Tech innovation and venture investment with a Silicon Valley view of global trends
December 15, 2020: CSIS China Power Debate
|
|
Online conversation with VC Nazar Yasin and Rebecca Fannin, host of Silicon Global Online, December 3, 2020.
Rise Capital – staying disciplined
·
The 5 M’s of Rise Capital’s investment strategy
are Management, Market, Metrics, Moats, and Multiples.
· It is common for funds in emerging markets to do a Series A and then a follow on Series B for portfolio companies. Rise reserves $2 for the Series B of every $1 for the Series A in these cases.
·
Rise takes a 5-25% equity stake in its portfolio
companies and a board or board observer seat. “There is no such thing as a
successful passive investor in emerging markets. It does not exist,” Yasin
notes.
The right CEO
·
Founders must be able to adapt when a successful
startup scales up. The right person needs to be in place at the top to do so.
·
In addition, surrounding the CEO with people of
differing perspectives and expertise is a marker of successful companies.
A new asset class
·
Investing in emerging markets such as Latin America, Africa, the Middle East, India, and Southeast Asia is a new asset
class.
·
To illustrate this, Latin America is roughly 45%
of China in terms of GDP and population but the number of firms who can lead or
co-lead a Series A or B is low enough to “count on two hands” (including Rise
Capital).
New business models
·
Rise Capital portfolio company Gokada, founded
in 2018, is the leading multimodal transportation company in Africa.
·
Gokada is currently growing 10% per week and is
cash flow positive.
·
Gokada provides drivers with a “Business in a
Box” that works well in light of Africa’s poor road conditions. This box includes a brand-new motorbike, a
Department of Transportation Certificate, and a smartphone.
·
The driver pays Gokada a daily subscription fee
to be part of the service, and after two years the driver has a fully paid off
motorbike and their own business. Gokada drivers in Nigeria make 3x the average
salary of other workers.
Evaluating Risk
·
Internally, Rise Capital deals with the issue of
actually not taking enough risk. There’s also the risk of not picking the “right
horses,” coming out of certain emerging markets.
·
Instead of viewing the risk of investing in
choppy waters as a negative, Rise Capital is investing in the fastest-growing
economies in the world, in the fastest- growing sector (the internet), and the
fastest-growing companies in that sector.
·
Trillions of dollars in market cap being created
in the internet sector coming from emerging markets in the next ten years.
Imitating China
·
Africa, Latin America, and Southeast Asia markets
see China’s quick and massive GDP creation from the internet sector and look to
emulate China more than the US.
·
Actions like India’s ban on Tik Tok and other
foreign companies help bolster this strategy in efforts to spur growth in local
startups.
Chinese Tech Titans in emerging markets, friend or foe?
·
Large Chinese tech companies are not crowding
out the market for startups in Southeast Asia and
other emerging markets. They actually make great exit partners.
Peak Globalization
·
The world hit peak globalization five or even
ten years ago. Since then, it has continued to grow more nationalistic.
·
Nationalism trends have helped Rise Capital in
some ways. Sovereign wealth funds from the countries that Rise invests in tend
to become LPs.
Mini Jack Ma’s
·
There probably won’t be another Jack Ma. Due to
the raw GDP Ma was able to acquire in China, all under one umbrella, Alibaba’s
feat may never be duplicated. But there will be mini Jack Ma’s coming out of
emerging markets.
·
One of them is Careem Founder and CEO Mudassir
Sheikha who has transformed the lives of hundreds of thousands of families in
the Middle East by helping them create their own businesses. Careem (which
Rise Capital funded) was acquired by Uber in 2019 for $3.1 billion, one of the
largest exits ever in the Middle East.
Advice to Wannabe VCs
·
“There is no way you can be a successful VC
without having run or been an executive at a successful company yourself.”
·
He also recommends obtaining financial knowledge
of how businesses work, even if it’s not from an MBA or CFA.
·
Lastly, it’s incredibly important that if you
can join a successful startup, do it, don’t worry about your position.
Bio:
Nazar Yasin is a Founder and Managing Partner at Rise Capital in Silicon Valley. Nazar is a seasoned entrepreneur and venture capitalist in emerging markets. He is a firm believer that technology entrepreneurs in emerging markets will become some of the most impactful individuals in the world over the coming years.
Nazar began his career at Goldman Sachs, where he led the firm’s internet investment banking activities across the EMEA region. He then served as the CEO of Forticom, a $1 Billion+ market value social networking business in Russia, CIS, and Eastern Europe that was acquired by a consortium of Mail.ru (LSE: MAIL), Naspers (JSE: NPN), and Tencent (HK: 0700).
After his successful exit as an entrepreneur, he became a VC, first at Tiger Global in 2010 for three years. In 2013, he formed Rise Capital in San Francisco, where he has backed several high-growth technology startups across Latin America, the Middle East, Africa, and Asia.
Nazar holds an MBA and JD from Northwestern University, and
a BS in Industrial Engineering from Georgia Institute of Technology.
Submitted by Mike Weiss, editorial contributor
to Silicon Dragon Ventures