By Rich Karlgaard Senior Contributor
Jenny Lee, senior managing partner of Granite Asia.
JULIANA TAN FOR FORBES ASIA
Amid a worldwide sag in early-seed funding, Asia鈥檚 AI startups are a top draw for investors.
In a widely read scorecard, Silicon Valley Bank, now a division of First Citizens Bank and a lender to venture capital-backed startups, reported that 鈥渟eries A tech deals underperformed our expectation [for 2024], hitting the lowest level since 2012.鈥 While moderate growth is expected this year, the bank predicts levels are still lower than a decade ago.
What explains the early-stage sag? Higher interest rates? Years of a blocked-up IPO market? This columnist suspects another reason. Today鈥檚 investment giants are so big they can鈥檛 really focus on seed rounds. Small VC firms face their own problem. They lack deep pockets, or connections, for later rounds.
This leaves Jenny Lee, senior managing partner of Singapore鈥檚 Granite Asia, in a good spot. Over two decades, Granite鈥檚 early investments have led to 48 unicorns and 30 IPOs. Granite now has $5 billion under management. That鈥檚 small enough to make focused seed bets. But large enough to partner with megafirms in later rounds.
Lee says by email, 鈥淚f anything, Granite is seeing healthy and accelerating momentum鈥 in seed funding for AI startups. These days, Lee likes AI-native apps that solve real-world problems鈥斺渢ransforming human-centric processes in logistics, manufacturing, healthcare and education into AI-powered systems. And they鈥檙e doing so with lower compute needs and greater capital efficiency.鈥
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When it comes to how AI has altered the economics in the VC industry, Lee says: 鈥淎I-native companies scale faster but also hit infrastructure costs sooner. That compresses the time between seed and scale. It exposes investors to more follow-on risk earlier. At the same time, valuation expectations tend to inflate ahead of fundamentals.鈥
As a global investor, 鈥渨e鈥檙e seeing more balanced risk-reward ratios in Asia, where exceptional founders are still building under the radar,鈥 she observes.
Asia vs. U.S. Venture Capital
The Asia model is less about blitzscaling [a description of hypergrowth, common to U.S. venture circles] and more about building with context. 鈥淚n the U.S., especially in the Bay Area, early-stage AI startups often scale fast on the back of open-source tooling, abundant capital and a well-worn playbook: build a demo, raise capital fast and chase valuation milestones. But in Asia, the road to product-market fit is shaped by real constraints鈥攆ragmented markets, regulatory nuance, cost-sensitive users and localization complexity,鈥 notes Lee. 鈥淭hese challenges force AI founders to innovate not just on technology, but on distribution, data access and business model design.鈥
But what about talent? The U.S. and Silicon Valley are rich with AI superstars, but also expenses. OpenAI CEO Sam Altman claimed on a recent podcast that Meta was courting his AI engineers with $100 million signing bonuses. And don鈥檛 forget options that could be worth hundreds of millions in a public stock offering.
Granite鈥檚 Lee observes that Asia鈥檚 talent pool is better balanced鈥攆rom China鈥檚 robotics depth to India鈥檚 developer base. 鈥淭he region has a deep bench of STEM talent, world-class manufacturing ecosystems and governments that actively support industrial automation and digital infrastructure. That combination is producing a new generation of founders who aren鈥檛 just fine-tuning LLMs [large language models that undergird generative and agentic AI]. They鈥檙e engineering autonomous robots for factories, building AI-empowered workflows, and developing full-stack solutions for mobility, logistics and healthcare.鈥
鈥淭hese companies are often being embedded into physical infrastructure from the ground up, solving problems in dense cities, aging societies and complex supply chains, and in doing so, creating globally relevant innovations.鈥
If Lee is right, then today鈥檚 global drop in early-stage investments will be short-lived. An IPO boom will fatten VC coffers, and likely reawaken interest in early stage. One way or the other, Jenny Lee and Granite Asia will be there. They never left.
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