Southeast Asia Capital and Companies Eye China AI Development, Similar to the Internet Era
SEA VCs strategically courting Chinese founders and doubling down on Indonesia
Following my last post about how Singapore has become a launch pad for many Chinese AI companies going global, several VCs in Singapore and Indonesia reached out, which I greatly appreciate. Beyond reconfirming what we discussed in that article, they provided additional insights into the current happenings on the ground.
Today, I want to share my learnings from investors in the Southeast Asia region directly - some on record, some on background.
BTW, I’ve been in Seoul for the last few days and met with some investors and reporters to learn more about the South Korean AI ecosystem - from hardware to software to the interesting AI startups emerging in the consumer space. SUPER interesting. A piece to come on my learnings from this trip.
Chinese Founders Received Positively in SEA?
According to an Indonesia-based USD fund investor, a trend is emerging where funds are recruiting Mandarin-speaking investors and scouts. The reason is that there is a bias or common belief that Chinese founders are very likely to succeed, and the goal of these investors is to court them.
The VC investor told me that many Southeast Asia-based investors are trying to court Chinese founders over local founders, but PR is the biggest issue.
His reasoning is that there is a common belief/ trend among investors in SEA that they prefer to back Chinese founders over local founders, with the belief that they're more competitive. But this is obviously an overgeneralization, and not shared by everyone, and in no way a diss of local founders.
However, it is underpinned by some truth in demographic shifts and the overall trends in the tech ecosystem in SEA (specifically in Indonesia) over the last decade.
Just as we’ve written about before, many of the major internet players in SEA - especially in major markets like Indonesia are Chinese, such as Alibaba’s Lazada, AliExpress, and Alibaba Cloud, all of which have a considerable presence locally.
Others, such as Tencent’s Gaming, Shein, and Temu, also have operations in the most populous middle-class market in SEA. While local SEA leaders such as Shopee/SEA (SG), Grab (SG), GoTo (ID), and J&T Global Express (ID/HK) dominate, many have also chosen to partner up with Chinese firms in some capacity, such as the Tokopedia/TikTok deal.
[And to add to the point of Chinese founders being technically good founders, this VC investor highlighted that even Shopee/ SEA and J&T’s founders are originally from Mainland China]
Caution Remains as Challenges Persist
Another investor I spoke to, who had only just relocated from the U.S. to Singapore in the last year, works for the VC arm of one of the most significant funds in the region and holds a much more cautious attitude.
He notes that it is difficult to draw a clear conclusion about whether Southeast Asian VCs systematically favour mainland Chinese founders, especially amid persistent public relations sensitivities around Chinese technology, mainly for companies that target Western markets.
He observes that, in global markets, Indonesian founders are often perceived as less technically sophisticated. In contrast, some believe that Chinese founders —frequently alumni of Alibaba, Ant Financial, or ByteDance — benefit from the depth of China’s mature start-up ecosystem and experiences. However, the reality is that this technical gap does not automatically translate into an advantage within Indonesia, given the size and complexity of the market.
Success ultimately hinges on nuanced local knowledge and relationship-driven commerce (to be honest, just like how American companies couldn't simply take their exact roadmap and make it work in China two to three decades ago as well), so even the most capable Chinese technologists struggle without strong domestic networks and a deep understanding. So the ones that are being backed by SEA funds have mostly led teams and demonstrated success at Chinese firms in the local SEA market(s) - such as J&T’s founder who was a former executive at Oppo Indonesia before starting his own business .
In fact, recent encounters with Chinese entrepreneurs in Singapore have made him cautious. Some appear primarily motivated by lifestyle considerations and by the perception that capital is easier to raise in Singapore at a time when China’s current start-up environment is weak. Others cite that their main reason for setting up shop in Singapore or the Southeast Asia region is due to immigration pursuits, rather than strategic or business operational reasons. Even among the credible teams, many import a distinctly “Chinese” operating style that raises governance concerns and may not align with Southeast Asian work norms.
Lastly, he argues that these companies will face significant headwinds in the United States, where investors and customers remain wary of vendors with Mainland Chinese roots, regardless of their Singapore domicile. This is more reflected in some of what we have written about as well, with the “China-shedding” strategy as a priority for many.
Indonesia, the Underdog Market
The fact is, for most realists, let’s be honest, it’s often just what works better and what can potentially generate a higher return in the long run. Whether they are Chinese or not is not a key consideration in whether they financially back them or not. And talent is heritage agnostic.
For many in the West, it is not realized that Indonesia is often the single largest profit lever for Singaporean tech players, such as Sea and Grab. So, I spoke to a leading Indonesian VC firm, Alpha JWC Ventures. The fund has over 70+ active portfolio companies and USD$650m of AUM.
I asked them whether they were specifically courting Chinese founders, given the rumors about the trend, and they said that they work with founders across markets and heritages. And again, proven that it’s their business and work ethic that speak louder than anything else.
Ray Djajadinata, Technology Partner at Alpha JWC Ventures, said to AI Proem: “We are excited by more Chinese founders exploring SEA's potential, in particular in sectors of consumer and healthtech. Specifically regarding AI technology, with more challenging market access to the U.S. and EU, startups in China will have to diversify into other markets, like LATAM, Africa, and Southeast Asia. They have also taken to establishing an entity in Singapore, which is viewed as more neutral, and can facilitate easier access to the U.S. market later on. Then, when a startup is AI heavy or AI native, it will need access to advanced GPUs, where Singapore facilitates easier access to uncrippled NVIDIA GPUs.”
In fact, most of the big Chinese tech companies have become their LPs over the years, and as the fund gets ready to launch its new fund IV, the team is “naturally speaking with new partners, Chinese or otherwise,” according to a company representative.
Externals might not know that one of their unique edges is their China reach, as it has long had venture partners on the ground in Shanghai. However, in no way is the backing more Chinese founders over SEA ones. It’s all about whether the tech is superior, but heritage agnostic.
And the Chinese presence in Indonesia is not a new phenomenon.
Djajadinata added, “Since 2021, we have seen a healthy influx of Chinese entrepreneurs building businesses to capture this market. Some examples from our own portfolio include those of Skintific, Cornerstone Robotics, Peak3, etc. However, a lot of entrepreneurs may simply look at exporting China-based models to apply to Indonesian markets, and successful ones spend more effort in localizing their propositions and channel partners. Alpha JWC is happy to partner with such founders to help them accelerate market adoption through our unique value creation capabilities and resources.”
And case in point, for many sectors, such as healthcare tech, Chinese technology is naturally a leader, and when they expand, Indonesia is often a natural choice, given its significant population and growing middle class.
Chinese Internet and EV dominate SEA, But What About AI?
The reality check is that Chinese companies and products are dominating the roads and the internet sector across SEA, and thus Chinese capital has a large sway locally.
According to various sources, I’ve heard that Chinese EVs have flooded the local premium market. Notably, the seven-seater Denza, a premium marque of BYD Auto, has replaced the Toyota luxury minivan Alphards, as it is more fuel-efficient, cheaper in price, and has become a new status symbol for upper-middle-class families.
While newer players, such as Shein and Temu, have quickly eaten up market share, legacy players like Alibaba’s Lazada and TikTok’s acquisition of Tokopedia over time have solidified Chinese internet players' hold on the e-commerce sector.
So, when it comes to AI, what will be the future?
SEA (ex-Singapore) has sometimes been viewed as a cheap data center destination for U.S. and Chinese big tech, as I’ve covered here re. Thailand and Malaysia, and that is in many ways a fair consideration from a business perspective (the pressure put on local infrastructure and communities is an issue, though).
“SEA's AI ecosystem is not suited to compete on AGI / Superintelligence domains, and for a good reason,” said the Tech Partner at JWC Alpha Ventures.
He explained to me that, indeed, there are innovations and opportunities in the application layer. “SEA AI startups also innovate in building more trustworthy AI, thanks to regulatory pressure (ex. Monetary Authority of Singapore's FEAT principle, Indonesia's Otoritas Jasa Keuangan's Trustworthy AI guidance, etc.,” he added.
So, how will AI play out in SEA in the long run? We do not know yet. But if we look at how even the major locally grown SEA internet players took a lot of consumer playbooks from China to SEA and localized them successfully, then maybe that is one future possibility roadmap to follow as AI consumer apps continue to mature.
In addition, I dont know if you guys remember, when I met with Zhipu’s COO and he said at the Beyond Expo that they mostly work with price-sensitive governments in markets that are less “geopolitically sensitive”? Well, one can wonder if he meant markets such as Southeast Asia and Latin America, where officials have welcomed Chinese FDI and consumers have traditionally been less skeptical of Chinese technology and products.
With a lower average purchasing power, cheaper goods, such as cheaper LLMs, may make logical sense for these markets over American alternatives.