Why is venture business a worthy alternative to other investments, what capital is needed for a start, where can you learn how to effectively invest in startups? These questions were answered by Abay Absamet, CEO of BGlobal Ventures.
- Venture investments are a relatively new phenomenon for Kazakhstan. Why is this type of investment so popular abroad, but underestimated in our country?
- Venture financing is a form of investment in which capital is invested in startups with high growth potential and high risks at the same time. Venture capital is a catalyst for the development of innovation and technology. This is most clearly demonstrated by the American market, where the foundations of the modern startup and venture capital industry were laid more than 90 years ago. It is generally accepted that in the 1930s, Stanford Engineering Professor Fred Terman was the first venture investor who financed and mentored his students, Dave Packard and William Hewlett, who founded HP. Today, the capitalization of this company is estimated at $35 billion.
If 15 years ago, the list of the most expensive public companies in the United States mainly included companies from traditional sectors - oil and gas, automobiles, financial, today it is dominated by technology giants, most of which "grew" from startups.
For example, seven companies from the top 10 by capitalization, such as Apple, Meta, Tesla and others, were financed by venture capital at the dawn of their history. Today, their total capitalization is about $10 trillion.
- Venture investments are a relatively new phenomenon for Kazakhstan. Why is this type of investment so popular abroad, but underestimated in our country?
- Venture financing is a form of investment in which capital is invested in startups with high growth potential and high risks at the same time. Venture capital is a catalyst for the development of innovation and technology. This is most clearly demonstrated by the American market, where the foundations of the modern startup and venture capital industry were laid more than 90 years ago. It is generally accepted that in the 1930s, Stanford Engineering Professor Fred Terman was the first venture investor who financed and mentored his students, Dave Packard and William Hewlett, who founded HP. Today, the capitalization of this company is estimated at $35 billion.
If 15 years ago, the list of the most expensive public companies in the United States mainly included companies from traditional sectors - oil and gas, automobiles, financial, today it is dominated by technology giants, most of which "grew" from startups.
For example, seven companies from the top 10 by capitalization, such as Apple, Meta, Tesla and others, were financed by venture capital at the dawn of their history. Today, their total capitalization is about $10 trillion.
It is obvious that, in addition to other conditions, one of the main reasons for the formation of the US venture market is the investment activity of the population due to the developed financial system, the culture of capital accumulation, the availability of a wide range of investment opportunities, as well as education and awareness.
Our regional venture market has been actively developing only in the last 10 years. Despite this, there have already been some successes. BGlobal Ventures, together with its partners, conducted a study according to which, over the past five years, the volume of venture financing in Central Asia and the Caucasus region has increased by 5.5 times. In 2023, the volume of transactions exceeded $ 110 million. Kazakhstan became the leader among the countries represented in the report: the total amount of venture transactions in the country reached $ 80 million.
- What amount is enough to invest in a startup? And what investment mechanisms are available to Kazakhstanis?
- Over the past few years, the world has seen a democratization of the venture investment market, making it open and accessible to a wider range of people, and not just traditional large institutional investors and wealthy individuals.
If earlier a business angel needed at least several hundred thousand dollars to invest in one startup, today, thanks to the syndication mechanism (joint investment of several investors in one project), the investment amount in one project can start from several thousand dollars. This mechanism can be implemented both through business angel communities and through specialized platforms. The key recommendation for those who are just starting out as a venture investor is to get into the community and try to invest together with experienced angels, since the cost of a mistake can be greatly reduced.
Those who are interested in this type of investment, but do not have the time to search for and analyze deals, can invest in a venture fund, where a professional team with high involvement in this area works. Choosing a fund is a responsible decision, but this approach also does not guarantee that the invested funds will pay off. Moreover, the amount of investment in the fund is usually much higher than a business angel can independently invest in one deal.
In general, before you start investing, you need to formulate your investment thesis, which includes answers to the questions: at what stages of a startup to invest, in what geography, with what checks, in what verticals, etc.
- Which of the proposed mechanisms is safer?
- All venture investment mechanisms, to varying degrees, are associated with high risks. Therefore, we recommend investing only a part of the free funds available for investment, in practice this is no more than 10% of the free capital.
At the same time, the principle of diversification should be supported both at the level of investment instruments - balanced between the stock market, real estate, other assets and venture, and at the level of the venture portfolio itself. I would like to note that, as in any area of investment, it is very important to have sufficient knowledge and competencies. And in such a high-risk area as venture investing, especially. Therefore, before delving into this area, it is very important to obtain a minimum set of knowledge.
- What is the portrait of a business angel? And why can venture investments be interesting to Kazakhstani investors?
- I will start my answer with the second question. Venture business is not only a way to increase your capital. One of the key reasons for many current venture investors is the opportunity to be part of technological progress, to finance and help talented entrepreneurs develop ambitious startups that change the world for the better. I would like to point out separately that venture investing helps to acquire new knowledge and competencies in various industries. For example, if an investor is considering a potential deal in the field of SpaceTech, before making a decision, he needs to understand in a short period of time how the market is structured, what problem the startup's product solves, what business model is used for this, and so on.
All of the above can be useful for both traditional investors who are considering venture to diversify their portfolio, and traditional entrepreneurs who, by increasing their visibility, can introduce innovative approaches and new business models into their core business. After all, there is also something to learn from fast-growing startups in order to transform their company and increase its competitiveness.
Top managers of various companies who have earned bonuses, understand a certain field and have the opportunity to become successful business angels are also interested in venture.
Often, business angels are successful founders of startups who have extensive experience in technology entrepreneurship and have earned capital from exits of their projects for further investment.
- Over the past few years, the world has seen a democratization of the venture investment market, making it open and accessible to a wider range of people, and not just traditional large institutional investors and wealthy individuals.
If earlier a business angel needed at least several hundred thousand dollars to invest in one startup, today, thanks to the syndication mechanism (joint investment of several investors in one project), the investment amount in one project can start from several thousand dollars. This mechanism can be implemented both through business angel communities and through specialized platforms. The key recommendation for those who are just starting out as a venture investor is to get into the community and try to invest together with experienced angels, since the cost of a mistake can be greatly reduced.
Those who are interested in this type of investment, but do not have the time to search for and analyze deals, can invest in a venture fund, where a professional team with high involvement in this area works. Choosing a fund is a responsible decision, but this approach also does not guarantee that the invested funds will pay off. Moreover, the amount of investment in the fund is usually much higher than a business angel can independently invest in one deal.
In general, before you start investing, you need to formulate your investment thesis, which includes answers to the questions: at what stages of a startup to invest, in what geography, with what checks, in what verticals, etc.
- Which of the proposed mechanisms is safer?
- All venture investment mechanisms, to varying degrees, are associated with high risks. Therefore, we recommend investing only a part of the free funds available for investment, in practice this is no more than 10% of the free capital.
At the same time, the principle of diversification should be supported both at the level of investment instruments - balanced between the stock market, real estate, other assets and venture, and at the level of the venture portfolio itself. I would like to note that, as in any area of investment, it is very important to have sufficient knowledge and competencies. And in such a high-risk area as venture investing, especially. Therefore, before delving into this area, it is very important to obtain a minimum set of knowledge.
- What is the portrait of a business angel? And why can venture investments be interesting to Kazakhstani investors?
- I will start my answer with the second question. Venture business is not only a way to increase your capital. One of the key reasons for many current venture investors is the opportunity to be part of technological progress, to finance and help talented entrepreneurs develop ambitious startups that change the world for the better. I would like to point out separately that venture investing helps to acquire new knowledge and competencies in various industries. For example, if an investor is considering a potential deal in the field of SpaceTech, before making a decision, he needs to understand in a short period of time how the market is structured, what problem the startup's product solves, what business model is used for this, and so on.
All of the above can be useful for both traditional investors who are considering venture to diversify their portfolio, and traditional entrepreneurs who, by increasing their visibility, can introduce innovative approaches and new business models into their core business. After all, there is also something to learn from fast-growing startups in order to transform their company and increase its competitiveness.
Top managers of various companies who have earned bonuses, understand a certain field and have the opportunity to become successful business angels are also interested in venture.
Often, business angels are successful founders of startups who have extensive experience in technology entrepreneurship and have earned capital from exits of their projects for further investment.
- Which startups are more profitable to invest in?
- It is difficult to single out specific areas for investment that are more likely to bring benefits. However, we can identify several areas that have historically been in demand in our region: financial and medical technologies, e-commerce, and more recently - artificial intelligence.
However, it is important to consider what experience and expertise a potential investor has. For example, an entrepreneur or expert from the agricultural sector has a strong advantage when investing in AgriTech startups, since he understands this market well and can adequately assess the investment attractiveness of a startup, and can also be useful in its development. Again, this all depends on the investor's formulated investment thesis.
- In July, your company launched the VC Bootcamp educational course. Can potential venture investors use it as a basis to take their first steps into the world of venture investing?
- BGlobal Ventures specializes in developing the venture market of Kazakhstan and the region, providing both financial and non-financial support. We actively popularize this area through various educational initiatives - master classes and workshops.
At the same time, together with our partners - Silkroad Innovation Hub and the Eurasian School of Business - we launched an educational course on venture investments VC Bootcamp, which provides an opportunity to immerse yourself in this area in six days of active online training. It is important to note that the course is taught by practicing investors from Silicon Valley, which is rightfully considered the center of global innovation.
As part of the first stream, 78 people were trained by us - investors, founders and representatives of the corporate sector: JSC NMH "Baiterek", JSC "Qazaqstan Investment Corporation", AIFC, EBRD, ADB, USAID and others.
The next stream with a similar training format will start in September.
- The first stream included grants for female founders. Why was this decision made?
- Our company actively supports ESG principles. We see that in the total volume of venture deals in the region, only 7% are for female founders. Therefore, within the first stream, we decided to allocate five grants for female founders that fully cover training. I hope that the knowledge they gain will help them in the future in the fundraising process.
- What is unique about your educational course?
- Venture investing is a fairly new phenomenon in our region, so there are few similar educational programs on the market as a whole that can become a good "guide" for a confident start.
If we talk about the main advantages of our VC Bootcamp program, its participants have the opportunity to gain expertise and learn from practical cases from top experts from Silicon Valley, whose experience is looked up to all over the world. For example, the course includes speakers who lecture at Stanford University.
A business tour to Silicon Valley is also planned for October, where participants will have the opportunity to attend leading conferences in the technology sector - TechCrunch Disrupt and the first Central Eurasia @Silicon Valley summit.
All programs can be found on our website
- It is difficult to single out specific areas for investment that are more likely to bring benefits. However, we can identify several areas that have historically been in demand in our region: financial and medical technologies, e-commerce, and more recently - artificial intelligence.
However, it is important to consider what experience and expertise a potential investor has. For example, an entrepreneur or expert from the agricultural sector has a strong advantage when investing in AgriTech startups, since he understands this market well and can adequately assess the investment attractiveness of a startup, and can also be useful in its development. Again, this all depends on the investor's formulated investment thesis.
- In July, your company launched the VC Bootcamp educational course. Can potential venture investors use it as a basis to take their first steps into the world of venture investing?
- BGlobal Ventures specializes in developing the venture market of Kazakhstan and the region, providing both financial and non-financial support. We actively popularize this area through various educational initiatives - master classes and workshops.
At the same time, together with our partners - Silkroad Innovation Hub and the Eurasian School of Business - we launched an educational course on venture investments VC Bootcamp, which provides an opportunity to immerse yourself in this area in six days of active online training. It is important to note that the course is taught by practicing investors from Silicon Valley, which is rightfully considered the center of global innovation.
As part of the first stream, 78 people were trained by us - investors, founders and representatives of the corporate sector: JSC NMH "Baiterek", JSC "Qazaqstan Investment Corporation", AIFC, EBRD, ADB, USAID and others.
The next stream with a similar training format will start in September.
- The first stream included grants for female founders. Why was this decision made?
- Our company actively supports ESG principles. We see that in the total volume of venture deals in the region, only 7% are for female founders. Therefore, within the first stream, we decided to allocate five grants for female founders that fully cover training. I hope that the knowledge they gain will help them in the future in the fundraising process.
- What is unique about your educational course?
- Venture investing is a fairly new phenomenon in our region, so there are few similar educational programs on the market as a whole that can become a good "guide" for a confident start.
If we talk about the main advantages of our VC Bootcamp program, its participants have the opportunity to gain expertise and learn from practical cases from top experts from Silicon Valley, whose experience is looked up to all over the world. For example, the course includes speakers who lecture at Stanford University.
A business tour to Silicon Valley is also planned for October, where participants will have the opportunity to attend leading conferences in the technology sector - TechCrunch Disrupt and the first Central Eurasia @Silicon Valley summit.
All programs can be found on our website