YouSaid · the spoken record

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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“Our global investors. So you just had Sequoia last week that raised a 9 billion fund in China. They have a dedicated office in India. So I think it's safe to say that truly venture capital has been globalized and why it's been globalized because of the dynamic I just mentioned that all of a sudden globally you have this well-distributed technology infrastructure, which meant that large populations and large parts of the global GDP that hadn't yet been digitalized could be digitalized, not in a sophisticated, deep tech manner. but basically in the coordination and the organization of these economies that could be made much more efficient on scale through technology and obviously there have been many success stories in that globalization technology i mean they're very well documented then you say okay well if a lot of the world is being digitalized what are the last areas that haven't or what are the last large countries that yet haven't”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“What has happened in the developable in terms of business model formation? Take a company like WeChat and Tencent. There's no model that is analogous in the West to that. There's no business that has the depth of the consumer that they have in the West. And so really it's a function of the landscape that we're investing in.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“As well, will they be built? And there's enough precedent now in the world, as I mentioned, for countries like China, through India, through Latin America, through Southeast Asia, where meaningful technology companies have built off size. There's an inevitability for that kind of dynamic taking place. So what is different is that you're investing in a landscape and nothing has been built. And so the question of what business models work and how they have to work in those countries relative to, let's say, in the US is very different. But it's in my mind also an advantage. You've had the kind of surgeons of neobanks in many of the developed countries. And frankly, they've had a very difficult time into building meaningful business. They don't have a great service, but they have a good enough service that is very difficult to take them away. In the countries that we're looking at, the majority, a large part of the population have not been banked. They've never had a financial service, meaning if we build a business that really truly from the get-go caters to them and provides a service that is great, we are leapfrogging.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Things have become equalized and equalized from a technology infrastructure perspective, meaning the majority of the population today has smartphone penetrations, whereas three, four years ago they didn't. The majority of the population today has access to 3G, 4G internet, whereas five years ago they didn't. And because you now have the concept of cloud computing, all of these things, you can actually build businesses, technology businesses, kind of technology business models that we've been accustomed to in the more developed world there for the first time. Now, why is that dynamic interesting? Because the countries that we look at, for example, let's say the countries that our main focus at the moment take Pakistan, Bangladesh, Egypt, that's half a billion people combined and nearly 600 billion in GDP, where you have sub 1% e-commerce. You have 40-50% of the population that don't have bank accounts. B2B software doesn't exist in the whole country. And so there's just a wall of an opportunity ahead for all these things to be built.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Think probably you could start with what is the same. So, our job, in essence, is the same, that is to provide capital and hopefully assist in the kind of arts and science of company building to hopefully create meaningful businesses and generate as a financial return and kind of hopefully in doing so generate some form of impact as well. The difference really comes in in the landscape that we're investing in. And it's really a function of the development of where these countries are through the lens of private sector formation and capitalism. Again, if you think about the US and broadly developed Europe, it's basically had much more iterations and a longer period of time of capitalism being implemented, meaning that the sophistication and the types of businesses that have been created are relatively high. And they just had a longer runway to be able to build these sort of businesses. The difference in our markets is that it's only in the past five years or so where from a technology perspective”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“In the ecosystem that they would need to be able to. And then shortly after that, they started their operations. You want to be the guy that whenever someone calls you from the company, the founder calls you, anyone from the team, you can be the objective source of reason and ration, that you can be pragmatic, that you will be an honest voice, that they can trust in and know that you will stand on the front line with them as they're building their business. That is a very, very powerful thing, especially for early stage high-growth companies, which are very difficult. It's a very difficult task. So you need that source of depth of kind of trust and pragmatism.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“So that's kind of the downside, let's say, value add. The upside is basically we have the privilege relative to an individual company of interacting with a wider range of the ecosystem. So in the countries that we operate in, we speak to large corporates, we speak to kind of late stage investors, we speak to the government, the regulated. And you have an embedded network that in theory could speed up acceleration for companies. So if a company does ever need to get regulatory permissions, okay, we have already had a relationship with that and we can accelerate that happening and reduce the friction of that happening. Today we invest in nearly seven different countries. So if a company we see is operating well in one country and we see the same opportunity in another, again using that embedded network, we can accelerate their market entry. We recently did that with a company called Zutpe, they're dominant in five countries. We saw that in Pakistan they can implement the opportunities themselves. We put a two-week kind of intense roadshow where they met every relevant firm.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“From there, then it's to basically identify what are the biggest stumbling blocks, hurdles, bottlenecks that they will likely face in that journey. Is it that they will have to raise a significant amount of capital over the next five years? Is it that they have to get regulatory approvals? Do they have to hire a very good suite of senior? All these different things. And our job as an investor is to try and focus laser sharply on de-risking all those big, big hairy risks. Why? Because if you do a good job with that, you leave a better canvas for the operator to really just grow organically and do a great job.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“And revenue, you really need the individuals that understand what it means to operate the plus thousand person company. Prepare a company for what it would mean to be in a public market, for example. Those are very different skill sets that are needed at a different stage. And that's why you broadly have actually venture firms structured in a manner that they focus on specific stages. So benchmark, for example, this very early stage, you have firms like ChoChu that do very late stage. You have the unique firm like Sekoya that does all stages and they do a tremendous job. Now where we play is really at that Series A stage that a company's found their traction, they found a demanker, and it's really about scaling the organization. And what is it that we really try to do there? It's to say it's probably a good analogy is kind of Bob's late team before they go down a race, they sit there in a visualize what they have to do ahead of them. So what do we do? You want to sit there and try to objectively visualize what this company could look like in SPEST form. What would it take to get there? What are all the different steps that they have?”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Reduce barriers, and that trust you with the amount of capital on probably high variance outcome. Then you get to what's called Series A, which is a stage above this. Where is a company typically a Series A? A company Series A really discovered their demand curve. They really understand what it looks like, what it would imply about trying to move up the demand curve, how much they can price their product at, how much it would cost them to acquire more customers, what does the nature of the Opex of the business have to look like as it scales up? And you have much more data points, but there are typically companies around a million dollars to $2 million in revenue. That's really where we get involved. From that stage following forward from that stage, it's really about company building and institution building to service the market you have ahead of you efficiently in a profitable manner. So the point is that at each stage you need a different skill set from an investor. In the later stages, let's say you're a company that's already doing 200 million dollars.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The concept of venture is basically taking a very early stage company that in theory has the ability to be a very significant company. And assuming that company, for example, could be a billion dollar revenue business in 10, 15 years, and that company over that intervening period would need 100 to 150 million in capital to get there. The point is that you cannot provide that capital all up front for a wide variety of reasons. And so it's provided in various stages. And it's probably important to define what those stages imply about where a company is and then kind of going back to your question of what value add an investor should bring. So you have basically pre-C2C, which is a very early stage of a company. And what a company is really doing there is basically finding traction in some form or manner that validates the concept of there being a demand for their product or service. In the type of investor you want at that stage is someone that can accelerate your”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Actually, a really interesting question because when you really think about it, at some point in time, you come to the realization that ultimately capital is really a commodity for a great firm, for a great company that needs investors, capital is a commodity. So implicit in investors is the concept of, I would call it the brand of capital. And if you want to, let's say, apply that to Buffett to kind of link to the last question, what is Buffett's today's myth capital? It is long-term patient, high trust capital. And that if they can partner with individuals and companies that can work with that, great outcomes are provided. The second brand of capital that Buffett has is that can be a fast deployer of significant amounts of capital very quickly in this stress situation. So you can be very specific about what his brand of capital is. Then we can link it to the venture business. And probably it's important to give some context maybe to the listeners of how broadly to think about venture and the different stages and why it is the way it is.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Is that at Sturgeon required reading is manga's lecture on worldly wisdom as it relates to investment management and business, which is basically the best 1012 document page document anyone in this business should be reading.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“So the concept of when we invest is what are the businesses that are building modes and that constantly can recycle capital at high rates of demand? So those concepts are also very similar. And then finally is just understanding the character of the operators. So if you look at a guy like Buffett, I think both he himself is a tremendous character, but the people he invests with are tremendous characters as well. The operators that are running the underlying businesses, the stewards that he's built with kind of Todd Weschler, they will be unique characters that will steward that company going forward. So as we hire individuals to our company and as we invest in individuals, we are kind of constantly looking for those unique characters and how we think about being able to work with such characters. So to cut a long story short, we're doing something very different, but a lot of the principles I feel that at least I learned or came away with by constantly studying Baffat and Manga were trying to apply on a day-to-day basis. And the final small point I will add.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“secular trend. So if you look at it again where Buffett started, I think he always recognized that the US was a long-term secular trend. He understood the essence of why capitalism in a large economy played out over a long period of time, needs to get outcomes. So we ourselves have to be involved in kind of long-term secular trends as well. We believe digitalization in developing world is a 20-30-year trend, meaning you will have interim volatility, but if we're right, we're right big played out over a long time. Then on a more micro level, the concept of why a business can return a high amount of capital over a long period of time. So the concept of moats, the concept of industries, some of them being providing products and services that are very valuable to the end consumer, but for whatever reason, they don't capture those economics, e.g. the airline industry. Why is it that a business like Coca-Cola has sustained high returns on capital over a long period of time? Because it had a distribution advantage.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The concept of system building is also very important. So if you look at Berkshire, I think it's a good way to think about it is that it's the most elegant business system design in the history of capitalism. Why? You have basically the insurance business that is a form of kind of very, very cheap leverage or float that you have the unique ability of Buffett and Manga to recycle that ever-growing float in things that have a higher return on capital, both in private assets and public assets. In private assets, they have a system of implicit trust with their operators. Why? Because they operate in a decentralized way and there is an implicit trust in how Buffett allows them to operate. So you put the totality of the system together. And to add that very rational people set at the top, the concept of systems is very important. As we build our firm and as we invest in companies to kind of understanding the true essence of the system of those businesses, the other one is to be involved in something that truly is a long-term.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“The normalized operating margins of that business range between 35 and 80 percent. That with that compounding revenue at some point in time, they will become very profitable engines. And that if you play that out, a company doing $1 million company comes a month. After 10 years, you get to about a 90 million revenue business. Let's say you're doing 50% operating margins, that's a $45 million operating margin business. And if it has a runway of growth ahead of it, you could value that company between half a billion to a billion. And if we start off owning 10% and let's get diluted by 5%, what basically means that we will really do 25x or 50x our capital? That's the best case. Obviously, you have different.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“You quickly come to the conclusion that you cannot replicate one for one what Buffett has done with Berkshire. Why? Because they uniquely were operating in a period of time that was the longest bull market in the boom of capitalism in the country that was the center of capitalism. And they were managing and capital was being managed by two uniquely gifted individuals. So to think that that could be replicated is probably invalid, but the principles could be applied in broadly whatever it is that you're doing. So the concept of compounding the concept of compounding and knowledge, that is to constantly be in the pursuit of studying, to understand your weak spots, to be improving, to be constantly gaining perspective and trying to understand truth for what it is on a large scale. And that is a precursor to be able to compound money. But compounding money is very important concept. And if I was to try and quantify what it is that we do in the venture business numerically for a kind of very simple calculations, what we care about then is”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“Technology companies, and I'll get to how the principles of Buffett apply and see how it goes. Basically, raised a bit of money and was the founding investor and kind of very active investor in free companies. And then basically over a six, seven-year period, two of those companies now collectively do more than 50 million in revenue, operating from 30% operating margins, so 80% operating margins. And the third business today is 200 million dollar revenue. The point being that they came across extremely talented operators tackling large opportunities in the developing world. And I saw why and for what reasons they were successful and can get on to those reasons later, and then really built Skurt. The idea of sturgeon is to kind of build that out into doing more transactions and being more involved in company building in emerging markets. Now, coming back to the principles of Buffett and Munger and why it applies, I think, to this line of work is kind of the universal principles that you can get from them are quite a lot because”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“But then, if you kind of transposed the track record of investment firms focus on emerging markets, you didn't really find someone that had a really great long-term track record. So in traditional private equity as well, in intrinsically your revenues are intertwined with kind of GDP and currency, which are inherently volatile. And if you looked at investors that kind of really were doing private equity meaningfully, again, they really weren't posting returns in line with kind of the perception of risk. What did happen though was that you really had a technology infrastructure shift in these countries. So many of these countries went from 20-30% smart term penetration to 70, 80%. All of a sudden, the country had access to internet and everyone is very young. You have 60, 70% of the population under the age of 30. And you'd see digitalization play out in a handful of other countries. So from China to Latin to Southeast Asia to India, meaningful technology companies are built. So the thesis formed is, okay, there are a handful of countries that are large countries. Why not test building technology?”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“As well, which was 0% management fees and 25% performance fee above six, and went about my work. And the fund did quite well, but it was unique in the sense that I really had no constraints. I could invest and do and invest in any manner I want anywhere in the world. And I could be very concentrated. So I did kind of your merger arbitrages, your kind of spin-offs. At some point, I had 70% of the fund in one position. And the fund kind of probably did well. It kind of compounded nearly around 32% for five years. So it kind of cemented the idea that what I really wanted to do was investing. I truly enjoyed it. But being kind of rational and trying to be honest with myself, I understood that I couldn't scale that investing business because no investor would allow me to invest with such concentration and such a broad mandate. And it just so happened that the most successful investment I had was a company in an emerging market in Egypt. And conceptually, I found that quite interesting originally Iranian born in the UK. And when I would travel to the country a lot, you would objectively see that there's just a hell of a lot of opportunity.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“That really, I think, the success that they've had, let's say from a business perspective and an individual perspective, is really a function of the quality of their character. That is, being pragmatic, being rational, being decent, having high integrity, working hard, keeping your head down, these character traits were just broadly good character traits to try and adopt. And then from there, literally read every single piece that I could find on these guys from Buffett's early partnership letters to all the shareholder letters, interviews and all of these things. And the other thing that you come away with is that they were really kind of young, hungry guys that just got going. And I thought that the best way to kind of really study something is to by doing something. So in very kind of uningenious fashion, I really copied Buffett's early partnership when I was in my late teens in the sense that I felt I had more ideas than money and I want to put whatever knowledge I had to work. And so raised kind of a pretty good amount of money at a time from investors, copied Buffett's fee.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT
“So I think this question could be the topic of a podcast in itself, but I'll try and kind of break down my evolution for that. How can a buffet and manga really impacted me, how it led me to do what I'm doing now, and then try to kind of cover the principles, I guess, which I've learned that I think are relevant to the way we do our business. And so effectively, I was a 13, 14-year-old kid that kind of randomly fell into investing. And so kind of to study the area properly, simply I was around 15. I remember I did a Google search to kind of who were the best investors of all time. And clearly you have Warren Buffett's name. So I then went and ordered a book, which at the time was the Lowenstein book on kind of the making of a capitalist and kind of devoured that. And again, if I'm to be completely truthful, I probably would profess to really understanding about 50%. But what I did understand off the back of that book was really in Buffett and Mungi, you have truly unique characters.”
2022-08-14 · We Study Billionaires · TIP469: Would Warren Buffett invest in venture capital? W/ Kiyan Zandiyeh · IDENTIFIED FROM THE TRANSCRIPT