Are ASEAN VCs Stuck With Un-EXITable Dividend Paying Start-Ups?

Johnson Khoo
16 min readOct 3, 2019


You have a profitable business that can’t grow anymore and can’t IPO or get acquired. What now?

**This piece first appeared on You can find more related stories and articles on his 10 year journey to build ASEAN’s first world-changing start-up that would help everyone in this world find true love and build lasting romantic relationships here.

I suspect that a growing number of ASEAN VCs are getting stuck with portfolios of start-ups that are profitable, stable but can’t really grow anymore and are having trouble getting acquired or going for an IPO.

That’s a problem for VCs because they would need to exit their positions in order to realise the returns on their investments.

Limitations Of ASEAN Copycats

Due to the fact that they are copycats, they would naturally be limited to the region or locality that they operate in because the original incumbent would prevent them from expanding into other regions.

If you are in China, that’s alright because China is one unified country of 1.4 billion people, with a thriving and growing middle class of more than 300 million people.

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That’s roughly the same size of US’s middle class. That’s why Chinese clones of US companies are still sizeable companies and are worth almost as much as their US counterparts from whom they copied from.

ASEAN Is 600 Million Strong — But Small Middle Class — Fragmented Markets

There are 600 million people in ASEAN. However, most of our population are not middle class, don’t really have credit cards, don’t really have tertiary education and don’t really have high earning power.

If you live in a city, are well educated and can understand this article, you’re probably part of the privileged few in our region who’re part of the middle class. To understand how you’re just 10–20% of the 600 million people in ASEAN, you’ll need to understand the true scale of the population in ASEAN in rural areas, in kampungs, in the city slums and in backward townships spread across every ASEAN country.

The city might seem big to you, but the reality is, if you have a good enough command of English to even read this article, you’re part of the privileged minority.

Most ASEAN countries also have different cultures, have different government regulations and speak different languages. That makes it even harder for any start-up to truly conquer ASEAN as a market.

The Next China? — Maybe — But That’s A Long Game

The spending power of the ASEAN market is just way behind that of the US & China.

Facebook just made its first billion USD in Asia recently back in 2016, and that’s including Japan, Korea, and Hong Kong since Facebook isn’t in mainland China, while it has been making 5 billion USD for every quarter back in the US for quite some time.

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Those with a vested interest in the strength of the ASEAN market will say that it is growing rapidly and ASEAN will become the next China.

Well, that’s not wrong, eventually, it will. China thinks so too, that’s why they are looking to acquire ASEAN copycats at a low price as part of their expansion strategy.

However, in my opinion, that’s still at least 10–20 years away, or even much longer. That’s a very long game, and you will need tremendous holding power to stay in the game that long, Chinese companies can do that, because they are loaded with capital. You would also need to pray and hope that all the leaders in ASEAN countries don’t screw up, that you won’t have a Najib starting a 1MDB or another leader doing something stupid that would derail the growth of any of our economies in the next 10–20 years.

It’s a very long game.

They have the cash and the holding power, and also know that it is still a long time before that happens, so they are willing to wait until you bleed yourself dry and run out of cash before acquiring you at a low price, like what they did with a local e-commerce company.

Copycats Are Great For Consumers — But Their Potential Is Limited

Don’t get me wrong, copycat start-ups are a great thing, it’s part of the globalisation movement, and they bring new solutions and products to ASEAN consumers much faster than the originals can ever expand their way to reach us.

It’s a good thing, and it’s great for us ASEAN consumers.

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In fact, for start-ups with a physical aspect to their businesses, local or regional copycats have a much better chance of winning and standing their ground, because the understand the culture and market better and can hyper-localise.

It’s just that as a business, their potential is limited to their region or locality.

Tech-Enabled Start-Ups Vs True Tech Start-Ups

This is basically the difference between a Groupon and a Google.

Tech-enabled start-ups don’t really have technology and innovation at their core, the core of their business is more focused on operational and business model innovation. Tech is just an enabler for them, they would still require huge on-ground marketing or biz dev teams to operate. Physical operation is still the core of their business.

They are essentially still a conventional business with a tech twist.

Engineering + Tech Innovation At The Core

True tech start-ups, on the other hand, have engineering and tech innovation at the core of their businesses. Their main product is often powered by a core piece of technology or platform that they constantly iterate and innovate on. They would focus on hiring an extremely capable engineering team to build upon their core product and are extremely scalable. Google & Facebook operated solely out of Silicon Valley while the rest of the world still got to use their product and advertise on their platform for a very long time.

Facebook is a true tech start-up. During one of Y-Combinator’s Start-Up School Talks in the early 2010s, Mark Zuckerberg mentioned that the greatest technical challenge they faced was with Memcached, because you would need it to quickly crawl through your social graph to show your list of friends.

Today, you would use something like REDIS. It is a hard thing to do because that’s one reason why Friendster died and was so slow in showing your degrees of separations between friends. I know because this was one of the reasons why We Could Happen, an early version of Wowwwz — the start-up I am building crashed on signup.

There is an entire discussion on Quora about the amazing technologies Facebook has built and more.

To built something like Wowwwz, I would have to build plenty of such custom solutions and push the boundaries of engineering and tech as well. I will write a separate article and story about how Facebook is a true tech company and how Wowwwz is one too on a later date.

For now, I just want to make my point that something like Facebook is a true tech company that has true innovation at its core.

Truly Highly Scalable — Do Not Require Local Offices To Expand Operations

Google & Facebook did not have to have an office here in order for us to use Google or Facebook as users or advertise on their platforms as businesses. They only recently opened offices in this region, but even so, most of their engineering is still done in Silicon Valley, and to a lesser extent, Singapore, other offices in this region are merely marketing and community building outposts to help support their clients better, but they would still do perfectly fine without them.

Tech-Enabled Start-Ups Would Need Huge On-Ground Teams To Expand

A tech-enabled start-up like Groupon, on the other hand, requires a huge number of marketing or biz dev team on the ground in each city they are expanding to in order to operate. They need them to reach out to merchants and keep convincing them to put up deals (which are essentially a marketing cost). It’s essentially a perpetual sales cycle.

Their “Tech Platform” Is Usually Simple And Does Not Need Much Tech Innovation

Their tech platform is essentially just a simple listing and booking web app with a countdown timer that has evolved little since it was first conceived. Of course, things need to be improved with scale, but such a platform essentially does not require any form of true technological innovation to build.

True Tech Start-Ups Are Worth Much More — Because They Are Truly Exponential

The reason why true tech start-ups like Google and Facebook are worth well over 500 billion USD and are easily generating more than 5 Billion USD a quarter in revenue globally with super duper high profit margins is because they are truly scalable.

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Google and Facebook is only built once in Silicon Valley, and is used by everyone across the world. Their core tech solves a global problem, and is the same virtually everywhere apart for some minor language translations that can easily be implemented with tech.

Most ASEAN Copycats Are Tech-Enabled Businesses

Don’t get me wrong, there is nothing wrong being a tech-enabled business. They still solve a problem, and are good for consumers, and still have value. Hence, you should definitely still invest in them.

All I am saying is that, their potential is limited, especially if you are only an ASEAN version of it, given the ASEAN market’s much weaker spending power.

Because of that, maybe we should not only invest these type of businesses, but focus more on truly innovative tech start-ups solving global problems that have a chance at becoming the next Google or Facebook instead.

Too Small To IPO

Because they can’t expand beyond ASEAN or their locality and the much weaker spending power of our markets, most of them are unable to IPO (unless you count penny stocks and secondary boards, but that’s not really liquidity and not really an exit).

No Bigger Acquirer To Sell To

If you have the right connections and have been aiming to sell to an Australian version of what you’re doing, or are lucky enough that an expanding original makes the mistake of growing too fast and acquiring you, that’s great.

But otherwise, it’s going to be tough to find someone to acquire you, because truly innovative start-ups would rather set up shop beside you and beat you, because they know that the best product will win, and they are confident in their ability to keep innovating and solving the problem better than you.

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Stuck With Collecting Dividends

Because of that, many VCs here are left with no other option but to collect dividends from their 10–25% share of small to mid sized profitable start-ups that can’t really expand any further, go for an IPO or get acquired.

That’s fine, but if you really wanted to do that, you should have invested in a good F&B business like Go Noodle House or a very good nasi lemak shop instead.

The dividends would likely be much higher and you would own more of the business, it is also less risky than “tech startups”.

VC Investments Should Be Super High Risk Super High Return

As a VC, that’s actually a problem because venture capital should be all about super higher risk and super high return.

Venture capital, as an asset class, should be looking for 1000x returns by investing in super risky ventures that would most likely fail, but even if just one of them succeeds, can generate 1000x returns for your entire portfolio.

Better Off With Bonds & Private Equity

If you wanted to generate conservative returns, you really shouldn’t start a venture capital fund. You are better of with investing in the bond market or private equity.

Find a factory or soy sauce manufacturer that is undervalued or has a strong product and invest in them before they go public. That would be a much better strategy.

Best Case Scenario — A Regional Champion Worth 500–700 Mil USD

A regional champion in ASEAN is worth around 500–700 million USD, there is a reason why start-ups like Jobstreet and iProperty sold for around that price point.

The value would increase in the future mainly because of inflation, but not by much. Grab, on the other hand, is a different story for another day, it’s mainly propped up by the value of Uber, which is mainly dependent on whether self-driving cars become a regulated reality, where governments are okay with self-driving cars on the road and all Ubers would be self-driving. That eliminates the middle-man and a limiting physical aspect to their business and drastically increases their profit margins. Otherwise, they are just a slightly better taxi company, which isn’t worth that much, that’s why they are not doing that well in the stock market right now. But they have strong investors and can play a long game, so we will see what happens. That’s another long story for another day.

In my opinion, for Grab to justify their valuation, they would have to become a Tencent of ASEAN, they probably realised that, that’s why they are going into payments, healthcare and more.

That’s another long story that I’ll leave for another day, but in most cases, there is a limit to how big an ASEAN copycat can grow.

ASX Does Not Guarantee A Good Exit

Plenty of ASEAN start-ups chose to list on ASX because for a period of time, Australian mining stocks have been steadily declining and delisting themselves from the stock exchange. That left a void of listed companies that was filled with ASEAN tech start-ups.

However, most of them weren’t really doing well on the ASX, many of their stock prices plummeted and flatlined. Even if they were doing alright, most were just penny stocks and don’t really have much liquidity. Getting acquired by a bigger Australian competitor would constitute a much better exit.

Can’t Compete Anywhere Else

In many ways, such start-ups are stuck, because they can’t really compete anywhere else outside of their home region.

Time To Invest In Truly Innovative Start-Ups Solving Global Problem

Perhaps it is finally time to invest in truly innovative start-ups that are solving a global problem that could one day become the next 500 billion USD company like Google or Facebook. ASEAN is ready to start it, we just need more VCs to be open the idea.

Higher Risk, But That’s What VC Investment Should Be

I know such potentially world-changing start-ups are much riskier, and often don’t generate any significant revenue for the first 5–7 years of their lives, but when they do succeed in solving the problem throughly and when everyone in the world is using their product, they can easily make billions every quarter with virtually no costs and sky high profit margins. That’s the kind of start-ups venture capitalists should be investing in.

It’s time to be more adventurous, you guys are VENTURE Capitalists!

Ask, What If They Succeed, Not What If They Fail

A lot of VCs in this region are pretty risk adverse, probably due to their past experiences from banking and private equity or the way their funds are structured — a lot of them are structured as loans, they tend to see all the obstacles and challenges a start-up would face while trying to carry out their mission.

However, if you have been learning from the best VCs in the world, that’s an entirely wrong way to think about things.

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Instead of on focusing on all the obstacles that would cause a start-up to fail, you should instead be focusing on all the great things that could happen if a start-up succeeds.

All big problems worth solving have huge challenges, the bigger the challenge, the BIGGER the REWARDS!

Can They Change The World If They Succeed

Ask yourselves, what if the start-up succeeds, would they change the world?

Would they solve a global problem and become something that everyone uses? Would they become the next 100 billion USD company like Facebook or Google?

If the answer is yes, and the founder has the vision to do so and a plan to overcome all the seemingly insurmountable challenges that stand in the way, you should invest and give that start-up a chance.

That’s the spirit of VENTURE capital!

Dare to be ADVENTUROUS and invest in things that could truly change the world, just like how J.P Morgan, one of the world’s first venture capitalists invested in this tech start-up founded by Thomas Edison which eventually became General Electric!

Even when everyone in the world was still using kerosene lamps and candles, when there was no power grid, and most people have never even seen a lightbulb, dare to imagine a world where every home in the world has electric lighting.

DARE to believe in a founder who has that kind of vision!

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We Need To Have More Faith In Ourselves

Many VCs are reluctant because they are afraid that ASEAN might not be ready to support such potentially world-changing start-ups, but ASEAN is actually ready, there is sufficient talent, and sufficient money, ASEAN is able to act as a stepping stone to support such start-ups, maybe not all the way, but at least until Series A before they continue their journey in Silicon Valley and the world.

The problem right now is that such start-ups are not even getting funded to even have a chance to properly get started, and that is causing top engineering talent to leave.

We need to have faith in ourselves, in our founders and in our talent.

Many VCs Are Great People — They’re Great Friends — Great Mentors

Don’t get me wrong, many VCs are great people, they are kind, helpful and honest. Many of them are also my friends and my mentors, that’s why I’ve had the opportunity to have many honest conversations with them, and I fully understand their concerns.

Many copycat founders are also my friends, and they are all great people. There is nothing wrong with starting a copycat, as long as you’re solving a problem and making life better for consumers. It’s a great thing.

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In fact, I would advise younger founders to start copycats or revenue generating start-ups, because it is what our ecosystem is ready for. It’s a much easier journey.

But I have limited time on earth, I have a much bigger dream, and I don’t have many 10–15 years to build start-ups, even regional copycats take 10–15 years to truly mature, that’s why I need to try everything I can to build the first truly world-changing start-up from ASEAN, by solving dating once and for all and making sure everyone in this world can find their right life partners and continue to live happily ever after after marriage.

But Maybe — It’s Time For Us To Aim Bigger — We Can Do So Much Better!

All I am saying is, maybe it’s time for us to aim bigger.

Regional copycats and revenue generating start-ups are great, but we can also build truly innovative start-ups with the potential to change the world in ASEAN!

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Here’s Why You Should Invest In Me & Wowwwz

We can do so much better. We are ready, we have the founders, the talent and enough money to get us started, all that’s missing is a shift in mindset and daring to invest in the first 100 billion USD start-up from ASEAN that everyone in the world uses.

Let’s start this exciting journey together!

You can reach me at or LinkedIn.

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Johnson Khoo

ASEAN Scholar | Founder @ Wowwwz | Start-up entrepreneur from Malaysia trying to help everyone in this world find true love and live happily ever after.