eFishery đã lừa các nhà đầu tư, các hoạt động kinh doanh không chính thức, Agritech Future như thế nào – E536

“So much of venture capital is about picking the right people and founders. But people change—going from zero dollars in the bank to ten million can shift their mindset. Temptations creep in, and some start playing short-term games because they don’t see a path beyond where they are now. Assessing people is tough, and it’s an ongoing process. In the U.S., it might seem like investors are backing young, unproven founders, but the reality is different. Many of those raising big rounds have done it before. Take someone who’s raised money multiple times—they’ve built a track record, so investors know exactly what they’re getting. Silicon Valley has a professional class of founders and repeat executives. These people have cycled through seven, maybe more, different startups. They’re known quantities, playing long-term games with long-term people.” - Adriel Yong, Orvel Venture Partner and Jeremy Au

“The eventuality of all agritech players is to be some form of a mini conglomerate, and I still believe that if you can build out that flywheel across your inputs, your offtake, your financing, the fund monitoring services, and all that, you can be a very strong lock-in for a lot of the farmers, and it becomes very hard to switch out from you. And that obviously makes it attractive to certain types of investors, just that they won't come in or buy out the business at technology multiples or venture capital multiples, and they will also run a very fine-tooth comb across the business and uncover all sorts of things. So I think that's the game that people need to think more about moving forward.” - Adriel Yong, Orvel Venture Partner

“That's where, over the past few years, so many deals started happening—once eFishery took off, everyone wanted to replicate it with an "eFishery for beef," "eFishery for whatever." The same idea kept circulating. The concept was that, despite being asset-intensive, going vertical and multi-stage would allow them to capture margins at every step, making the entire operation more efficient than the incumbent conglomerates, which were seen as too large and bloated.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast

Adriel Yong, Orvel Venture Partner, and Jeremy Au discussed:

How eFishery Fooled Investors: They examined the elaborate scheme that allowed eFishery to inflate revenue and mislead major investors. They broke down the warning signs, such as financial irregularities, CFO departure (similar to Zilingo failure signal) and too-good-to-be-true business model that were ignored until it was too late.

Informal Business Practices: They discussed how informal business practices in Indonesia contribute to the perpetuation of fraud by senior executives. Adriel shared stories of where kickbacks, inflated supplier numbers, and fraudulent financial reporting were common. They noted that many investors struggle with due diligence in Southeast Asia because operational transparency is often low, and cash-based businesses make fraud harder to detect. They contrasted the startup environment with family-owned businesses, where profitability and dividend payouts serve as stronger incentives for financial discipline. Jeremy explored why foreign founders often exit Indonesia due to ethical dilemmas.

Agritech Future: With eFishery’s implosion leaving a gap in the market, they analyzed whether competitors will rise or if investor confidence in the sector has been permanently damaged. They debated whether eFishery can stage a recovery similar to Luckin Coffee in China, or whether the board will write off the investment. They acknowledged the chilling effect the scandal has already had on future investments in Indonesia, agritech and Southeast Asia.

Jeremy and Adriel also discussed prior fraud cases, ethical business executives and board governance.

(01:10) Jeremy Au: Hey, Adriel.

(01:12) Adriel: Hey, Jeremy. Good to see you again. You had a lot of feasting over the Chinese new year.

(01:16) Jeremy Au: Yeah, I know. It was like the whole Christmas and new year's season, then the Chinese new year. So I gained five kilograms for the Christmas season. Now I just lost five kilograms just to slowly kill all carbs.

(01:27) But I guess the eFishery thing, both us, you and I were discussing this very early on. Yeah. And we had some inklings very early in the crisis that this was the magnitude of the issue.

(01:36) Adriel: Yeah.

(01:37) Jeremy Au: And it looks like it's gotten worse actually since then, but maybe let's just recap,

(01:40) so eFishery obviously turns out that the allegations are they were not just doing embezzlement. The official reason, but the district Asia and the public press has broken the news that they've inflated initially 20 percent of revenue and maybe close to 80 plus percent of their revenue is basically fraudulent.

(01:59) Obviously (02:00) that continues to be done and reviewed for evidence and so forth. But I think on the face of it, I think it seems quite straightforward that These are serious allegations, and these are easily provable, and if they have a forensic audit report, I think it's going to be quite hard to contest, actually.

(02:15) In my head, probably more likely to be guilty. Innocent now at this stage. Yeah, so I think that's a tricky part. What are your thoughts about it?

(02:22) Adriel: Yeah, I'm not gonna be one of those VCs that say Oh totally knew it all along Blah blah blah. The truth is I think internally I was always quite interested in the Apple culture and obviously we've reviewed many of them together Fishlog Efficiary, no, Efficiary didn't, but we've always talked about it and we were always wondering, how did it get so large so quickly,

(02:45) and raise so much, institutional capital. It was the secret sauce and we always had that adjacent conversation, but never really focused on it and drew deep into it. And then I think part of. My curiosity like that need to talk to some of my Indonesian friends and ask them what (03:00) is the Indonesian aquaculture market like is it driven by people eating more fish in the next 5 10 years and that rising middle class And I think you know when we looked at the different say poultry, seafood vegetables, rice,

(03:14) obviously I think Aquaculture is interesting given the sort of supply chain dynamics that it had. I think the distributors apparently had much larger margins than distributors in other verticals which made, aquaculture distribution plays like eFishery interesting to many people.

(03:31) And then even the sort of SKUs. And the range of it in our whole culture was to say like chicken, a chicken is a chicken, That's maybe six or seven different types of fish that people want to purchase and eat And then obviously I think in chicken your cost of goods is more controlled because you know You have really large players like CP and Jadfar That control a lot of your key inputs or, your day old chickens,

(03:56) whereas I think in aquaculture, say you have tadpoles and, (04:00) that's probably more fragmented, which gives you a lot more power and ability to play around with your course of goods. And probably that leads to much better margins overall. So to me, aquaculture always seemed like a nice vertical to make a bet in.

(04:13) If we went for one of those Indonesia agri tech plays. I will be curious to see how the other aquaculture players like, I guess it's still like Aruna and Delos that's still in the race, yeah. What about you? What are your thoughts since, you have also had some musings about eFisheries over the years?

(04:29) Jeremy Au: Yeah, and I think we want to discuss this because we were both looking at this space together and so we never did an after action review because some of the listeners were like, Hey, Jeremy, did you know, because Adria and you always complain about fraud.

(04:40) Yeah. Southeast Asia ecosystem. And I was like, it's funny because I don't think I knew specifically, but it is also true that there was so many things where we just never put two and two together, I think we've done multiple episodes where we've complained about fraud and the amount of fraud that we've seen in the due diligence process to get in looking at startups in Southeast Asia.

(04:57) So I think that's. One track.

(05:00) Adriel: Yeah.

(05:00) Jeremy Au: And I think the other track was that you and I were looking at agri tech and like you said, there's so many things that are positive about it at face value, because I think conceptually several years ago, the story is like you said, rising middle class. They want to eat more fish, more chicken, more products.

(05:14) Indonesia is primarily in a strong agricultural sector that's servicing its own needs. There's a lot of waste, which is true, farmers are not productive. A lot of it is skimmed off by middlemen. A lot of shrinkage, in other words, waste, because they don't have the right refrigeration or points or, intermediaries.

(05:31) It creates this conceptual underpinning for an end to end vertical glides conglomerate for a certain SKU, whether it's fish or chicken and I think that's where over the past few years, and I think you and I have seen that it was like. There was so many deals happening where it was like after eFishery started succeeding where everybody was like, I want to do the eFishery for X,

(05:50) so eFishery for chicken, eFishery for beef, eFishery for, whatever. And so everybody was talking about the same thing. And the concept was, yes, (06:00) it's asset intensive, but by going verticalized, by going multi stage, we get margin for every slice of it. And we make the whole thing more efficient, compared to the. Incumbent conglomerates that are, too large and too bloated, that's what it was saying. So I think we looked at it together and like I said, the rumblings that I had was I kept asking in the meetings okay, they're saying that eFishery for this, but what's so special about eFishery?

(06:23) And then I kept asking the question and it was like, like what makes, because it's a metaphor, when you say eFishery for X, you're saying like. Amazing magic for something. It's cause it happened, it used to be like Uber for massage, Uber for, I don't know, groceries.

(06:39) because where the metaphor quick breaks down quite quickly is that, if I told you, you'd be like, Oh, the magical product is I don't know, McDonald's and I was like, yeah, I love McDonald's.

(06:49) And you're like, McDonald's of trash. And I was like, wait, it doesn't make sense. Why does the McDonald's of trash work? Because McDonald's is about good brand, tasty food. Cause that's what your (07:00) brain is. And then you're like, but trash, it doesn't make sense. So I think metaphors break down very quickly if you're like, but of course I think there's a magic of investing,

(07:06) it's actually, if you say McDonald's for something, then the story can become much easier to swallow, which I think is a tricky part. so you and I did have a conversation, which is eFishery for X. And then I asked the question, what's so special about eFishery? So do you want to recount some of the conversations we had about what made eFishery special?

(07:23) Adriel: Yeah, man. I think there was some sense that the aquaculture margin profile was Much healthier than say other commodities or poultry. And then of course, Indonesia has established conglomerates and players already in different parts of those supply chains,

(07:37) everyone always talks about the almighty Joppa and CP for instance, in the chicken vertical. And then, I think in agriculture, there's probably other local mafias as well who control the supply chain at different points. Whereas I guess in aquaculture, there was some sense that supply chain was much more free and easier to play around with.

(07:56) There was arguably some level of efficiency (08:00) gains with automated feeding systems. I guess maybe it's because it's in the ocean so you can see as well compared to say in a chicken farm where it's more visible. So there was some argument that there was a technological use case and enablement there.

(08:13) That then led to the ability to be the distributor for a lot of these farms, and then I guess, probably from a ESG perspective as well. It was exciting because I guess aquaculture is perhaps less polluted than say cows less, Fluctuations say some of the vegetables which are more perishable and easier To get defeated by the weather.

(08:33) Yeah, so there was different Reasonings that different people shared with me over the years, which I thought were fair And the truth also is that People have asked me to go to Samarang or like one of those fish farms right to go and check it out at some Point over the last two and a half years, but I never really made the trip out to visit a fish farm to really understand That, life cycle and the value chain of how a company plays there.

(08:56) Jeremy Au: I didn't really have the best sense. And I think what's interesting is (09:00) that, together we've done the due diligence on so many agri tech companies in Indonesia. and I think the easy part is yeah, there is a lot of waste or inefficiency in a farm, by nature. Yeah. It's a small holder. Farm cannot be as efficient as a large farm and a large farm that has technology with lots of smart people, very hungry to make things better, obviously are more efficient.

(09:21) I think what gets tricky and you and I have done this, it's hard to track the financial flows of the farm, because it all becomes cash, at some point, which is, I think the big difference between the other companies we've done our SaaS companies that we've looked at and all these other companies it's quite straightforward,

(09:34) the due diligence is like, boop, it's all on strike. and then, the argument that you have is does the contract start in April or does it start now? but I think for these agri tech and all of these tech enabled businesses, it always ends up in cash.

(09:46) And the cash is always reconciled on a weekly or monthly basis, which makes it impossible to audit at some level.

(09:53) Adriel: Yeah, bank accounts as well, I guess right now we're both like COO, so we have a sense of how many bank (10:00) accounts you need to operate when you have all these different operations.

(10:04) I've been a big fan of the treasury management startups playing in this space just because like financial visibility is actually really hard Even if you're a software company much less like a company with numerous operations across the entirety of Indonesia Yes, I think some of my investor friends probably found it hard to complete 100 percent diligence as well You can prove that Maybe 10 out of 100 farms exist and are functioning, but it's very hard to prove 100 out of 100 At that scale,

(10:33) so yeah, I think figuring out how to effectively diligence such operationally heavy companies Will be a key issue moving forward in Southeast Asia.

(10:44) Jeremy Au: Yeah, and I think you know, it's a Good reminder that, obviously, you need to have on the ground folks who are doing a due diligence and people who have a high reputation of integrity and intelligence work.

(10:55) I think the tricky part of course is obviously I think people have shared, I think definitely a chilling (11:00) effect on investments. I think especially I would say in Indonesia and Vietnam, I would saySingapore is like less. Exposed, but still being impacted because when I talk to my American VC friends, they look at Southeast Asia as a whole,

(11:11) so they're like, Singapore is part of it. This is Indonesia. Screw up. So to them it's

(11:16) Adriel: yeah,

(11:17) Jeremy Au: they're like, ah, whole thing got pushed down, but Singapore is a little bit less pushed down than the rest. But I think Vietnam and Indonesia definitely a chilling effect on the whole agri tech and real economy startups vertical for sure on a growth stage investments.

(11:30) Adriel: A hundred percent. I think the beauty of Singapore has always been the companies that expand to the U S and that's, a corridor that we have always watched really closely, the B2B SaaS companies that moved out there and we've seen several of them play out quite well, whether it's Niamh or Padsnap.

(11:44) I think even open guys very early proofed out that corridor with their exit to Zendesk. I think that will continue to grow and succeed. And obviously with, ai, there are a lot of Singaporean founders who are super excited to just move out to the Bay Area and build straight out there.

(11:59) (12:00) Yeah. I agree with you. I think It's not lost for Southeast Asia, especially some of the markets which have not been hit with, reputational issues. But from a five, year perspective, it's all about macroeconomics where we talked about this numerous times beforeon some level, bad behavior is also a function of larger structural economic societal issues, and we can only hope that gets better as economies progress, the politics get better in different countries.

(12:24) Jeremy Au: Yeah. And I think, it reminds me of some of the warning signals that we actually had discussed about eFishery, but we never put them together, so I think one was we never really felt at least, I kept asking over and over again for two years and I figured out the secret sauce of eFishery.

(12:41) It turns out the secret sauce is fraud.

(12:43) Adriel: Yeah.

(12:44) Jeremy Au: And then the second part was that. We had identified the departure of the CFO. Remember we discussed that quite early on because I had flagged that, the person left about a year. And to me, when a CFO comes in for a year, he's out after a year, it's like (13:00) zilingo as well.

(13:01) Then it's normally a very bad sign because it means that they sell something that's spooked them because normally they should. No going in,

(13:09) Jeremy Au: And the third signal of course is that we've always encountered a lot of fraud in the Indonesia kind of ecosystem, which is a function of the, I think the, some of the financial due diligence slash, like culture,

(13:19) and obviously we also know about the pressure that startup founders have in feeling like they have to report very high numbers.

(13:25) Adriel: Yeah.

(13:25) Jeremy Au: There's an incentive to conduct fraud, versus a family business where you're just like it doesn't matter. So we had all those things, but we just never, I don't know what to put them.

(13:33) Adriel: Actually, yeah, the incentive structure is so fascinating because, a lot of like family owned businesses or say. Where, management owns majority of the company. It's supposed to be cash flow positive, it's supposed to get dividends. The incentive is to make sure that you get a certain level of profitability.

(13:48) So you get to enjoy your dividends.

(13:50) Jeremy Au: Yeah,

(13:50) Adriel: And so I remember, one large Indonesian company manager was telling me, his company was like burning a couple million dollars a year for the last four or five years.

(13:59) Jeremy Au: Yeah,

(13:59) Adriel: and he (14:00) just could not understand why because the business model and economics for that industry was actually quite favorable, monopolistic, duopolistic ish.

(14:09) So he went in and he realized there was a lot of trim it under the table, kickbacks, whatever. Can be things like, Oh, let's see, we need 10 gig workers for something. They recorded it as a hundred and it took that arbitrage between a hundred and 10.

(14:23) It could be things like renting of equipment, renting of office spaces, just massively inflating all those numbers. So that guy in house a lot of things. And then, within one, two years, that company turned profitable.

(14:36) Jeremy Au: Yeah.

(14:37) Whereas like the incentive of a venture backed companies to always show that top line growth, rather than that, like bottom line profitability. So yeah, I think, there probably needs to be some. Perspective change of how to achieve that. Yeah. And I think there's a good point that you have, which is a lot of Indonesian companies go in house because when they start having that relationship with the external party, that external party needs (15:00) kickbacks and all kinds of stuff to make it smoother.

(15:03) And so there's an incentive for Indonesian companies to verticalize and eat their own, even, suppliers because at least If you're doing trimmage internally, it's just a bonus for your employees, which is a form of retention,

(15:18) Adriel: you

(15:19) Jeremy Au: know, but at least it goes to your own people rather than to.

(15:22) Somebody else. And I think that's a consistent truth for not just obviously Indonesia, but for a lot of emerging markets that have that same culture where they are like dealing with a culture of, kickbacks and bribes.

(15:32) Adriel: Yeah. It's also even things like organization design,

(15:35) because I think someone was telling me that in one of the companies that they supported, initially the margins were quite bad and they had to separate out The team that goes out and looks for suppliers versus the team that chooses which supplier to give the orders to. The problem when you put those two things together is the person who finds the supplier and the person who chooses the supplier the incentives are (16:00) actually Very disjointed,

(16:01) because, if I'm the one who gets to choose which supplier to give the orders to, I would, choose the one I'm super buddy with, then I have less incentives to go and find other suppliers to increase the competition with the supplier that I really like and might be giving me kickbacks and inflating the cost to the company.

(16:19) Jeremy Au: Yeah. And I think that's a very big control risk. I think we also saw that in Indonesia where I think it's like sales teams as well, the close contracts, they do the opposite, which is they give out bribes and

(16:33) Adriel: then

(16:34) Jeremy Au: it was just like,

(16:35) Adriel: what?

(16:35) Jeremy Au: It's just like a cultural issue where it's endemic and it's not The startup is more it just exists and then it's just contaminated by the same issue but supercharged,

(16:46) Adriel: I guess, that's the beauty of software companies, you're supposed to have operating leverage and you can keep teams lean. You can select and be biased towards the sort of people that you bring on board. Whereas if you are running a massive operation, (17:00) like the quality control on people, their integrity just becomes like way, way harder.

(17:05) And I think, that should also be a factor of consideration, for investors.

(17:09) Jeremy Au: Yeah. I think what's interesting is that we've seen a lot of international founders piece out from Indonesia because they can't deal with that culture. Like I think I've, I definitely know quite a few founders about four to five of them who have explicitly told me like they pissed off Indonesia because they couldn't deal with the culture of kickbacks and bribes because they felt like it, there's a moral aspect of it, but also there's a kind of like work reputation because it's a real thing,

(17:34) which is that if you have a long career in the future. Potentially MNCs or as a leader, what do you want to change yourself with this kind of like small level stuff, can screw up your whole career. So I think that's a good example of people who I think from my perspective make the right decision because they say I'm thinking about my longterm career, but it's also because they have a longterm career at MNCs and other places, alternatives, whereas I feel like a lot of. Some local founders I've talked to privately feel like they have (18:00) to do it because everyone else is doing it, which is weird, I don't know. I feel like my mom is like saying Hey, if everybody jumped off a cliff, do you also jump off a cliff?

(18:07) It does feel like a lot of folks in Indonesia feel like they have to do it because everyone else is doing it.

(18:11) Adriel: Yeah. you just can't fight the very like embedded, like culture of how business is done in a very traditional manner.

(18:18) It's not in the tech and startup way that you see in Silicon Valley, for instance.

(18:22) Jeremy Au: Yeah. And I think where that kind of comes to the next point is what do you think is the future, for agri tech, in Southeast Asia, Indonesia, at least for the vertical, I'd say,

(18:33) Adriel: yeah. I think, we're starting to see small cap private equity players look at some of the, Series A, post Series A type of agri tech companies.

(18:41) And it makes sense because, the eventuality of all agri tech players is to be some form of a mini conglomerate, and I still believe that if you can build out that flywheel across, your inputs, your offtake, your financing, the farm monitoring services and all that, you can be a very strong lock (19:00) in for a lot of the farmers.

(19:01) It becomes very hard to switch out from you. And then obviously it makes it attractive to certain types of investors like private equity, just that they won't come in or buy out the business at. technology multiples or venture capital multiples, and they will also run a very fine, tooth comb across the business and uncover all sorts of things.

(19:20) So I think that's the game that people need to think more about moving forward. It's also like an interesting reset, the most well funded player going bust gives a lot of leg room for. Your player number two, three, four, to play catch up, I think we saw that sort of reset happening in the FMCG space,

(19:38) with the Bukuwarongs, Bukukas, ULA, which have raised massive amounts of capital going out of business and, that leads to interesting new players coming out into the market like Basket. And those players tend to have, because of how Burned investors have been and how high the bar is now for investors to invest in that vertical They (20:00) also hold themselves a much higher standard of operating and also conducting business with their customers and suppliers.

(20:06) Jeremy Au: Yeah I think two things that come to mind based on that is I agree with you that I think this kind of story is really important because it puts the fear of god into everybody because everyone's like Fuck. Someone got caught and they got beaten by a big stick, as everyone's shooting on them and everyone's okay, I better not do that.

(20:25) And I think it like it or not, this kind of story is, part and parcel of every emerging market. And I think it's going to be a big point for a lot of founders. I think those who are ethical founders will stick around. And then those who are unethical as I say, you know what, let's not do this and let's do a different way of whatever they want to do.

(20:43) And those people who are on the fence will be like, okay, better for me to stay on the good side. So I think, and I think actually you gave a really good example of the like the war room, which is the kind of like the what we call like the small hold. The seller, the intermediary space, I think we've seen a lot more efficient players (21:00) come out as a result.

(21:01) So I think, yeah, in the agri tech space, for example, in fish farming, there's Delos is still around. I think they're still, pushing hard. Yeah. You never know. I think one thing I want to say is I do really respect the eFishery board for pulling the trigger.

(21:12) Adriel: Yeah.

(21:12) Jeremy Au: And doing the report and kicking out the founders because eFishery still has a lot of runway left, actually,

(21:17) they have years and years of runway. And obviously, I think there's going to be a lot of hard work that needs to be done which is going to be quite tricky to do. But I think the question now is do you think they're going to become like a luck in coffee? I'm just giving an example, because they still, I think, have the market position, and the market leader position,

(21:31) Adriel: not

(21:32) Jeremy Au: But they still have it, and there's still a lot of runway. So technically, you can imagine a scenario where they clean up shop, they just focus on fundamentals, they bring in the right executives. Maybe, the outcome won't be as big as what people thought it was going to be, but it could still become a big player and still be a big player.

(21:47) So I think respect, I think, to the board for pulling the trigger and making the call while there's still time because I think it's important. We've seen the other happen, the other way around, which is, it happened way too late. And then the whole company has to fold, which (22:00) is the worst position by everybody,

(22:01) Adriel: yeah. Someone was telling me about a company that, been through like 20, 30 million in a year. And, the board was like notified about how capital intense, how high burn, abnormally high burn the company was. And then the board ignored it. And then now. They're just like rushing to try and salvage the scraps.

(22:18) So it is true I think, you talked about it in previous podcast before, capital as a mode You can actually do a lot with the sort of money in the bank and build sort of boats around it But yeah, I think hiring a new management team, executive team non trivial you and I have both hired like people before, I tried to hire executives as well yeah, it's going to take a long while and I'm just not sure if there will still be a business after that process is done.

(22:46) Jeremy Au: Yeah. I wrote the article, you reminded me about Capitalism Mode and now I feel like I had to write a sequel to it. Because I think Capitalism Mode does actually be true. Which is that there are returns to scale for being the number one player. And by (23:00) becoming the largest player, you get to squeeze everybody else.

(23:02) And therefore, capital can, anoint. The future king and can be the kingmaker. The problem is that, and I think my reflection from the time I wrote that article to today. Now that I think about this, so thank you for reminding me about the article is that the people that were anointing as kings are not as mature and they don't grow up fast enough to be kings.

(23:20) They end up being, yeah. I was gonna say tyrants, but tyrants is at least. Potentially competent, like more like foolish or, like you're wasting the money. And I think it just creates that really bad situation where like you said, the executive team, but the CEO and the founders, I just don't have enough.

(23:36) What's the word? Sophistication, maturity to spend the money. Which is a problem. I think, no easy answers. Hopefully people will spend money better if they get anointed as a king, but I think that, of course, I think people are just going to anoint less kings,

(23:48) Adriel: Yeah. I think that's the unfortunate truth. They always say venture capital, so much of it is like choosing the right people and founders, people will also tell you that people change right from the time they have 0 in the bank (24:00) to like when you have 10 million in the bank.

(24:02) Jeremy Au: The temptations, start to emerge, people start to play shorter term games because they don't think they can get further than where they already are today. I think assessing people is tough and it's a very continuous thing to do. Yeah. I think, the thing about the U S is that, people think Oh, people are anointing these young people.

(24:22) But the truth is a lot of people who are raising money are people who have done it before. And also the people who are raising lots of money is great example, he's raised money so many different times. He's built his track record. So when people give him money, they know exactly what he's going to do with it,

(24:34) So I think, there is actually in Silicon Valley, a professional class of founders, repeat founders or repeat executives, but people know okay, they've done these seven experiences at different startups. So we know who they are, and when I was visiting my friends in SF, they had done stints,

(24:49) I don't know. Four year rotations at different startups. And so they were like, everyone's they're like a known Quantity. Yeah, they're playing a long term game with long term people. So actually investing in (25:00) them or putting money in them is not really as high compared to putting that money into a fresh university graduate in Southeast Asia, who doesn't have that track record, who has not gone through that rotational programming. So I think it's a different field to the talent quality.

(25:13) Adriel: Yeah. It's just hard to find people who have seen temptation and then rejected it. Not everyone has that benefit of going through those experiences.

(25:22) And then I think as investors like spotting that type of. Proven talent becomes very tough in this part of the world where it's still fairly emerging.

(25:30) Jeremy Au: Yeah. On that note let's wrap up. What's one positive hope that you have for the future out of this whole debacle?

(25:37) Adriel: I think with every fraud uncovered there's one less playbook to play with for those who are thinking about committing fraud.

(25:44) The truth also is that it's very hard to blame the eFishery investors when you read the DealStreet article and you realize that actually it was a very elaborate scheme and structure, the money flowed through numerous entities and you really had to be intentional to (26:00) say, Hey, I think this company is fraudulent, let me engage a forensic consultant to go ahead and run.

(26:04) The numbers trace the financials all over the place. I'm not sure if a normal, financial due diligence exercise at say a series A where you know you want to close it in three months so the founders can go off to build their business is sufficient. And then let's say you raise a large series A, you have three four years of runway.

(26:23) How does the board impose or bring in proper control measures to Really understand portfolio monitoring, because a lot of portfolio monitoring is, let me send out a questionnaire if I'm just gonna fill it out. Like, how do I actually cross reference this with reality?

(26:39) Maybe a quarterly board meetings. It's very easy to just show a very specific sliver of the business to investors and the board. I don't think there are any easy answers again, because. American venture capital is very used to investing in software and tech and they have probably built out a very great playbook on how to diligence fraud (27:00) in that part of the world.

(27:01) Jeremy Au: But in this part of the world, I don't think there is really good playbooks on like how to catch the entire range of fraud or Misreporting. So I think that is a business in itself. Catching fraud Yeah. I think for me, the hopeful thing and it's inspired by what you said is that I hope that this is a good wake up call for, I think, investors as well.

(27:22) Which is that I think it's not just about investing in the companies that will do well, but it's also about not investing in the companies that don't. And I think a lot of investors are like very big on a momentum piece, but the momentum piece can really be artificially hyped in so many different ways,

(27:36) ranging from fraudulent to legal, but not business economics justified. And so I think being able to. Talk through the BS and the press release to be like, what's the deeper call to reality, which is this a good business or not?

(27:51) Adriel: Yeah.

(27:52) Jeremy Au: Is the CFO good or not? If the CFO quits, should I do an exit interview with this person to figure out what's going on in the business?

(27:58) There's just a whole bunch of (28:00) like deeper reality work. There's these people that just have to really do the legwork

(28:02) you just can't skip the legwork, and the truth is, there are investors that walked away from eFishery, there are companies and many investors that said no to eFishery as well.

(28:11) To some extent, they did a job by not investing. But I think it's an interesting dynamic where I think it's a good reminder that in retrospect, I think it's good that eFishery Imploded because it's a matter of when, not if, I wish it imploded maybe two years ago.

(28:26) Yeah. Then I think a new crop of founders will have come up. A hundred percent. So because two years ago, I think it'd be less painful. It'd be not a unicorn. It'd be only a hundred million dollars, and everyone's ah. But now I think what people are just surprised by is like the sophistication, like you said, the size.

(28:40) Yeah. And I think the big part about why you and I never put two and two together was just like. You and I was just like, Oh, those guys must have caught it by now because they paid for money for a big deal to the Georgians. So I think we were just like, What's the word? We were just surprised at the scale of it.

(28:53) We were not surprised by small fraud.

(28:55) Adriel: Yeah.

(28:56) Jeremy Au: But we were surprised by the audacity of the scale of that fraud.

(28:59) Adriel: Yeah. The truth (29:00) is, there have been much larger frauds, like FTX, for instance. So I guess E3 is large in the context of this region. And then of course it's like Invest Tree as well.

(29:09) So yeah, I think, the bright side and the silver lining, as you say, just that talent and I guess on some level capital is now released back into the ecosystem. And hopefully the employees who have seen what happened at eFishery take the positive lessons and don't take the negative parts of it and build much better businesses in the years to come.

(29:28) Jeremy Au: Yeah. I think I agree about that. And I think that the people who got the most screwed with the employees sorry, but if you're doing fraud, fuck you, like what a fucking waste of time really made a giant shit on everybody in the Southeast Asia tech and gave all of us a bad name. And then to the, what, the 10 to 20 executives that were involved in this fraud was a fuck you.

(29:48) Adriel: It probably made some nice money along the way.

(29:51) Jeremy Au: Yeah. Fuck it. I'll never work in tech again. Southeast Asia. But everybody who got shafted is I think like I got impacted obviously as somebody, but even so it's (30:00) less but all the junior employees or the fish farms got massively screwed.

(30:03) Oh, a hundred percent. Yeah. It's that livelihood is a day to day. It's on their resume. Yeah. It's just horrible. So I think those guys got really screwed, which is, I think quite a shame. I don't know. Like it feels like a horrible thing to do.

(30:14) Adriel: Yeah. No, I think. It puts into question fundamental leadership questions,

(30:18) as a leader, do you really care about your people when you did all those different actions? Yeah, maybe you can argue that you did that to raise money so that you can continue paying salaries, etc. But, longer term you probably have also scarred their careers and livelihoods on some level. Yeah.

(30:33) As the fraud imploded.

(30:35) Jeremy Au: Imagine if somebody walks into your resume, and you're like, eFishery, as an example. Head of sales for three years. Which is a total reasonable job to have. The first question you're going to ask yourself is just imagine you go into an interview and you're like, were you ethical?

(30:47) Did you conduct any fraud? Were your sales real or not real? Yeah, exactly, so that's literally going to happen in an interview. Yeah. And then after that, Even if you like the person, you're going to be like, Oh man, I have to tell my board, I hired somebody to hit a sales from

(30:58) Adriel: The branding is the

(30:59) Jeremy Au: (31:00) branding is good. You'll be like, ah, you know what? I'll just hire somebody who is a little bit safer as a choice. So I just think is this yeah, I don't know. It just makes life hard. So it's just horrible. Yeah. On that note, peace out and see you next time.

(31:11) Adriel: Yeah. Thanks, Jeremy. Have a good Chinese new year.