James Palmer is an Investor Media editor and founder of Stratal, an agency working with a selection of established funds and high growth businesses, showcasing emerging global markets across blockchain, healthcare, clean energy and space technology.
Welcome to the second issue of The Alternative Investor, our expert analysis across the world of next-generation investments.
When we conceived the idea of a focused look at investment, particularly in new growth regions, at the end of 2018, we could not have anticipated the changes witnessed over the last sixteen months. Thankfully, we did manage a handful of events in Dubai and Monaco, a now invaluable memory of catching up with friends. But for the main we have been, like most of the world, stuck at home, dreaming of travel and what we have missed in business and life our constant companion.
Although investing is broadly facilitated on a local basis, at The Alternative Investor we like to take a global outlook – and the lack of travel has only accentuated our state of mind. So in this issue, we look at geographies that perhaps would often go under the radar of many investors but still, at least in our opinion, are likely to generate positive returns post-pandemic. Regions such as MENA, CEE, LATAM and Sub-Saharan Africa.
Importantly, these are also the areas where, in live situations, we are seeing increased interest from institutions looking to broaden their portfolios. And so it is here that will focus our attention in the coming months.
In LATAM we are seeing an effect not unlike what was observed a few years ago in India. Less than half a decade ago overseas institutional investors realised the market for alternatives was under-priced, and it was a little too easy for consulting businesses to buy into startups early rather than allowing them to grow to maturity. Today, in India, we have big investment companies and web giants like Facebook investing alongside Indian ‘home’ funds like Reliance, IvyCap & JSW.
As with India, we are seeing major players such as SoftBank pour into Latin America – where local initiatives like Startup Chile and INCmty have helped to forge an entrepreneurial spirit alongside an educational focus on deep tech themes. Remarkably, during the writing of this issue, our client, DraperCygnus -a local partner of Draper Ventures- scored a huge exit via their seed investment in Auth0, acquired for a reported US$6.5bn. We take a look at the story of this incredible investment success in the following pages.
CEE in Focus
Central and Eastern Europe remains a challenging investment environment and one where a local partner is very much necessary. Despite its reputation, the growth of the local economies tied with lightning-fast modernisation has had overseas investors circling. We have some first-hand knowledge of the interest in the markets, across logistics, clean energy and renewables, as well as niche technologies such as quantum computing and novel healthcare. Our CEE discussion also highlights the speed of transition from a mainly fossil-based power grid to one that runs exclusively on wind, solar and hydrogen. It puts many more Western countries to shame.
Such investment stories and opportunities should not be ignored – when major US Private Equity firms are not waiting for an opportunity but actively seeking briefs in the market it is clear that the CEE is entering a golden period for investment. I spoke to Jakub Leonkiewicz, a Private Equity specialist in Warsaw, about how the markets in his home geography are shifting, as is the approach of PE firms. Jakub founded Avia Capital looking to grow family-owned firms in his native Poland, often with the idea of moving outside the region. But, as the indicators move swiftly upwards, many firms are concentrating on home market growth.