Can you really be a 'global' investor?
Walking into my 6th meeting of the day in Bangalore, I get the all too familiar question that comes with part of the early formalitiesâ€Š—â€Š"Where are you based?" When I respond with New York, most investors tend to follow up with, "How do you source companies and manage your portfolio without being based here?"
Over the last four years, I've wrestled with this question of how best to invest and work with companies across the globe as part of a team of 7 covering markets from Mexico to the Philippines. Having learned the hard way through trial and error, here are a few things that are critical if you want to be a 'global' investor.
"I travel the world and the seven seasâ€¦everybody's looking for somethingâ€¦"
There's no getting around itâ€Š—â€Šbeing based in New York (or anywhere, for that matter), doesn't allow you to avoid the undeniable truth: if you want to invest in many markets, you're going to have to travel to those markets and spend time on the ground. You have to be on the road, spending time on the ground with entrepreneurs, at conferences, at board meetings, and everything in between. In the past 12 months, I've spent time in India, Brazil, Peru, Colombia, the Philippines, Ghana, and South Africa. There is no substitute for time on the ground, so you have to be willing to spend that time, especially if you're based elsewhere.
"I get by with a little help from my friendsâ€¦"
That being said, travel alone is not enough, especially when it comes to sourcing new opportunities across the globe. That's where good friends in adjacent spaces come inâ€Š—â€Šaccelerators, earlier-stage investors, industry conferences, NGOs, and capital advisors. We depend on great partners for inbound pipelineâ€Š—â€Šfrom capital advisors to local accelerators to global programsâ€Š—â€Špartners like this have been invaluable in ensuring startups that meet our investment criteria find us. These are trust-based relationshipsâ€Š—â€Šeach of these partners has to know what we stand for and how we support entrepreneurs to send companies our way.
"It's a small world after allâ€¦"
When you consider the scale of the problem globally in education, it can be daunting. The fact of the matter is networks are smaller than you think. When I first scoped the market in Brazil in 2014, I met every stakeholder I could find and then would ask them who else was worth meeting. Within my two weeks, I was getting referred only to people I'd already met. It's funnyâ€Š—â€Šwhen you have a specific scope, the world is quite small and interconnected. Once you get plugged in, you really can get to know most of the market in a reasonable amount of time.
"If you don't know, now you knowâ€¦"
As an investor, you want to understand and communicate your competitive advantage to attract the best startups. At the same time, knowing what you don't know is also crucial to ensuring the best chances of success for the companies you support. For global investors, that usually means partnering and co-investing with local investors who know the country very well. We bring domain expertise while they bring geographic expertise, providing complementary support that tangibly improves our companies' chances of success.
"I am whatever you say I am; if I wasn't, then why would I say I am?"
Doing all of the above would be meaningless without a positive reputation. Without other stakeholders understanding and valuing what you do and how you do it, they won't refer companies to youâ€¦it won't be possible to plug into these tight-knit networksâ€¦you can't be as effective with your time on the ground. Reputations can't just be fabricated, they must be earnedâ€Š—â€Šthat means adding value to entrepreneurs, even ones you don't invest in. That means publishing thought leadership to advance the interests of the sector more broadly. If others in the market don't see you as a valuable investor, nothing else matters.
This is not to say there are no drawbacks to being based so far from the markets we cover. There are two that come to mind particularly that we have never been able to fully overcome.
"Just call my nameâ€¦and I'll be there"
Sometimes, it's really nice to be able to just pick up the phone or have a face-to-face meeting immediately with no planning. Whatsapp is great, but it lacks the same immediacy when you have to consider time zones with each message. Tone can get lost in translation over email and small issues can fester and grow instead of getting squashed over a meal or beer. You can set routines to mitigate this like weekly calls or being in person for board meetings. Even with strong routines, however, there's undoubtedly something lost in not always being a phone call away.
"I don't want to waste my timeâ€¦become another casualty of society"
Last but not least, the biggest pipeline issue we have is one investors should never complain about (though I will anyways): effectively managing a large pipeline. The problem isn't that we don't have enough companies in our pipeline sitting in New York; the problem is trying to sift through the hundreds of companies in these markets that come across our desk. When you aren't on the ground, moving companies through the funnel effectively can be inefficient. Where one face-to-face meeting with the team or one visit to see the product in action could have proven the company wasn't a fit, you can spend days and even weeks over the phone and going through materials trying to ensure you don't miss out on the next big investment.
This one will be hard to solve (it's a problem I'd much prefer over an anemic pipeline), but it's a drawback well worth it all things considered. Casual conversations with colleagues in the office have allowed me to view an entrepreneur's vision differently, have helped me identifying better metrics to evaluate a fledgling business, have led to useful connections for our portfolio. Plus, if you enjoy watching movies, you can catch most of the good ones on flights months after everyone else has seen them.
Lastly, if you can name all the artists for the lyrics above, tweet me at @arvindnaga and we can exchange notes about investing and music because we are clearly kindred spirits.