Episode 013 - Sturgeon Capital, London; Kiyan Zandiyeh, Chief Investment Officer

Introduction

• Welcome to Distilling Venture Capital.  I am your host, Bill Griesinger;

Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world.  My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape.  And provide you with information you can use.  

Episode Introduction:

• Welcome back everyone.  We have what I believe is a very interesting program for you today.  Today, I have the privilege of speaking with Kiyan Zandiyeh, Chief Investment Officer of Sturgeon Capital, a London-based [boutique] investment firm with a very unique investment strategy and thesis.  
• Sturgeon was established specifically to tap into Central Asia.
• Kiyan, thank you very much for joining me today…
• Let’s begin by providing some background on yourself and then an overview of Sturgeon Capital, when and why it was founded, etc.
• History of Sturgeon, why founded with this vision for frontier markets in Central Asia? 
• What is a “frontier market” according to Sturgeon?  Your website indicates “we reject traditional definitions of ‘frontier markets’ – expand on this… 
• Your website indicates Central Asia is a “vast area of enormous potential and extreme complexity…   I like the ‘enormous potential’ aspect – who wouldn’t.  The ‘extreme complexity’ characteristic might give many investors pause…Can you explain this further?

In this Episode, Kiyan discusses the following:

• Describe Funds 1 & 2
• • Purpose/strategy of each, when launched; 
  • $$ size of each, no. of investments to-date, no. of investments total to be made from each Fund;
  • target technologies and target size of investment per co. on average;
  • Do you typically lead, co-invest, or indifferent?
  • Fund 2 – describe its focus on Uzbekistan…
  • Other countries in the region where Sturgeon is invested?
  • Do you leave a reserve or have an allocation from each Fund for follow-on investment to support portfolio companies through additional rounds?
  • Sturgeon leaves about 10% reserves for follow-on investments

• Spend some time on how you source deals, what you are looking for in an investment in a co. for in this geographic region (game-changing tech, solving major pain points, etc.)
• • We like market-place bus. models, e-commerce and SaaS 
  • Can capture customer base, then capture other services…
  • Had to solve for:  Logistics, payment solutions (< 10% Visa/MC penetration), then needed to have products on the platform that people could buy
  • Effectively starting e-commerce businesses building from the ground up
  • But the opportunity is huge with attractive returns, 4X-5X+

• Even though we focus on “frontier” markets and regions, what we are presenting is a business bet not a country bet…
• Public-private partnerships you have developed and how that works…
• • There isn’t a well-established venture investing ecosystem in these countries
  • By product of our investing in the region, though, creates jobs, especially among youth - 
  • So, we are adding lots of value in infrastructure, in case of e-commerce you’re helping the national logistics company become more efficient.
  • In some cases, govt. co-invests with us, reduces impediments to establishing new businesses, etc.

• Where does Sturgeon’s capital come from mainly?  Family offices, geographic diversity?
• Are you currently accepting new investments into Fund 2?  First close in June 2020
• Fund 2 will be capped at $25MM; 2/3 of the way there now.
• Before we launch any fund we spend 6-12 months building a pipeli