This article first appeared in Digital Edge, The Edge Malaysia Weekly on October 25, 2021 - October 31, 2021

The past year has been the busiest one yet for Ong Peng Tsin, co-founder and managing partner of Monk’s Hill Ventures (MHV), a venture capital (VC) firm investing in early-stage tech companies in Southeast Asia. 

Ong co-founded MHV in 2014. Before that, he was a venture partner of a VC in China and co-founded a series of companies in the US and Asia. 

Covid-19 has triggered a surge of good deals in the market, he observes, and an acceleration in digitalisation. “There are a lot of smart people trying to change the world with very reasonable ideas across sectors.” 

Nevertheless, the tech start-up ecosystem in Southeast Asia has been growing rapidly in recent years. At least 19 unicorns emerged in the region this year, according to DealStreetAsia. 

E-commerce company Bukalapak, the first Indonesian unicorn to go public, scored the country’s biggest initial public offering in August. Indonesia’s two largest start-ups — on-demand multi-service platform and digital payment technology group Gojek and e-commerce tech company Tokopedia — merged in May to form the GoTo Group, becoming one of the country’s most valuable tech companies. 

Meanwhile, Malaysia’s first unicorn, Carsome, emerged in July. Other start-ups that achieved unicorn status this year include Singapore’s Carousell and Carro as well as Thailand’s Flash Group. A record number of investment deals in Southeast Asia were done in the first half of the year, according to Cento Ventures.

Against this backdrop, MHV launched its Scouts Program in September, enlisting over 20 founders and operators in the start-up world with a strong track record to invest in high-growth pre-seed and seed stage start-ups across the region. 

Scouts Program is meant to help MHV keep up with the rapidly changing Southeast Asian tech ecosystem. 

“The way we think about it is that we are helping the Venture Scouts help the ecosystem. One of the ways they can do that is by investing,” says Ong. 

“It’s interesting that when we put all the Scouts into a WhatsApp chat group, they become a community of people exchanging ideas. MHV’s model has always been entrepreneurs backing entrepreneurs. Now it’s entrepreneurs backing entrepreneurs, who then back other entrepreneurs.” 

The Scouts, also called Venture Scouts, include Bukalapak co-founder Achmad Zaky, Snapcart co-founder Araya Noon Hutasuwan and Zopim co-founder Royston Tay. 

The Scouts can invest in tech start-ups in the region across industries but they have to invest their own funds as well. MHV will then co-invest with them. 

“They control the deals and decide when to get in and out. We stay out of the way because the whole point of the Program is for us to work with a bunch of people who are former CEOs and executives,” says Ong.

Other than having impressive backgrounds, these Scouts are people MHV has known for years and, more importantly, trusts. 

“I’ve known Achmad Zaki for nine years, dating back to when I moved to Jakarta. He’s never had time to invest in many start-ups but he’s passionate about it. He’s a thoughtful founder of a unicorn and enjoys helping the next generation of founders,” says Ong.

As at September, the Scouts had made 10 investments. For instance, Crystal Widjaja, chief product officer of Filipino livestreaming start-up Kumu, invested in ADPList, a global mentoring platform, and John Tan, founder of edtech start-up Doyobi, invested in Rocket Academy, an online coding boot camp.

Driven by the pursuit of growth and returns, investors have been pouring funds into Southeast Asia’s high potential start-ups. While this is good for the start-ups, it is worthwhile to ponder whether it will inflate valuations and create a bubble. 

“I think there is too much risk-sensitive capital coming in. I’m alright with that but when I see seed deals valued at US$50 million, I think people are going crazy. When you see the prices of non-fungible tokens (NFT), you realise there is irrationality in the market,” says Ong.

“This is probably the fourth market cycle I’m going through, so I’m not surprised at people’s behaviour. But at some point, it needs to be corrected.”

Speculative investing — where people do not focus on the fundamentals of start-ups before investing — is dangerous, he adds. Ong is a believer in start-ups that are fundamentally creating value instead of those that have high valuations merely because the market believes in their story.

“The reason most of us believe that there is a bubble is because at some level, rationality has gone out the door. We have [companies with] price-revenue ratios of 50 to 100 times. It stops making sense. How many years of growth would you need to earn those kinds of valuations?” he asks.

These inflated valuations are not just seen in start-ups, he emphasises. Some of the initial coin offerings (ICO) do not offer real value, Ong believes. “If your price-earnings ratios are so high, [you have to question] where it is coming from. When we see start-ups with crazy valuations, we stay out of those deals.” 

Despite the noise in the market, Ong is excited about the huge number of founders in the region who are eager to make a difference by using technology to build high-impact businesses. 

“They are going to change how Southeast Asia works, from how the education sector operates, how people find jobs, how healthcare is delivered and how financing is given to small and medium enterprises. These are big tectonic shifts that will happen in Southeast Asia, 10 years from now,” he says. 

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