Quyết định của VC: Đặt cược tuần tự, Điều hướng thoát khỏi thị trường và Giải quyết các thách thức về quy định - E542
“Well, in Singapore and New York, they decided that the needs of local residents outweighed those of Airbnb landlords. Singapore expressed concern that allowing Airbnb to operate would shrink the total housing supply for residents and long-term workers. As a result, the votes and complaints of these residents carried more weight than those of landlords wanting to use Airbnb. A similar situation occurred in New York City, where a housing crunch led policymakers to prioritize local residents who opposed Airbnb over pro-Airbnb landlords who were tax residents. This debate continues in many cities and countries worldwide.” - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast
“Society will need to co-evolve with artificial intelligence. At the same time, Sam Altman emphasized the need for regulation. However, Andreessen Horowitz strongly criticized him, arguing that he was advocating for regulation to create a competitive moat that would prevent new startups—backed by VCs—from competing with OpenAI. They contended that the high cost of regulatory compliance could only be borne by a company as large as OpenAI, effectively limiting competition.”- Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast
“Ben Horowitz initially supported Trump over Biden due to his perception that Trump favored "Little Tech"—a term used in their manifesto to describe smaller tech startups fighting against big incumbents and Big Tech. His stance was also influenced by policies on crypto, an industry in which Andreessen Horowitz has a significant portfolio. However, after Biden dropped out, Horowitz announced his support for Kamala Harris, citing their long-standing relationship, and began fundraising for the Democrats. Ultimately, he has donated to both Republicans and Democrats, though historically, his contributions have primarily gone to Democrats.”- Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast
Jeremy Au discussed key aspects of venture capital decision-making and tech regulation including how VCs make sequential investment choices, navigate acquisition offers and public listing routes, and address regulatory challenges. He also examined how customer advocacy and jurisdictional differences shape tech policy, while debating the trade-offs between asking for permission versus seeking forgiveness.
1. Sequential Investment & Timing: VCs re-evaluate decisions over time, balancing past rejections with new opportunities.
2. Acquisition Offers & Public Listings: Companies with similar acquisition terms can choose different paths, and public offering routes vary widely.
3. Regulatory Environment & Legal Lag: Laws only regulate what exists, leaving tech companies to navigate gaps in regulation.
4. Permission vs. Forgiveness: Startups must choose between seeking approval or risking later consequences based on local rules.
5. Customer Advocacy & Jurisdictional Impact: Mobilizing customers can influence regulators, and success depends on local political and legal climates.
(00:51) Jeremy Au: What are the recurring clusters the startups have and how they fail and how predictable they are, and how VCs can help avoid disaster but also (01:00) add value? Last time around, we talked about the context of adding value versus portfolio success and versus judging. These are two things that always happening, the yin and yang you're always going to help some companies But you got to prioritize your time your attention your allocation for that and so we talked about how VCs are always thinking to themselves, stack rank, who are the winners, who are the ones that could be a winner really soon, some of the ones that's kind of not here, not there, and which ones we're just gonna write off in terms of time and attention.
(01:26) And so, we talked about how we have a good example from the Instacart IPO that was in 2022, 2023 about how we saw that VCs had to make sequential decisions about whether they should double down, they should exercise a pro rata, whether they should sit out the round. And basically what we saw was that some VCs missed the opportunity to make a lot more money, some VCs made more money, and some VCs lost money, but this is kind of the sequential piece. And I think one thing to really emphasize is that when you're in 2012, you made, you know, 40 or 50 other investments. It's hard to tell that this is the one to make the bet. Now, obviously, in (02:00) 2022, hindsight is 2020. So we want to look backwards in time. And it's more obvious. And so there's a lot of VCs who are kind of like having old sharks moments. So, recently I got a WhatsApp message earlier today and then, we said no to this startup.
(02:14) And then, my friend was like, "Yo this company got accepted by a Tier 1 VC Accelerator Program." But then also it doesn't mean that they succeeded. It just means that somebody wants to make a bet on them. And the opportunity I saw was like two years earlier, maybe I can come in again. But, you know, there's always that reevaluation when you look back in time. But I said no to them two years ago and now maybe they're coming back. Who knows? Because now a Tier 1 VC has blessed them with their attention. But I don't know whether they are right. They could still be wrong. So it's something that we had to be thoughtful in terms of timing.
(02:43) We're talking about how startups have three major approaches, if your company is not going anywhere, we can either close the company and wind it off, or we can do an acquire, where we keep the talent for the acquirer, or we cash out and we sell the stake back to the founders to continue running this as a lifestyle business, or whatever you want to call it.
(02:59) (03:00) There are secondaries where VCs can sell it to somebody else because some other VC may perceive there's a higher value in that stake, but you only want to sell because you don't think it's going to go well, or you don't think it's going to be an appreciable, need more growth then. So, there needs to be a seller, and then there needs to be a buyer who thinks they have a different judgment than the seller.
(03:19) We talked about the story of two companies that had the same terms in terms of acquisition offer from Facebook, now Meta, Instagram, and Snapchat. Both of them had an opportunity to be acquired by them. One decided to say yes, one decided to say no, and we talked about some of the differential outcome and obviously the return on investment that it was for the VCs. We also talked about three stories of Southeast Asian companies that went public. We had Sea Group that went IPO in the most traditional route through the New York Stock Exchange. Then we talked about how Gojek went for IPO in the Indonesia Stock Exchange. And obviously, we talked about how Grab went public with a special purpose acquisition company which is a blank check company to (04:00) make companies go public.
(04:01) We started talking about regulatory affairs. We recapped this quote about how at the end of the day, all of us here are interested in law, but law can only be used to regulate and define things that already exist. And the problem that we have with technology is that we're always bringing in a new order of things. So by nature, the law does not exist for a new thing. And we heard that from a regulator, talking about how everybody making a decision whether they should be aggressively proactive about legislating it, versus being more of a wait and see approach or a light touch. So the regulators are gonna create the law. So the enforcement of law is the enforcement of something, it's a whole process and so forth. And so we talked about how startups and technology, they have a certain mindset. And Peter Thiel who founded PayPal, Palantir, Mithril Capital. He is the mentor for JD Vance the Republican vice presidential candidate. But he talked about how all happy companies are different. Each one earns a monopoly by solving a unique problem. All failed companies are the same, they failed to escape competition so they got (05:00) stuck. So we talked about how regulation and regulatory capture is a point of view and so a lot of VCs that you see by nature when they explain or have a point of view, a lot of them are by nature anti regulation because they are concerned about regulatory capture by the incumbents versus they are supporting and investing companies that will rewrite the playbook in the next 10 years or 20 years.
(05:21) We talked about how regulatory affairs, of course, are a function of whether your country, for example, is able to enforce law and what kind of law, what is the perception or discussion about how wealth and rewards should happen in the economy. And so we talked about how startups have to think through about how they work with regulators because a lot of regulators have to make a decision, and a lot of them choose not to make a decision.
(05:48) And so a classic example was Handy. I think that whole law and creation of the law around what is a gig worker using an online tech platform has mostly played out, but you must (06:00) understand that five years ago, it was not settled in most countries around the world. But today, it feels more settled, which is that it is a relatively distinct class on average, and they're somewhere in between full time employee and somewhere in between. So, but every country has slightly different legislation on each one. So startups often have a saying, which is, is it better to ask for permission or to beg for forgiveness? The question that you have to think to yourself is, "What's this jurisdiction?"
(06:26) All of this point of view on regulators comes from past ventures and task ventures is a VC that's focused on regulator action. So they're a VC fund. They say their value add is that they help startups survive regulator actions and help them write new laws into existence. So they worked with Uber and the big thing that they had was uber was going to get regulated because basically, taxi medallions is legal to have a taxi through a taxi medallion. Is it legal for freelance people to pick you up in their normal car, (07:00) right? So, totally not settled law. And in fact, there were multiple instances where New York State tried to kill Uber at the city level. States were trying to kill them for Uber. And so lobbyists perspective, they were saying, what's the jurisdiction? Is this a place I can work with or is that very scary place jurisdiction wise? And for Uber, a lot of us kind of know now that they eventually decided that they would not ask regulators for permission. So they grew as fast as they can and that was very much their culture in terms of how they worked with regulators. And of course they were thinking through the narrative about how that compares to the incumbents, so when Bill de Blasio, which was the New York City mayor, tried to attack Uber basically saying that they're trying to protect taxi drivers. Then for Uber, their press was basically saying, "Hey, if you look at taxi fleets, the way that these taxi fleets are, are discriminatory against minorities," because the existing taxi fleet structure, they do not like (08:00) to operate in certain neighborhoods.
(08:01) And Uber actually provides better, responsive, on demand, private hire for low income and minority neighborhoods. So, they flip the script and say, "Hey, this is our approach about why we think that opening up access to people who cannot access private hire is better." So, obviously, these are the competing marketing narratives that both regulators and lawyers will be working through. And what are the consequences for forgiveness? So, is it nothing? Is it a penalty? Is it jail? Is it death? It depends on the country that you have. Some countries, the penalty is going to court and spending a lot of money, legislating over and over again the court case, but in certain jurisdictions, you know, you could have the death penalty, right? So you have to think through what is the penalty for asking for forgiveness or whether you even get it and of course the last thing is when you work regulators you really shouldn't bail. So a lot of startups we've seen kind of work regulators halfway then they start to bail and regulators get pissed off and then everything doesn't work out well.
(08:58) We also saw that (09:00) for Didi IPO. So Didi was in China. It was the newspapers that reported that they were told that they should not list on the New York Stock Exchange by the Chinese regulators. They listed, and then they were forced to delist, because the Chinese Communist Party basically said, " thank you very much, you now unwind that," And that would be something that would be quite rare, it would be quite hard for you to imagine an American court forcing an American company to delist from a European stock exchange, for example. So I think the consequences or the strength or the conviction of regulators to actually enforce this action is quite different.
(09:31) Another thing that we saw recently is that TikTok was given I think several weeks to get a license, which was impossible to get within that time frame. So that was once a regulated action, and then TikTok Shop eventually solved that by acquiring Tokopedia from GoTo. So currently, we are now seeing the repeat of that. The Indonesian government has decided to ban Temu and ask them to delist it from the local app stores. The perception is that they are competing with local (10:00) manufacturers and taking away jobs of the middle class, which is already shrinking in Indonesia. That being said, of course Bukalapak shares have gone up. Rumor mill is saying that maybe Temu, which is a subsidiary of Pinduoduo in China, may repeat the same playbook of acquiring a local player in order to comply with the new laws that prevent a foreign player to come in, but a foreign player that buys an Indonesian company and becomes Indonesia centered in that sense could potentially pass the regulatory requirements.
(10:29) Next thing you need to think about is, you can actually figure out whether to mobilize your customers to advocate for you politically. So the question that you have to ask yourself is, " Do they care about you or not?" and, "Why do they care about you," and, "How bad is incumbent?" Are they really anti competitive, even though they're protected by a law? Are they very unpopular? So things can change. For example, if you're in a democracy, then votes can change. Obviously, if you're not living in a democracy, then votes don't really matter. But this is kind of a lever of action it can have. And do the elected politicians care? Are they (11:00) prime voters? Are they voters that are very swingy? Or are they already very much in one camp or another? So to give you an example, you look at DraftKings and FanDuel. Both of them were doing basically fantasy sports, which is a nice way of saying that they allow gambling on some sports activities. And then they were banned in multiple states. The reason why, of course, is that multiple states actually have legal gaming or gambling or lottery operations in each of their respective states that fund a lot of their local charity or healthcare or social programs.
(11:29) When these were banned, DraftKings and FanDuel basically activated their customer base with a pop up saying, "Your legislator or your city or your state is trying to kill. Here's one click message and we will automatically place a call or email to lobby your legislator to change their mind and start supporting fantasy sports."
(11:48) Obviously, these voters were very important because a lot of these happen to be the people who play fantasy sports. You can imagine that kind of person is considered to be a very important swing voter in the US and so, that was (12:00) why they were able to activate and push. And of course, in America, it is a democracy, so these votes actually matter. That notification happening, for example, in a different country may not work out, if you don't have a democracy.
(12:11) Another example would be Airbnb. if you think about Airbnb, it's a similar version of this, where they have two sides of it, right? They have tourists, and they have landlords who own properties for Airbnb. Singapore and New York City have both banned airBnB, so AirBnB has failed in their regulatory affairs to be able to prevent a law from being enacted for their continual existence in these markets. Singapore is obviously a huge market but there is existing and incumbent hotel industry in Singapore, that's one. But AirBnB was unable to really activate, I think they did try to have people who are their primary users that have a lot of votes? It would be tourists. And tourists have zero votes in your local constituency because they're tourists, they're not local residents.
(12:53) And the local resident who cares about Airbnb is the landlord. Do you care about these people? Well, in Singapore and New York, they decided that not as much as compared to the people who need housing, right? So Singapore said, we are concerned that if Airbnb is allowed to proceed, it will shrink the total supply for housing, for local residents and long term workers. And therefore, their votes matter more and their complaints matter more than these landlords that want to use Airbnb. Similar context for New York City. There's a housing crunch. They said, we care about local residents who are anti-Bnb more than pro Airbnb landlords who are tax residents, so forth. So, obviously this continues to be a debate in many cities and countries around the world. Of course you know, startups can make a choice about whether they want a proactively shaped regulation for this new sector.
(13:46) This, of course, is, you need a point of view, which is what are the right regulations which city or country is the best first test case, which is the easiest or the most favorable jurisdiction for me to build out (14:00) this new regulatory strategy?
(14:02) For example, if a regulatory strategy is committed and new legislation is written in New York or SF, it tends to be very much an index or reference case for multiple countries around the world. If, for example, the Maldives did legislation and policy on AI, very few people will use them as a precedence or benchmark to write new policy. So what you can see is that Open AI, after they hit a certain level, they go in public, they got very popular, and then he started doing a whistle stop tour. He went to Singapore. He went to Indonesia. He went to Europe. He went to Germany. He basically said. We want regulation and we wanna shape it. So you can see him, there's a Singaporean Rachel Lim, Open AI just announced opening up an office in Singapore. And they basically, the headline that he said was, "society will need to co-evolve with artificial intelligence," so there's a message. And of course, at the same time as Sam Alman was saying that he said, "We need regulation." Andreessen Horowitz basically blasted him, Sam Altman and said, "You are
(15:00) asking for regulation because you are trying to create a competitive mode to prevent new startups that VCs will fund to compete with you." because the cost of regulatory compliance can only be borne by Open AI, big enough to survive the cost of compliance. So this is actually an interesting debate. Obviously we saw that very much with crypto and banks. Banks said, "Hey, crypto needs to do KYC and anti money laundering requirements." Crypto basically said, "The only people that can do these compliance requirements are big banks, which is so this is a way to be anti competitive." So it depends on whose side you are and obviously we saw that in the most recent piece, Ben Horowitz decided to support Trump against Biden because of his perception and his stance on how they felt like President Trump was supportive of "little tech," that's their quote unquote manifesto because little tech fights against big incumbents or big tech
(16:00) but also their policy on crypto, for example. So, Obviously, Andreessen Horowitz does have a significant portfolio in this industry, but of course, what's interesting is that Ben Horowitz has now announced that since Biden has dropped out and he has had a long prior relationship with Kamala Harris, he is now fundraising for the Democrats. So he has basically donated money to both sides, both Republicans and Democrats. But of course, the interesting part is that historically, Ben Horowitz had donated to Democrats in the past, in the years before.