Early Stage Investing in Asia | KBW2023

ladies and Gentlemen please give a big round of applause hello hello everyone Welcome to our panel about early stage investing in Asia um I'm very excited today because we have our panel of distinguished experts that are on the Forefront of early stage investing in the Asian market my name is house I'm a general partner at agnostic fund a liquid token fund were based out of Thailand and I will be your host in this session I'm very honored to introduce you to our distinguished panelist charin from seon Capital Sierra Sun from C Square adventures and Gabriel from Arc he's coming soon Asia with its diverse culture and economies post a unique set of opportunities and challenges let us dive in Sharin can you tell us more a little bit more about yourself and also explain your firm's investment thesis and philosophy sure thing hey guys Sharin here from seison Capital we are the investment arm of a Japanese financial institution called credit Saison where we are one of the largest credit card companies as well as one of the largest wholesale lenders to different banks non-banking lenders and quite a few um Tech Unicon that have embedded fintech businesses and for crypto we kind of invest from ideation stage to series a and have also invested in more than 30 funds so far crypto and non crypto um and in terms of our investment Focus right now I guess we we pretty much focused on I guess quote unquote institutional defi as well because so prior to seison I was actually one of the co- contributors for one of the largest AUD books where at Peak it used to do um 1.4 billion in Daily volumes um and and and then like I decided to I saw this trend that a lot of banks and institutions were really keen on crypto but they were not really super keen on how it is currently done which is I guess like a lawless plan right like while West and and then we kind of decided to see what are the benefits to crypto uh crypto and a bank and the biggest benefit for any new technology is getting rid of the cost so anything institutional def5 we kind of mix trafy and some of the defi applications I um we definitely have a big focus on that and which also includes rwa we kind of have backed a lot of the unicorns um in Southeast Asia and India that have been doing fintech private credit as well so we are also pushing them on chain as well and helping them incubate their um cryp or crypto subsidiaries as well and we focus a bit on privacy plug and play um as an optional privacy route instead of like just having a chain that's where users don't have options but have privacy and lastly because of the credit card angle we are also quite focused on uh the payment layers thank you Sharin Sierra can you yeah I'm Sierra s founder and managing partner of cqu Ventures uh we are a early stage rep three investment firm and uh prior to found C Square Ventures I was the vice president of HB group had a listings Investments and also built um institutional business unit and GL markets um in terms of growth for the exchange um joined crypto in 2017 and prior to that I was doing traditional Finance in New York Management Consulting with BCG and uh this is my fourth I think KBW week and this is where we had it in 2018 so very glad to be back and a little bit about um C Square Adventures we are actually new started C Square Ventures after you know um the whole China shutdown exchange is saying 2021 and then hob was sold to third party so uh that was like a year ago and we raised 100 million last year from reputable investors we actually are very lucky to have a local supporter here is the hanha group uh which is one of the largest insurance company based out of soul and um they investing us as a large LP uh we also have other investors like my X portfolio companies um polygon a grand Avalanche uh immutable Gala game um and also some market makers I used to work very closely with like GSR Kronos net from the Europe and also web to investors like uh Google where Google's first and only crypto fund investment so with all of that resources we aim to bring the gap between web two and web 3 and really be providing Hands-On um help and op personal expertise for our portfolio companies so our SE is very very simple we just um try to invest in them early and guide them through the way for not only go to market for the product and also how to build a token around it as you know I was in charge for listing for a couple of Cycles been through a lot of building the community and listing strategies and that's the kind of help that we can provide to our um our portfolio companies as for the caeses um I guess that's pretty much it we're like agnostic um we don't just favor a Chan over another or favor any ecosystem over another or any region we try to become the East and West Market uh bridge and also um invest agnostically into all of the web threee um early stage um protocols thank you SRA yeah very impressive um what are some exciting sectors in crypto you want to talk about and that you're investing in charvin um okay I guess I can went through this but institutional Defi and rwa for example um is one of the lowest hanging fruit like T bills is sure like I think pretty easy but um what is really key uh great is I guess the private credit models especially in like southeast Asia uh Latin America where people are uh those guys are doing like ridiculous amounts of volume and the benefit of them going on a blockchain is they kind of reduce their um backend cost by 26% or so if they go on a more High trut chain and low gas fees chain and that that's like one of the biggest value at and you know um we are also exploring like quite a bit of collaboration between these kind of companies uh the I guess web 2 web 2.5 companies and some of our crypto companies that are purely onchain like for example like a stable coin protocol um and basically tokenize the private credit and you know use that as collateral for this minting of the stable coin and just exploring some easy use cases like this and with regards to the other thing things we are focused on right now is on the defi side um we are I'm we are still super bullish on the whole audiobook model um but not a pure onchain AUD book because we I mean I kind of was part of it and we saw that it was really really tough to be sustainable unless you have big companies just uh giving you cash non-stop like every week um and so we kind of believe more in like a hybrid de a hybrid uh model for audiobook but that being said like if if you really want um real adoption and activity happening you need an AUD book and amm will just not work and I guess in terms of um ecosystem side we again we have no bias towards anyone but the only thesis we have is we want to back like leading applications leading fiber optic applications you can say instead of dialup applications cuz if we get Mass adoption today on on whatever changeed right now like pretty sure I think most of us will be kind of down because the networks will it's it will be impossible for this to have for the networks to take in so that's why we kind of focus on more upgradable High troop with low cost chains right now that also are kind of fit in with the regulatory uh requirements um on the D5 side um you know the recent hes rwaa and ld5 has definitely been a focus we get inflow of all these kind of deals um a lot every okay um and I I actually agree a lot on the aor book side U one of the portfolio that we uh backed and actually double in down investment is called orderly that's a order book infra um going from near to to multi chain now so I I think from exchange U background the central exchanges um which is not regulated I don't think it's going to work um I think the whole market share for Central exchanges like binance you know like all of the other ones even like Hobe right I think the market share for them is going to be just continuing decreasing from today and now on and regular exchanges with license um with local support um I think it's going to be taking a lot of that market share and then on the other side it's going to be decentralized exchanges with order book experiences that can actually facilitate institutions to trade on and also have a very friendly uiux for on boarding a lot of the retail especially from web to because now you know daxes are not really working well from avoiding Mass adoption of users um so that's like something we've been continuing to focus on orderable daxes and especially you know defa infra that powers up those um kind of uh daxes that can actually aggregate a lot of liquidity from different CH and different Market um and then we're also continuing focusing on cash flow business I know it can sounds crazy for for crypto projects especially in bare Market but uh platform business like exchanges like nft uh platforms actually still very very uh profitable so one of the large bats that we did um this year is called ubox is a nft Marketplace based out of Hong Kong now as um you know the regulations in Hong Kong has grow so friendly basically three say they're now approving ETF ETP they're now giving out exchange retail license and um also they are um classifying uh they classify just just walk walk up uh you need to take a lot of so I guess tonight to make up for it and uh yeah and then also Hong Kong classify nft as a commodity so that's huge news right you don't actually need a license to sell nft in in Hong Kong anymore and the reason we B ubx so much is because of the operational expertise they can bring in and I think that's one of the Adge Asia has that's why we're spending so much resource and time being here right like KBW and then Toka next week as because we see um user operational skill sets from Asia based exchanges actually have a lot of core competence compared to you know West they've definitely lead a lot of the um infrastructure and Tech development um so you know ubox was able to make 180 million Revenue last year and it's still sustainable as of today and we're really bullish about a lot of the marketplace actually happening and growing out of uh Asia as um we have lots of great IP not just Korea but also you know Japan and other very culturally deep countries and that's something we're very U bullish about and also investing into gaming Studios exploring um onchain games and then last but not least um ZK um we are we are one of the early investors in this stage that uh backed a lot of the ZK protocols and infrastructure like ZK link and DK power did projects and uh data analysis privacy protect so yeah I I just the list keep going on but uh happy to talk to you guys off stage about the more things we invested in that's great um yeah um g hi Gabriel hi maybe you can tell us more about yourself and your okay sure uh okay look we got 15 minutes left so keep it very short hi Gabriel U sorry I'm late I underestimated or overestimated how much time it takes to go from gangam here so I do apologize uh very quick one Deputy CEO of uh arc Arc is basically a digital gang we are reimagination of a collective uh we're based in Asia uh we are membership club that's basically nft gated um some of the things which the community does uh there about 40 members from arkc uh here at KBW this year not just from Singapore uh but from all over Asia and Beyond as well um we run quite a few activities anything from simple Gatherings meetups um to basically talking about about um investment opportunities um allocations um as well as uh Duty and advisory on top of that um and some of the fun stuff but uh we'll get into that uh as we go along the panel thanks thank you Gabriel um apart from providing Capital what are some roles you or value ad you you give to the project sure so I guess for sayon Capital although I kind of work for a bank right now uh most of the investment team are not Bankers all of us were operators before and we're part of early stage companies and were part of it until like it kind of grew to unicorns or something and so that that's definitely one I think point where like for example last night also Founders can call me at 2 3 a.m. and you know I don't mind like even if they just woke me up from sleep or whatever but um that's like one thing being able to relate because the typical Banker VC it's it's really hard for them to relate to what a startup life kind of looks like and and then like secondly from seison side we also have like uh what an 80 Engineers or so um that we can deploy for our portfolio companies as and whenever needed um based on the requirement and priority because there's quite a long list of you know for close and some of our other Venture fund portfolios portfolios as well that also want to uh get access to us and then secondly is especially in the rwa space um we have been contributing like a few billion dollars um to in every year to several rwa fintech companies um in Southeast Asia India and obviously Japan and that is definitely one angle we are looking for in the crypto side maybe not start so big we're doing a bit small stuff so we can help a lot with the underwriting process the overall distribution process and basically how to build a proper lending business right and and secondly we is we also invest in other funds right so that kind of helps quite a bit um whenever funds are looking to raise money um because in the bare market like sometimes you can't get in the door without a warm introduction unfortunately um and secondly and lastly is you know like I personally uh we personally also have like a a few people that kind of help some of our D5 portfolio companies a lot especially with the smart contract and also and how to incentivize market makers to come on and um how to get the volume up and running because that's what we've been doing like last few years as well and yeah hopefully that kind of helps them I think I already touched upon this um a bit um but the things that we do right so first of all is the token side we help with the design of the token you know go to market for a token um help them with exchange listings um building up the community as those were kind of the things that we've been doing in the past few years um and um also you know how to how to to do like a better secondary Market strategy and access to more liquidity um for token recently um and then the second part is uh more about I guess creating an army for the portfolio companies to actually grow right not just the people we worked with in the past years RP and also our protocol itself so for example some of our prot protocol has been really helpful to my other portfolio companies like um social related projects like cyber connect and project Galaxy are both my portfolio company and they were able to through their campaigns bring a lot of onchain users and real token holders for my other portfolio companies and also uh technical support as well that's the sort part uh we do have an in-house ZK Studio who can provide technical support and especially in this market a lot of pivoting happening so we would sit on calls with uh portfolio companies and guide them through um the private for the project as well yeah um I think the the both of them covered it a lot more um I think AR as collective is a little bit different um we don't have the underwriting responsibilities and you know we've got you know our own Builders and everybody in the community uh I think one very big difference is ties back to what we do in Arc every single member you can just pay to enter like a typical Country Club where the more you pay basically the year earlier you get access to a little bit different um everybody has to be vetted and verified so basically when it comes to either sharing of deals looking at deal flow looking at what's new um you know it basically serves as a very good deal diligence process and everything like that uh with regards to like token design and everything like that you know with all due respect I leave it to the experts to do that uh but one thing Arc does very well especially when we look at either deals or we look at other projects um it serves as a base of uh dual diligence uh in a very short way thank you Gabriel um charvin what are your thoughts about layer ones and Def how are they different in in Asia compared to the rest of the world sure so I guess how we think about their ones um so maybe if I go back all the way back to 1990s when dialup was 56 kvps um I think it was pretty useful I think it was pretty okay because there was not much usage of I guess the internet back then but then then you look at I guess things like Bitcoin ethereum um I think Bitcoin is 1 point something MVPs I I know you have the lightning Network and everything but it doesn't really affect too much in the outcomes like that's all we should be caring about right and and then for ethereum it's kind of like also some single digit MVPs um which is I I guess you know from the 2018 to 2020 region maybe it was okay because the usage was not too much um but you know now that you have Ines and Trad fires like us coming in or or Bank Bank of America that's actually coming in um those kind of uh efficiencies are not going to help anyone in the long run and in fact could actually help bring down the ecosystem right because there's a lot of flow that comes in and we tried every we tried every blockchain like more than 60 blockchains just to figure out what works for us what what's going to help our loan book a bit and also the main variable thing is the gas cost for us like any Financial in institution the cost to income ratio is always a trouble and anything to do to help improve that helps the company overall very well and so I guess like and then if you look at more High trop put upgradeable chains that's what we want to focus on so it can be Sol can be appos um yeah like we we kind of focus a bit on that because we also want to focus on ecosystems so infrastructures that have been getting approvals or at least getting some form of endorsement from Regulators in the countries we are operating in and where we get the letter from The Regulators that say you know it's okay to build on this chain um because it's not the same for every chain right now unfortunately but you know um tldr is high triplet low cost and you know we just get our stuff done we don't care about the tribalism and with regards to defi um obviously like I think speed matters a lot um for example if if you're super slow in the chain it you know like Traders pay like for example uh hfts pay like $25 million a year just to get an extra one millisecond of latency or something and it's it's not something people I I think people in crypto just take it for granted the speed side like so what it's fast or whatever I mean it's about the info at the end of the day more than everything else um and the results that come from it um yeah so like we we just want to focus on anything that is efficient and we won't get in trouble later down the road when our operations are too reliant on it what you want to add views on ler one yeah some your views on layer one or D5 um so for layer one right I okay so back in 2017 we invested in a lot of the layer one and um uh back then in 2018 when liquidity was crazy some of them listed token performed really well without even working me that um I think that all narrative related story is gone now and the newer L one and upcoming winner I guess is a I think going to have um a few qualities first of course is increasing efficiency and have an TPS that can at least hold was currently on chain not having like a crazy crazy high gas fee without um sacrificing decentralization or security to a certain level because I just think that you know it is already a mathematic problem it is a impossible triangle right but you don't have have to put 100% of it or all decentralized or you know going stream but I think there are balances that can be found um we've seen some really good design uh right now with the new newer um upcoming updates with existing layer ones and new layer ones and I think the second most important quality is um to go to market not just for users but also for on boarding grade developers and you also need tons of capital resources so all all of these things um goes together to build ecosystem because layer one um you know we can think of as in the web to World iOS or Android right you need all the good developers you need the users and access the market and also support um on the operational side and capital size to make sure I actually work um curious to see what's going to be in in web stre for layer one or Layer Two ecosystems probably not going to be you know win or takes at all um probably we'll see see still lots of them existing in a few years um but as a role of the investor we're just you know trying to find the best team that builds on all the different layer ones and I think the future is going to be multi chain cross chain anyways thank you Sierra Gabriel you you want to add I think there are too many layer ones yeah yeah I I I don't know I'm very simplistic I think there are too many layer ones yeah a lot yeah I think look as an investor I think it totally makes sense right why do we invest in why do why do why do any of us invest in layer one layer twos and everything because there's an opportunity there's money to be made right um obviously we look at the potential of blockchain and everything God bless that that's why we're here all in this room that's why we're on this stage as well but the opportunity here with layer ones is is there is an investment opportunity without a doubt right because we're all looking for the ethereum 20 cent moment right that's the reality of it and also you know we comes to what sarra said about you know Mass adoption the way I see it is that it's not about Mass adoption the reason why and and you know all du respect I know Shin's involved in a lot of the other protocols as well right Shin's a member of Ark as well it's that at the end of the day like it's efficiencies you know cross border cross chain bridging blah blah blah all this really matters but the end of the day is where is the opportunity lie right and I think I think that's also one thing that a lot of us look at where does the opportunity lie right and some of these chains are more awesome some layer twos layers trees maybe next time next year we're talking about layer five right it's at the end of the day it's what's more efficient where's the opportunity where's the opportunity to scale my business where's the opportunity to make money right that's why we all here right that's the reality of it so that's my take that's very true I know we've had this conversation before house okay so um I think last questions you have a few minutes left how do you guys do risk management when invest in early stage pre what I mean does anybody know any better real question does anybody really know any any better right like you know like yes you know we can come up the usual spill right look at DD you know bet on the founder and everything like that but like do we really know I mean if you talk about Venture Capital investing right whether is it web0 0.

5 web 1 Web Two web five whatever it is right we're all in the business of investing in the future and sometimes we make wrong bets right I've made plenty of wrong bets I made some bets right and what else can you do like is smiling down there because like you know Arif is a very good example guys Arif by the way is one of the top top game studios in Indonesia he's just sitting at the corner pretending nobody sees him that's why I'm pointing him at on purpose but like same thing as well you you don't know a lot of us passed on Arif when he was trying to build a game 12 years ago now he's one of the top game studios I look like a idiot for not investing in him right he works with square inex and everything a final fantasy and everything right so what can I say pray sorry I just want to as some fun you guys look bored I'm sorry well I have to say I disagree on this we do pray to but we do have treasury duty to our LP so uh I I guess you know it is a um a lot of luck right if you can actually get to invest in uh say Tik Tok pretty early and make you know thousands of returns but there are things that we can do in the process to make sure that uh we can see some of the very obvious red flags so for example we've seen a lot of safe investment plus Tok warant recently compared to Saft um it there are some teams that actually put in the work and work with the legal team to understand how the ratio works and how they can design the whole um structure of the fundraising so that's one thing and then also their understanding of trary management so they can actually survive right um that's one thing and then technical due diligence to make sure that uh what they're building uh aligns with with uh what they're telling us they're building um and also um you know like like you said there are some really good Web Two Studios coming into web three those are successful um experiences with building something from scratch and um teams with successful experiences uh was building before is definitely one plus um and also their understanding of uh of token whether the token go to market and product go to market can be two separate things and they're actually willing to learn about it and deploy more resources into building the token very successfully so there are you know kind of like due diligence process we have to go I guess no but you see the due diligent process on this right is that if the investor also gets involved advisory of tokens right as startups and as Founders you also going to make sure that an investor is not just looking out for their interest but also the portfolio's interest as well right so it's very very important that also that the balance is struck is kind of like the balance of the force where you know you're got to make sure that you know any tokenomics and everything and I think that's why you know like Siara and the team do a fantastic job because it's always about that balance right it's about the advisory right especially with token warrants in this example right or what cison does as well right but I think one thing as well is that what exactly is that balance between advantages to the founders versus that right at the end of the day tokens is a bloody Beauty right you don't have to give up equity you know they to do what Travis clanic did in Uber and everything and even like what Anthony did with grab in Southeast Asia right tokens is a bloody Beauty right it allows us to expand it allows us to scale businesses it doesn't have but it's about that balance as well that's also very very important and then pray to uh to uh Jesus Buddha and Satoshi oh yeah everyone generally in that order yes let's hear from charin Yeah man they kind of covered pretty well um but in with regards to our due diligence process um obviously like all of us kind of come from a technical background so we do Grill our Founders a lot on the code um and try it out ourselves and we take maybe one to two weeks per deal for it and a minimum for us is we need to do at least eight reference calls on a founder or anyone from like the key co-founders or something and where for us like um obviously it's a very conservative well Japanese Institute So like um anything to do with Integrity ethics it kind of comes really important to us um and we can't be you know investing in any company that well um has been doing weird stuff right um and surprisingly like we thought like some Founders were really good and then after like fifth reference call they're like oh my God this guy this something two years back like this and immediately the deal is cut off like we take um the integ and ethical side really seriously um and even if it means losing money and we have lost I we have give up on quite a few deals that way um we we don't care um we just want to back the right ethical Founders who are doing the good job that they are supposed to do and um in terms of like other stuff we are in terms of uh diversification like it's more important to well diversify amongst your different sub sectors so that you're not heavily exposed I mean there's not much you can do like as a venture fun to be honest to so-call have a risk management process um but that being said we are starting a liquid fund so yeah we could probably hedge our bets as well from there um but mainly focus on the Blue Chip tokens yeah I I I like that the eight reference calls is very good Gabriel you want to talk no no nothing yeah I think we we've come to the end of the session so it's been a fun and useful session I'd like to give thanks to our speaker and thank you house charv Gabriel Siara um and also the the audience for being such a wonderful they're just here for the air conditioning I'm very sure yeah so let's continue to innovate and collaborate and Sh help shape the future of blockchain in Asia thank you thank you everyone thank you thank you um you could seen a very honest point of view for every single thing um