Sushant is a Principal with the Dubai Future District Fund (DFDF), the evergreen venture capital fund of funds of Dubai, anchored by the Dubai International Finance Centre (DIFC) and the Dubai Future Foundation (DFF). Sushant received his BS from Indiana University’s Kelley School of Business and his MBA from the Indian School of Business. In this interview Sushant shares how his background in the worlds of banking and consulting shaped his passion for investing and working with startups.
Interview with Joseph Aldcowski, BRV Fund Manager 2022-2023.
Q1 – Sushant thank you for joining us here today. I had a chance to review your background in the days leading up to this. Having a background based in investment banking, but also augmented with consulting experience really makes you a well-rounded investor for evaluating early-stage companies. How did those early career experiences shape your investing philosophy and your career so far as a venture capitalist?
SS:
Joe, that’s a really great question. As you can tell from my LinkedIn profile, I grew up in the middle east and went to undergrad in the U.S. I come from a family of financiers, so I knew early on that I wanted to be in Finance, and I realized that the first step I wanted to get into was in Investment Banking. In particular, I was really intrigued by the Tech sector. I interviewed with several banks in New York, Chicago, and San Francisco, and when the TMT (Technology, Media and Telecom) opportunity came up with JP Morgan, I jumped on it – it was all of my goals aligning in one place. As you can imagine, it was right around 2004, which really appeared to be a fantastic time to jump into tech, right after the recent bubble.
Joining one of JP Morgan’s highly coveted transactional groups was a fantastic launchpad for my career, because it allowed me to operate as a generalist within the sector. I gained exposure to internet businesses, semiconductors, digital media, biotech – you name it, just about anything that had a tech component to it. I got to see all of it, and from a transaction perspective, I got to work on debt offerings, IPOs, and M&A transactions as well. I think perhaps the most important realization I found over those two years was that I’m not a deal guy; I love the strategy side of things much more. Back when I was following tech names like Oracle and SAP, I remember being very interested in how they leveraged their substantial free cash flow generation to drive massive inorganic growth strategies. As a result, many of these types of companies had very strong corporate development teams that focused on developing these strategies internally. So, I interviewed for some of these corporate development roles in Silicon Valley, but one thing led to another, and I signed with a company called FTI Consulting in their telecom practice – a sector that was booming at that stage in Western markets. I think the FTI experience was really interesting for me because not only could I work with power, fixed line, and wireless companies, but I was also able to work with startups in that space.
Since I came from an investment banking background, a theme with my M&A projects in the space related to private equity companies doing buyouts and needing industry specialists to come in and do the work around the logic surrounding the deals, which allowed me to work on really specific components of projects. I liked being able to learn about how these firms were identifying arbitrage opportunities in the telecom sector and that ultimately propelled me towards getting into the field of investing.
Q2 – You mentioned that early on in your career you had primarily focused on the telecom and semiconductor sectors and currently, you are paying attention to companies in the Fintech space as an investment vertical for the DFDF. What other industries is the fund seeking to gain exposure to?
SS:
One of our pillars is certainly Fintech, but another pillar we have is called “future economies” and that contains companies focused on innovations in robotics, the future of work, the future of logistics, and food security. These are our two primary pillars, but as the fund has been seeded by two Dubai government entities, it bears mentioning that one of our primary goals is to stay relevant in an ever-changing world and one of the best ways to do that is to continually invest in technology. That is one of the primary goals of this venture, to not only invest in these new evolving technologies, but also to provide a playground for these companies to prove themselves out. As we provide this incentive, we believe that Dubai can become an attractive destination for companies of the future. The government is very focused on catering to these companies so that we can further develop the Dubai economy. In fact, recently we have seen a lot of Indian VCs move to Dubai and startups along with them, especially in the crypto space. A big driver of this has been the Dubai government, which has been very proactive in terms of creating an open legislation environment for crypto.
Q3 – That’s fascinating to hear how receptive the government has been to creating legislation opportunities for crypto and other Fintech companies. As you are likely aware, here in the U.S., Fintech typically resides within the financial institutions group at most investment banks, and within that group, one of the hottest sub-verticals for deal activity has recently been insurance. Given that focus here in the U.S., what trends are shaping Fintech over in Dubai and how are they piquing your interest in investment opportunities?
SS:
We have a pretty wide mandate on the Fintech side, and we have actively invested in companies within the sector. There is a high standard of living in Dubai, but the wider region suffers from financial inclusion challenges. Our investments target companies who are providing solutions to these underbanked and unbanked populations, especially as we move towards a cash-less and digitized environment. There are also lots of opportunities with companies focusing on KYC and AML technologies, in addition to crypto assets such as stablecoins.
Q4 – It sounds like there are really great opportunities available right now, from a few different aspects: you can look at companies disrupting traditional payment rails, companies focused on decentralized finance (DeFi), and even open up financial markets to underserved communities. I really love the way that you are approaching this problem and trying to target these solutions to all members of the community over in Dubai. Is there a particular investment that you or your team has made that has you excited about the future prospects of serving this market?
SS:
Yes, one of our recent investments is a company called Zywa. It’s a Y Combinator-backed neo bank for kids, meaning that they only focus on digital transactions. One of the interesting demographic figures of the middle east is that in our region we have some of the highest number people who are under the age of 35. A lot of teenagers have access to cell phones in Dubai and they are already familiar with using the payment functionality to purchase apps from the Android and Apple app stores. But if they want to go out to McDonald’s or go watch a movie that typically would involve cash, which tends to be less secure than digital payments. The idea with Zywa, is that the teens are issued a card from Zywa that is like a debit card. The card connects to a corresponding app where parents can load funds onto the card and track spending habits. Zywa also aims to encourage responsible spending and saving habits among teens by allowing them to set aside funds within the app to save for future purchases.
Q5 – That’s fantastic, thank you for sharing that perspective! Thinking about the larger structure of the DFDF, my understanding is that it operates in two silos with one half investing in local venture capital fund of funds and the other half directly investing into startup companies to add to the portfolio. As a Principal, how do you manage your time between both of these strategies and more specifically, what do you look for in an optimal early-stage company? Do you focus more on the founders and their vision, or is the product/market fit more important?
SS:
That’s a great question. I primarily focus my efforts on the direct investment platform, while some of my other colleagues are more focused evaluating investment opportunities into the fund of funds. When I evaluate companies, there are 3 main criteria that I look for. First, I need to do my best to get comfortable around the potential market for the product. The founder needs to understand what they can deliver in relation to what the market wants. Second, we need to evaluate if the founders do have the necessary technical skill set. Do they have the right background for it? Are they the right people to be executing that particular opportunity? Ideas are great, but you need to have something which makes you the best person, and the best team to support you, to deliver on that vision. Third, and this is really a combination of the two points, can you continue fundraising into the future? Capital is really important; it’s not just about getting from zero to one and getting some initial traction. You may know that industry really well and have contacts you can leverage, but those are low hanging fruits. Let’s say you locked in your pre-seed or seed funding, what is your next milestone? How are you positioning the company for future growth? So, to me, that interaction between the market, the founder, and ability to scale while subsequently gaining access to future capital without stalling out is the capstone factor that I look for when evaluating companies.
Q6 – That makes a lot of sense to evaluate those factors in tandem, rather than in isolation. As we wrap-up today, Sushant, my final question for you aims to allow those reading this interview to better understand Dubai and the issues facing the venture capital landscape there. You’ve touched on Regtech, Fintech, and other banking opportunities that are focused on serving underserved communities. Are there any other unique or pressing issues facing Dubai that your team is really hoping a startup can come into this space and innovate on?
SS:
I think Dubai’s ambition is to become a playground for really deep tech. I think one of the challenges right now is that there are certain centers where that expertise and ecosystem exists which allows entrepreneurs to gain traction. We want to build a similar ecosystem here in Dubai that allows these novel technologies to take root and allow a new generation of industries to come out of that. Right now, we are a relatively new fund, and that means for us we will be investing in companies that have more tangible growth horizons and where we see a path to profitability. However, the larger goal is to invest in really deep tech with more patient capital horizons that has the potential to solve problems across the world. That is what we would like to eventually pursue.
Closing – Sushant it has been an absolute pleasure learning more about yourself and the incredible work that the Dubai Future District Fund is doing to develop the venture capital and startup ecosystem in Dubai. Thank you for taking the time to educate us and we look forward to following future developments from your fund!