Growth-stage investing in 2024

[Music] everyone welcome welcome to ABAB Finance we and welcome Courtney how are you today doing great wonderful to be here with everybody thank you for having me very good well I think we should just jump right in I think that the uh MC mentioned uh the long list of accolades so I guess you know can you kick us off with what are your keys to success would you say in a nutshell yes so I think you know one of the keys to success that I really like to talk about is especially within this region is being able to be in a role every single day in an organization where you're just surrounded by incredible Talent Founders who are creating these huge businesses that are not only going to impact themselves and their teams but the countries even that they're operating in uh so it's wonderful to get to be around Innovation and Technology day in and day out great and I know that you know you you're a Founder yourself you've started up companies as well and uh you could say one of the things that 500 Global are good at is picking out you know early talent and also picking out Emerging Markets I noticed that you do a lot of reports in the rise report recently can you tell us a little bit about your strategy with emerging markets and and perhaps even emerging Talent sure so um a little bit of context a 500 started in Silicon Valley back in 2010 and in 2010 the idea of seed stage investing was really still forming so 500 wanted to put a unique spin on seed stage investing we invested both both in the Bay Area started spreading out around the US and then ultimately decided from our first fund we were going to invest worldwide so the first fund we started outside the US was actually in Mexico in 2013 and today we have more than 30 funds around the world and it's uh your colleague said we invest in in 80 markets so when we're thinking about which markets we're going to invest in we're looking for some key characteristics we want to see a really strong youth population because it is young people who are going to continue to not only drive adoption but the adoption of new technologies we want to see a really healthy regulatory framework to be able to facilitate Innovation and make it easy for entrepreneurs to start companies for VCS to get started and for exits to occur and we really want to see that the kind of Wi-Fi mobile uh penetration is high enough uh that there's going to be proper access to bring an entire population online and into these products so those are some of the key character istics that we're thinking about from a country level perspective great and here in Abu Dhabi there's no shortage of that I mean how have you seen this region Thrive with those themes over the last 5 to 10 years yeah so I mean I think the the Middle East has just been an incredible story a phenomenal story about the use of innovation to drive an economy forward and you know I made my first uh visit to Abu Dhabi in 2019 um but I actually moved to Riad in 2021 so I've been able to see firsthand what it looks like to see uh the UAE and governments around the region really make the way pave the way uh with enormous ambition and resources to help entrepreneurs Thrive so we started our first fund actually in the region in 2017 and just a few numbers that I think kind of help people to understand the pace of growth in the Middle East in particular you know our first fund and invested in 180 companies uh in the Mina region um all early seed Investments today we have 16 companies I believe valued at over100 million in the region nobody thought that was possible uh when we launched our first fund and it's just incredible to see the pace um and I think this region is going to do you very well globally and in terms of the sectors of those companies would you say that there was a strategy executed would you say that you kept on course with there any challenges along the way that made you think actually I might we might change course um I don't think there's been a sense of change in course but there are some Trends so you mentioned we have what's called The Rise report which is the first time 500 has really leveraged our data set and our investment thesis and put it out for the public to see in terms of how we uh select markets and also what we see develop in terms of industries that indicate a market is growing in the right way so we started investing heavily in e-commerce first uh within this region then we started to see kind of more pure playay consumer Technologies come online um obviously fintech and edtech has been incredible I think uh Logistics has also been really interesting in this region and what we hope to see moving forward is a little bit more on the Deep Tech side um continue to develop um I think that will be really important and do you think the infrastructures there are there is there the talent and the growth and the nurturing that is required to take the uh the ecosystem to the next level it's certainly developing and I think one of the unique advantages of um seeing um entrepreneurship and Innovation become really inculcated across um a country is that they have the opportunity if you look at the UAE they've done an incredible job of actually leapfrogging some of the regulatory uh Frameworks that exist in other parts of the world and that is the opportunity uh of an Emerging Market to be able to say this worked here this didn't work here and this is how we're going to take advantage of that so I think you know the sandboxes the uh ability to work really closely with regulators that doesn't happen everywhere and I think that is a is a significant benefit that will help us see more and more um deep Technologies coming online because I think I saw in your report that uh em Emerging Markets as a whole the top 30 emerging markets that you've picked out will Fast exceed the established markets I do you think we'll start seeing a lot of those established Market startups and VCS coming to this region and building on top of that and uh how do you find that in as a competitive landscape is that a good thing a bad thing you know so uh first of all what we call our investment thesis it's it's called um The Rise the rise of the next right the rise of the next economies and the principle behind it is that if you look at the 30 uh economies that are most interesting from a venture perspective their expected GDP growth over the next 10 years is actually higher than the US and China combined and that is how we think about where we're going to invest and why we're going to invest and you know with that in mind I think you're seeing more and more International Venture capitalists uh come to the region start to pay attention to the region invest uh within the region and that's a great thing we need a healthy mix of capital in this region we need different types and stages of capital I think we have um probably a sufficient amount of seed and maybe even series a I still see a big gap in series B and Beyond in this region and I think we want to see different sorts of capital we need Venture debt we need other sorts of instruments to be able to support um startups as well yeah I've got a panel just to plug that on Wednesday with liquidity group who are going to help to plug some of that Gap so definitely come down for that on Wednesday um and you mentioned a lot of these startups coming and setting up here in the uee uh I've got an office here at H 71 U and so it's a really exciting ecosystem full of startups from all over the world and so I'm wondering when you come to managing portfolio startups who operate in multiple jurisdictions with multiple regulations H how do you do that what advice do you give them it it certainly takes um a lot of work and we're really fortunate to have a very large team worldwide and I don't know the latest numbered but I would guess about 25 people here in the region um we've had 40 companies more than 40 companies register in adgm since we started investing here so you know I think it will continue to be a stronghold for um startups trying to get licensed and get off the ground and in terms of helping companies go from Market to Market within the Mina region this is very important you know you need to be able to capture not just the UA UAE but also potentially Saudi or Egypt and vice versa to really build um you know the billion doll exits that we're all looking for so that Regional connectivity is critical and I think from a venture perspective that can really only be done effectively if you have relationships in local teams across the region to be able to help you know startups when they need uh when they need access and when they need support and when you're investing how how have um are there new Innovative Technologies that help you do your due diligence and understand these startups better are there any sort of new ways that you're looking at startups now with ESG and other themes as well you know I don't know if there's um you know I heard abdella ask earlier whether or not you know we were afraid that uh AI was going to take over our jobs I think when you're managing large quantums of money it's it's uh not as likely that you're going to see a decision made independent of an actual human being however I do think that today our portfolio is almost 3,000 companies worldwide we've been investing for 13 years we've seen similar business models similar trajectories similar developments across these ecosystems and all of those insights and experiences certainly feed into the decisions that we're making moving forward and we do utilize a lot of Technology internally to be able to make sure that we are considering the data um but I think from a decision making it's still uh it's still the partners around the world so we live to see another day live to see another day yes and in terms of that I mentioned ESG obviously we're on the eve of cop 28 here in the uee which is very exciting how do we balance the need for profit but also sustainability goals uh and also social and governance issues so how do we balance all of that whilst obviously having that uh bottom line to think about sure so I think I probably have a little bit of an atypical response here which is we believe that as Venture capitalists our ability to see top Founders and Founders being able to create incredible companies that create jobs is really a significant contribution to society and ultimately what these economies need to see is sustainability increased GDP increase growth increased jobs being created so rather than thinking of any one particular framework we believe that continuing to invest in Founders is actually what's going to move the needle however I will say you know one of the things that 500 has been really focused on um our team worldwide is over 60% women we are led by uh you know myself and Christine Sai are obviously uh women and if you just look at our Middle Eastern portfolio uh we have 30% nearly of our portfolio is U female founded or co-founded and half of our partners within uh the Middle East are women so I believe you should be absolutely in investing in incredible you know portfolio um investors and incredible Founders and I don't necessarily think that it takes a framework to do that I think it takes the desire to just invest in the best companies and the best companies are distribute you know distribution wise is pretty evenly male and female uh so that's how I tend to think about it and in terms of the sustainability angle are you trying to invest more in cleanex or do you think that there are other ways that you can incorporate the sustainability theme into investment we don't have a standalone investment thesis uh related to sustainability at this point I think it's still a very very nent um kind of thesis that we will see buildt up more and more over time um but we do invest into sustainability related or adjacent companies across our portfolio but no dedicated vehicle uh as of yet okay and in terms of uh we're here in Abby Finance we so you've seen obviously regulations here in Abu Dhabi with Defi and other digital currency what do you think are the opportunities for startups especially in this region and what are some of the challenges you know I think the challenges um within the region today are not unlike some of the challenges that we see around the world there is always going to be a need for more Talent more technical Talent uh to see Founders operators who have seen really massive scale and at the end of the day that just comes down to being able to identify where that Talent is and being able to recruit that Talent as a founder or as a CEO and that's the same challenge that happens in Silicon Valley that happens you know worldwide so certainly Talent is something that's really critical but something we've seen really um grow the talent base over the last decade of investing in this region um and I think you know really as well the ability to have put uh you know Abu Dhabi and other cities in the region really on the map globally has been such an incredible boost uh to the ecosystem and so we're excited to see how it continues to grow great and I guess at the end of the day a lot of VCS talk about exit strategy and I wanted to understand a little bit more about whether you feel that that goal is evolving is it are you getting more Innovative in the ways that you might exit these days uh you know I think uh not just uh within the region but worldwide the three primary exit strategies are going to continue to be you know IPO m& and then you know potentially uh some sort of uh you know secondary measures if you're a fund manager so I think there's not going to be any any change in course uh in terms of the types of exits I do think that m&a will play a much larger role than what people have anticipated within this region I know there's a lot of headlines about how many unicorns will be created Etc but um you know in our experience it takes 10 to 12 years to really see an emerging market or any Venture fund see the sort of exits uh from a listing perspective and we're still in the early endings there so I think uh for the region m&a will continue to be the primary um uh exit pathway and then finally I guess I just wanted to uh get some tips for some of the startups that are here listening today uh what advice would you give scal ups and how can they navigate an increasingly AI Rich regulat burdensome kind of type environment and and geopolitically there's a bunch of issues so how can startups really take advantage of opportunities and uh what tips would you give them I mean I first and foremost to any founder running a business whether it's seed stage or growth stage you really have to be able to shut out the noise as much as possible you know certainly coming from the industry The Venture industry startups as a whole you're always going to hear people talking about the next big thing or whatever's going on in the macros and those things play some part but at the end of the day you you're it's your relationship that your C with your customer customers that matter so if you're able to continue being F focused on your customers creating products that are moving the needle from a revenue perspective from a profit perspective that's going to see you through any sort of macro uh changes or risks you know that are going on so the basics is still truth back to the basics I wish it were something else but no no it is always just the end of the day being in love with your customer great great advice well thank you very much I'd like you to thank our very esteemed guest Courtney power here thank you so much for your time I hope you have Festival thank thank you so much