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Kiyan Zandiyeh

lines on the record: 73
first: 2022-08-14
most recent: 2022-08-14
sittings or episodes: 1
sources: podcast

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“So, the easiest way to go is on our website. We try to actually regularly put out four pieces or kind of things that we're thinking about. And you can obviously subscribe and anyone can listen to it. You can reach out to me directly. My email is Kz at SturgeonCapital.com. Always happy to kind of speak with individuals that kind of share common interests. And yeah, just reach out. We're quite easy to find online. And always more than happy to speak. I can speak all day about these things. So if anyone wants to learn more, just call or email me.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Silver bullet as to what is the right area that you believe you have an edge at that you can execute and consistently to generate outsider returns. And I think the kind of principles and buffer and monger are applicable regardless of the type of investment that you do and where you invest and probably that's the kind of a true admirer of Button and Monger is kind of what I would say, my humble opinion.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Of building a defensible tank that gets larger and larger over time and that could last forever. So it's very interesting to understand system building. Not probably stockpicking per se because stockpicking is an output of everything else. So it's kind of what are the true inputs? What are they applicable in the areas? And the final point on the circle of competence, but it always says it's important that you have your circle of competence and that if you look across the different investment areas There are a handful of firms that over 20, 30 years sometimes longer period have consistently made money but doing completely different strategies so we have Renaissance technologies that does purely quantitative and have been amazing at it you have Sequoia Capital that's purely done VC for 30 40 years they've been amazing at it you have stand drachenmiller that does kind of macro and less and everything that has done a tremendous job of it you have Baupost that does distressed assets on top of traditional value but there is not one can”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“You look at the kind of value investing community, sometimes you can make the criticism that it's kind of set in its ways, that it truly doesn't understand, for example, why Buffett is successful the way he is. The fact that when he was running his partnership actually was not long-term buy and hold, he was doing everything. He was doing, I think there was a paper at some point where if you took out merger arbitrage, if you took out spin-offs, control situations, that during a partnership years when he kind of compounded at 35%, you took all of them out. It would have been 18%. You have to kind of truly understand”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“In a pragmatic manner, kind of, if you want to be cheesy to kind of wrap up, to be kind of emulating bottle and manger in their mindset and how they approach things, but doing what we do.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Generate high rates of return. The bear case is basically if you want to think about it on a high level is that for whatever reason the concept of digitalization stalls, there is truly a depth of liquidity, meaning that companies don't have the oxygen to be able to build. And on a micro level is that we make mistakes in backing the wrong founders and backing the wrong business models. So we kind of really want to substantiate the risk is really, really, those are the risks. So some we can mitigate and on a high level we try to mitigate by basically ensuring that for all of our portfolio companies and we relatively run a relatively concentrated portfolio, we always have enough funding for them to be able to execute on what they're doing. And then relative to the reality of that funding available, they are calibrating their plans accordingly so that they're not running headfits into a wall, that everything is kind of planned properly and that we're kind of trying to operate rationally.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“In Bangladesh, you have a company called BCASH, which you have the likes of Alibaba and Softbank that invested in. In Pakistan, you had Taraj, which was acquired by Alibaba. In Egypt, you have Fauri, which is a listed $2 billion payments company. The point is that there is also precedent and proof cases for meaningful business to be built, but also exited in our countries. Now, it just so happens that there is still a huge amount of things that have not been built. So I mentioned e-commerce 1% penetration. consumer lending doesn't exist. A lot of the population don't have bank accounts. B2B software doesn't exist. Important infrastructure layer that relates to payments, logistics is not built. They're large enough combined when you're looking at a population of half a billion and you're looking at GDP above half a trillion that meaningful companies won't be built and I believe humbly that we have a system that we know how to go and do it and hopefully in the last fund we've kind of proven that also we have the ability to execute and also”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Technology companies accelerates, and as a result, you have kind of significant businesses created. So if you believe that there's an inevitability that meaningful companies can be built, it's really then bets on our ability to execute within that. That is to have the ability to make sure that we have access to the greatest opportunities, the greatest companies and the greatest founders operating in each of these markets, that we have a good engine to understand what are the business models and people we should and should not be investing with. And that once we're invested, we have a meaningful ability to increase the probability success and decrease the rate of probability of failure. And that collectively put together, it will lead to good outcomes. And in each of these countries, you also had the precedence of success stories. So from Kazakhstan, you have a company called CASPI. Today's a $12 billion listed business in London. It's a $12 billion business in a population of $18 million.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Probably to be fair, I'll cover the bull feces and maybe what the bear feasess as well. So the bullfess is kind of, let's say, accumulation of what I've been talking about so far in the sense that what are we doing? We're really looking at the last really large countries in the world that have nascent venture ecosystems. They happen to have now the technology infrastructure such as technology, meaningful technology companies can be built. They have relatively low levels of VC capit funding, but that is increasing every year. And that we're quite early in the inevitability of investing in kind of meaningful technology companies to be built. And if you want a concept of validation of that high-level thesis, you have enough precedent in nearly two dozen countries where once a country has reached a level of technology infrastructure, digitalization meaningfully accelerates and as a result, capital formation around”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Those individuals you want to be system builders as well, and ultimately system calibrators because it's a company isn't built by the individual, it's built by basically a system of individuals operating within that system and constantly tweaking that system.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Of the interactions that they have are on such a high level, the types of people that they're interacting with on a day-to-day type of problems that they have to deal with on a day-to-day basis are very difficult things. And that's because they're doing it consistently, their kind of subsequent ability to do more just constantly increases. You really want those kind of types of characters, ideally. What you also need in those people is to really recognize in an honest and pure manner what their weak spots are and what they will likely be as the company grows and then hire for it. So to have a true depth of management and team that can support them holistically in a comprehensive manner as the company grows. And then finally, as a person that really thinks through systems, if you look at any great business, it's really you can unpack it by looking at the system that's governing how that company operates. We talked a bit about how Berkshire system works. Every great company is kind of a system and people operating within that system.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Think if you kind of maybe define the perfect individual first or the perfect mindset to kind of understand probably what it takes to be that character. So to be the Mog Zuckerbergs and Peter. And then if you then kind of transpose it back to when they first started their business, what you really want in an individual is a person that going back to the concept of buffet is a compounder of knowledge. That is because they are on the front line on a day-to-day basis, because they are pushing on a day-to-day basis, it implicitly means that they have a very steep curve in terms of learning trajectory, but that at least in some form or manner they have as a system that they can continuously take those learnings and re-underwrite all their assumptions and all their knowledge basis and all everything that they do. And then they execute on that reunderwriting of assumptions in a more optimal manner. And that they do that as a continuous process day in, day out. So if you think of a guy like Zuckerberg or Beta's only, and you think about it through the following lens, they are inherently very capable people. They're inherently constantly learning more. And the volume and the nature”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“But we're making 10 year capital commitments, and so it's very important for us to have visibility that ultimately does have a motor and its high return on capital, basically outcome.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“And typically, when we invest, we invest in the category leader in that particular software. Same in marketplaces, marketplaces are network-based businesses. So if you have a particular edge in forming a network or a distribution channel, typically that's a very, very strong mode. And if that network or distribution channel happens to be larger by far than anyone else, it means you can overlay more and more services at basically zero marginal cost that continues to add to your mode. Same in kind of fintech. You either have a balance sheet advantage or a distribution advantage, but all of these free business models are business models where emote can be built. And as such, kind of consistently higher return on capital business can be developed. So to answer your question, we basically, in history of never invested in multiple companies in the same industry, in the public markets, you can do it because you're not liquidity tied. You can sell out at any point in time, probably from a risk perspective is the safest bet to make.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“We're investing in, it's very likely that that will be such a competitive industry that it's very difficult in a normalized state to create abnormal kind of returns or very high margin business. So we really focus on thinking through what are the industries where we actually truly are developing a mode. And if you think about emote, it's not a static concept. You are either developing one or you're kind of your motor is being attacked. So we want to see businesses that are gradually, systematically methodically building a moat. And that because of that mode, they will generate a kind of high return on capital. That applies in software. Why? Because once you're ingrained in the workflow of a lot of companies, the substitute costs are very high typically means you have high levels of recurring revenue. The product you've built is built on an initial capex to build software, which can be scaled without kind of significant marginal cost. And so you have a high recurring revenue business, high margin that basically what you have to get right is.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Loyalty, the drivers will go to wherever they get paid the highest commission, and the passengers will go over to where prices are lower. So you don't have pricing power in a traditional sense. The network effect that you build up in one city or the monopoly you build up in one city doesn't necessarily apply to another city. You basically have to go and build a monopoly yourself. Now, so all of that dynamic put together, I mean, it's a very, very difficult business. And combining the fact that it's low barriers to entry means that basically the game that you're playing is a game of execution and capital raising. So the company that will win is the company that has the ability to raise more capital from investors and can execute faster, you could fall off at any moment in time. Now, obviously, statistically, you have a success story, and in this case, it's Uber in the West. But the point going back to your question is that if indeed we're looking at industry where there are a handful of players and they're all of good quality and you play that out, played over five, ten years, which is typically the investment horizon.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Actually, links back to that concept of mode and competitive edge. And it's actually quite interesting to then overlay that with kind of venture vesting. So my belief is if an industry has a large range of competitors from the get-go, that basically probably will be an industry where the end state economics are not that attractive. Doesn't mean that a valuable business won't be built, but as an investor, it's a very high risk proposition, in my view. And I'll give a kind of maybe a practical example of a company for your listeners. So if you think about Uber as a business, clearly it's a success story in the sense that it's kind of a decade now. It's kind of worth tens of billions. But if you kind of take a step back at probably the beginning of the journey and think about why it's a difficult industry to invest in, is that the initial barriers to entry to get a business like that started are actually quite low. And you don't particularly have dry”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“So, for example, if obviously operates within the logistics ecosystem, so we potentially have a software company that works in the logistics space, and it's very easy to put the two together. They have efficiency gains from kind of working together, but they also kind of help teach each other generate revenue because you need infrastructure layers to enable the front-end layer, and we invest both in infrastructure layer and the front-end layer, and all of that stack is complementary. So then we work quite hard to building the ecosystem together so that all these companies are supporting each other in the pursuit of what they individually are trying to achieve.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“That post investment when the majority of the work goes in, we have the ability to truly add value in how that company is being built. And that's the manner in which we interact and kind of try to allocate capital and invest in through that system that we describe. The other thing that we do is because typically we're one of the largest investors in these markets, our portfolio companies are very complementary to each other.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“What they really bring to the table is a true understanding of what is going on on the ground, what it means to kind of bottom up, build a business in that country. And combined with that kind of sector or segment expertise, it's quite a powerful combination. Then we add a layer on top of that in kind of what we call a suite of venture partners. Venture partners are who. They're very well experienced individuals that have built and successfully, let's say in some cases sold very large businesses in that particular vertical. So in fintech, for example, we have a gentleman that basically built a bank from a 30 million dollar bank to a plus billion dollar IPO and went on to build two or three kind of three other banks in many different emerging markets. What does that do for us? When we're looking at investments pre-investment, that collective kind of system reduces hopefully our error rate so that we're right on our assumptions.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Maybe it's a way to explain how we're set up. So the way we set up is that we have a London-based team that typically travels quite a lot. And the London-based team is split up by business verticals. So the three main verticals that we invest in are B2B software, marketplace businesses, and fintech, so financial services. And that we want basically on a partner level, someone to be a deep expert in each of those business models that is applicable across the countries that we invest in. We have a layer of individuals on the ground in the country that are also very kind of either have been ex-operators in that country.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Tackling a business where we believe they have a unique edge in building it, and we know that that business in its end state will be a very profitable business. So it's the kind of combination of the two.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Are logically developed. There aren't too many gaps in how they've come up with the method of what they're doing. It has to be someone that is very personable. If you think about it, you're starting from, let's say, 20, 30 people in a company. You could potentially have 500,000 people in the company. So does that person understand what sort of systems to be built to be able to scale an organization? Then they basically have to be ruthlessly executors. They have to have a deep bias for action. because it's all good and well being methodical, having great thoughts, but if they're not implementing it kind of on the front line on a day-to-day basis, then you don't learn as fast and you don't test boundaries and you don't understand boundary constraints. It's very important that someone is driven and pushing. And then basically our job is to study the teams that come our way, that we can speak to, to come to a conclusion who really has the combination of all those factors.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The concept of found business fit is that if you think about it, you need a certain character or profile of founder relative to the type of business that you're in. So if I was to give two extremes, if you were running a luxury consultancy service, the profile of the person running that is very different to someone that's running a logistics haulage business. The nature of the ecosystem you're interacting with is different. The types of thing that the systems that you're building internally is different. Broadly, that profile a person has to match the industry, the type of industry they're operating in. Then it's kind of a question a lot of character traits. So what you want is someone that is intellectually honest. It's very important that they're intellectually honest. That is, they know what they know. They know what they don't know, but they kind of systematically are trying to study and build kind of feedback loops to improve their thought processes individually and collectively the system within the company. It's important that they're intellectually rigorous. That broadly conclusions that they come to, the things that they try to...”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“That's built and sold a hundred million dollar business, then built a company, sold it for $800 million. And this is his third company. So you know it's someone that really has kind of been through what it means to be in the bowels of building a business and to come out the other side successfully. The more tricky one comes when you're dealing with first-time families. So first-time founder is someone that previously even has worked in a range of companies, but it's really the first time that they're entrepreneurial endeavored to start a business. And what you're really looking for there is deep domain expertise combined with the concept of founder business fit. So deep domain expertise is basically someone that for a particular reason really understands the truth and the nuances of the particular industry that they're looking to tackle in, it may be because they've worked in it for five, ten years. It may be for a handful of reasons, but that is very important to kind of just get right.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Guess there's always a debate on what is the main thing as a venture investor you're really looking for that kind of time as a success. And I kind of think of it through a filter-based approach. So the first filter is in the best case, is this business a one that has a defensible high returns on capital and a relatively high margin business and really understanding why those conditions would exist that would enable for that to happen. Once you pass that hurdle, really the magnitude of your success is a function of the quality of the team that is executing that business plan over an extended period of time to have a framework of really understanding who are those great teams or individuals that are doing that is actually really, really important. In the best case, you would have an entrepreneur that has done it a number of times before. So there's precedent of how they built previous businesses, why they were successful, and why they specifically kind of contributed to that success. So in the case of Zudpe, the founder in his 20s built a”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“What ways can we interact to maybe help set legislation to create certain incentives so that we can build an ecosystem around ourselves that we don't want to be the lone player? We want everyone to be there and invest. It just adds to the quality of the ecosystem. So it ranges from being advisors to certain elements of the government that can really help shape that ecosystem. And in some instances, we actually manage money for certain elements of the government to really practically invest alongside ourselves in building that ecosystem. So hopefully that answers the question.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The broad point is kind of, I think it's all good and well to have a system that makes money, but probably when you're old and you look back, if you could build a system that collectively made money but substantially also had an impact that you could measure, it was measurable, would be kind of a really great thing to do. And that if we could build a value chain for our business, that we are taking on capital from investors or organizations that do great things, that we invest it in a manner in countries that severely need kind of efficient solutions on scale, having impact in those countries. In doing so, make money that benefits our investors and they hopefully can spend it in productive means, that we ourselves as employees of the company can independently become wealthy and hopefully be characters where we reallocate it back in society and productive way. That is a very positive sum value chain. It's not saying that it's easy to implement, but it would be a great thing to try and accomplish.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“We then during the studies give them internships in our portfolio companies, and if they finish their studies, if they so wish, and if they're able, they can get full-time jobs as well. So you're creating the full funnel of palant spotting, both in individuals in each country. And we then set that up in a kind of formal foundation where we commit amounts of our revenues to it every year to hopefully do kind of nearly 50 to 100 scholarships a year in these countries.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“For the past two years is actually published an annual impact report. What we tend to look at are what are the kind of critical issues in the countries that we're investing in, what are the implicit things that we're doing that are creating an impact, and how do we focus and systematically do it. So I could tell you on a quarterly basis how many jobs our companies have created, how many jobs have been under the age of 35, how many female jobs we've had, how much money has been spent on R&D. All of these kind of statistics. And then we went a step further. We kind of believe in this concept of equality of opportunity. And then we said, okay, objectively in these countries, you have very smart individuals that for no reason of their own don't have the platform to be able to kind of present themselves to the world. And so let's go to the universities, the leading universities in each of these countries, and then tell them which are the smartest students that you have that for whatever reason can't fund their education. We commit part of our management fees to funding those students.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Three questions to this is that if you really look at the majority of countries, why is it that broadly they have lower GDP per capita than let's say the developed world? I say this well, any kind of ounce of judgment. It's really because that capitalism for many different reasons wasn't truly formed. And if you believe that an unlock in ideas and unlock in wealth and kind of improvement in kind of general living standards has come a lot of it through capitalism, what we are in essence doing through the way we invest in these countries is kind of bring the full force of capitalism, competition, entrepreneurialism to these countries. And if done successfully implicitly, it does a lot of benefits. It creates a lot of jobs. It brings a lot of efficiency gains to a broader range of people. And we like to think kind of sets a very good operating culture for how business could be done. The point is it's kind of all good and well me telling you this verbally, but how do you kind of quantitatively prove that?”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Mind is that the current situation has brought a lot of discipline back into how things are done. So from a capital allocated perspective, if your confidence level was 20% on a certain assumption, today it has to be 90%. That passes on to companies itself. They have to then increase the confidence level behind their own assumptions and how they're operating. And so the whole process becomes much more disciplined because the bar raises. The bar raises whilst actually valuations come down. In theory, all else being equal, you have an increase in quality whilst prices come down. And in my mind, that's a very attractive kind of dynamic to be investing in.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“And you had line of sight as the profitability in two years, the calibration is, okay, maybe I should not go a FreeX, I should grow 1x or 2x, but bring that line of sight to profitability to the next six months. As a function of the runway of capital that you have ahead of you, so if you're a company that has two years of cash ahead of you relative to your clans, you have to calibrate accordingly. If you have one year, you have to calibrate accordingly and probably raise a bit more capital now to give you the extended runway and slag. That's really what's happening. Now between ourselves and the stack of capital that's available in the kind of local markets and the regional markets looking where there's enough capital to provide companies between three to five years of the runway. So it's really a question of what can be done in those three to five years and to what extent they can build quality business, ideally profitable businesses by that point of time so that self-sustaining, they don't need to kind of raise capital, they're in a position of strength. And the final point, which is a positive in my mind.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Capture the opportunity at hand. And so the message effectively was that kind of survival is a precondition for growth, that great companies are built through cycles. The very nature of cycles is implicit to company building. That is to kind of always be expecting of it, but that great companies are built through, great value is created through enduring through these cycles. And then really ultimately it's a function of calibration. And calibration is easier in markets kind of going back to my previous point when competition is less intense. So for example, if you are in the US in a very competitive industry where everyone has historically raised a lot of capital, I mean, if you fast delivery grocery apps in this bucket, you are now in a very, very difficult situation. But if you are a business that previously was growing, let's say FreeX,”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“If you kind of try to very simply and crudely define the past 15 years, because you've had low interest rates in effect, the confidence level behind assumptions needed for investing has been, let's say, the lowest of all time. Meaning the burden of proof was kind of cyclically very low. So if a company, for example, showed very high growth rates but didn't really have a clear path to profitability, as long as that growth rate was very high, it was likely that kind of generally it would be funded. What changed really is liquidity, as you can have rightly said, the concept of inflation in these markets isn't too relevant because they are typically high inflation countries. They live through it, so it's kind of something that they've adapted to and they function within it. But really it's liquidity. Why? Because as a company is growing, especially in the early stages, clearly it's not profitable. So it needs liquidity. It needs kind of effectively oxygen to be able to keep growing.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Don't really lead from series beyondwards, so any that we have on our portfolio that implies a certain IRR, they are always from funding rounds that have been led by an external investor. So we say there is external validation and proof of what the valuation of the company is, and we're simply following that.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Invested in the siege round, and you're leading a series A round, are you kind of increasing your paper performance yourself? So take a step back. I mean, the reality of all of this is we could show 73% IRR, we could show 30% IRO, which is a 5% IRO. In reality, that IRR doesn't substantially mean anything beyond being an interim signal as to how things are going. At the end of the day, really, your performance is a function of the amount of money you return back to investors and what multiple is that relative to the capital they put in. That really at the end of the day is what matters. But obviously during a 10-year period, investors want to see kind of signals of how things are going. So there's no ideological reason why we wouldn't want to lead a seed round, lead series A round, in some cases maybe lead series B round. Why? Because if we have conviction and confidence in a company, we would want to deploy larger amounts of capital in it. Now, implicitly, there is a dynamic where we don't want to be signaling prices to give a false signal to investors. So what we typically do is we lead Series A and then...”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Probably to first define the concept of leading around. So I get it broke down earlier on the concept of seed series B and C. And maybe a different lens to see that concept of different stages. It's both a risk management kind of tool in the sense that you can deploy capital over a period of time as opposed to all upfront. At each stage, your company learns more and more. And so the confidence level with which you can determine the outcome increases as time goes on in theory. The concept of leading rounds really comes in in that whenever a company is raising capital, let's say, for example, it wants to do a 10 million dollar round. And let's say on average you have three to four investors that are participating in that round. There has to be one investor that is basically the large investor in that round. And by virtue of being a large investor, but really the crux of it is valuation governance. Now, the point which I think you're saying is that to what extent if you, for example,”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Again, a company that went on to have a funding round led by another investor at a higher valuation obviously to what we initially invest.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Innovative solutions, their HR software, their inventory management software, their cash flow management software. And we invested in what we believe to be the leading HFR management software at the time I was in Eastern Europe and Central Asia. And what the business has tremendously shown is that it's basically a 90% operating margin business. Every new customer that it sells to, 98% of them it keeps. So they have less than 2% share. So you have very high levels of recurring revenue. And that basically you have a very good understanding of how much you need to spend to acquire a customer. And that from a revenue basis, the ratio between the two is actually very large. And because you're a high margin business, you'll be a very profitable business. And that really what you have to build is the system of distribution for approaching different customers on scale to show them the efficiency gains and the benefits of your product. So it is likely that it can become the dominant HR software company in this broader region that we're talking about.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“What the company did then was effectively acquire fulfillment centers and told all those merchants, bring your products into our fulfillment centers, we have visibility on, we see the product, we see who you're selling it to, and we can finance all of that working capital. And e-commerce, consumer lending, SME lending are the largest markets in these countries. So it really evolved from e-commerce when we last spoke to becoming a platform for lending and probably many other services that it can add. At the moment, it's kind of just past 130 million in annualized revenue. And we see that it has a tremendous long runway ahead of it to keep growing. Another business maybe to kind of give some more context. We really like the B2B software space. Why? Because if you look at the business landscape across all of these countries, many back-end processes of companies are still done even with Paper or Excel. So you've seen what Solutions broadly work, and they're not innovative. They're not kind of very...”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Data and distribution is first doing e-commerce. So let's build the infrastructure to enable e commerce. And then basically in a few years they became the most downloaded shopping app in all the countries that they operate in. 10 million downloads, 2 million monthly active users, and 50,000 merchants selling on the platform. That links back to the distribution point in the sense that in many countries you now are the significant owner of distribution and a lot of value is always in distribution. And you have transaction data. So, okay, then you want to start lending. On the consumer side, for the first time, you provide installment options for individuals if they want to buy, for example, a product that they would need on a day-to-day basis. And that increased average order values from $40 to $140, which is very interesting. And a lot of data was picked up on that because in most of these countries, there's no credit bureau. The other side of the equation are small to mid-sized businesses. So the 50,000 merchants that are selling on the platform.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Allocate and what sort of situations do we have to allocate, and what is the market depth for us to allocate to be able to kind of with a level of confidence generate that rate of return? And so we don't do 300,000 400, 500 million funds. We do very specific fund. You can be very specific to also investors about what it is that you are and how you do it. And I think that's scalable because then once you do it, hopefully you kind of under promise and over-deliver, you build trust and you build credibility that can be kind of leveraged in many different ways as you build AUN. And so that's really the gist of it. Now, last investment on paper, if you want to call it on paper, is up Mini Forex. Now, maybe if I speak specifically about the evolution of Innocence who last spoke to kind of get the context, the general principle of the business was that there are a handful of countries that neither e-commerce exists, neither consumer lending exists, and neither SME lending exists. And that really, if you want to solve for it, it's data distribution problem. And so, okay, the easiest way to build.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“So implicit in building an investment firm is that effectively to think of your funds as products and understand why a certain investor base would want to have a demand for that product. And so if you want to crudely think about it is you have to be able to generate a rate of return that is attractive enough commensurate with the perception of risk or the reality of risk that is attractive enough for a certain investor base. Over time should be ideally if we want to build that investment firm should meet broader and broader applicable, but be very specific about it. So what do we say? We say we do funds for now that we're underwriting the ability to be able to journey to 40% IRR. Meaning if you're doing a good financial model on your investments, your discount rate is 40%. We then basically extrapolate that to look at the markets that we're investing and ask ourselves statistically what would we have to do to be able to get there, how much do we have?”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“A natural dynamic where if you've had many repetitions in something, your knowledge and understanding of that thing is just very high. So if you were a firm that over a 10-20 year period has invested in hundreds of companies, your collective wisdom and understanding is very high. And that kind of collective wisdom adds a tremendous amount of value to company building, the company building process. It also provides a more honest sounding board to company. So if you typically think of an early stage company at any point in time really having a handful of investors, ideally you want to curate that investor group to be the best sounding board possible for you. We almost have to work with companies to curate that sounding board. We really want the greatest minds working with the greatest operators to build the greatest businesses. in these countries and so it's to think that it can be done all by itself”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The same time, the experience of observed these investors working with them is tremendously valuable, and that because it's not zero sum, you work in a very collaborative manner for the collective best outcome. And all our incentives are aligned. So hopefully that explains kind of the nature of the interaction, why we interact, and why we like to think it's a win-win.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The community, where where we act as effectively the underwriter of early stage risk and the presenter of opportunity to these investors where we understand what are the sort of opportunities that they want to look at, and it's a marriage of convenience and complement. So why is it convenient? Because at some point in time, if a company is approaching Siri C and above, they will need probably around 40 to 50 million dollars in capital, sometimes more. We ourselves obviously cannot provide that today. Hopefully there'll be a time we can. So it's important that we secure downstream funding by having relationships with co-investors that can provide it so that our companies have the cycle of funding that they require to get to the size that they need.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Then create a local VC ecosystem that is funding those companies, that continues their growth. And at some point in time, the quality of those businesses, if they've earned the rights for it, will attract the attention of global venture investors. So then coming back to your question of where we sit in all of that, if you overlay all of this with the capital that's available to these countries, as I mentioned, you have the local VCs, which do a fantastic job in building the ecosystem and being champions of venture and technology in those countries. And they didn't push the companies and they're always there. Where we play is we focus systematically on these types of countries. So countries of nascent venture ecosystems and understanding what sort of businesses are successful in these ecosystems and systematically investing in them across them. The benefit that we have is that we both have local teams in the country, but we're London-based. So we are in a position to be able to integrate and have conversations and interact with the global investment.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“That's a reflection basically of a few things happening. Some companies becoming a success story, that creating a cycle such that the successful people around the world come back to the country seen at the opportunity exists and continuing to build.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“And really, I think those are the countries that are our focus. So if I individually go through them, Pakistan, 220 million people, Bangladesh, 170 million people, Egypt 130 million people. And each of these countries have a region surrounding them that they can also operate in. Combined, that presents a very large total adjustable market, if you want to kind of use VC Lingo. And so then the question is at what stage do these global venture investors get involved in these markets? And my reader is really a function of liquidity. If you take a country like Pakistan prior to 2021, on average for the three years prior to that, the country raised about 10 to 30 million a year in venture capital. Certain legislation was changed and certain technology infrastructure became embedded such that there was an unlocked in 2021. You had $350 million of venture capital. So far this year you already have more than that and we're kind of halfway through the year.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT