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00:00Assalamualaikum warahmatullahi wabarakatuh
00:07Assalamualaikum warahmatullahi wabarakatuh
00:08You're watching Agenda Awani
00:10And of course welcome to Gazanah Megatrends Forum 2025
00:13And this year's team debugging uncertainty
00:16And of course this could not be more timely
00:19Given that across the world economies are recalibrating
00:22Amid geopolitical fragmentation
00:25And of course at the same time supply chain realignment
00:28And also rapid advances in artificial intelligence AI
00:32And in Asia for instance
00:34Malaysia has emerged as one of the most resilient nodes
00:38In this shifting landscape
00:40And with Penang now contributing nearly 30%
00:43To Malaysia's total exports
00:45And hosting over 350 multinational firms
00:48In the semiconductor and also electronics value chain
00:52And the country of course attracted over 70 billion ringgit
00:56In approved manufacturing investments in 2024
00:59Much of it driven by high value technology sectors
01:02And of course that resilience and readiness
01:06Are precisely why GPA Bulhon
01:08Basically a leading global investment and advisory firm
01:10Has chosen Malaysia and specifically Penang
01:13As it's South East Asian based
01:17And of course this move basically reflects a growing belief
01:21That Malaysia can play a pivotal role in the next chapter
01:24Of global tech diversification
01:26Of course joining us at this time is Hugh Campbell
01:29The co-founder and also partner Bulhon Capital
01:32Thank you so much Hugh for joining us at this time
01:34Let's start our conversation with the Gazanah Megatrends Forum team this year
01:38And of course Debug uncertainty
01:41How does you know GPA Bulhon basically interpret this idea
01:46In the context of global investment strategy
01:48How does this concept basically shape your investment decision making
01:52And particularly in volatile sectors such as the AI and also semiconductors
01:56I mean uncertainty is the I guess the pool in which we swim
02:02I mean if you're investing in private technology companies
02:06You are surrounded by risk really at every turn
02:10And so debugging uncertainty for us is all about making sure
02:14That we understand the risks that we're taking when we invest
02:18But we do everything we can to minimize their impact on the businesses
02:23So debugging uncertainty I think is a really interesting way
02:28Of thinking about this very difficult period of investment
02:32Particularly in the advent of AI
02:34Help us to understand when you debug uncertainty
02:37Are you identifying risk pattern or you know
02:41Or are you creating new playbooks for resilience?
02:45Yeah I think when you make investments
02:48And we've now been investing in private technology businesses for 25 years
02:53You have a list of criteria
02:57I mean the challenge always is to follow the box ticking exercise
03:01Because more often than not you fall in love with the founder
03:04And so for us it's probably a few things that are critical
03:08The first is that founding team
03:10More often than not we're backing not just one founder
03:13But a team of founders
03:14Do they really understand the market that they're operating in?
03:19And do they have the resilience to navigate a very uncertain future?
03:24I mean in many cases these founders are trying to change the world
03:27And so of course they're operating in unknown unknowns
03:32And so founding team is a critical piece
03:35The second is one around market
03:37Is the market big enough and global enough for this founder to be successful?
03:42And then for us the final piece is the product
03:45We spend a lot of our time in due diligence
03:47Looking at the product
03:49Reference checking the product
03:51Talking to the customers
03:52So I would say these three areas
03:54Are critical in debugging uncertainty in the investments we make
03:58So assessment is super important
04:01Of course the GP Bullhorn's experience across Europe and also the US
04:05But how do you see and how do you make informed decision in terms of understanding Asia market
04:12Particularly in Malaysia and Southeast Asia as well?
04:14So I first came to Malaysia 33 years ago actually
04:19I was 19 years old
04:22And I got a job working at a school in Penang
04:26And so my love of this region but for Malaysia in particular started a very long time ago
04:32So it's great now to be back and taking off my teacher hat and putting on my investor hat
04:39And through that time of course Penang like you said in your introduction has been transformed
04:45I mean there's now 21 IC design teams in Penang
04:49The foreign direct investment from Nvidia, Microsoft, Tencent
04:54From all over the world is extraordinary and something to be very very proud of
04:59And so I think as we move away from our home base in Europe and the US
05:05Investing in this region takes time
05:08So what we tend to do our innovation model is to lead with research
05:13So we write research about the region and we've done that already in Southeast Asia
05:18Then we tend to advise companies
05:22So as you said in your introduction we're an investment bank
05:25Which means we have an advisory M&A business as well as an investment business
05:30So the second part of the jigsaw puzzle is very much to advise
05:35And then the third piece is to invest
05:38So we never lead with a checkbook
05:40We start with research, we do advisory and then when we feel we have a great team on the ground
05:46When we feel we're in the flow and we know the best founders then we invest
05:51And I'm sure that will happen in due course in the region
05:55You've seen a lot of uncertainties throughout the years I believe
05:58And also in terms of making assessment
06:00But in your point of view, you know, what are the most critical traits in terms of, you know, for firms
06:07Especially an ecosystem need to develop, you know, to thrive
06:10I mean uncertainty, especially what we've seen now with the geopolitical tensions across the world
06:17I mean the centre of these ecosystems for us is always the founder
06:23Whether we're an investor or an advisor, we're a humble servant to the founders
06:29I mean the innovation that they're trying to bring about is extraordinary
06:37And in order to be successful as a founder, you need to
06:41I like this phrase, you need to work 24-7 in order to avoid working 9-5
06:47I mean the rest of us work 9-5 but the founders are working all the time
06:51And so in order to be successful they need an ecosystem of support
06:55And that's a mixture of government support
06:58Whether that's reducing red tape or providing seed capital into the early stage market
07:06It might be universities becoming more commercial at spinning out their ideas
07:12It might be corporates like Petronas and others taking a bit of a risk
07:16And contracting with a start-up instead of only contracting with more mature businesses
07:22So all of these areas, governments, industry, universities
07:27All need to collaborate together to create a platform on which these founders can succeed
07:33Let's talk about the quality that the company should have especially in facing uncertainty
07:38Because previously and even up to this day we are talking about
07:42You know you should have the quality of good governance, transparency
07:46And also a long-term capital discipline in terms of that
07:49But do you also see that agility and also innovation is part of the important traits
07:57That the company should have in facing uncertainty?
08:00Yeah, I think when you talk about company traits
08:04It's really individuals, I mean companies don't really have traits
08:08They're not, we need to talk about founders or founding teams
08:13And I think wherever you are in the world you need to have a really resilient mindset
08:20I mean you need to, it's lonely being a CEO of a start-up
08:25You know you have to take a lot of hard knocks
08:28Most people, whether it's employees that you're interviewing
08:32Or whether it's customers that you're trying to win
08:35Most people say no at the time, at the start
08:39And so you need to have a certain resilient and confident nature
08:43In order to break through that and still succeed
08:46So I think resilience is a really important part of it
08:49I think you also need to have a certain inspirational aura
08:55In order to be successful because people need to believe in what you're doing
08:59Even though the evidence suggests that it's not going to work
09:04I'll talk about the, in terms of evaluating leadership resilience
09:09In deciding, you know, when to back the founder of an unpredictable environment
09:16How do you do this in terms of evaluating leadership resilience?
09:21So what we find is that it's very rare we make an investment in a founding team we haven't known for five years
09:28Because over a long period of time you can get to know someone properly
09:34You know, maybe you even meet them socially
09:38Maybe it turns out you play tennis at the same tennis club or whatever it is
09:43But over a long period of time you get to know whether you trust somebody
09:48I mean this era of uncertainty, one way of counterbalancing it of course
09:55Is to trust the people that you work with and that you invest with
09:59So time is a great way of finding out the truth
10:03And so we tend to not rush into investments
10:07And then of course, you know, when you do the due diligence
10:11You get an opportunity to talk to customers
10:13And I would say outside of this five year period
10:17Then we love to talk to customers to really find out
10:20Ideally customers that haven't been introduced by the company
10:24So using third party research can we find a way of getting the truth about the product
10:30So if we come back to these three things I said at the beginning
10:33It's the management team, the market and the product
10:36You know, we need to find a vehicle of doing due diligence
10:40That allows us to tick all of those off
10:42And when it comes to the people, it's time
10:45And then it's customers on the product side
10:47I want to talk about GP Bullhorn in Penang
10:49Specifically where you choose Penang
10:51But the office is not in Penang
10:53The office is in KL
10:54That's the later part of the interview
10:56But I want to talk about your, you know, GP Bullhorn
11:00Helping portfolio companies, you know, in preparing for geopolitical risk
11:04Especially in sectors like semiconductors, AI and also digital infrastructure
11:09But how do you manage this?
11:11And how do you actively encourage diversification of production footprints
11:15And if the whole situation in facing R30 for these companies?
11:21Yeah, I think so
11:22So when we invest, we're active investors
11:25So we take a good size minority position
11:28So less than 50% but probably 10-20% position
11:32And we sit on the board
11:34Right
11:35So when you sit on the board, you have a lot of responsibilities, of course
11:38You have a governance responsibility naturally
11:41But in addition to that, we try to be helpful in two specific areas
11:46The first area is to educate and support the company on the journey to raising additional funds
11:53And ultimately exiting
11:55I mean, the journey of an investor is not to be there forever
11:58For us, it's about being in a company for three to five years
12:02And then handing off the baton of responsibility to either another fund
12:07Or to a Microsoft or an SAP to a large corporate
12:11So it's a little bit like having a banker on the board
12:14So that's one key role that we play
12:17Is ensure that the company is properly prepared
12:20In order to exit and for us to return capital to our investors
12:25Point one
12:26The second point is how can we help the business commercially
12:30And I think there in particular to Malaysia
12:33We now have five portfolio companies
12:36That have moved a part of their business
12:39Either commercial or software development into Malaysia
12:43And they're using that base for one of two reasons
12:46One is to hire software developers
12:48So we have a business in sustainability software called EcoVardis
12:52That has 30 software developers now in KL
12:55That's a French-based company
12:58And the second reason is to use Malaysia as a hub for expansion across the region
13:04Because it has a level of stability that we like
13:08It speaks English as the main language
13:11So that's of course very beneficial for UK and European businesses
13:15And it's a great jumping off point for much larger economies
13:19Like Thailand and Indonesia and perhaps Vietnam
13:24When you invest, you make decision to invest in these companies
13:41Take us through the process
13:44I mean how do you see the difference in the culture in terms of local companies
13:53And then having them to have this global mindset for instance
13:58Do you see any difference in that or are we on the right track in terms of having global mindset?
14:04I mean I think if we're trying to compare Europe
14:09Yes
14:10With perhaps Southeast Asia
14:11There are of course some similarities
14:13It's a similar population size, about 700 million
14:17And we have a lot of different languages in the regions
14:22We have lots of countries
14:23But of course all of that, if you're an entrepreneur, creates problems
14:29Because it's a hundred different VAT rates
14:32And it's a hundred different labour laws
14:33Whether you're in Europe or Southeast Asia
14:35So these are big barriers for entrepreneurs to get over
14:38And so I think what we find in common is that the entrepreneurs are very resilient
14:43You know, unlike in China or the US
14:46Where you have one large homogenous market
14:49You know, in Europe or in Asia you need to be a bit craftier
14:53You need to figure out all of these intricacies and difficulties and red tape
14:58In order to be successful
15:00Which tends to mean that you're more efficient with the capital
15:04Capital is harder to find
15:05And so you need to be more careful with every pound or every ringgit that you raise
15:10So I think there's definitely some similarities in the way the entrepreneurs develop
15:15But of course there are big differences across those regions
15:18So here in Malaysia you have a much younger demographic
15:22They're digitally native, they're mobile native
15:26And of course GDP growth in this region at 4-5% is significantly greater than we're seeing in Europe
15:33I think UK's GDP growth will be a paltry 1% this year
15:37So there is tremendous opportunity to take some of the perhaps institutionalised knowledge in Europe
15:46And apply that to a much more dynamic and youthful market
15:51And that's why we're excited about being in the region
15:54You mentioned a little bit about building successful companies in this particular region
16:00But there's some quarter, some group of people who see valuations are no longer predictable or linear in that sense
16:10But how do you measure success in a world where valuations are no longer predictable or linear?
16:18I think over the last two decades
16:22Valuations jump up and down in all sorts of different slithers of technology
16:27We had it in telecoms infrastructure in 2000
16:31We've had it in the mobile internet when the iPhone came out
16:35And we're having it in AI today
16:37So this is not unusual
16:39I mean it's a function of being at the bleeding edge of technology
16:43You go through these phases where different areas of the sector go through very high valuations
16:50So you need to be very sensitive to that and very careful when you invest
16:54To make sure that you're not like a lemming and leaping into the next trend without thought
17:01And so for us we try to always focus on investing in businesses that have a software brain
17:07So this is software that makes a competitive difference
17:10Either to you and I as consumers
17:12If you think about a Spotify for example
17:15Or to corporations
17:17Again businesses like Slack that are driving efficiency
17:20So I think we need to stick very close to what we really understand
17:24And then make sure that we use our network to navigate the
17:30The comings and goings and the valuations that you quite rightly talk about
17:35You came to Malaysia 33 years ago
17:39I was three back then
17:41So of course you understand this region and developing countries across Southeast Asia
17:48If you could give your point of view
17:51What signals do investors look before committing their investments and decision making
17:57Or long term exposure in the developing market
18:02Yeah I think I spoke about this yesterday actually during my speech
18:07I think one of the
18:09There's probably three areas in this region
18:12And Malaysia of course specifically where there are gaps that I'm concerned about
18:18One is around growth capital
18:21Right
18:22So for me there is a lot of capital at the early stage
18:26Whether it's grants, softer money or more traditional early stage funds
18:33So I'm not concerned about the start up capital to go from zero to 50
18:37But I am concerned about the capital to go from 50 to 1000 people
18:41And there there isn't enough domestic or regional growth capital available for founders
18:48And that's a problem
18:49And the reason for that is when your business is growing very fast
18:53You'll need to raise that capital to continue to drive growth and maintain momentum
18:58And without growth capital as a founder that leaves you with a problem
19:02You can either grow more slowly
19:04You don't really want to do that
19:06You can try and raise money from a bank
19:09Tricky because you're not profitable
19:11You can sell your business but it's too early
19:15You know you're selling it at way way lower than the opportunity is
19:20Or you go bust
19:22Which of course is the worst of all four
19:24So that's a reason why I think growth capital is really important to develop in the region
19:29And the second thing that we don't have yet here is a reliable source of exits
19:35So the public markets are still quite immature when it comes to flotations of technology businesses
19:44And the relationships for Malaysia with the big buyer groups
19:50So these are buyers in San Francisco, the US, buyers in Europe and buyers in China
19:55Are still not strong enough to allow the founders to have close personal relationships with those buyers
20:01So that's the second piece and then the last piece is about recycling knowledge from founders
20:07So one of the great things that happens when a founder sells their company usually is that they become rich
20:13So they're very happy about that, pat themselves on the back
20:15And the second great thing is that they have learnt this journey of founding and building technology companies
20:22And that's information that I usually found founders are really willing to share
20:27And right now in the region we have a bottleneck
20:29Without getting the exits you're not recycling this experience from the founders
20:34And those founders can go on to found the next business
20:37You know maybe a second or third business
20:39And in Europe today most of the companies we back are second or third time founders
20:44And also of course they may become angel investors
20:49Putting some of their capital and knowledge to work at this to fund this next generation
20:53So those are the three areas I think where there are gaps
20:56And as I invest into and think about investing into the region
20:59I want to think very carefully about how I've plugged those gaps
21:03Let's talk about these three main points
21:05Especially number one and number two
21:07Because you mentioned about capital and also financing
21:09Of course traditional financing is a little bit hard
21:12Because you need to have a good track record in terms of for your business
21:17But we also in Malaysia we also talking for many years about alternative financing
21:21We have P2P financing etc etc
21:23But how do you see the alternative financing can help you know
21:26The start-up for instance going further
21:28And also at the same time the exit that you mentioned just now
21:30The connection
21:32How do we improve further in terms of this?
21:34So as I said I think there's enough I guess more traditional equity financing
21:41Right
21:42But I think the banks much like banks all over the world to be honest
21:45Are very risk averse
21:46But there is certainly a product called venture debt
21:49Right
21:50Which is a blend of really equity and debt that I think would be very valuable here
21:54To perhaps bridge the gap between some early stage funding
21:58And some of the later stage funding
22:00So there are additional alternative products that as the market in Malaysia matures
22:07Will be quite a natural development
22:10But right now probably the market is too early
22:13But it's something I think Kazana and others
22:16And the big banks in the region should think very carefully about
22:20You know is there are some learnings they can take from the venture debt market in the US
22:24Or the venture debt market in Europe that could be applicable here
22:28Whether it's now or in five years time is to be determined
22:31And then on the exit front
22:33I mean there's two things I think that needs to happen
22:38The first is Malaysia needs to shout out
22:41Shout more about its successes
22:43I mean let's take Ishita for example
22:45That's just raised this big round
22:47$155 million in social commerce
22:50I mean come on let's talk about this more
22:53Let's talk much more about Ishita's than we talk about fashion ballets
22:56I mean everything's back to front
22:59I mean we should be celebrating founders not demonising founders
23:02We should be encouraging them to be successful
23:05And trying not to pull the rug from beneath their feet
23:07I mean if we want to be successful as an ecosystem we need more founders
23:12And for founders to take this leap of faith
23:14To leave their proper jobs or start from scratch
23:17They need to know that the community is behind them
23:20And so I think that's a really important part of this journey
23:25Is making sure that the media and the government agencies and everybody
23:29The population at large becomes better educated
23:32About the fact that innovation and risk are two sides of the same coin right
23:37You can't have one without the other
23:39My final question in less than two minutes
23:44You mentioned about Malaysia should shout more about our success stories
23:47You as a person from your point of view
23:49What are some of the success stories that you think you as a person will tell to the world about Malaysia?
23:56Well I think this journey of Malaysian success in technology is just beginning
24:02But you've made a great start
24:04I mean already you have two technology clusters that I think most countries in the world are very envious of
24:11You spoke at the start of this interview about Penang
24:14And that's well known on the world stage
24:16But also in Johor you're now building a cluster of data centres
24:21Which are powering the artificial intelligence for many many organisations and governments across the region
24:27So I would be talking about those two
24:30And if I think about investing
24:32What I want to do is see if I can find a software entrepreneur and company
24:36In one of those two clusters
24:38That has found something that is internationally
24:42Could be an international success story
24:46Internationally available
24:48So I think it's a really good start
24:50And then I think it's about making sure that some of the more venture-backed businesses
24:57Get enough oxygen to succeed
24:59Not just regionally but on the global stage
25:02So I would be talking a lot about those two clusters
25:05And then selectively picking companies like Ashita and others
25:08That have made a great start
25:10Alright, Hugh, thank you so much for spending time with us
25:13There is a lot of good insights
25:15To understand the whole situation and markets
25:17Especially in Malaysia and also investment
25:19A strategy amidst uncertainty
25:21That is all the time that we have for this show
25:26Of course you can watch this interview on astroat1.com
25:28That's it from now
25:29I'm C. Arof
25:30So I got some help
25:31Bye
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