Q&A: 500 Global’s Christine Tsai

Q: What was the group thinking when you set up the firm in 2010?

A: It was about a very contrarian conviction on talent existing outside of Silicon Valley. I grew up and was educated in Fremont and the University of California, Berkeley, so I know the mindset in that 30-mile radius. There was not much venture capital outside of the US, especially at the seed stage. We had a pretty bold thesis around going early-stage with a large portfolio and bringing in operator expertise – which was also a novel approach. A lot of people didn’t understand, but from the very beginning, we were backing companies in East Asia, Latin America, the Middle East, and Southeast Asia. Now we’ve seen all these regions start to mature, and I think our portfolio is a really strong reflection of where the market is heading.

Q: What was your approach to going overseas?

A: One of our learnings from the past 11 years is that a big aspect of being global is being hyperlocal, committing with boots on the ground, investing, and building up a track record. That meant a lot of travel, trying to build our network, bringing in LPs from different regions, mentors, co-investors, and eventually recruiting investment partners and tutoring them to be good stewards of 500 in those regions. It was a lot of air miles – and writing checks. The capital spoke a lot. The founders in these markets were not accustomed to raising capital, so they were bootstrapped. But being from Silicon Valley was definitely notable, and early-stage checks are always a big need.

Q: How has that early-stage space evolved?

A: It’s definitely something we’ve seen change over the years. It’s still a need for companies everywhere, but it usually comes last. In a lot of these markets, there may not be any venture investment, let alone in the early stages. The nomenclature changes – seed, pre-seed, Series A, pre-Series A – but we usually write the first check into a company. That’s the riskiest stage, but it also has by far the largest upside. Now we’re seeing a lot more early-stage funds in regions like Southeast Asia, which is great for the ecosystem. We’re excited to see how much it’s developed.

Q: What has been the role of Asia in 500’s development?

A: It’s critical. We first started investing in East Asia and Southeast Asia in 2012, before people in Silicon Valley knew what Southeast Asia referred to or encompassed. Many people confused it with India. Now, a lot of my colleagues in Silicon Valley are saying, ‘I just invested in my first Cambodian company.’ Many of the first companies we invested in have gone public, announced plans to go public, or raised big rounds. Of the 34 unicorns in our overall portfolio, five of those came from the first 20 investments we made in Southeast Asia. So, we’re continuing to lean in there. We have partners in Singapore and Kuala Lumpur, and we even did a couple of investments recently in Myanmar.

Q: What about the rest of the region?

A: In East Asia, some of our earliest investments were in Japan, including Paidy, which was acquired by PayPal, and SmartHR, a recent unicorn. Our Japan partners spun out to launch Coral Capital, but they continue to manage our 500 Japan portfolio, and we have a few accelerator programs in Kobe as well as a couple of team members and LPs in Tokyo. We also have people in Korea and Taiwan, where we’re ramping up quite a bit. We have one team member in China and one in India. We also have a presence in China and India through co-investors or LPs, and in India, through about 70 portfolio companies. We were early investing in India but haven’t been as active in China.

Q: What new markets are you looking at?

A: Pakistan is one we’ve been paying quite close attention to. There are some parallels to how Indonesia has developed. We did our first investment in a Pakistani company a few years ago but recently we’ve seen the deal flow start to pick up. The market itself is more than 200 million people, and there’s a lot of founder talent. We’ve seen several local companies either expand into Southeast Asia or the Middle East. We have a couple of companies that are doing both, including Retailo, which covers Saudi Arabia. The investments have been from the flagship fund [which recently closed at $140 million], except Dawaai, an online pharmacy, which was discovered through our Southeast Asia fund.

Q: What is the plan for the new fund?

A: We have historically done a lot of enterprise SaaS [software-as-a-service], and that continues. We also see a lot of interesting things happening in fintech and digital health. We’ve been doing some blockchain and crypto, which has been fascinating, and a couple of those are Asia-based. A good portion of the fund will be allocated to Asia. This fund is also expanding into later stages – a bit more Series A and B. Historically, that has largely been out of scope for us. We’ve been flexing our muscles with that for a while with SPVs [special purpose vehicles], and we hope to keep putting more capital to work there.

Q: Why do you want to do more late-stage investment?

A: A lot of it comes from how our portfolio has matured and developed over the years. We now have a more than 2,500-company portfolio that spans stages, geographies, and sectors. It’s deep and diversified, and we’re finding that the relationships that we’ve built with these companies and the reach of the portfolio are advantages. We intend to not only be the first check into a company but hopefully the last check before they go public. There is still a need for that in these emerging markets, and we’ve seen a lot of demand from our companies. We want to continue doubling down on them and following their journey.

Q: What has been the reaction of LPs?

A: It’s been quite attractive to a lot of LPs and why they’re drawn to 500. It’s because we have access to a lot of these companies, and in many cases, we’ve built strong relationships. So even when companies have gotten to a later stage and don’t necessarily need our help in that way, there is still a lot of trust. Because of that, we have had the ability to get allocations into some of these later-stage rounds, and that’s certainly very attractive to LPs, either from a co-investment standpoint or just learning and getting connected. A lot of institutional investors are looking to get access to certain regions or just global deal flow, and we have that breadth and depth.

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