Borderless Investing: Eduardo Saverin And Raj Ganguly Grow B Capital – Forbes

Posted: October 20, 2019 at 9:03 am


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Eduardo Saverin and Rajarshi "Raj" Ganguly are two of the three cofounders of B Capital Group, a venture capital firm with close to $800 million, split between a first and a second fund (still being raised). The third cofounder is legendary investor Howard Morgan. Brazilian Saverin, 37, is based in Singapore and best known for being the cofounder of Facebook whose shares in it give him a net worth estimated at about $10 billion.

Americans Ganguly, 43, and Morgan, 73, come from diverse backgrounds. Ganguly, based in Los Angeles, spent his early career at Bain Capital, overseeing a number of investments. Morgan, based in New York, helped start ARPAnet, the internets precursor, in the 1970s, and later was president of hedge fund Renaissance Technologies.

B Capital has dual headquarters in Los Angeles and Singapore, as well as offices in New York and San Francisco, with a total of 40 full-time staff. B Capital focuses on companies already in series B or C rounds, generally over $10 million in revenue, and looks to invest roughly $20 million. The trio would like to keep the total number of companies in each fund to about 20.

The firm has the slogan innovation without borders, reflecting the founders belief that innovation can originate anywhere, not just in Silicon Valley. B Capital also uses global consultancy Boston Consulting Group (BCG) to help it grow startups and match them with larger firms. Saverin and Ganguly sat down with Forbes Asia in an exclusive interview in September at Singapores Shangri-La hotel to discuss their goals for B Capital.

Forbes Asia: How are you deploying your capital into startups?

Eduardo Saverin: Primarily we focus on companies that have an existing level of traction. There are a lot of places where you could invest in technology, but you need to have an edge and focus. For us, together with our relationship with BCG, its about accelerating growth. Most companies we invest in have a B2B angle. When the company is still an idea on a napkin, its hard for us to introduce them to some of the largest companies in the world. So we tend to invest where theres a particular amount of value that we can bring through those corporate introductions and value acceleration, which means they tend to translate to series B and beyond. But frankly the staging is fungible. Its about traction.

Raj Ganguly: As we build the firm we want to be really conscious of being able to invest into some companies really early, probably smaller amounts of capital, and as some of those companies scale and grow, we want to bring larger amounts of capital to those companies. Then finally for some of the companies that really continue to go into highly accelerated growth mode, we would actually not just double-down, but we would take outsized ownership stakes. As were growing the capital, were increasing our ability to invest across multiple stages. The best use of our capital, rather than finding a new investment, is finding a company in our portfolio where we can see the trajectory of the company before an outsider can see it.

What is the value-add you want to bring to your entrepreneurs?

Ganguly: We focus on doing three things really well ourselves and then partnering with BCG and others for everything else. We focus on helping make introductions and really helping get that growth flywheel going. The second part is we are focused on hiring key C-level talents into companies once we invest into them. We find that every single time we make an investment, if we can help them with one or two better hires on the margin, it fundamentally changes the direction of the company. And third, we help them raise strategic capital. We think, while its great to have other venture capital firms and folks like that, there are so many large enterprises sitting on over $1 trillion of capital and many of them want to invest and partner with startups. They could be much more strategic in the capital and the value that they bring.

Saverin: One of our early investments was in a company in the clinical trials space called Evidation Health. Its a perfect example of a business where they can develop all the technologies that they would like. The truth is, success will come from adoption of virtual clinical trials from the largest pharma companies in the world. When we first met the business, it was working with a lot of smaller biotech firms, which are the traditional early adopters of such technologies. But leveraging our partnerships, including BCG, we had a chance to meet with some of the largest pharma companies in the world.

Through those discussions we understood that, unlike traditional tech innovation cycles where things over time get a little bit cheaper and faster, in the pharma world, you were seeing kind of a reverse innovation cycle where it was getting more expensive and taking longer to get to market.

And one of the largest pharma companies in the world took one of their existing trials that they had already done, and then just replicated it through a virtual standpoint, and saw both the speed, the cost effectiveness, and the depth of the data. That gave us conviction to invest, because we knew there was a real appetite for experimentation. Today, that business has most of the largest pharma companies in the world as customers. Some of them have become investors.

Ganguly: It just announced, a few weeks ago, a landmark partnership in dementia with Apple and Eli Lilly. Weve been a part of helping make some of those connections.

Whats unique about B Capitals approach to investments?

Ganguly: There are four key parts of our model. Its about global thematic investing, one single team leveraging global data. Its about deep local expertise in each market that we invest in. Its about being the single highest value-add investor in every company and having the capital through partnerships with our investors and through our own capital to fund the growth of these companies as they scale. Our risk model is a lower risk model than early stage, which is about investing in ideas on a napkin, and having one of 20 companies that you know will drive your whole returns. Our model is about backing companies that have customer traction, that have a founding team that has high potential. We are looking for large potential customers and large potential partnerships that further mitigate risks. We believe our approach has upside because were investing in companies that are growing at 100% plus a year.

Saverin: The VC game is an information edge game. You need to leverage it not just in the first investment, but across the lifecycle of the company. Our model is about rolling up our sleeves and getting deeply involved, where entrepreneurs want us to, and where we can tremendously add value.

You believe in innovation without borders, can you expand on that idea?

Saverin: Companies are becoming global increasingly by design. Theres no border to where innovation can be received and used. Whether you start a company in Silicon Valley or in Africa or any part of the world, there really is the increasing impetus to go beyond your existing borders. When you start thinking about the evolution of innovation, some of it is the enablers, including the engineering talent. When you go to Silicon Valley, thats actually one of the hardest places in the world to get engineering talent because of the massive competition. In other parts of the world you can ask is there enough raw talent, even though its not as competitive? So well see a broader equalization. It would be hard for me to believe that as tech enablement becomes a big part of much larger industries, that all that innovation will come from one place. If that were to happen, Id do anything I can to change it because the truth is the whole world is consuming technology.

What opportunities do you see in Southeast Asia?

Ganguly: We understood early that e-commerce was being inhibited in the region because e-commerce companies had to do their own delivery. Thats what really convinced us that we wanted to invest in all the picks and shovels around e-commerce, but no longer invest in e-commerce, or at least not focus on e-commerce. So today were investors in Ninja Van, BlackBuck, Mswipe and Bizongo, all companies that enable e-commerce.

Given WeWorks pulled IPO, have valuations gotten overdone?

Ganguly: Where we are in the cycle and when it changes, thats not our business. We dont time the market, but we fundamentally take a long-term perspective. There are times when youre in a cycle and you have to pay a little bit more for that. But if you have the right time horizon, we think its still far better to do that than to be looking for value plays where youre looking at the second- or third- or fourth-best company. We always say that you might sleep better if you have a value play, but you wont sleep very well when you exit because the valuation differential is even more stark when you exit a lower-tier player. It used to be that you were forced to go public because you had to pay out early investors. Thats no longer the case. You can now continue to stay private, and have access to very large amounts of private capital. Your early investors can cash out because later stage investors are willing to buy them out. Theres a very active secondary market. Whats changed is I think theres no longer this belief that going public is something that you have to do. There are a lot of questions about whether going public drives long-term value. While its worked for some companies, it hasnt worked for others.

What would be the process if a portfolio company might fit with Facebook?

Saverin: We are trying to facilitate introductions with any enabler, hopefully a win-win on both sides. So Facebook of course would be part of that equation, and parts of its strategy that converge with some of our focus areas, especially in financial services. Many companies will already have some type of relationship with Facebook, given where Facebook is today, through WhatsApp or otherwise. The innovation ecosystem touches Facebook all the time, so its just a question of extent.

Where is B Capital going to be in 10 years?

Saverin: Thats an important question. I usually think about it in two ways. We are incredibly ambitious, and we want to have an institution that will outlive us, so we are always thinking of the very long term. One thing I say every single day, whether in our partner meetings, or when we speak to our entrepreneurs, is to always push focus. Focus on what youre doing today, thats how youre going to get to a bigger vision ten years from now, and even a vision well past our lifetimes. But at a really top level what I want us to do is to enable technology to get into the hands of consumers faster by leveraging the existing distribution networks of the largest companies in the world. Push intrapreneurship, it doesnt necessarily need that push, but enable them to not only think of disruption but a positive win-win transformation. Its not about the top ten tech companies that will take over a market by themselves, but the enablement of every company in the world with technology in collaborative innovation.

What do you mean by collaborative innovation?

Saverin: This is a really high-level idea, that can be seen in the platform technologies, such as Facebook, WeChat and others. They have created massive innovation acceleration by enabling other businesses to come on top of their platforms to gain distribution and engagement. What we are looking for is a win-win using the distribution assets of the largest companies in the world to ultimately get API-ed to the innovation ecosystem. If we get even 0.5% of the way in driving that, we will be doing the right thing for ten years from now. I think its not always a success when a startup out-innovates and massively disrupts a big company, when it could have leveraged a big companys distribution, the licenses, the regulatory know-how, and so on, so that consumers could get the advantages of technology much faster.

This conversation has been edited and condensed for clarity.

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Borderless Investing: Eduardo Saverin And Raj Ganguly Grow B Capital - Forbes

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October 20th, 2019 at 9:03 am




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