Why replicating Chinese firms in Southeast Asia may be ‘impossible’

This article is from an episode of Asia VC Cast, a podcast hosted by Daniel Song. This is heavily revised from the original show transcript. For the full interview, go here.

Ian Goh is the founder and general partner of 01VC, a venture capital firm that builds on China’s untapped potential in enterprise and transaction platforms. With 18 years of experience, Goh is a seasoned investor in the tech space.

Previously, he was a partner at Matrix Partners, Kleiner Perkins, and TDF Ventures.

Here, he talks about the evolution of Chinese tech scene, Southeast Asia’s key challenges, and the sectors he’s focusing on.

Tell us about yourself and why you established 01VC.

I came to China in 2001. I worked for internet company Lycos until 2004, then I had a great chance of entering the venture industry. It was a great year to be in the space because the firm I was working for was investing in companies like Alibaba, Baidu, and Focus Media.

After that, I joined Kleiner Perkins in 2008 or 2009 and then Matrix Partners China. I started 01VC in 2014.

You pretty much witnessed the full cycle of Chinese tech evolution. Can you tell us what you’ve experienced?

Broadly, I think the tech industry in China is split in two phases. Prior to 2008, companies were mainly copying business models from the US, like Google and Baidu, and Amazon and Taobao or JD.com.

After that, we started seeing Chinese business models coming out. Today, Meituan-Dianping is not a copy of Groupon or Yelp. And TikTok is probably the first global consumer internet company that came out from China.

In 2005 or 2006, US-based VCs were flying to Beijing for week-long deals, then they would fly back. So we started seeing US-affiliated VC firms mushrooming in China (such as Lightspeed China Partners, Matrix Partners China, Sequoia China). That was the infusion of The Valley’s viewpoint of technology into China’s tech scene.

But copying in China what was proven successful in the US doesn’t really work. This is why the investment decisions of successful VC firms today are very localized.

So I would say that the US guys brought in some know-how but, in a broader sense, a lot of the companies today have managed to localize and become successful.

Why do you believe it’d be impossible to replicate Chinese companies in Southeast Asia in the next five years? What key challenges do you see in the region?

I think the two global powerhouses in venture investing today are the US and China. And just based on the average revenue per user (ARPU), Southeast Asia is only a fraction of China. For average basket size for clothes, for example, Taobao has around US$20 to US$30, depending on the brand, while Indonesia has only US$6 or US$8.