DisruptInvest 2024:Chua Kee Lock of Vertex Holdings on the 3 key trends emerging, and the exit of momentum investors

With three days to go before the DisruptInvest Summit on 23 May in Kuala Lumpur, keynote speaker and one of the top VCs in Asia, Chua Kee Lock (pic), CEO of Vertex Holdings, who leads a global network of seven funds (with Japan being the most recent one, launched on 16 May) with around 90 VC professionals, shares some quick thoughts with DNA on the tech trends he sees. We also asked his opinion on which island, Penang or Singapore has the tastier street food. (Spoiler alert, his answer is not spicy.)

To start off, can you give us an overview of Vertex Holdings and the seven funds it has?

 Vertex Holdings, is a Singapore-based venture capital investment holding company with AUM of over US$6 billion (RM28.16 billion). It provides anchor funding and operational support to a proprietary global network of venture capital funds.

 At present, we have seven network partnerships, each with distinct focus areas. Our Vertex family of funds invests in early stage technology opportunities through Vertex Ventures, namely – Vertex Ventures China, Vertex Ventures Israel, Vertex Ventures Southeast Asia & India, Vertex Ventures US.

We recently welcomed Vertex Ventures Japan into our Vertex global network which launched its inaugural ¥10 billion (RM299.7 million) fund with Vertex Holdings as its anchor investor. The fund will focus on investing in leading Japanese startups with high growth potential in Deeptech, Digital Transformation (DX), AI and the creator economy.

For our global funds, we have Vertex Ventures HC, which specialises in early-stage healthcare opportunities and Vertex Growth, which targets growth-stage opportunities across technology and healthcare sectors. 
 
Each Vertex fund operates independently and is managed locally and separately by its respective General Partners. Through the Vertex global network, collaboration and knowledge sharing is fostered among the funds. 

Can you share your view on the current funding landscape (based on the locations and investment themes of the 7 Vertex funds) and the top 3 disruptive trends emerging from the network?  

Given the breadth and depth of our global network, we do see pockets of opportunities emerging throughout our network. The wave of global technology disruption is here, and innovation cycles are moving faster and getting cheaper – enabling exponential growth in supercomputer power and a corresponding decline in technology cost over time. In the past two decades, many countries have set up and continuously enhance their digital infrastructures enabling an accelerated adoption of new technologies. 

With the rapid adoption of technology, we are witnessing some key trends emerging:

1. AI is changing the future – Generative AI applications are transforming businesses through various means from increasing productivity to creating new business models.
2. The rise of “As-a-service” (XaaS) model – With a subscription basis model, businesses are transforming how they utilize technology.
3. Dynamic shifts in Cloud Computing, Cybersecurity and Big Data – With the rapid advancements in AI, we believe these sectors will leverage AI to enhance their existing applications and offerings.  

Based on media coverage and the current hype, it is hard to think beyond AI as the trend of the moment and future. But from your vantage point, what are the trends that Vertex sees?

      With the overall AI market forecasted to hit around US$2.5 trillion by 2032 and the generative AI market poised to be at at US$1.3 trillion by 2032 it is no wonder why AI is changing the future. We believe AI have the potential to disrupt industries        much like the internet revolution did as startups develop AI-enabled applications to transform industries.

     Beyond AI, we also witnessed significant shifts in the cloud computing space where the industry is moving towards specialized and intelligent cloud solutions. We see a rise in adopting hybrid and multi-cloud strategies, to leverage the strengths of       different providers. The integration of AI and machine learning into cloud services will enable automation, optimisation, and deeper data analysis. Coupled with the growing focus on edge computing for real-time processing, the cloud landscape         is becoming increasingly intelligent and distributed. 

    Secondly, the "as-a-service" model, often referred to as XaaS, is also experiencing remarkable growth. This model encompasses everything from software (SaaS) and platforms (PaaS) to infrastructure (IaaS) available on a subscription basis. Its     appeal lies in the on-demand access companies have to cutting-edge technology at a cost-effective rate.

Cybersecurity is another area where we see significant advancements. The rise of specialised language models and AI-powered attacks highlights the evolving nature of cyber threats. Both cyberthreat actors and cybersecurity teams (including      Information Technology and Operational Technology) can leverage on AI to enhance cyberattacking tactics or respond against cyberattacks to prevent disruption. Lastly, big data and datafication are moving beyond mere volume to become    actionable assets by leveraging on the power of data and AI to drive real-time decision-making. Datafication, the process of turning various information types into data, will continue to expand incorporating sources like the Internet of Things (IoT)    and sensor networks. 

In terms of Southeast Asia, do you buy into the often-repeated narrative that it is a market of 600 million or it is much more segmented than that? Why do you say this?

Southeast Asia (SEA) is one of the world’s fastest-growing markets, and home to more than 600 million people. However, it comprises of a diverse group of countries and cannot be considered as a monolithic market. Investors should be aware of local preferences and cultural sensitivities; and should not be applying a one-size-fit all strategy across the various markets. 

We believe SEA remains an attractive investment destination and Venture Capital (VC) activities remain active despite the recent dip. For instance, during COVID-19, we witnessed a hyper investment pace between 2021-2022 especially in Indonesia and Singapore startups. Since then, the investment pace has moderated. Venture capital firms who overinvested previously may deploy capital into existing portfolios instead, as concerns over existing investments performance arise. While the overall funding has dipped, competition for high-calibre deals remain. 

With “momentum” investors leaving the ecosystem, companies are focusing on fundamentals such as Product Market Fit, Scalability and Path to Profitability. We continue to see innovative and disruptive business models or technology applications emerging in early-stage companies while the growth stage companies are increasingly becoming more realistic on valuations by raising funds at normalized valuations. 

Which island do you feel has the more delicious street food, Penang or Singapore?

Both islands offer great options, each with its own unique flavours. Penang is renowned for its rich culinary heritage, where you can find an array of traditional dishes like Penang char kway teow, assam laksa and others – which reflect the island’s diverse cultural influences.

Singapore, on the other hand, is famous for its hawker centres, where you can enjoy a variety of local favourites such as Hainanese chicken rice, laksa, and chili crab. 

Personally, while I have a deep appreciation for Penang's authentic and traditional street food, my personal preference, although slightly biased, leans towards Singapore. The variety along with the consistency of quality, make it a favourite for me. However, both destinations are culinary paradises, and food lovers from over the world would be delighted with what each has to offer.

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