Profiling the investor of ‘tomorrow’: looking at a value-based investment strategy

[Music] I was just I was introduced as the uh the session as in the next uh uh uh session as in chapter in investing and to me it is a a Natural Evolution so what I want to uh talk to you about is the sense that so today to me is couldn't be a better place to look at investing look at what we've just experienced we had inflation we had a a period of zero interest rates where money was plentiful and now money got priced properly and now we have also people who want to care about the environment which to me is a natural uh Evolution uh coupled with people also are using the the new technologies to be able to participate in so many different things which is really the democratization of investing so if I can start with you Tammer uh ask you how do you reflect on this change in environment from money was plentiful to actually money pricing risks appropriately so it's been absolute and total chaos for quite a while and um in times when everything is absolutely and completely chaotic we have to look at some of the values that continue to bind us uh whether it's in times of chaos or times of order and there's a lot of really cool history around how people changed their investment mindset and um I'll tell you very very quickly so the the first sort of change in how we think about investing happened with University students as some of you know endowment funds are some of the biggest investors for people like us and students at universities in the United States decided Well we don't want want to invest in oil and gas we don't want to invest in Coal tobacco uh gambling right and that was the first phase or stage of evolution where people were saying hey these things are bad I want them excluded from uh our investment portfolios for the university in which I study after that we started thinking about uh ethical investing so things like animal testing and working conditions after that came a wave ESG and impact investing where we started thinking about Blended returns right social impact and financial returns people were willing to compromise on how much money they made uh instead of just um focusing on returns they were willing to accept so positive social outcomes and now I think Sonia can talk a bit more about this we're seeing a new wave of investors thinking about something called conscious investing sure do you want me to continue yes sure um so I guess for those who don't know me I'm a GP at Adventure soup we've around been around for 10 years which is a long time given how still very nent the ecosystem um I believe to still be um so when thinking about something like value based investing what we call conscious investing it's kind of encouraging investors to move away from that two-pocket thinking approach thinking that if you're investing in a mission-driven Founder based in Egypt or based in Saudi or elsewhere that it falls under the bucket of philanthropy or that you're going to get limited Financial returns we at ventur are a VC we have two themes we focus on fintech and climate Tech I lead our climate investment practice we are looking for those financial returns we're not investing in a mission-driven Founder because of some lofty ideal that he or she may have we want to believe that there's a commercial model behind that business and so I think what's happening in the region right now is that sorry it's a bit weird to hear myself echoing around the stage I feel like I'm in my head um so I think like we we do need to kind of move away from the two- pocket thinking driven approach that I mentioned before and I think we're seeing it now with cop specifically um those in the in the ecosystem that are not familiar with investing in climate-based uh Technologies are now going to be able to actually go to Expo and see them firsthand experience them firsthand and hear from uh climate-based investors from all around the world who are flying in to speak at cop and so I encourage those of you who are interested in giving your money more purpose more impact act more purpose um and more power ultimately to actually start opening your mind to this um there's people like Tammer and myself who have historically invested in Founders who are looking for long-term social uh economic and environmental positive outcomes and you can do that and get a financial return at the same place we from our impact vehicle that we launched in 2020 called a conscious Collective we already have our first unicorn um and so you know this is not us investing in you know a social Enterprise in Latin America this this is very much a for-profit entity it's the first B Corp unicorn in Latin America and we are expecting a financial return we already have multiples on that investment already sorry that was long-winded answer but I guess I guess you know the investing at the end of the day needs to attract capital and people's labeling of whether this is impact whether it is Evol whether it's to take care of the environment the bottom line is if this is how how the investors want to live in in an environment that's clean they're naturally going to allocate capital and I think what you've what you've just had a reset of the price of money yeah along with it people who want to do things for the environment and these things happening at the same time probably is creating a bit of a tension but uh but my sense is we're going to step over that how are you seeing these from the from the investor side do you see people who are just fixated on the impact or do you think now the price of money and and the impact investing are converging so the the cost of money has created a lot of change in our ecosystem right um debt was considerably cheaper and now we're actually seeing it become more expensive or priced better and this creates a significant opportunity for equity right Equity can now compete better uh it's becoming more efficient and it's a window of opportunity and when you couple that with a change in how people are thinking about solving problems right we always say Market Market Market you know or you know some people will say oh team team team but then some people say well I'd rather back an A minus team in a A+ market right but some of the biggest problems in the world are things like the environment or education attainment or access to water electricity right and we always say well show me a big Market well that's the these are the biggest markets there are and if you go into and try to solve some of these most pressing and complex problems that's when you actually generate outsized returns from your experience Sonia do you do do you see the convergence between the pricing of capital and the value system that that people are adhering to I think for us it's interesting because I mean we focus I my team is focused on the climate space and before that more of the financial inclusion Health Tech kind of what some people call impact space more broadly so that reset that was felt more recently with regards to certain sectors like fintech Etc was not as harshly felt I would say for my portfolio because I guess maybe we invested in the unsexy sectors and so you know we weren't going in at crazy valuation and so we didn't see as steep uh kind of a devaluation of these companies as some of the other sectors perhaps did and even then stuff like fintech for example it was much steeper of a of a shift in I think the West to be honest in Europe and the US and we've seen even in the Mina region as well where maybe there was a bit of a shift in in valuation but not as steep as what we saw in the west because there's still very much a need in this region for acceleration in a lot of different sectors ftech included how committed do you think investors or governments are to the this ecosystem that you guys have described because I mean as I said that the onset I think people evolve and they become better they get fed they get become educated they want to care about the environment that's that's a very natural but then in tough times these models gets gets questioned so I know Europe is very advanced in this yeah us there is a bit of a disagreement but we seem to have now uh moved a bit further and the region here wants to do these things and they and and they recognize that it actually helps their carbon economy indirectly so how are you seeing the conversations when you see that people are scrambling to raise money and at the same time people who have invested and are not getting the liquidity or the the the marks that they expected I think I mean listen we're a couple of days away from cop now so obviously that's kind of front of mine climate is definitely front of mine for a lot of people which I personally am very happy about if it takes an event like cop for people to start thinking about climate change then I'm happy um I think this The Challenge and I'm have to be diplomatic the challenge that we're facing here in the region is I think there's a lot of initiatives being put forward for entrepreneurs which is great and so obviously you're going to see during cop a lot of announcements being made left right and center around various initiatives Etc focused on kind of the the entrepreneurial side of the equation I think the elephant in the room that no one talks about is the capital and I think people forget that we as GPS also have to fundraise so if we want to see some of these entrepreneurs Excel we as GPS need to be able to inject Capital into them and people forget that we as GPS also have to fund raise and so I think there is a bit of a funding Gap with regards to the climate sector specifically and hey hold me to my word this may change two weeks from now we may be having a whole different conversation post cop post announcements but I would say up to now it's been more difficult to pitch the climate thesis than it has to be pitching other thesis um I think people don't understand we focus on early stage climate so we do seed in series a people think of climate as more later stage kind of growth stage Capital which is fine it exists there there's a whole value chain of climate financing required right but we Adventure sou will not go there you go talk to Kik R go talk to tpg go talk to you know investor and the Carlile group if you want that type of kind of ticket size and asset heavy opportunities we're focused on the earlier side and so I think there's a need for education in the market even amongst the LPS here with regards to okay Venture suuk if you're investing in early stage climate what does that mean in practice and kind of give them case studies what we've been doing is because we invest internationally each time we have portfolio companies in the climate St is coming through the region we send them our LPS way go meet with muala go meet with adq go meet with all these LPS so that they start also understanding the types of opportunities that we're investing into and I know some of you are around here so uh Tam I want to ask you the question what is NLP for you because today you know the definition of NLP is different than the previous my previous experience with NLP back in the.com Bubble Burst which which was a similar period to now so who is who is an LP for you now so LPS were typically sort of of these really opaque unknown sort of entities with tremendous amounts of capital that nobody knew really how much they were but now they're just um institutions just like us they're out in the open they're accessible they're available uh to us uh we believe that we're our number one value at chuk Partners is that we're Founders partners and we believe the same way in our relationship with our LPS my LPS need to be my partners in every aspect of what I do they are uh I'm not just investing their money and giving them their return they're also part of the conversation with me they share common values with me they share the same long-term goals and the ambition to affect real and genuine change in this region and around us so picking up on that note so when you say they are your partners which resonates a lot with me then then are you really sharing with them the challenges that you're facing like for example the typical question today between the GP and NLP is your cash how much cash you have for you to to continue survive yeah so so the reality is that the market is still very nent like Sonia said right we're going to start seeing funds Close Up full Cycles very soon and Our Moment of Truth as GPS in this young region is coming right and we will start seeing some of the thesis we backed actually generate the value that we hypothe hypothesize they would right and that's going to be a real intersection for for organizations like Venture like shuk Partners where we're actually going to show folks that what we said we were going to do we did and it created the outcomes that we thought it would create right obviously it's not going to be sort of 100% but UL ultimately all of us here um believed in something and Our Moment of Truth is coming maybe in two three years I would say but just to pick up on that sorry hasham it's I think it's an interesting question right because it's like the gplp relationship is a to the GP founder relationship as well you know how open and transparent as a Founder do you want to be with your investor how open and transparent do you want to be as a GP with your LP how wide did you want to open that kimono of yours and either leverage um kind of the knowledge the expertise that your investor your LP has versus try to cover up and and make sure that they don't find out that you're actually in trouble and I mean I personally think it's actually a very dicey Dynamic and like I think people like Tamar and I I think what we like to do with our Founders is sorry I'm totally speaking on behalf of you but I know we're Akin and like-minded um is create a safe zone for the founders for them to feel comfortable opening up to us and they're not going to do it with all their investors on the cap table but at least if they can do it with some of their investors on the cap table where can they have open transparent conversations with them and be like hey Tammer I'm really struggling personally you know I'm going through a divorce like it's actually starting to affect work like give me you know give me some pointers what you know I think that's important and I'm not saying I don't expect all investors all GPS to do that but I do think we do need a couple more not a couple more but a couple on each cap table so we need more of these types of GPS where they do create that safe Zone and I know it sounds a bit idealistic and and cliche but I really mean it because I think we've both I mean I know you guys have and we have as well been through through covid diff difficult conversations with our Founders and you don't want them to be pent up in a corner being a feeling of shamed that they can't share with their you know with their with their investors just like you know you also want LPS to create that safe Spain for GPS like we should you know we should perceive our LPS as our allies just like Founders should see us as investors on their cap tables as allies as well so sorry I know you want to jump in no no no I absolutely agree with that right you if if if I were to give any advice to Founders there's two types of investors you should make sure you have on your cap table if they can have both characteristics that'd be great make sure you have at least one empathetic investor someone who you can actually pick up the phone in the good times and the bad times you want to give them the good news but also you can feel safe enough and comfortable enough to give them the bad news and know that they're not going to just bail right the second type of investor you should have on your cap table is an activist investor right so when things are Bleak and things aren't going right you want someone to step up lead around for you pull everybody together push it through and fight for you to make it happen right if you have one or both ideally on your cap table then you know someone's got your back that's good and how about you so you mentioned something interesting that uh uh as a community here in the region talking to each other how have you been have you seen the interaction with the outside Venture investors whether it's the funds or even other Technologies do do do you see this people reaching out to each other I mean definitely reaching out to Tamar and I because I think everyone in their mother is fundraising from the region these days as everyone knows so I think we're feeling it I think you know again speaking on behalf of Tamar and myself I think we get calls on a daily basis from GPS uh from from other markets which is fine like we're also here to help people navigate the region um I think for international GPS they kind of need to move move away from this old ideal of you come here for 24 hours put your hand out and get some money and leave those days are gone you need to build a relationship you are in line with thousands of other GPS that are pitching the same people that you're pitching and they're doing the same Dubai Abu Dhabi Riyad circuit and times have changed and so what are you bringing to the region where is the knowledge transfer happening back to this region that makes you stand out and back to the empathy bit that Tammer mentioned like why do you care why do you care about getting money from this region is it just like you know just a check or do you actually care about kind of elevating the ecosystem in whatever sector you're focused on yeah we've earned our place we've worked hard for almost two decades we've built an ecosystem together right and we need to work together to change the narrative that the relationship between external GPS and our Market is extractive right it has to be a reciprocal relationship you're raising Capital why what are you bringing to the table right and that comes also from our LPS right well what are you going to bring to the region what kind of skills and experience and funding and cross sort of country experience so a lot of investors globally will do this sort of global horizontal play great right help us teach us let's learn together let's grow together let's build together it's not an extractive relationship anymore and we have the power to change that narrative together so as an allocator now if I put on my allocation allocator has to me I love this environment because now I'm getting to see how solid are you as an investor you you spoke about things that I love hearing from a from a GP uh I am I'm also not naive to recognize that you know Venture you're going to have some failures this is this is part of life and also in a way the the the fact that if you pass these couple of years and you stay then this is really you've really created now a venture Community uh so my com you know uh uh my comment my comment on that is what you what I've heard you guys say it is it is something that you need to to Really spread around because this is what is required and do you feel others who are having the same thoughts or is or you we haven't gone through the cleansing process I I wouldn't call it a cleansing process I think um I think we have to lead by example right and if I do it Sonia does it maybe some other person will do it and then we become three and then we become four and then we become five and if we all commit and repeat the same message over and over and over again and then in two to three year times in Our Moment of Truth we turn out to be right hopefully right you know it will happen but we have to stay the course let me ask you now a question about I think we're being kicked out H okay can we get one question the marks how are you doing with the marks of your portfolio what the marks how are you marking your do your book look at depends right so uh uh if if we are genuinely seeing a company is on the verge of collapse or disappearing or has taken a significant write down or the M macros around it have changed then we'll absolutely mark it down if it takes a Down Round we'll absolutely mark it down and if that means we are adjusting the value of our portfolio to a time when U markets were more reasonable then so be it right there's no there's no shame in it it's a reality and we have to be honest and transparent with our partners whether they're Founders or LPS I agree no no I agree and I think like with us like we actually issued a document Top's explaining uh where we mark down what basically and why and so again as long it's it's about for the GPS I guess here it's all about communication with your LPS ultimately and again it's a reflection of how good a relationship you have with your founder and how transparent they're being with you as an investor as well right so it's kind of this like triangular like LoveHate relationship I guess but you know again at the center of that love ha relationship is that honesty and that transparency and so we have to be we have to be honest with with our LPS just like the founders need to be honest with us as well thank you guys I learned something new thank youh thank you so much thank you everyone thank you