A company like OpenAI that founded ChatGPT will never spawn out of Singapore, due to the lack of artificial intelligence (AI) talent and capital, says venture capital (VC) firm Antler’s managing partner for Asia, Jussi Salovaara.
Instead, the early-stage VC investor is taking a bet on a “second wave” of AI start-ups across Southeast Asia, also known as verticalised AI companies. This refers to companies that take existing broad-based foundational AI models built by horizontal AI companies, and craft industry- and case-specific solutions.
Together with Malaysia’s sovereign wealth fund, Khazanah, Antler has invested US$5.1 million ($6.86 million) in pre-seed deals in 37 verticalised AI start-ups this January — which span across 19 sectors, including fintech and health tech.
Salovaara, one of the founding partners at six-year-old Antler, observes that the global pendulum of start-up investing has swung away from the trendy blockchain and Web 3.0 investments, and towards the trendier AI. However, the inherent “global-ness” of the playing field in AI makes it challenging for homegrown start-ups to compete.
For one, many firms building the foundation of AI are mega-capitalisation companies with large capital and operational expenditure to fund innovations that can take on worldwide challenges. Most of these firms do not have founding roots in Southeast Asia.
Instead, Salovaara believes that the take on AI moving forward is to focus on concrete business problems in different industries, specific to a country.
See also: Prudential launches global AI Lab in Singapore to accelerate innovation
The investor cites as an example Indonesia’s food supply chain — which faces systemic challenges such as fragmentation and a lack of traceability — something a country like Singapore may not struggle with.
Antler has therefore invested in Zolo, an AI-powered assistant for food suppliers in Indonesia, to get food to customers fast, without the need for human management.
In Singapore, the VC has invested in BorderDollar, a trade finance fintech start-up that tackles invoice financing for cross-border maritime logistics, something that is only relevant for a global maritime hub, Salovaara explains.
See also: Ninja Van Group secures US$50 mil revolving credit facility from HSBC
“It’s about what type of AI business should be built for [a specific country], and what type of AI business should be built for Southeast Asia,” he says.
Antler’s managing partner in Asia, Jussi Salovaara, says that the lack of AI talent and capital makes it hard for a company like OpenAI to be born out of Singapore. Photo: Antler
‘Day zero’ investor
Founded in 2017, Antler has developed a reputation for incubating young start-ups from their “day zero”. Last year, Pitchbook ranked the VC as the most active seed-stage VC firm globally with 263 deals.
Its co-founder and CEO, Magnus Grimeland, was once part of German internet company Rocket Internet, famous for its venture building in start-ups. He co-founded Zalora before starting Antler.
Last June, the VC raised US$285 million for its “Antler Elevate fund” that aims to provide scale-up capital from Series A onwards to growth-stage start-ups. Prior to that, Antler had two Southeast Asia-focused funds — Antler SEA Fund I, worth US$30 million and closed in 2019; and Antler SEA Fund II, with a closing amount that has yet to be announced.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
The firm says that it is committed to investing US$100 million in total in Southeast Asia by 2025.
Salovaara declined to go into specifics on how Antler’s first fund has fared so far. He would only say that he is “generally happy” with its performance, citing a few successes that have sprung out from that fund, including Airalo, the world’s first e-sim store; and Reebelo, a marketplace for refurbished electronic devices.
“The second fund is now too young to comment on,” says Salovaara.
With 2023 coined as the “extinction year for start-ups”, and the ensuing sentiment that almost nine out of 10 start-ups fail in their first year, Antler, like many other “day one” investors, are seemingly taking a riskier bet.
As such, Salovaara highlights the importance of investing in founders with proper skills. Gone are the days of the Rocket Internet-age of start-ups in Southeast Asia, he quips.
“We need to be able to hire talent relevant to AI, because we invest in almost no other employees except founders from the start, and whether they are talent magnets are critical for AI start-ups,” says Salovaara.
Meanwhile, the investor echoes the year-long sentiment around what VC firms are looking for in start-ups — being focused on the unit economics from the get-go, goes a long way.
For this year in particular, Salovaara believes that “AI is going to be a big theme”. While historically, Southeast Asia has been a hub for fintech start-ups and investments, the investor says that almost every company from here on will have to utilise AI.
“For early-stage [investments], investors are very active, and later-stage investors are only kind of starting to invest [now],” says Salovaara. “They’ve updated their requirements for what needs to look like a financially sound start-up, and the bottleneck in funding [companies to expand faster] is moving from Series A to Series B.
