Out with the Old, In with the New A Fresh Approach to Venture Capital

[Music] so for those of you that were here about 10 uh 10 minutes ago 20 minutes ago you are probably going to get sick of the sight of me because I I seem to be going one after the other but it's a real pleasure here to be joined by colle colleagues uh new friends and old uh from uh an industry uh that is in many respects shaping our ecosystem here uh I want them to introduce themselves in their own words very quickly uh one at a time and then we're going to dive into a more of a dialogue and conversation about where venge capital is at today where it's heading and perhaps a look inside uh the uh the black box of how venure Capital funds work in terms of sourcing invest M strategies and how they're going to be leveraging technology uh in the future so so John uh starting with you just a quick background on yourself uh what you're looking at these days and then we'll go through uh our friends on the panel sure uh John bacus I run a US Venture fund called proof why am I over here I work closely with uh the tech Prince Saudi Prince khed benel wed who uh Cherry picks out of our portfolio interesting companies that he thinks might have an application in the region region s pleasure to be here thanks for having us here at ADW s mad I'm a senior partner at Global Ventures we are a middle easn Africa predominantly seriesa focused Venture Capital firm sector agnostic but thematic in nature um I'll share more about that um later on in our discussion today pleasure to be here once again thank you hello Chris muras U founder and managing partner of ilad Partners uh great to be here thank you for having me uh we're in early stage uh Tech VC uh focusing on the Mina region with a focus on Saudi and the UAE investing at the early stage uh pre- series a and series a uh personally uh before uh founding ilad Partners I was a tech enterpreneur and have been in tech for uh several decades uh and have been based now in the in the UA uh since uh 2007 thank you all we really have a a fantastic and and Rich array of of uh Venture investors here with us today uh operator backgrounds Finance backgrounds so so hopefully we can glean a lot from their insights I think before we go into the sort of uh meat and potatoes of of looking out into the future the best place to start is where we're at today and and Christos I'd like to to start with you you know we're thankfully in some companies together as well how do you think about uh the region what has been your strategy iliad's strategy of spotting the right companies um beyond your own team and the wonderful talent you have at Iliad what do you leverage today in order to work at maximum efficiency and and find the right companies here in the region thanks for that uh so IAD Partners we've been um engaged with the ecosystem since the early days since its Inception and of course we've seen it develop quite a bit in in the last decade uh I think we all can recognize that it's been developing uh really in an impressive way at the same time one could say we're coming now to uh the completion of the first cycle of enture capital and Tech startups here in in the ecosystem um so there's you know there's a little bit of a correction in in valuations there's also maybe uh taking a bit of a fresh look on on how to go about venture capital in the region um I think sort of some of the key things that sort of stand out in our mind is the need to be active and Hands-On uh when working with founders uh you know having been an entrepreneur myself in the past and having worked with uh startups as an investor uh we do believe that it's very important to support them in their Journey uh supporting them with business development Regional expansion entering other big markets uh from the UA for example into the Saudi which is which is a big Market um and generally supporting their their uh their journey I think that's one key thing from our perspective and then also uh Beyond obviously being you know dis when it comes to the way we work uh and the way we uh go about valuations I think more importantly also um uh uh working with uh with Founders uh very closely um uh side by side collaboratively um and uh uh I think the sorry the second thing I wanted to say is also being from our side being very selective and um and working with him sort of getting to know them over a period of time maybe even a couple of years uh our theory is it takes time to get to know teams and Founders um and we spend a lot of time getting to know them before we actually invest and that's good because it creates meaningful and deep relationships uh which also enables us to collaborate um much better in the future thank you s sure um from our perspective we believe that um while I agree with Chris value creation does set a core um it's very important to be an enabler and that can actually create a u if you want flywheel effect a virtual flywheel effect where you become a salt after investor because you're in nature quite supportive and helpful um the sourcing side is also driven for us through the Thematic approach I mentioned earlier we are a thesis-driven investor and a thesis L investor which means that we like to do research understand the sector very deeply articulate what the value chain across that sector looks like and then pick winners from within it um we actually publish our research it's on our website I'll do a Shameless plug um you can go online and find 10 11 sector reports at the moment the most recent one is the mobility tech report in the middle eastn Africa um this acts as a lighthouse for Founders as well when founders see that you actually are knowledgeable in the space understand the sector understand the nuances around it and can help them navigate through it um you'll start to get the best Founders coming to you wanting to um have you on board as a value added investor John sure I'm going to give a little different perspective which is how does the region compared to other parts of the world or in my case other cities or states in the United States so I get asked all the time in the United States because I'm based outside Washington DC how can we pick a name a city or a state become the next Silicon Valley and in Washington DC we deploy about you know the the Virginia Maryland DC area about a billion and a half dollars in venture capital a year that makes us the seventh largest area in the United States and people are proud of that and they should be but but what I point out is in Silicon Valley alone they deploy a hundred billion there's a big gap and what it really takes and what I see the beginnings of here is an ecosystem and an ecosystem to be successful needs to create what I call a virtuous cycle which is you need to have people who want to be entrepreneurs people who want to take a risk who are going to start a company you need to have people with money who are willing to take a risk with them who are willing to to fund them and I I see a lot of that happening now with a lot of the second and third generation wealth in the region you've got to have the service providers the law firms the head hunters the banks out there willing to support this ecosystem and then most importantly uh you have to have layers of capital you have to have not only the small Venture groups that're going to write that first or second check to a company you have to have expansion stage capital and growth stage capital and that's what I think is still yet to come at scale into this region then last what you have to have is an exit environment that does two things number one is it encourages local companies to stay in the region and to be listed locally because the minute they go elsewhere and get listed in London or get listed in New York sort of the Nexus moves over there you also have to have acquiring companies who are going to be local you have to have enough companies get big enough that want to acquire and bulk up locally because if you end up having 10 successful companies that are all bought by big naves in Silicon Valley the talent's going to leave and the intellectual capital is going to leave and the money's going to leave so I think we're about two-thirds of the way through that virtuous cycle here in the region and I I see seeds of promise that we can get all the way through thank you John uh I want to touch upon what you just mentioned here and and you know we have a a very contrasting set of backgrounds here as well um from sort of traditional Finance to to being uh having operator backgrounds um both in the region and outside it I think that for me begs a very important question around um impact right so as VCS we we sort of are focused on at the Strategic level what can we be doing to unearth some of the best companies adding value um and being able to Tool them to be successful but how much are you three in your respective Fields either today or or you can also talk in an anticipatory way in the future thinking about impact locally and John I want to start with you because you know when we talk about impact when it comes to Emerging Markets Frontier markets it's their part of the story we don't talk about it for example when we're in the US ecosystem but that doesn't mean that it matters any less know the history of venture capital is coming in to support Innovation when the US government couldn't right so how do you think about impact in the US and how have you seen that resonate in how you think about the region I think impact is a question that uh people frankly in Venture didn't think about 20 years ago you know all we really thought about was we're stewards of the money that the people give us to invest and we have to maximize the return on that while that's still our guiding principle what's changed is that a large if not the vast majority of entrepreneurs care about impact and so we you know even though we're trying to profit Max maximized for our investors are doing good and making money at the same time you know I'll describe a company that that we're just about to invest in that that I think is a a brilliant idea uh that is such a simple idea but it's not being done right now it's a company that uh basically plays on what in the United States are called food stamps you know there are 45 million people in the United States that get some form of government Aid to buy raw food not processed food not restaurant food but you know you can buy a raw chicken but you can't buy a cooked chicken with it and these 45 million people uh get about $500 a month today they can only buy in store they get a debit card loaded at the beginning of every month but they can't buy online and of these 45 million people one out of five are disabled one out of five are over 65 three out of five have kids at home and two out of three live more than 20 miles away from the nearest grocery store so the founder of instacart figured out a way to enable uh these 45 million people to buy groceries and things like that online within two years it became 10% of instacart's business this is helping people who might have a hard time getting to the grocery store because they're old they have kids they're disabled or they live just too far away do something they couldn't otherwise do and it's a brand new market they're creating so I think what's changed is that the entrepreneurs out there are really trying to find solutions to real world problems that that people have that just make their lives better from our perspective we see it slightly different a lot of the impact that's created through investing here um and and we say something quite similar to what you said which is it's possible to do well and do good at the same time um and the reality is in in by investing in Emerging Markets a lot of the technology applications are providing a positive impact so you talk about access to financial services Access to Health Care access to education all enabled through fintech digital health and attech businesses U you're actually seeing a very virtuous approach towards how that impact is created if you're looking at access to number of doctors per thousand people in this region versus the US it's a stark difference you see a major acceleration of access to healthcare when you're introducing elements like as basic as tele medicine for example so those technology applications that are not necessarily the absolute Cutting Edge latest and greatest technology are still creating a massive difference Visa your average consumer your average um unbanked uh customer underserved from a health and education perspective among other sectors and so the reality is it is a measured byproduct of everything that you're doing in this part of the world we're able to identify and really see great impact being created I love that because I think something that sort of emerges as a narrative here is that that one of the future red threads between developed and Emerging Markets May well be developed markets looking at business models that have succeeded here for us because impact is implicit in what we're building uh and that could actually have a resonance in some of the emergent social and economic challenges not just in the UK but but even in Europe um Kristoff same question to you sure thanks so um I do believe that the impact is a is a matter of how you define it especially Vis A V the stage of development of the ecosystem so I think if you look at uh all VC managers here in the region we are having an impact an enabling impact maybe even on a much more fundamental level um uh you know we're investing in companies that are digitizing as a first layer and then innovating in uh key sectors so in in our case we we're focusing primarily in areas such as fintech Logistics and proptech so really digitizing and Tech enabling the economy is a is a very key sort of enabler um and then uh you know on the flip side in terms of how we go about that uh we are B2B focused so we uh systematically enable commercial Partnerships with our LP base which have operating companies and are traditional businesses right so if you think about the region if you look at Mina you know the the part of the fabric of the economy are these large traditional family groups which uh you know uh are very keen to to drive digital transformation but at the same time they're quite traditional in the way they look at technology so working with them very closely and trying to inte integrate these companies Beyond sort of financial gain for portfolio but also to Tech enable their traditional businesses I think is is you know one way we do it and of course uh every Regional VC manager uh here has played a key role in their own way to do that I think a second way is really just working very closely with Founders and at the end of the day developing them as people as uh um as as Founders uh and in a way in a very small way we are helping develop the human capital um in the region uh and there there's a lot of great talent uh which also needs some guidance when it comes to scaling their companies outside of their home market and and and more regionally and of course these companies ultimately and hopefully will end up uh adding jobs to the economy innovating uh digitizing the economy and you know sort of enabling the the next phase of growth for the region but these are some of the sort of ways that we think about doing things on the ground um in a in a much more I guess fundamental way thank you kristos I I want to go deeper on this point that you mentioned about sort of future proofing and and and what's going to happen you know Venture Capital has in many respects had an Undisputed position over the last certainly 30 years when it comes to investing in early stage uh Innovation and Technology um but of course what does the next 30 Years look like how are venge capitalists thinking about new entrance into their ecosystem for example uh decentralized Finance institutions crowdfunding organizations Al to these sort of uh let's call them Alternative forms of capital competing with us uh for Access into early stage tech companies to help seed them support them and grow them um where do you where do you when you look at your CAL ball where do you see these Alternative forms of in of funding coming from uh how do you anticipate working with them and what impact do you think they could have on the ecosystem uh broadly speaking uh John we can start with you sure uh if you think of venture capital and and I've been I went to school back in the uh back in the 80s in Silicon Valley you know it was a game that kings and queens played you know the money came from endowments and pension plans and common people couldn't invest in Venture Capital you know it was ruled by a handful of very large you know small today but large at the time Venture funds today that entire system is being disrupted you know it's no longer a game that only the ultra Rich can invest it you know now you're seeing uh investors move down from endowments and pensions to wealth advisors and their clients to family offices to highet worth individuals who may not yet have a family office so you're seeing a democratization of the sources of capital I think you're also seeing uh a change in how that Capital gets deployed into the companies instead of just a handful of people like us on the stage deciding who's going to get the capital we're now seeing emerging models that use early forms of AI to basically either you know there's a couple companies like correlation Ventures that use it just to completely pick the company they put everything into a machine they've been doing this for six or seven years and they say we're going to invest in this company not that company time will tell if that's a good model or not uh but you're seeing I think every one of us up up here and probably every Venture fir firm out there if they're not using AI today to at least manage their Pipeline and sort of help you know find the needle and the haystack to make our jobs more efficient uh we're not going to be doing this for very long you know so so we have to use these tools to sort of innovate ourselves because if you think about it we're funding the innovators out there that are disrupting you we're funding the mammals disrupting the dinosaurs you know we're going to be a dinosaur ourselves as an industry if we don't innovate as well yeah I mean I wholeheartedly agree I I think the one thing I will add to that is um while we can definitely lean on technology to support with whether it's sourcing or elements around decisioning utilizing the vast amounts of data that are out there um I think that the scalability aspect of what we would term value creation or the elements of how you add value to companies Etc will continue to be nuanced and so there will continue to be an approach of how you can get the two to live the VC Tech stack and it's in its earliest stages was about how you can actually just bring in something to manage in in the simplest form a CRM or anything of the sort or a platform where you interface with with uh with your LPS uh I see the folks from Cartel laughing in in in the crowd um alternatively it's it's it's now turned into much more on sourcing enabling data enrichment data enhancement and we ourselves are are building that out internally as well um we've gone as far as to build also a platform that we share with our Founders that has a lot of the different use cases information and again data that can enable them to be much more effective in their execution and so it's about continuing to ride that and ensure that we build on it I guess building on what has already been said I would say um a few things are are happening um uh as as you said there's a lot of alternative sources of capital coming into the market and that is you know competition to traditional uh VCS New or Old um I think you know on that side it's uh more and more there's more Capital available to startups the question is and that one could say that's commoditized if you decouple it from the value that is added uh post investment so I think if you're sitting there as a Founder you should be thinking about not uh what you know what kind of money I can get but what value is attached to that because that's very important in getting getting the support and I think you know of course this is within a context of venture capital being under pressure whether it's um you know performance uh in terms of returns but also performance in terms of return uh of supporting Founders I think uh you know time will tell on you know which managers will sort of be a longterm uh play in the region and and globally whether others will sort of be more shorter term but I think as Venture capitalists uh were we are judged and will be judged by in part the value we add um as we said there's more and more Capital available from different sources but the question is what kind of help as a Founder can you get and how will that help you succeed uh in the short term and long term uh you know with your venture sorry just one I'll add to that one anecdotal thing which is that Capital can also be available to the GPS and so it can actually also act as an alternative source of capital for GPS to deploy into companies and so it's not only for directs yeah uh very well said on the fund of fund side especially um you guys all kind of touched upon it but let's dive deeper onto it which is AI you know we're seeing AI disrupt pretty much every industry around the world at different degrees um how are you anticipating it right now and give us some of your more sort of wacky creative thinking on on how AI could disrupt uh fund managers and and VC uh looking out into the future of course many VCS are now very open about using AI to find and Source companies um that much seems pretty straightforward but if we really look out into the future um how do you anticipate uh artificial intelligence um and you know different modalities of llms being able to be leveraged by VCS to get a competitive Advantage uh and not just on the investing side but also on the portfolio management side you know can we imagine a world where you know a robo analyst can help us better manage our portfolios and pick out where some of the risks and threats May lie uh within a company and its underlying structure uh how much have you thought about this is this something that that is even top of mind for you all uh and all your partners s i I'll throw it differently can you imagine a world where there's a robo IC member and then every partner that brings a deal to an investment committee is judged on historical data performance where on average you have overshot on valuation by 12% undershot on Revenue by 30% and so on can you imagine that conversation and what it looks like with an with a robo I member hopefully we'll be out by then so I mean talk about putting your track record on the line and really utilizing the data there um that's one disruption that can definitely come in and be properly fed with the right information right data sectorally geographically by partner by investment analyst but you call I mean you name it um that's one world and then for sure on the enhancement side across everything that we do but that's sort of the world in which this can this can go and this can head that's one of the quirkier uh sort of thoughts that can come to mind yeah John you you you gave a nice sort of uh disruptive history earlier on Backstage where you said you know you've seen firsthand how sort of software came to eat everyone's lunch and then mobile phones did Etc and we forget sometimes that as investors especially Tech investors we don't function in a vacuum we're also leveraging these Technologies to improve our own um uh uh you know daily jobs essentially you know C M systems to better manage our companies mobile phones to be able to be stay in better touch with uh with our Founders and and solve crises you know here in the region um often times you're actually interacting with your portfolio through WhatsApp uh I think Mark Cuban said uh in in one of his interviews that one of his best investments that has helped him grow his his portfolio has been you know buying a private jet because it means that he can go and do due diligence per personally himself and do it rapidly and get a Competitive Edge on his uh uh on his peers certainly he would have been would not have been able to do that 100 years ago so what do you see as as some of the the sort of Future tools with a specific focus on AI how you anticipate leveraging that both in its current form but in its future form uh to get an edge on your competitors and and and to deepen the industry sure so if you think of technology technology comes in ways and you know you know in my life uh at least adult life you know that the 80s were all about a hardware wave it was about let's integrate that disc drive with the CPU with the monitor with the keyboard and different people made all those different components and you created an ecosystem around it the 90s were all about moving online the 2000s were about mobile the 2010s were about the so the hardware moving out of the business and into the the cloud and we're at the beginning of an AI wave I don't think we really know uh what the result is going to be of that I'll give you uh one of the most interesting flip-flops that I've seen in Venture uh in the last 40 years in the 1980s and the 1990s it was there there was no question about if you could make this technology work there will be a market for it for example if you could make a disc drive that cost 30% less and was five times faster you knew every PC manufacturer out there would buy that so you didn't have to worry about the market so what we analyzed as VCS at that point in time was the technology can this team really make the technology work when the internet came along when mobile came along when software moved into the cloud it became pretty easy to build a software-based product and we didn't ask the question as much anymore on the software side can they build this the question we asked was can they bring it to Market so we had to ask a very different question I think AI is going to give us another flip I don't know exactly what it's going to flip into but I think we're going to start asking very different questions because things that are hard today are going to be simple tomorrow and things that you know we take for granted today are going to be hard for AI I for example say all the time that you know I'm not the smartest person in the room I'm not the best at num I'm not the best at understanding technology but what I think I do really well is I understand people and you know you might have the best technology in the world you might have the best go to market plan but it still takes human beings to build a company to hire other employees to bring them to Market and that's an edge that I think people like us on the stage it's a skill we have to master and it's going to be one of the toughest ones for AI to figure out so no AI John then uh same question to you kristos I'll have to 100% agree with uh John I I I really see it that way as well so I think it's undeniable that AI is a huge Dynamic and Trend that will be pervasive across our lives across what we do in our case you know how we invest how we manage our portfolios how it impacts the companies we invest in in their own sectors that's 100% for sure what's not for sure at least for me is how exactly it will impact and how it will be used and what will be the outcome um but all that said and of course you know we all need to closely monitor understand Implement and leverage uh AI for for everything we do at the same time I strongly believe that at least when it comes to venture capital uh you cannot strip out AI you cannot strip out the human component excuse me from what we do um the relationship with Founders mentoring them working with them you know I don't think it's something that can be entirely automated perhaps other types of Investments could be in other asset class class ES but the human component when it comes to what we do is very important um and uh so AI will be I believe complimentary but it will not eliminate the human uh Factor at least I hope so thank you uh we're coming to time so I want to take advantage of having such a prestigious panel with us to just get there quick 30 to 45 seconds on what's what excites you most uh as we head into 2025 in your space you know whatever it is that you're you're investing investing in right now whether it's software fintech platforms Etc what's exciting you the most uh as you look ahead to the next 12 months uh Christos let's start with you sure um we're very excited about 2025 uh especially because this morning we announced the launch of our new fund congratulations thank you so by default I have to be excited about our strategy right which is uh B2B software in the region with a folks on UA and Saudi investing in uh sectors like uh fintech proptech and and Logistics um but no you know that aside uh overall we're very excited about the region it's it's gone through some major development over the last decade I think we're entering a new phase a more a different phase a more disciplined phase a more focused phase maybe more specialization um and uh you know we're excited about the road ahead and I think it will evolve as we go thank you so yeah I mean absolutely I I think Chris is is on money congrats on the new fund by the way um the uh the the focus that we've been sort of um looking out for a while now we see a lot of opportunity in supply chain Tech we see a lot of opportunity in Agri Tech continue to see opportunities in fintech digital Health Mobility which we just published a report on among other sectors but importantly also from a market perspective we're seeing a lot of excitement around um I'd call it Global first Innovation coming from markets like the UAE with with what we've seen in markets like Abu DHI where we are today and the buildout of the Falcon llm and other um super technology that coming out of here to act as an enabler for that scalability and growth that's super super exciting and then markets like Saudi where you're seeing a lot of a lot of adoption and a lot of consumer like growth um in in a market where sort of you know opportunities are Limitless so we're super excited by that thank you and uh so I mentioned early on that we're working with uh Prince khed benal lead's family office uh I'm excited about what we're going to be doing with KBW ventures in the next couple of years so stay tuned for some announcements there I think what you're going to see is an interesting I'll call it crossborder technology transfer between this region and the United States as well as sort of a cross-pollination of ideas you know like you mentioned you know all the ideas the great ideas don't originate in one place and go elsewhere we're moving into the world where the ideas originate everywhere and those who can move them to other places seamlessly are going to be the ones who will be very successful I think that's a great note to end on please join me in thanking our panelist for a wonderful discussion [Music]