Southeast Asia's Leapfrog to Clean Tech | Ep265: Marie Cheong

Marie Cheong

So now you've got people that, you've got households that suddenly have disposable income. And so these households, and I think rightly so, are thinking about, what do I buy with this? You know, like, where do I spend my money? Like, what matters? And they're thinking about experiences, they're thinking about consumerism. They're not thinking about...

Michael Liebreich

Degrowth.

MC

Exactly, right. It's, you know, two or three generations that have benefited from a tremendous amount of growth in the region. And I think where we are at the moment is that emissions and growth in Southeast Asia is very, very closely linked.

ML

Hello, I'm Michael Liebreich and this is Cleaning Up. One of the priorities we set at the beginning of the year was to spend more time outside the US, Europe and China, focussing on what we call Most of World. That's where 70% of the global population lives, a huge amount and a growing amount of energy demand and of the economy, and most of the demographic growth.

So I'm here in Singapore, it coincides with Ecosperity Week. I've been moderating sessions on AI, helping to launch an organisation called FESIA, which is the Future Energy Storage and System Integration Alliance, and also hosting a number of Cleaning Up Leadership Circle events.

My guest today is a business builder and venture capitalist operating across South and Southeast Asia. She runs a fund called Wavemaker Impact, and she's going to be spinning out an organisation called 100x100, which we're going to hear about. I am really hoping that you enjoy this conversation for a reason that we will reveal towards the end of our conversation. So please welcome Marie Cheong to Cleaning Up. Marie, thanks so much for joining us here today.

MC

Oh, pleasure. Thank you for having me.

ML

Now, we're going to start where we always start, which is with you describing who you are and what you do in your own words. And then we've got lots of good stuff, because we did the visit yesterday, we'll get into that. But first of all, who are you and what do you do?

MC

Ah, fantastic. Okay so my name is Marie, and I'm a founding partner of a climate tech venture builder and VC firm called 100x100. Maybe before I launch into that, I'll say that I am relatively new to VC. I consider myself to be a very reluctant venture capitalist. The real passion that I had coming into this was, this question that was in my mind is, how can we build companies that could meaningfully decarbonise the world?

And that set me on a journey that started about five or six years ago, really trying to explore what kind of business models are out there that are scalable and can be needle moving, especially for a region like South and Southeast Asia. So what we try to do at 100x100 is we're on a mission to build a portfolio of companies that can abate 10% of global greenhouse gas emissions. And we do that by working with experienced entrepreneurs.

So these are founders that have built companies before, scaled them and exited, and are somehow crazy enough to want to do it again, and want to do it with something with impact. And we work with them over a period of six months to build what we call 100x100 company. So these are companies that have the potential to abate 100 million tonnes of carbon dioxide equivalent and be $100 million revenue businesses at scale.

ML

And I was going to ask you about the 100x100, because that's going to be a big feature of your future. It's going to be part of the brand and you're spinning that out. But I was wondering whether you're going to try to build 100 of them.

MC

Well, so the whole idea is that if we had 50 100x100 companies, then that would be five gigatons of emissions that we would have abated. And that's the 10% goal. So that's what we're trying to get to. So then the big question is, in order to get those 50 successful companies, how many other companies do you have to build on that mission?

ML

Because you spun through very quickly, you said you're a venture builder and VC. And then you filled in a little bit of what I was about to ask, which is what does being a venture builder mean? And it is about working with those entrepreneurs to make the company happen rather than just being a passive venture investor, right?

MC

Yeah, exactly. So when we first launched this in 2021, we looked around the region and climate tech is incredibly nascent in this region. So Southeast Asia is about 7% of global carbon emissions, but gets less than 3% of VC funding in the space. So there just simply aren't enough companies to launch a meaningful VC strategy just for climate tech in the region. What we do have, on the other hand, is an incredible pool of talent. So we have founders that have built, scaled and exited tech companies that have been early employees and some of the unicorns in the region.

We also have a group of founders that have built, I would say, more traditional brick and mortar businesses that have gotten reasonably large and have decided to exit those. So we've got an incredible pool of talent that are interested in doing something meaningful. So interestingly, about 50% of our founders come to us having already started to look at climate because they've got kids, they read what's going on in the news.

And another 50% of them are just people who are passionate to do something to solve big problems for the world with urgency. So they've been looking at health tech, they've been looking at ed tech, they've been looking at issues like water, and they've been looking at issues like climate, but they haven't found a space. And part of our thesis is that there's a misconception around climate that it's all about these silver bullet technologies, you know, it's nuclear fusion and direct air carbon capture, that's what's going to save us. But we can abate 50% of global carbon emissions using the technology that we have today. There's green discounts everywhere. And these are, I would say, more engineering problems than they are tech problems.

ML

This resonates with me, I love it, because I actually bridle at this sort of the silver bullet thinking. And I wrote a piece for The Economist in response to a piece that had been written by Vinod Khosla. And Vinod Khosla was saying, don't invest in any of these things, all of this wind, solar batteries, all the stuff that we've got, it's all pointless, because it can't solve the whole problem and it can't scale. And what we need is, and then he listed a whole bunch of essentially technologies that he had invested in. And it was things like superconducting, transmission lines, and of course, the usual effusion and small modular reactors and so on, it was either in it or implied.

And I've got nothing against those technologies. I've just done too much of what I do tracking the actual energy system to think that those things are going to suddenly materialise and suddenly be rolled out at scale. And within two, three, four decades, because it's just such a big, big and complicated system. And so, you know, we've kind of got to do both. But you are the anti-bro VC in a way, because you only want to do the stuff that can work now in this region.

MC

Yeah, exactly. I mean, another great example that I know we've talked about in the past is hydrogen. And I mean we've been talking about hydrogen in this region for at least the last decade right. And it's nowhere close to really being able to have the impact that it needs to be meaningful. On the other hand, you know, we've recently launched a solar consumer appliance business. So selling solar lights, solar fans, solar fridges and freezers to tier two and tier three cities.  And the revenue of that company, I mean, the first revenue was in weeks of launching and the growth rate is incredible. 

And so I think there's a couple of things here. So I think one is there is a skip the landline moment that is possible in Southeast Asia. You know, the phrase like the best coal fired power plant is the one that's never been built. So energy demand in Southeast Asia is set to double in the next 20 years. And you know, what is that driven by? Right. That's driven by people buying air conditioners for the first time for their homes. The people who are now buying a car instead of having, you know, a two wheeler. And so all of these things, we have the opportunity now to green it at the point of demand rather than having to wait for a big energy transition to happen.

ML

I love the phrase skip the landline moment because I've been talking about leapfrogging and I don't understand why leapfrogging hasn't been a big word in for instance the COP process, but skip the landline moment it's so obvious what you mean by that. Before we dive into the visit we did yesterday, which was so much fun, there's a couple of other things. Give us the metrics. How many portfolio companies, how much money have you got under management? How many people, what have you achieved? You said this all started around 2021, 2022, metrics.

MC

Yeah. So when we started in 2021, we were a completely new product in the market, right? So venture building was new. Climate was new for the region. So we set out to raise US$25 million and we ended up hitting our hard cap of US$60 million. So US$60 million under management.

ML

Acronym alert. You know, you know our rules here. USD is of course US dollars, but we just make it clear in case anybody listening has any doubt.

MC

Keep me honest. Keep me honest. We now have 23 companies in our portfolio. So these are 23 companies going after the biggest drivers of emissions in the region, everything from rice cultivation, rice is the second largest driver of agricultural emissions globally, to two companies, one in Indonesia and one in India, that is creating a drop in replacement for coal from agricultural waste, to companies in the built environment, for example, a bamboo company producing an alternative to wood products. And two AI companies recently, one tackling overproduction in the fashion industry, and another Muun AI, which we'll talk more about later.

ML

Absolutely. And then the other thing we need to clarify before we go further is the region. And it was one of the things that I've wanted to do with Cleaning Up, but it's been a strategic goal for Bryony and I, we decided with the editorial council that we wanted to really represent or showcase or understand what we call Most of World. So that's not the US, Europe, China, which grabbed most of the airwaves in energy discussions and climate discussions. So that's why I'm here, it's Ecosperity Week, so it was a great opportunity and I'm off to Australia, which is also part of Most of World. 

But some definitions for me, you can test me and for the audience, because okay, there is Asia and we all kind of know what Asia is. And it starts from the Bosphorus and it goes all the way across. But then you've got these other terms that you've already started to use. And because you knew this was coming, you were very careful. You said South and Southeast Asia. So what is Southeast Asia? Let's start there.

MC

So Southeast Asia is generally about 11 countries that are a part of ASEAN, which is the Alliance for Southeast Asian Nations. So that includes Singapore, of course, but also Malaysia, Philippines, Thailand, Vietnam, Indonesia, Laos, Cambodia. Okay, Michael, who have I left out?

ML

Oh, I don't know because at the fringes

MC

Brunei...

ML

Brunei is absolutely in there, but Papua New Guinea is an observer. And then you've got, what was the one that I always forget? But it's quite easy from a European or the US perspective to just kind of know these countries exist, but not really to understand. Do we get a sense of population as a whole? I mean, you've got some quite big ones in there. You've got the Malaysians, the Indonesians, the Philippines.

MC

Indonesia is about 200 million people.

ML

Right, exactly. So we're into the sort of half a billion-ish type population, most likely. I haven't done my homework and it looks like you haven't either.

MC

I know, I know. Failing the pub quiz now.

ML

We'll put that information in the show notes.

MC

There we go.

ML

That's the scoundrel's refuge for me at this point. But it does not include, so when you say South and Southeast Asia, so that's then not just the ASEAN, Southeast Asia countries, that starts to include?

MC

So South Asia is India, Bangladesh, Pakistan.

ML

Okay. And the reason it's confusing is if you look on a map, it's not obvious why that's South Asia and it's South relative to China, but it's not South relative to Malaysia and Indonesia and the Philippines. But that would then be South and Southeast Asia, and that's really what you're talking about as the area that you're going to invest in, correct?

MC

Yes, that's right. So we started in Southeast Asia. That's our backyard. Southeast Asia, as I mentioned, is about 7% of global carbon emissions, but scattered across 11 nations. So it's different than, for example, when we look at India, which is also about 7% of global emissions, but is a single country.

ML

And of course, India is referred to as the subcontinent because it's mainly, obviously there are some islands involved and so on, but it's mainly a block. Whereas Southeast Asia, you could say, I'm hesitating, I have to check my terminology every time. Southeast Asia is a lot of islands. You have a very different sort of structure of the landmass and the issues around access to ocean and industries and transport requirements and so on.

MC

Absolutely. And it's also one of the regions that is most vulnerable to climate change. I know it's not in vogue anymore to talk about climate change, but it is a real threat. Over a hundred million people in Southeast Asia rely on coastal regions for their livelihoods. We see all the time in the region the effects of unstable weather conditions, both on crops, both on coastal regions, typhoons, which are hurricanes. So, you know, it's a vulnerable region. Bangkok, as an example, could be underwater by 2050 with rising sea levels.

ML

Although when you say that, I immediately got my sort of, I have a different claxon, which is, hang on a second, because Jakarta, people say that about Jakarta, and Jakarta has a huge flooding problem because most of that is caused by over extraction from the aquifers. You build lots of skyscrapers on squishy land and then you take all the water out and not surprisingly it sinks. But the sea levels are also rising. So your point is a good one.

MC

Maybe just to extend it a little bit more, I think what is valuable to think about is stranded assets. So, you know, this region has grown tremendously in the last 50 years. You talk about skyscrapers, I mean, you know, the cities in Southeast Asia are modern metropolises and billions have gone into infrastructure. And that's really what is kind of at risk when we talk about climate risk.

ML

Absolutely. And I got a bonus question, which is because as I was thinking about islands, having said that India, of course is the subcontinent and it's a big block, but you've got Seychelles, Maldives, Mauritius, places like that. Are they South Asia or are they Southeast Asia? Does it matter? 

MC

Can the listeners refer to the show notes on that one?

ML

We'll put definitions. And I'm being slightly sort of, we're having a bit of fun here, but these definitions they do matter because of course you are operationalising a business. You're running a business and what you don't invest in is as important strategically as what you do. So you would look at opportunities and you do look at opportunities. Do you already have portfolio companies in India or do you look at Bangladesh and Pakistan as well?

MC

So India is our primary focus in South Asia. We have three companies there at the moment, and we are investing in another two, hopefully in the next few months.

ML

So you can get your revenge by asking me about CPTPP, because I was on the board of trade when that was negotiated. And that is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which for some reason includes the UK. But we're very happy to be in it because trade is a key part of what actually is bringing your regions up economically, right?

MC

Southeast Asia is a supply chain hub for the world. So, you know, if you're buying clothes in H&M, the shoes that you're wearing, chances are that these are produced in Southeast Asia, even your plastics are a big production here.

ML

Or if they're not produced here, then they will have passed through here because they may be produced in China, but the Straits of Malacca and there's all sorts of complications. But one of the things that's very striking about the region is the diversity. And you have Singapore, literally the highest GDP per capita of all of the advanced economies. And then you've also got Papua New Guinea, which is maybe it's only an observer, but there is this huge range of wealth, but also geographic and cultural diversity. You just have to go to the food marts here in Singapore and you can see the different peoples that there are in the region.

MC

Yeah. I mean, look, I think it's a great strength of the region. It adds to many of our cultural aspects. I think it also gives us a more global and international view from day one, because you're so used to seeing so many different nationalities and cultures. I think the challenge from a VC and a business perspective is that to build a hundred MT company, you know, the scale of companies that we are looking at, you have to go multi-country. 

ML

Klaxon alert, MT?

ML

Million tonnes, megatons

ML.

Yeah. Sorry, I'm going to stick to the rules. I'm the only person allowed to break them.

MC

Can I give you an example? So one of our portfolio companies, Arysun, is doing small scale consumer solar in Indonesia. Indonesia is I would say, it's a fairly nascent market still when it comes to, you know, rooftop solar. And there is quite a lot of regulation to navigate. And one of the interesting things that we found there is that there is an opportunity to put a completely behind the metre, small scale solar system with a battery attached to it. And do you know what the customer insight, which really unlocked it was? So PLN, which is the state energy company, they moved to a tokenised system. So you prepay for your electricity.

So that means that every household has to go and buy a token. They have to top up their credits. And middle income families in these regions outside of Jakarta, you know, so tier two, tier three cities, they think about having to top up their electricity all the time. So they're making choices like, do I run my washing machine today before I have to go and top up my credits? And it's also quite common we found when we went out and visited a bunch of these households that 80% of these households had at least one appliance that was broken. So their fridge could be broken or their rice cooker could be broken. 

Why? Because they're so used to their power getting cut on, you know, cutting in and out. And that of course, shorts the electronics. And so when we sold these systems, the price point was low, right? It's the affordability of like a TV or a new fridge. So you're in kind of like the consumer price point here. But people were doing it not because of solar, not because of savings, but because they wanted to have the certainty that they wouldn't have to go and top up this token before they could run their washing machine.

ML

This is so exciting because we've now heard about people who've got range anxiety for a washing machine.

MC

Exactly.

ML

But that insight is absolutely essential.

MC

So here's a challenge. So taking a company like Arysan, even though we know that small scale residential solar plus a battery could work in other markets from an income perspective and so on, that insight that really is allowing Arysan to grow at a tremendous rate in Indonesia doesn't necessarily translate to Vietnam or it doesn't translate to Malaysia. So that is the challenge of building in a region like Southeast Asia.

ML

It's also the reason why I can't just sit in London and bloviate about Southeast Asia and what it should and shouldn't do or could or couldn't do because those insights are absolutely, when you're a business builder, that is absolutely the level that you have to be operating at and understanding. Just talk to me briefly about the region's attitude to climate, the negotiations, what's going on in the Gulf, driving up and down energy prices.

My sense, let me give you on climate, my sense is that this region has never been quite as on board with the urgency of climate action. It has had other priorities to do with development and to do with bringing people out of poverty and providing modern energy services and then just the daily bustle of living. But equally, it hasn't fallen out of love with climate action to the same extent that some countries, not looking at you US, but it hasn't been as extreme. It's neither been as sort of hysterically involved in climate action, but neither is it going to be stepping out now. Is that fair?

MC

Okay, so there was probably a government and a policy angle which I don't think I'm qualified to really talk about. But maybe I think I would say from a public perception or a sentiment perspective, what we're seeing now is an incredible growth in generational wealth. So in one generation, people have gone from being, I would say very low income earners to suddenly having disposable household income. And there is a burgeoning middle class all across Southeast Asia, and it is fantastic to see.

ML

Presumably, they've also gone from rural, almost subsistence farming or rice farming to living in a city. So incredible generational change.

MC

Yes, exactly. And so now you've got households that suddenly have disposable income. And so these households, and I think rightly so, are thinking about, what do I buy with this? Where do I spend my money? What matters? And they're thinking about experiences. They're thinking about consumerism. They're not thinking about... 

ML

Degrowth.

MC

Exactly. It's two or three generations that have benefited from a tremendous, tremendous amount of growth in the region. And I think where we are at the moment is that emissions and growth in Southeast Asia is very, very closely linked. So we haven't seen that delinking that happens in China, that happens in the EU. So when we say that the energy demand in Southeast Asia is set to double in the next 20 years, that is because our economies are growing, we're in a growth economy.

So then when you think about the mindset of people, life is good right now as a general rule, right? And getting better, I think there's a lot of optimism in the region. And I think as a result, there's not so much of a focus on sustainability, on climate, on the energy transition. The caveat I will say to that is, for example, there's been a lot in the press around, the Philippines only having, I think it must be like 20 days left now of energy supply because of what's happening in Iran and the Strait of Hormuz

And that's what has driven a tremendous demand for things like solar appliances. So the Philippines is one of those unique economies where it's got a very liberal energy market, but it's also got the highest energy prices in the region. And it's got one of the most unstable grids. So brownouts are very, very common. So people are thinking about buying things like larger scale battery systems. For example, one of our team members lives in a tier two city in the Philippines, and she plugs her Wi-Fi into a battery so she can continue to work from home. So these are these everyday kind of things. So I would say that's how people feel things like the energy crisis.

ML

And that's why the idea of the skip the landline is so important, because if there is that enormous growth in energy demand, and I think that absolutely there is and there should be, and this is a good thing, but it can't just double down on using coal, which is a mainstay of most of these countries' energy power systems.

MC

And the fastest or the easiest to grow, right? I mean, you don't have to, there's not huge investment, you don't have to think about intermittency, you just turn on another coal-fired power plant, right?

ML

And a lot of the countries, Vietnam, Indonesia particularly, have got a lot of coal. So it's a very resilient fallback. And so that's something that I'm doing a lot of thinking about and talking to people about how, you know, yes the coal is going to play that resilience role, but it doesn't have to run 24-7 at very high proportions of the electricity generation in order to do so. Can coal become more flexible, almost like the role that gas plays in Europe and will play increasingly?

MC

So one of our big theses is that we've been developing over the last two years in our fund is really this idea of greening energy demand, both from a supply perspective and also from a demand perspective. So I think that, you know,the supply perspective, the large utility grade solar, I think there's a tremendous amount of work that's happening in the region around this, and I think it's very much needed. And there's, you know, big infra funds that are being launched. That is fantastic. But I think there's also a role to green, as we talked about skipping the landline, from the demand perspective.

ML

So I don't know if you've had the opportunity to see a recent episode with Harish Hande, who's a friend of mine who works absolutely on that model, but with the very poorest in India, actually in northeast India. And he's talking about, you have to work out if somebody is rolling rotis or they're grinding millet, help them to do that. Oh, by the way, it's solar.

MC

Yeah.

ML

And then it's easier to get finance from the banks because there's an economic rationale. It's a wonderful model. 

ML

Cleaning Up is proud to be supported by its leadership circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL, and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live.  

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ML

I think what we need to do is introduce the visit that we went on, one of your portfolio companies. Kathryn Knight is the entrepreneur, Muun AI. Just give us the quick studio version and then we'll cut to what we were doing yesterday, but we're talking about vermicelli noodles.

MC

Yes, exactly. I'm so happy that we were able to make that happen. And maybe if I could just set a little bit of context. So manufacturing in Southeast Asia emits a gigaton a year. And to put that in context, right, a gigaton is the equivalent of SAF, like, you know, if you're talking about like aviation fuel. And so when there is...

ML

Sustainable aviation fuel.

MC

Sustainable aviation fuel. But when we talk about, going after big emitters...

ML

Or non-sustainable aviation fuel. Essentially, it's about 2% of global emissions. And that's just manufacturing in Southeast Asia. That's not the whole region. The whole region is 7%, you said, and the manufacturing is 2% of all emissions globally. So it's significant.

MC

Yeah, it's very big. And about half of that, we estimate from our calculations, come from SME manufacturing. This is the heartbeat, I think, of the manufacturing economy that exists in this region. So I was very happy that we were able to kind of show you this. And we have a number of companies that are looking to address some of the challenges of the green transition in SME manufacturing and Muun AI is our latest example of that.

So Desmond, who is the CEO of People Bee Hoon Factory, is a family owned business,  I think they said they've been operating since 1947. It's been around a long time. It's a noodle factory, right? There's lots of thermal processes. Steaming is one of the big elements of this, cooking noodles, lots of boiling water everywhere. And interestingly, Desmond has invested in, you know, Industry 4.0, right? So he's put a lot of IoT devices on, for example, all of his steaming chambers that are producing terabytes and terabytes of data. And there's nothing that is actually being done with this.

ML

IoT devices, let's just call them sensors.

MC

Okay, sensors.

ML

I don't know what IoT stands for.

MC

Internet of Things.

ML

Internet of Things. Otherwise known as sensors.

MC

So an incredibly data rich factory, but insight poor. Like, you know, what do you do with this data that is being generated? How can you use this data to optimise factory operations? And that's where Muun AI comes in. There's two elements of what they provide. So the first is being able to ingest and label an incredible amount of data in a very short period of time. And then the second is the model that they build on top of that to enable businesses like People Bee Hoon to get real insights out of it. So for example, there are different steaming chambers that are core to this process and we've discovered that a number of these steaming chambers are steaming for too long.

ML

Just to be clear, your investment was in Muun AI. So that is Kathryn, who we also are about to meet, and not directly in the Noodle Factory. You do not invest in Noodle Factory. You might in another life, but not this one. And so we're going to meet Kathryn, Kathryn Knight. And we're going to meet Desmond Goh, who is the visionary, CEO of People Bee Hoon Noodle Factory. 

MC

That's right. 

ML

So here we are at a Noodle Factory. Remind us, why are we here, what are we visiting?

MC

25% of all emissions in Southeast Asia comes from things like manufacturing. And I would love to be able to show you one of our portfolio companies, Muun AI, which is working with People Bee Hooon Factory to work on the energy transition here.

ML

Okay. And People Bee Hoon Factory, what do they make?

MC

They make noodles of all kinds. They make bee hoon, rice-based vermicelli, all kinds of noodles.

ML

Okay. So this is like peak Singapore, isn't it? Vermicelli noodles, and this is the factory. Let's go inside and find out more.

MC

Excellent. Michael, I'm very pleased to introduce you to Desmond. He is the owner of People Bee Hoon Factory.

Desmond Goh

Hi, Michael. 

ML

Desmond, very good to meet you.

MC

And this is Kathryn. She is the founder and CEO of Muun AI. 

ML

People Be Hoon Factory was founded in 1943 and makes Singapore's classic rice vermicelli noodles. The factory is now run by family member Desmond Goh, who took us inside and showed us the hive of activity with mixers, extruders, steamers and dryers, making hundreds of metres of noodles per minute. Earlier this year, Desmond teamed up with Kathryn Knight, founding CEO of Muun AI, to see how artificial intelligence could make People Bee Hoon Factory more energy efficient. 

ML

Kathryn, tell us how did this all start?

Kathryn Knight

Okay. So a little about myself, Kathryn, founder and CEO of Muun AI, actually, I spent the past 15 years in applied AI. So not just AI in the theoretical sense, but how we can use AI to achieve real business outcomes and also now with Muun AI, sustainability outcomes.

ML

Those steamers that you're now monitoring, you're getting a row of data every second.

KK

Yeah, that's petabytes of data. So what we're able to do is we take raw data, raw machine data, and turn it into actionable intelligence for operators like Desmond. So what does that mean? We're creating a true baseline of how the machines are actually operating. So we can see anomalies, drift before something goes wrong, before the machine breaks, or before like a failed batch. So for example, you saw five chambers there, two of the chambers are over processing by maybe 20, 25 minutes.

ML

So cooking, steaming for too long.

KK

Steaming for too long. We've seen one of the chambers, there is potentially a seal leakage because there's a drift in terms of the pressure ramps and how it's sustaining. And these are things that we were able to uncover in just weeks time versus he's been sitting on these data for years.

ML

What I love is also that your approach, your tools, your intellect is being applied to noodle steaming, not to investment banking. This is great.

KK

It's so refreshing. I love, I mean, walking the factory floor is so much more fun and interesting and colourful. My life is much more colourful now.

ML

So now Marie, how did you source this as a venture investment for 100x100?

MC

So we talked to about a thousand founders every year to find eight or so founders that we end up building companies with. So we met Kathryn as a part of that process. We were talking to hundreds of founders and we were really impressed by Kathryn's experience, by her genuine commitment to use her skills and her talents to do something meaningful in climate and to solve real problems in the real world. And then we worked together for six months to identify a space that was at an intersection between the skills that she brought to the table, her previous experience, as well as some of the biggest carbon opportunities in the region.

ML

So when you met her and talked to her first, the company did not yet exist? 

KK

No, no.

MC

We built Muun AI together over a six month period of time. And then at the point at which we were confident that this was a 100x100 opportunity, so a company with the ability to abate 100 million tonnes of carbon dioxide equivalent and be a $100 million revenue business at scale. And I think more importantly, Kathryn was excited by this opportunity and thought she could do something meaningful in the space. That's when we wrote our first check.

ML

And how long ago was that? 

MC

Oh, yeah. Three months, four months.

ML

A hundred million dollars of revenue. How are you doing?

KK

Great! On our way, on our way. 

ML

Outside the factory, Marie caught up with Desmond to ask about how he's using AI and data from the factory's machinery to improve his business.

MC

So Desmond, how have you used the data so far?

DG

So far, I think we are still in the infancy stages of collecting data. So we are still trying to figure out how we can make sense of all these data as well. And then from there, then we will decide how and which parts are we going to automate. Because when you have all these data that are measurable, then you know what good looks like and what not good looks like.

MC

And what was the motivation for working with Muun AI?

DG

Because I think we are quite intrigued at how this AI thing can help us. And I think for AI in particular, from what we understand, it's very good at passing through a lot of data and making sense. And I think you've seen we have a lot of data.

MC

Terabytes and terabytes of data. Yeah.

DG

Yeah, and I think we don't have operators that are skilled enough to be able to process all these real-time and then make that split-second decision. So, yes. And that's why when Kathryn came and proposed this solution, we thought, OK yeah, why not? We should give it a shot.

MC

Well, thank you very much for, I guess, giving us a shot with Muun AI and hosting us today. I think we have to do a formal...

ML

Yeah. Oh, Desmond, thank you very, very much for hosting us. It's absolutely fascinating. You made me hungry.

DG

Oh, we can go to lunch.

ML

I loved the visit, partly because I used to do lots of work in the food industry. And so it's just very nostalgic for me to wander around where there's pallets of raw materials, and then there's steaming and cooking and drying type processes. But it's really, it brings home something really interesting, which is, and you use the phrase that carbon happens or emissions happen in the real world.

MC

Yes.

ML

What's the phrase you use? 

MC

Emissions live in the real world.

ML

Emissions live in the real world, you're so good at this. And if we don't change how noodles are made, then we're not really going to solve for emissions. It doesn't matter how many PowerPoints we do or conferences we attend in air-conditioned Singapore hotels, we're not going to fix the problem. So that's what the problem really looks like. And that's what the solutions really look like.

MC

Yeah. Yeah and you've got to find the right incentives, right? You know, Desmond is a good businessman and he's making choices about the future of his business, profitability of his business. So we've got to take it away from I think the ideological, we have to do this for climate, to let's try to figure out how to decarbonise this business in a way that makes sense for this business. And so I was actually, one of my favourite bits of the visit, Michael, was when I saw your eyes light up at one point and it was almost kind of like the, oh yeah! And we had a few conversations about it, but I think it might be interesting, I'd love for you to share with the audience what you saw.

ML

So I think the, oh yeah moment was in fact the dryer, not the steamer. So the steamers where, you know, Kathryn is collecting the data on the steamers and already, you know, her eyes light up because you're already seeing differences in performance and noodles being cooked too long, or steamed for too long, which is wasting money. And I think the noodles are fine, but it's not good for business. So she was very excited about that. 

But I was looking at the dryer because we walked into this room and there's a big dryer and it's actually circulating steam to dry the noodles so they can be packaged, but it's using natural gas to make the steam. And one of the companies that I've been involved in is a company called Heaten. It's an industrial heat pump company that makes steam at up to 200 degrees centigrade. And so you could power that process using a heat pump much more efficiently and much more cleanly, even by the way, if you use natural gas, right? Because you could go natural gas to make electricity, to drive a heat pump with four, coefficient performance of four or five or something like that. 

And you would actually be saving gas and saving emissions. But also you could then start layering in maybe solar power or coming in from a cable from, there's all sorts of, you know, there's the ASEAN powered grid that's under discussion. So maybe you'll get more green electricity from one of your neighbouring countries here in Singapore and you can start to see a real pathway. So I was just doing my thermo geek out about the dryer.  And I was also perfectly happy with the optimisation of the opportunity that AI offered. And in a way, maybe...

MC

Complimentary, right? 

ML

Complimentary, exactly. So you've got to have the right thermal process and then you've got to optimise and manage it right. And so I think it's so illustrative to get out into those businesses and see them and understand the challenges at that granular level. That was my takeaway.

MC

Yeah, yeah. It's my favourite part of the job. You know, visiting factories, visiting farms across the region, because then you really get an appreciation of, sure the challenges, but also the tremendous amount of opportunity to do something at a green discount, right?

ML

Did you notice there was something else that I did was to ask about the waste and the off cuts, what happens to them? Because from my previous life, I know that in most food factories, the waste is produced and it goes off and it can either be reused, which is what they were saying they do, they sort of put it back into the process, or it can be a problem. And if you've a waste rate of 2, 3, 4%, well, guess what? That is 2, 3, 4% of the emissions of the costs of that factory. It can also be a disposal problem, depending on how you're allowed to use it, mostly in food, it will go into the animal food chain and so on.

MC

Yeah, yeah. But you know, there's also those issues. One of the spaces that we think Muun AI is going to sell really well in the F&B manufacturing sector is actually around batch rejects, because rejected products cost businesses hundreds of thousands of dollars every month. And so, you know, if you can reduce that through better optimisation, better prediction, then you know again you're saving money for these businesses, but doing it in a way that also contributes positively to decarbonisation.

ML

A hundred percent. And there are lots of stories that kind of annec-data, right? There's a lot, there's so many stories that it becomes data or somebody can do a PhD. If anybody listening, if you're looking for a PhD thesis topic, turn this into robust data. There's stories like when municipalities wanted to save energy costs, so they switched from their sodium light bulbs, the yellow streetlights to LED, they save energy. But what they actually save much more of is maintenance costs. Because the light bulb lasts longer, you don't need as many crews going around and changing light bulbs. 

Or there's another one, avocados, when they started to use avocado chilling warehouses and they started to flex the temperatures up and down a little bit to take advantage of time of day pricing of electricity, they had to put in so many temperature sensors that they were able to stop batches of avocados from going off. And that paid for the system, not the electricity.

MC

You know, so this goes to actually the heart of how we venture build, right? Which is that we look always for a carbon pocket. So, you know, how are we going to reduce emissions? So if you take Muun AI and the noodle factory, that's through energy costs primarily. And then we look for a value pocket. So how are we going to create more value for this business? So of course, if you're reducing energy, there's lower costs, but you know, what's really the incentive? So again, you know, something like reducing rejection rates, that could be the incentive, reducing maintenance rates, that could be the incentive. 

So I think we often kind of assume that businesses will do things like optimise energy just for the sake of optimising energy for their energy bills. But actually, that's something that we've not seen at all in this region. Most people look at the cost of electricity as the cost of doing business, and they're very much focused on growth. So you've got to give them another incentive that actually goes to something that they care about in order to get to scale.

ML

And there's another good one, which is, if you are making something and it's got quality variations, then if you only find out about them when your product goes to a customer, whether it's cheese or noodles, or in my ancient life I did this on photographic paper just before the Kodak moment. If you only find out about a non-conformance when a product is shipped, or after it's shipped when it's used, then there's a big opportunity by improving your process control using AI. It will also help you on the energy front, but it will improve your customer service. 

MC

Your customer service. Exactly, so that's exactly what we're looking for, right? We're looking for those incentives.

ML

Now, Marie, we've got to do the big reveal because we have trailed at that and in my introduction, I said that I really hope people enjoy this episode for a reason which we're going to reveal. And the reason is that you and I have been talking about you hosting a few episodes in your region, using your network, maybe a few of the people that I know, and actually sitting in a sense the other side of the microphone and being a guest host of Cleaning Up.

MC

Yes, I'm very excited. I'm very excited for two reasons. One is, you know, Cleaning Up is a great podcast. I think, Michael, you've done a tremendous amount of work kind of getting some of these topics out. And then secondly, I'm very excited to share with your listeners more about my region. So all of my following episodes will be in different countries. We'll actually go into market kind of similar to what we did with the noodle factory, right? Just try to give people a little bit of perspective of what the green transition, what decarbonisation looks like across the region. So very excited to share my region with your listeners.

ML

And I'm equally excited. Now, I'm not going to ask you to reveal some of the people you've already approached and started to talk to. It won't just be portfolio companies, it won't just be SMEs, small, medium-sized enterprises. You'll be talking to some of the bigger business people and some of the officials and policymakers and investors and so on. Although we're talking about three episodes, perhaps by the end of the year. So we'll try and get as interesting a set of people, right?

MC

Yes, yes, yes.

ML

And then we'll see, you know, if the audience is resonating and enjoying it, then...

MC

Also, they've got to listen, right, if they want more.

ML

It is such a diverse region that I'm now, even as I say that, I'm thinking three episodes, big deal. You know, that's not going to represent it, is it? But we can get started.

MC

Yeah. Fantastic to get started and fantastic to show the different countries in the region.

ML

Very good. And I will look forward very much to my next visit back because we will have a chance, I think, then you and I will debrief periodically, either in person maybe when you're in London, or if I'm back in the region, and talk about what we're learning and sharing our observations with the Cleaning Up audience.

MC

Yeah, fantastic. Looking forward to it.

ML

Very good. Well, thank you very much for your time today and for the fantastic visit to People Bee Hoon Factory.

MC

Yeah, delighted to have you.

ML

Excellent.

MC

Yeah, thanks Michael.

ML

That was Marie Cheong, business builder and venture capitalist operating across South and Southeast Asia and a new guest host for Cleaning Up. As always, we'll put links in the show notes to resources that we discussed during our conversation. And with that, I'd like to thank Oscar Boyd our producer, Jamie Oliver the video editor, Kendall Smith our head of operations who's been working overtime on this Asia tour, the rest of the team behind the scenes at Cleaning Up, and of course the Leadership Circle without whom none of this would be possible, as well as you the audience for the time that you spent with us here today. Please join us this time next week for another episode of Cleaning Up. 

Cleaning Up is proud to be supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL, and Wärtsilä

For more information on the Leadership Circle, please visit cleaningup.live. If you're enjoying this episode, please hit like, leave a comment, and also recommend it to friends, family, colleagues, and absolutely everyone. To browse our archive of around 250 past episodes and to subscribe to our free newsletter, visit cleaningup.live.