Tuesday, August 16, 2022

Hunting For Super Apps

From Stanford Data Scientist and NYC Investment Banker to solo-capitalist living the dream in Puerto Rico - This is Ali Jamal.

Ali Jamal

Founding Partner at First Check Ventures

Hey hey!

Today’s guest is Ali Jamal, the Founding Partner at First Check Ventures. He’s invested in over 200 startups - including several unicorns.

How?

Well, he has a very specific strategy. 

First, he invests globally. But not where you might think.

He’s not looking in London, Paris, Japan, or Singapore. 

In fact, the bulk of his outsized returns are from investing in companies based in Latin America. 

Second, Ali has a knack for discovering massive consumer facing companies really early. He knows how to spot market inefficiencies, that if capitalized on correctly, create opportunities for enormous companies to be built.

Let's get after it!

 

In Today's Expert Session: 

  • Meet Ali Jamal,Founder at First Check Ventures: From Stanford Data Scientist and NYC Investment Banker to solo-capitalist living the dream in Puetro Rico - This is Ali Jamal. 
  • How To Spot The Next Super App: This is a deep-dive On Yummy - a recent investment Ali made into a Vuenazuelan super app that has raised over $80M. Learn these principles to help you spot the next big opportunity.
  • The 7 Principles Of An Effective Pitch Deck: All startups begin life an idea. It’s often how you bring that idea to life that determines whether or not a company will get funding. Here are the 7 must-have elements of any pitch deck. 
  • The Future Is Already Here…How To See The Future: Become a global trend-spotter to identify the next big investment opportunities in emerging technology markets.
  • 50 Minute Video Workshop: Learn these principles directly from Ali Jamal during this recorded workshop. 

Guest: Ali Jamal, Founder at First Check Ventures

Video Length: 50 minutes

2002 to 2010 - Looking For Success In Traditional Opportunities: Ali began his founder's path in a very traditional way. With a Stanford econ degree (Ok, the statistics masters from Stanford is another level of complexity most people avoid but its entrepreneur adjacent).

After graduation he moved to New York and did the investment banking thing. He started to realize that working for legacy institutions was not really a long term solution for his career. 

In 2013 he made the jump to product and growth for the mobile gaming app maker Zenga. After 6 months there he was recruited to go work for their competitor Rock You. It was at this point Ali started to hit his stride.  

He spent 4 years at Rock You. Products. Marketing. Analytics. Strategy. If there was a hat, he wore it. His efforts were paying off. Then a peculiar thing started to happen. Ali began to feel the same way he did in the investment banking world. 

Back to wash, rinse, repeat. Everything started to seem the same again.

He did not want to get pigeonholed in Silicon Valley. Not only because the problems and their solutions began to follow a familiar pattern of stagnated learning but there was an impact problem. 

He was only incrementally solving first world problems. He wanted more.

2017 to Today - A Global Mindset Created Global Opportunities: 

During this time he got a call from a recruiter. Agoda, one of the worlds largest travel platforms needed his help.

The twist…he’d have to move to Thailand. 

He had a couple interviews and they flew him out to meet the team. A few weeks later he had an apartment in Bangkok and got down to work. 

The team he was on was data driven and analytical. Exactly how he liked to do things. He eventually led their marketing in China. 

As fate would have it, he was in China during the rise of the super apps. There was an arms race to create apps that had utility across multiple vectors. People wanted to pay their electric bill and book a massage on the same platform.

The dominant app at the time was WeChat.

He was hooked on the idea.

2019 to 2021: Discovering Super Apps & Building An Global Investing Presence:

Ali had a thesis. If these super apps can become dominant technology companies in Asia. Why can’t they elsewhere?

It was during this time that he knew he wanted to stay in emerging markets. That universe always has big foundational problems that need solving. Ali was not interested in squeezing out 5% efficiency on a B2B SaaS product. 

Ali wanted to know how these companies worked. After going down the super app rabbit hole, he discovered Rappi - a Latin-American company and the first SuperApp in the region. He joined as its Head of Performance Marketing. 

Rappi is now present in 9 countries and more than 200 cities. It has raised $2.3B in financing and is valued at over $5B. 

He shoots…he scores. 

Soon after Rappi, Ali joined Clip, a leading commerce and digital payment platform that is empowering businesses in Mexico. 

As if he has a knack for this stuff, Clip is now one of the most valuable companies in Mexico - raising $403M in financing at a valuation of over $2B. 

Eventually Ali settled in Puerto Rico where he set up his home base.

He realized he had a great opportunity on his hands - he was an insider in one of the fastest growing startup markets in the world. Investors wanted in. Asli set up his investment syndicate on AngelList and got to work.

In two years he went from zero to 200 investments in places like Colombia, Brazil, Egypt, and Pakistan to name a few. His syndicate currently has 3,000 investors in it. 

Its focus is on providing an impact for consumers that you can see by solving everyday problems in emerging markets. He is well on his way.

The success of any syndicate relies upon the partners ability to pick winners. If you select at random, you get random results. If you have sound principles that you stick to religiously, your chance of success rises dramatically.

It is analogous to one long poker session. Leaks in your game? You lose over time. Let’s dive into Yummy and explore what makes it a winner in Ali’s eyes using his principles.

During his time in China Ali noticed the rise of the so-called ‘super app’. Instead of being hyper focused on one complicated problem, these apps try to solve a lot of smaller simpler problems in underserved markets. 

Now the super app is not a new development in South America so Yummy was not first to market with regards to their competitors. Instead of focusing only on product-market-fit as a criteria, the brand drilled down on which market was optimal for entry. 

They knew there was a fit as similar apps were gaining traction in the larger cities but they did not want to go head to head with mature competitors. Yummy was willing to pick smaller markets where they knew they could take market share.

While their competitors were racing to the bottom competing for the same restaurants in major cities, Yummy has an open field in smaller markets…and they were growing fast. 

They flipped the script and went for 100 shiny pennies instead of 4 rusty quarters.

The strategy clearly worked as they just raised $47 million in their latest round.

Why did so many other investors mistakenly stay away?

The Problem: Unstable Country

Many observers would point to the chaos in Russia at the moment as a reason to stay away from foreign countries that haven’t quite got the whole stability thing figured out. 

Venezuela’s leadership has been in the news recently for all the wrong reasons. If ‘regime’ is an apt description of who is in charge you definitely have an optics problem.

Let’s take a step back and look at the problem in a different way.

If the government, local or national, is having a difficult time meeting the basic needs of its people doesn’t that create a gigantic need that can be filled by savvy entrepreneurs?

Of course it does. But there are two main risks brought on by instability: 

  1. The first is the threat of nationalization or social chaos: If Maduro wakes up one day and says to himself (in spanish) “Self, I think I want to nationalize that plucky start-up Yummy” then Caracas we have a problem.

There is also the small challenge of what if the government falls? Again, isn’t it possible that super apps like Yummy might be the only way for people to participate in commerce as the new government rebuilds?

It is at the very least an interesting thought experiment (one that Anthos Capital definitely went through before they signed off on giving Yummy $47 million).

  1. The second elephant in the room is currency risk: In 2016 Valenzuela started to have a tiny hyper inflation problem. And by tiny I mean since 2016 the country has experienced an overall inflation rate of 53,798,500% (that is not a typo).

Some might see these two major challenges and give a hard pass on investing but Ali is a creative thinker and dove a little deeper. 

Let's drill down and see how these issues were solved to his satisfaction…

The Solution: A Local Founder Utilizing Foreign Structures

Ali likes to say that the Founder is everything in evaluating a business. He personally reached out to Vicente Zavarce, CEO at Yummy, who was born in Valenzuela. Zavarce had worked at Postmates, Wayfair, and Getaround before founding Yummy so he experienced first hand what was required to grow an app.

Zavarce knew the importance of utilizing sound principles of a/b testing, positive unit economics, and understood the constant need for quick iterations. More importantly, he knew the proper metrics to focus on and he related this knowledge to Ali.

With the Founder checking all the right boxes it was time to kick the tires on the business.

From the beginning the company was created as a United States corporation with an operating company in Venezuela. All of the intellectual property and assets are owned by a Delaware corporation. This corporate structure allows for a continuity plan for a worst case scenario. While there would be front-line losses on the ground, this set-up hedges against foreign governmental action.

The app also doubles down on the halo effect of the United States by operating exclusively in dollars. There is tacit acceptance by the government of Valenzuela of greenback use. End users of the app already pay in USD for other purchases. Yummy utilized existing habits of its customers to de-risk the situation without creating friction that might suppress uptake on the app.

Finally, from inception, Yummy planned to expand to other countries throughout South America. Think of it like a sovereignty hedge fund, where geographic diversity spreads out the counterparty risk. 

There is a lot of talk about the pacific rim as a prime investment destination but don’t sit on South America. Our neighbors to the South have a combined GDP half of China.

What if you are on the other side of the coin? Ali provides guidance to those who are looking for investors to back their start-up. He looks at 200 to 300 pitch decks a week so he knows a thing or two about what makes the wheat stand out from the chaff.

7 Principles of an Effective Pitch Deck:

  1. Keep it simple: Make sure to answer the basic questions of Who? What? Why? Especially at the early stages. When you don’t have a history of hard data to work off of, collateral “soft information” becomes paramount. Who you are can trump the “ you haven’t done anything yet” problem.
  2. Clearly define the problem you are solving: Your presentation must tell a story. If it does not put the reader into the person who is experiencing the problem they will not be able to connect to the solution. Solving incremental problems is not enough to move the needle. A pizza robot that gets you your food in 16 minutes versus 17 minutes is a hard pass. 
  3. Once the problem is defined, advocate for the simplest solution possible: Complex things break. A lot. If you have an easily digestible solution that can handle being stress tested by a large user base you put your business ahead of the curve from the beginning. Simplify your solution. Then do it again.
  4. Show, Don’t Tell: Do the leg-work before you propose a solution. You would be amazed by how many people think they know what the market wants without asking them. Do research. Survey 100 people and ask them about pain points. Learn all you can about your prospective customer. How disappointed will they be if your product did not exist? Get an MVP up and prove people will pay for it. Get stats on churn. Be able to paint a picture before you have a canvas.
  5. Prove you are the best person or team to solve this problem: Show what you have done to this point to show that it is not just about the money. Bringing in a lot of cabbage is great but it doesn’t always feed you when the grind kicks in. The journey from founder to IPO takes longer than most marriages last in the United States. It is not enough to marry your business. You have to desire its success above all else. Be humble but aggressive.
  6. Build An Army Of Believers: Who else believes in you? Show who has joined your team before you even have a product. Are they “A” players with track records of success in other places? Do people from your prior stops invest in you with their time and their money?
  7. Craft A Story Not A Journey: Journeys are for big brands with far away trust horizons. A story is something told for the community around the campfire. A community will fight for you. Send big signals that you are the right person to not only tell the story, but live it. 

The Future Is Already Here

 

To me, this quote epitomises Ali’s investment strategy. 

When you dive into some of these emerging markets with B to C apps you should not ignore what other founders are doing. If you have a food delivery app in Nigeria it is very unlikely you will be expanding to South America anytime soon. This means you can research other solutions and how those companies have scaled.

They have probably had to try a few different market and customer segments to get traction. Reach out to them. They are not coming to your market any time soon and if they tried you will already be entrenched. View them as compatriots, not competitors. Add some synergy and network effects to your offering.  

Want To Learn More About Ali - Here’s Our Quick Fire

  1. Important truth that many people disagree with you on? As you might have guessed Ali believes there is huge upside to investing globally instead of limiting yourself to domestic opportunities. Most of the big problems in the United States have been solved. Start-ups now fight over incremental solutions for first world problems. Foreign markets still have huge opportunities available for basic challenges that need to be solved with the requisite huge unserved markets.
  2. Productivity tools you swear by? Analog pen and paper. Forcing yourself to slog through everything without the help of an assistant filtering information results in constant learning. This does not scale very well but ask yourself if you are in a position to do that now anyway. Learn everything you can throughout the process by going hyper-granular. This approach compels you to choose your projects with a high return in mind because your time becomes incredibly valuable. 
  3. Important piece of advice you have received? When he was in the banking world his boss told him that if something is not 100 percent done it is zero percent done. While this is the most banker thing ever to have been said, it is true. Details matter. Friction kills start-ups and unfinished or partly finished tasks create resistance. If the difference between winning and losing is a micron, completing every task hedges against failure.

Collaboration Opportunities:

Check out Ali’s investment syndicate here. Here’s how you can collaborate.  

  • As an LP - Ali is always looking for more people in the syndicate. They provide feedback both on the deals they invest in and on opportunities on which they pass. This feedback leads to better choices going forward and everyone wins.
  • As a start-up - The syndicate is always looking for new opportunities to invest in. Now that you know his principles of putting together a pitch deck you can outshine the competition. Fire up power-point and get a deck together. 

I hope this got you thinking. See you next week!