Observations from Southeast Asia

GS Futures Observations from Southeast Asia

The team at GS Futures joined our limited partner — GS E&C — in Singapore and Vietnam in December 2024. The trip proved to be one of the most powerful learning experiences in recent memory. We met with venture co-investors, real estate developers, contractors, government entities, family offices, and a wide variety of founders. From these meetings, we observed three important lessons for our fund's deployment strategy.

"Nontraditional" Business Models for Hardware

GS Futures invests in physical AI as a technology thesis for the future of the built world. In one particularly memorable meeting, a contractor observed a significant difference in the balance of IP protection vs. commercial friction from North American and Chinese providers. The North American manufacturers had closed ecosystems while the Chinese manufacturers more freely opened API connectivity as long as a commercial transaction occurred.

This observation underscored the surface level competitive differentiation between the markets: Chinese firms tend to emphasize superior manufacturing scale while North American firms tend to emphasize proprietary software and more robust features. For our investment activity in North American startups, defining the "technology moat" becomes more nuanced in the face of a credibly (albeit rarely directly competitive) commercial strategy to sell hardware and allow end customers to build their own software.

Eliminating Barriers for Pilots

We met with several government entities in Singapore, including the Building and Construction Authority (BCA). The BCA is a leader in the global construction innovation community and has championed technology adoption in the Singapore market. One strategy that the BCA utilizes to encourage technology utilization is a partial subsidy for pilots. The goal of this partial subsidy is to reduce friction in trying new technology.

We have observed countless times the challenge of "finding budget" on an individual project to implement a new technology. General contractors operate on tight margins, with little incentive for an individual project executive to spend precious financial and human capital on early stage technology. In contrast, the BCA works with its construction partners to identify high-value use cases for new technology and helps align incentives with project staff leading implementation by reducing the cash cost of a pilot.

Tech is Only a Temporary Competitive Advantage

Like many venture investors, we believe technology can unlock competitive differentiators — and even long-term competitive advantages. However, during our trip, we heard several builders and developers say it differently: it is possible to have a tech-related competitive advantage for a period of time, but this advantage is temporary. Interestingly, we heard this message of "a fleeting advantage" in both mature real estate markets (i.e. Singapore) and emerging markets (i.e. Vietnam).

The reason the competitive advantage diffuses is because (1) construction and real estate markets are fragmented, with dozens of stakeholders of all sizes working on any one project and (2) much of the work is based on direct labor or service at a physical location. On this technology adoption curve, we find the most impressive firms are evaluating their tech stacks regularly, sharing insights freely, and willing to adopt new ideas readily.

We look forward to seeing our new friends in Southeast Asia again and appreciate the reflection the trip inspired as we continue to close the gap on built environment innovation between Asia and North America.