there. And you literally, we told people basic first day, they built a soap factory. We created some access to capital.

12:16And people were dying off of things that you could literally treat for 50 cents, right? And that's still happening in the world today, which is crazy. And on top of that, in the developed world, I think in the US now, healthcare spend will soon be at 20 % of GDP. And each additional dollar being put into the system has very low ROI. 92 % of healthcare spend is spent on treating. 80 % of that could have been avoided by simple changes in lifestyle or early detection. Technology can kind of enable all of this in a way that we've never seen before. It's obviously a tricky area, but it can have an impact on the world that nothing else will have.

12:57And AI will be a huge accelerator of that. And you see now the bigger bets than ever have been made, I think, in that space by new founders who really want to take it on. COVID there, obviously, was a horrible tragedy, but it actually helped, I think, in the long term to make regulation easier, get technology faster to the market. So there's a lot of interesting things happening there that makes it, I think, a really, really interesting space. So we'll get on to AI because it is the topic of the day, of course. But in terms of how you approach investing, because you mentioned it that you invest at an early stage, you want to back great founders.

13:31who have good ideas, but you're also investing in companies that may not necessarily have revenue, right? Or even potentially a product yet? Yeah, sometimes we just back a great individual or a team of a few individuals. So what makes a great, like what are you looking for? So the great thing we figured out kind of looking at all the successful companies across the globe up until now in our own portfolio, and so far we had close to half a million founders applied to We have quite a bit of experience in kind of looking at these profiles now. It's that I don't think anyone is kind of born a founder.

14:07You develop a certain set of skill set that makes you able to really drive hard problems forward and have a big impact on the world. So the three things we think are the most important is A, some spike, right? Is there something you are better at than most other people, right? For example, you might be incredible with connecting with people, going deep into their lives and understanding what they're for. That's a real spike. Some people are very deep in a specific algorithm. Some people solve the Rubik's Cube faster than anyone else. You want to identify something like this where they've excelled at some skill set.

14:48And Founder tends to be quite spiky. So they might not be great at many things, but they're really great at something. and we want to see that. And so that's one. Two is drive. And I think drive very often is confused with passion, right? And there's a lot of passionate people out there who never get anything done. So I think passion in itself is great and it's important and it creates happiness. But for us, drive is really raw ambition combined with the ability to execute, right? Do you really want to achieve something truly remarkable and have you showed the ability to move things forward? And the third thing we look for is grit.

15:28And I think this is overlooked a lot because there are a lot of amazing profiles that has amazing spikes and they have a ton of drive, but they just give up too quickly. And I think founders really need to go into building a company with a mindset that failure is not an option. Sure, if you've failed in the past, you learn from that and you go on. But when you're building something new, you really need to be ready to break through walls, put in five to six to seven, eight, sometimes 10, 12 years of your time solving a very important problem. And if you look at the best founders in the world, they all experience insane difficulties.

16:01Like Elon Musk, which is probably like the most successful founder in the world right now. You know, all of his companies have been near bankruptcy like dozens of times. He ran out of money, nothing worked, product didn't come to market. The first Tesla was like three years delayed. SpaceX blew up all their rockets and he just powered through. So very often it's not the best team that wins, but it's the founders who just don't give up. So for us, it's a spike, it's drive and grit. And I think all of those things you can develop, right? You're not born with them. Sure, you're born with some, you know, some skills that you might be better than anything else.

16:38But we really think that you can develop these things. And it doesn't matter whether you went to the best schools in the world and worked for the best companies, or if you grew up in a slum in Mumbai and you got a job early in Flipkart and you excelled there. Like you can find these characters everywhere that at some point in time might change the world. And if you look historically, that's what happened, right? Like in the U.S., 70 % of unicorns in the U.S. as a first and second generation immigrant, like you never know where these people will come from. But that is what we're looking for. And those are the type of people we want to back.

17:09Really interesting. Fun fact for our listeners, of course, you used to be in the Norwegian Naval Special Forces. Is that what taught you grit? It definitely teaches you grit, but you also need a certain amount of grit coming in there. But I think the Nameshiel's experience is incredible. Obviously, I was just there for a short period of time. My friends have been, many of them are still there. And they've been deployed in every single conflict in the world and done an incredible job. So, you know, kudos to them. But I learned a lot about mental resilience there. And, you know, you just got to go, if you're going to make it through that training and education, you really need to go in there with a mindset that there's no option to fail, right?

17:54If you ever think about, oh, I could just do this instead, you will just not succeed. And I think, you know, founders who go out there and let's say you're leaving Google and you're like, hey, I might try building this startup and in the worst case scenario, I can just go back to Google and get free lunches and massages on Fridays. Then, you know, you're not going to succeed as a founder, right? So you just got to like throw already all other options out. you've got to cut all the bridges behind you. I like to create like insane social pressures. I always have been speaking very loudly about what I'm doing.

18:25Also now obviously with Andrew, like a lot of my friends and the family have invested into our funds. You know, you just got to do whatever you can to, you know, make this the only option and build that mindset that failure is not an option. And then I think more likely than not you will succeed. Let's talk about AI then, Magnus. It's everywhere. You can't go to a tech conference without talking about it. You can't go anywhere without talking about AI. But going back to your investments in people, how do you invest in the early stage when it comes to AI? Yeah, so what is quite fascinating with our investment process when it comes to AI is that when you just look for the best people in the world and you want to back the best teams in the world, then they tend to build around the biggest opportunities, right?

19:18So obviously, AI has been around for a long time. And if we looked at our portfolio and how we've been investing throughout the years, and, you know, in 2019, which was our second year, we made 30 AI investments, right? And in 2020, we made more than that. And this is kind of slowly grown every year. So we were quite early on investing in AI. And these companies are building really, I think, across kind of three different areas. One is infrastructure. There we really care about backing the best people in the world, right? If you're building a fundamental model or you're building a new chip design or you're building decentralized AI, whatever it might be, you need to be amongst the best people in the world.

19:59It doesn't help that you're the best person in the Valley or the best people in Singapore or the best people in Japan. You got to be the best in the world because, and you got to have deep experience within that area. So there you look for like deep, deep sector expertise and people with a really strong background. So that's one. Then I think for the application layer, which right now, if you think about it, over time, when you see these platform shifts, more and more value accrues to the application layer over time. In the early days of mobile, the people who earned the most amount of money was like AT &T, Verizon, Zingtel, Ericsson, Nokia, these types of providers.

20:40But now, if you compare them to TikTok or Meta, they're small businesses. And that's what's going to happen in AI, right? So the infrastructure is going to accrue the most amount of value in the early days. And over time, the application layer is just going to dwarf all of that. and they're the type of people you're looking for are the same type of founders you built on the mobile platform shift, the same type of founders you built on the cloud platform shift. I think in the early days, there's even more opportunities for younger founders because there's still like simpler problems that are there for a taking where you don't need 10 years worth of experience to solve them.

21:13So there are some kind of nuances like that. But in general, you're looking for the type of founder I described earlier where it's going to be the best building within that specific area and build a really great business. So those are the kind of two areas we're very excited about. And obviously, whenever you have a trend like this, there's a lot of noise and there are a lot of people who throw AI into their pitch deck. And there's a lot of like wrappers on fundamental models and people who say they have a proprietary data set, but they don't and like all this type of stuff. You got to avoid. Yeah, no, absolutely.

21:40Look, there's so much to unpack there. I think you partly answered what I want to ask you, but that is, you know, where is the value going to accrue over the longer term? Because we think about now and you can count the the companies making money from ai on on a hand right you're talking nvidia you know and the other chip makers you're talking about the hyperscalers over in the us building out this infrastructure open ai is a fundamental model company trying to do infrastructure they're losing loads of money right now um and then you've got other model companies that have you know popped up across europe us uh in asia and elsewhere um but they're not really making any money so over the longer term you sort of were talking about the application layer being where you think the value is going to accrue does do you think that those companies that come out in that wave of the application can dwarf the size of what we see you know with nvidia and microsoft these days for sure right and and i think there's there'll be kind of three types of application it'll be the big platforms, you know, similar to what, you know, Amazon and e-commerce, there will be more specific applications, right?

22:52Like TikTok, let's say global applications. And then there will be regional applications. Like if you look at Uber, for example, you use Uber in the US and Europe. Here you use Grab. You go to China, use Diddy. So those, I think, are the three major areas. and sometimes in the early days you can get a little bit confused, right? Because if you think about e-commerce in the early days, Amazon didn't earn any money really for what, 20 years or something like this, right? And the only people who were earning money on e-commerce in the US in that period of time were logistics providers, you know, server parks, warehouse managers, like, you know, all the auxiliary infrastructure to e-commerce, they were pumping one in that period of time.

23:39But obviously, if you look at it now, the value of Amazon versus any logistics provider is, you know, this drove you completely. And you're seeing the same thing with AI right now, right? Like a lot of values occurring to data centers, to NVIDIA, to the people who have big, the big cloud providers, like they're generating an insane amount of revenue. Now over time, that part of the infrastructure and the revenue being generated there would be a very, very small part of the whole. And so the opportunity, I think, is huge in the application layer. And I think, you know, the platform level is quite straightforward.

24:15I think global applications, people can understand pretty well. I think on the regional side, it's interesting to see whenever there's a big platform shift, you don't really know at the outset where you will have global winners and where you will have regional winners. And in AI, it's the same. Our assumption is that, you know, for example, within healthcare, within fintech, within legal services, things that require physical infrastructure, there's probably an opportunity to build regional winners, right in the same way as you saw for mobile and e-commerce. And then wherever it's mostly software and you don't require physical infrastructure for global distribution, you'll probably have global winners.

24:55So within all these areas, really, really great opportunities. Obviously, the trillion-dollar-plus companies are going to be in category one or two. And then there's going to be a ton of, you know, one to 20, 30, 40 billion-dollar companies in the regional application there. Do you think it'll be harder to build a moat, a defendable position in the world of AI? The reason I ask that is, if we look at the infrastructure players now, right, they have huge amounts of capital to deploy, and investors are happy for them to go ahead and spend, you know, 100 billion plus a year on infrastructure per company.

25:31NVIDIA's moat is clear. It's very much seen as a leader in the GPU space. Then you get to the model companies, right? And that world is moving so fast. You know, at one point, OpenAI's model may be the best, another something open source from China may be as good, right? But then I look at some of the application layer, the early application layer now, You might think about, I don't know, translation companies or video generation companies and these kind of things using AI to do this. Why? But actually, you could say, well, could one of these model companies just do that? Is that a defendable position?

26:09And so because the technology can do so much, does it then become harder to build a moat in AI as a company? I think it's definitely harder. some things are still true as any other platform. If you truly have a technological edge like NVIDIA does, for example, then you'll continue to win. If you have managed to create massive scale, which gives you access to capital resources where you can basically develop and invest more than other people can, like ChatGPT is doing or OpenAI is doing, you create a different type of moat than only technology. So even if the fundamental models are getting closer and closer in their capability, you actually still have a bit of a platform mode, just given your scale.

26:59Now, in the application layer, the big issue you have is it's just way faster to kind of replicate any technology, right? So if you and I built a legal tech business, we could build that faster now and cheaper now than we could in the past. but it also means that like a billion other, well, not a billion other, but like hundreds of other people could build the same model very quickly. So distribution takes on much more of a role in selecting the winners in the application layer than we've seen in the former platform shifts. And distribution is getting trickier because a lot of these new platforms are sucking out eyeballs, right?

27:35So if you look at, you know, ChatGPT is about 800 million active users or something like this, right? Obviously, a lot of time has been spent there that is not being spent elsewhere. So all these things is just making distribution insanely important. So the way you think about your B2B distribution strategy, the way you think about, you know, getting to consumers through virality, you know, these things takes on a new importance because that over time will be your malt and not necessarily the technology unless you truly build something that is very, very hard to replicate. But if you think about some of the faster growing AI companies in the world right now in the application space, The technology itself is not that advanced, right?