Yacine Derradji of LaunchGarage & Acudeen
Venture Capitalism in Burgeoning Markets: The 21st Century Gold Rush
By Xavier Selman
The world of venture capitalism is a world rife with risk and reward; in the 21st century environment, venture capitalists are comparable to the adventurers of the past—putting everything on the line for the chance of scoring big. But venture capitalism isn’t all about rolling the dice and hoping everything falls into place. Making the right investments, finding the right industries, and being there at the exact right moment: all of these need the market know-how and innate business talent to understand, and the overall general acumen to properly execute in a real-world setting. Because while many plans can look brilliant on paper, only a handful of them can translate to real life.
Meet Yacine, a fresh graduate student from Paris who made a careers commitment to frontier markets and aspire to be a new type of venture capitalist, hands-on investments by hitting the streets, looking for the next black swan venture. He does the groundwork for the investments he and his partners will push their money into. With investment opportunities all around Asia - Pacific —including the Philippines, Myanmar, Indonesia, Australia and New Zealand—Yacine understands the value of measuring the scope of the various startup markets and pouncing on the perfect investment.
Getting Into Venture Capitalism
No one really begins in venture capitalism, and neither did Yacine. With years of experience in various industries, including investment banking and private equity, Yacine could have stuck to it and secured himself a safe and hefty future. But the fulfillment wasn’t there. For Yacine, it was hard to understand the purpose of buying and selling projects to clients that he virtually had no hand in the creation of, and the repetitiveness of the entire process pushed him into finding something new.
So when one of his friends asked him for help with his startup, Yacine began working with him part-time when he was in still in university—now that startup has expanded to several countries worldwide. Yacine had another startup experience with two genuine Indian entrepreneurs from London and gained his entrepreneurship mindset at this time. He knew that being in entrepreneurship and venture capital is to be in the middle of value creation.
Venture Capitalism in Asia
“Asian countries are entrepreneurs,” Yacine tells us. “Not afraid of taking risks, not afraid of prioritizing the long-term over the short-term.” To Yacine and his friends, there was no market more obvious than the Asian markets: with five billion people, a burgeoning understanding of the Western model of startups, and a growing consumer base in nearly every Southeast Asian country, the Asian market is a gold mine waiting to be tapped. “Political stability,” Yacine says. “When the governments are politically stable, they help us entrepreneurs: their policies benefit us, because we benefit them.”
But there are differences between the Asian markets and the more established Western markets that make the processes of venture capitalism and securing the right investments much more difficult. Perhaps most importantly is the lack of competition, which in turn creates a lack of overall innovation. “Innovation is a strange term, because everyone wants it, but nobody knows how to do it. You see places like Berlin, London, New York, Silicon Valley, even Japan, and you see highly competitive markets that push each other to be innovative. But when you have no competition, then there is a lack of innovation, and that’s the problem in these smaller markets.”
The advantage, however, as Yacine points out, is that the lack of a cut-throat competitive market in turn allows startups to proceed at a calmer and more stable pace, rather than the rushed paces of harsher markets, and with this extra time, more innovation can be created.
The Difficulties of Innovation, and Understanding the Importance of Value
Success can be a tough egg to crack: Yacine cites a painful 75-90% failure rate amongst his earlier investments, due to a lack of innovation. But it would be silly to expect every new startup to come up with a completely original idea. Not every new idea will break out to be the next PayPal, or Uber, or AirBNB, but that doesn’t mean that it can’t find success. Rather than focusing on pure innovation, there is what Yacine calls the “side innovation”: the unfair advantage your business has over its competitors to give it the edge it needs.
“Take our company Acudeen, for example,” Yacine explains. “We knew we didn’t have much innovation, being just a simple online marketplace. But we had the advantage of disrupting the market.” By being new and original in that specific market, they still found success with Acudeen, and that’s all a startup needs—the advantage.
Venture Capitalism in Young Markets and the Philippines
It can be difficult in markets like the Philippines, where the market is so young it almost doesn’t even exist; with a lack of comparables, a lack of existing market research, and a lack of potential growth rate, choosing the right investments can be a headache. This is why Yacine has to be on the ground: “The information you find online can be so incomplete, so impersonal,” he says. “You don’t know the pros or cons unless you are there yourself.” Despite having contacts in multiple burgeoning markets, including Africa and South America, Yacine will spend the next two years backpacking throughout Southeast Asia, finding the startups right where they are born.
So how does he gauge a “good” startup over a weaker one? He has one answer: “I look first to human capital, the team, to see how serious they are. Can they answer all the questions, have they down their research, their homework, do they know the growth rate of their chosen market, what are the numbers? If they can’t answer this, they aren’t serious.” And it’s only when the startups take themselves seriously that the market can grow seriously—the investors will take notice, the consumers will take notice, and the potential competitors will take notice, sparking the next generation of startups to push innovation to higher levels. But despite all the seriousness and innovation Yacine preaches, he ends our interview with him with a laugh and the solemn confession: “Chance. You need a lot of chance and luck in the startup market.
” I think there’s one missing point, maybe we can put my vision or philosophy: “ We’ll always see more innovation, ideas and knowledge because humans have always been explorers and disruptors, trying to survive in a constant changing world.”