Dusan Stojanovic, founder and director of True Global Ventures, shares his journey in entrepreneurship and building his customer base.
December 27, 2016 | The Banking Conversation
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- True Global Ventures is focused on investing in serial entrepreneurs and bringing more customers to their portfolio companies.
- Stojanovic said that the company scales as long as they see that there is a bit of profitability per costumer.
- He believes that a company should be kept entrepreneurial-driven for a long time with people who want to change the world.
Emmanuel Daniel (ED): Today I'm speaking to Dusan Stojanovic, the founder and director of True Global Ventures, a true entrepreneur, builder of Fintech businesses around the world. Today he is living in Singapore, but with portfolios in many cities around the world. I'm curious about your own journey in entrepreneurship, in building this skill, taking portfolios, and building them. That's part private equity, part investment. How would you describe that and your own personal journey?
Building success through an entrepreneurial journey
DS: Well, thank you very much for having me here. On your question of on my personal journey and what I actually do, I would just describe it very simply that my own experience was entrepreneurial. I did manage to get my own entrepreneurial exit from what I would call internet banking 1.0. A bank called Monabanq and that was basically a very simple bank with no branches.
We sold simple payments, simple credits, simple savings, and simple insurance to 350,000 customers. And we had about 350 people, and managed to get about $12 million dollars of profit. And I exited that in 2004. For the last ten years I've been doing mainly early stage investments. And that has worked okay. So I've done 18 investments, and nine of those have been exited. And I was very lucky to have actually three exits in a week in 2012, and that's why I got this Angel of the Year award in 2013.
Now what do I do? I only invest in serial entrepreneurs, who are really investing the cash at the same time as I or True Global Venture do. So that is our investment thesis. It's got to be business-to-business (B2B) to be fintech, and it's got to be in one of our cities, where my 40 partners are based. And these cities are Beijing, Hong Kong, Singapore, the Bay Area and New York, Paris, Berlin, Stockholm, and London. That is basically what we do. We do two to three deals per year, and are ultra-focused on bringing more customers to our portfolio companies.
I would even say we are obsessed by it. So we would like to be the rocket internet for B2B fintech, to give you kind of an analogy, in terms of growth.
ED: Right. To define all that, so two to three exits in a year out of –
DS: Two to three investments per year.
ED: Investments per year?
DS: Yes. I've done 18 investments and nine exits, five full exits and four partial exits, and one is about to close down.
ED: And how many potential investments do you look at, to come down to that two or three?
DS: Given our very, very niched investment thesis, which probably wouldn’t work in one single city, except for maybe San Francisco, since we are only investing in serial entrepreneurs, who are already investing the cash. That is one reason why we have the global reach because otherwise we wouldn’t have a deal flow. We do look at very quickly about 1,000 deals, which is roughly two to three per day, but out of these 1,000, I would say only 60 to 80 qualify per year, in terms of these three investment criteria that I have. And out of this 60, 80 we will do two to three, to give you a rough idea.
ED: Right. And you would put in about $200,000 to $700,000?
DS: Yes, that is maybe what it says on the website. It all depends on how much does your entrepreneur put in, and then how much we would put in. So it is actually not a kind of standard investment fees, but we put in everything, to give you an idea, between $200,000 and $2 million when we enter a company, so it's very broad.
ED: What is the internal discipline that you have that makes you focus and then make those two choices with the criteria that they have to be high growth, and they should really have a good exit? How does your mind work in terms of focusing?
DS: Well, it is actually about the entrepreneur. Since we are investing in serial entrepreneurs, if they have done a too large exit before, maybe they're not enough hungry. If they haven’t done any exit at all, maybe they don’t have the money, then the criteria is not there. Our sweet spot is that they have done an exit, but they are hungry and wants to go from a fair amount of exit before – 95% of exits are about $20 to $30 million dollars.
They may have never been venture capital- (VC) backed even. Those are actually the majority of exits. A lot of people talk about VCs, but most of the exits are actually done by non-VC-backed companies. And when you look at those, they have maybe done just a local play, maybe only in Singapore, in U.S., in Sweden or in France, and they are hungry to go one step further and do something really global. That is really our sweet spot.
ED: But you would be competing as an investor with others who would also see them and say that there's something there that can be taken up.
DS: Yes, sure. But I don’t see anyone who has such value proposition… a fintech as one global firm reaching 1,000 financial institutions in nine cities, nobody.
ED: And how do you keep that relationship or network going?
DS: It is basically through our 40 partners in our nine cities. And actually, we do four things… Every six weeks, we are in contact between the portfolio companies and our partners. And then they in turn communicate to the financial institutions. Number two, we are organising our own events. We had 11 events in the last 12 months. Number three, we do one-on-one meetings all the time. And number four, we have webinars with the financial institutions. These are the four areas how we keep in touch with them.
Differentiating fintech and regular technology companies
ED: How do you make a distinction between a fintech company – which is making a difference that it would otherwise not be able to make if not for the investments that you put in – and a regular technology company that basically has a product, which is a mainline product on its next phase of development. You see a lot of this in banking, in payments, in core banking, and in data analytics. Is there a distinction between a regular technology company and a company that is going to change the world?
DS: Yes. Though the way we look at it is slightly differently. We look at that there are a lot of copycats. There are companies that are inspired by something that has happened, and then they do the same thing in their countries. That would be by definition what we do not want to do. I don't know even if our aim is completely to change the world. What our companies are doing is facilitating the change of the world. If we invest in an artificial intelligence (AI) company or a blockchain company, I don't know if we would be remembered as the brand who changed the world. It's not going to be a new Tesla or whatever, right?
But we will be facilitating that change by serving a lot of customers. So what is the difference between a normal product company and a company that changes the world? For me, again, I will going back a little bit to the same thing, it's the entrepreneurial ambition behind it. If you have an entrepreneur who is really convinced of actually changing the world, and he or she shows that by execution even before you invest, that's the guy you want to back.
And a lot of people are not comfortable in doing that kind of global approach, yet they are very comfortable in their home markets.
ED: Even as we have this conversation there are the traditional technology companies, like FIS, the Mysis, and Onetech.
ED: In fact, I think Mysis just went public and it wasn’t very well received by the market. These companies used to be able to sell software and solution at $2 million dollars. And now, the fintech players that are coming in can do very specific things at a much, much lower cost, and they're funded well. At which points do you think that the income stream or the price points recover to make fintech sustainable as a long term business?
DS: Do you mean to actually really become profitable? So the profitability, the way we look at it, we look at profitability per customer.
ED: Per corporate customer or business customer?
DS: Yes. And as soon as we see that there is a bit of profitability by customer, then we scale. We don’t wait until the company is profitable to scale. As soon as there is an embryo of profitability somewhere, if we are starting with the customer, maybe a region, and then globally, it is a growth story and not a dividend story. And as soon as it reaches too much cash flow positive, well then it is a private equity story, and it's not a stage investor story anymore.
I think this is the difference between – I think you used the word private equity earlier, but that's not what I do. I do early stage investments, by definition. Now the only question is how early? So we would never have very cash flow positive companies, as soon as they do become cash flow positives, which has happened to me after seven or eight years, a private equity player might come into the game, clean up the capital for instance, where I would stay, and then we would go maybe together to that final exit, right?
ED: You’ve had some very large investments that have succeeded.
DS: Well, the most successful one has been Pro Web Seer, which was the one that I was just referring to when I described the private equity players coming into place. That one I invested in 2004 or 2005. Well, just when I started in 2005, so basically it had about €1 million ($1.05 million) of revenues in those days. In 2015, when it was sold, we had about €100 million ($104.77 million) of revenue. We didn't get a lot diluted, so it was a very good story. And about 8% profit margin, though.
We started a company, we grew, and we were not profitable. At some stage we were almost profitable; we actually took an IPO on a smaller market called Alternext. They took it private again, private equity prior to putting this out, and then ultimately we sold it to corporate. And I was actually involved in the whole journey from A to Z. So I sold pieces of it during that way, but not the main part, because I truly believe that we could actually build a $100 million company.
It wasn’t sold for enormous amounts, about €110 million or $120 million depending if you work in euros or dollars. But anyway, it was a good journey.
Innovating to ensure success
ED: Yes. What was the product journey like, in terms of enhancing the product?
DS: That is the other point. It's definitely not the same product that we started with that we ended up with.
And we kept innovating along that way. It was in the beginning really, I would call it a software to enterprise model, actually a little bit similar to Connected Nation and Rosalina’s business here in Singapore. So when I see that, I see that same story. And I think that is a great business by the way. But it started with a software enterprise model, then later on moved into prepaid payment solution as a complimentary solution to the one we had. We kept enhancing and widening the product range. In the end we also became like your bag. We had one entry point product, and then cross selling fee for products.
I think that is the key point with all those companies – they need to keep innovating all the time. Payments is definitely the area where I have done most of exits, which is now moving into blockchain, where you see an innovation happening again, and again, and again. It never stops.
ED: There is the product expand, and then there is the sales expand, because you have to build sales…
DS: Yes. But it's kind of linked because if you listen to the customers all the time, you can define the new products. You got to get the product guys in the sales meetings all the time. And so it's kind of linked. But yes, I agree, those are two separate processes. The product guys have to think about the future, the sales guys have to hit their daily targets. From that point of view, it is different. But it should be extremely close to the customer, though.
Keeping an entrepreneurial-driven environment
ED: Talk to me a little bit about looking for partners – both the serial entrepreneurs that you're looking for, as well as your partners that you say you’ve got 40 –
DS: They were the same. We have built our partnership on only serial entrepreneurs. Everybody has done at least one exit. On median, not on average, but the median is about 20-aged investments has been done by each partner, and they have a substantial network within the financial services. These are the three criteria to join True Global Ventures as an investor. But we also invest in serial entrepreneurs. And again, that is much niched, so it’s not about being elastic or anything like that. It is just that our nature is that we do not have the traditional 2 & 20 system, where we have a lot of analysts being helpful and doing these sort of things for companies.
We do not have these capabilities. We can only do hard core introductions, and that's what we're good at. We basically build our investment thesis on what we can execute and what we cannot execute. So it is not as showing arrogance towards first entrepreneurs, everybody starts as a first time entrepreneur, it's just that we've seen that our model works with serial entrepreneurs, in terms of what we can offer as a service.
I don’t believe that recognising a good entrepreneur, if he’s good or not, is something that should be outsourced. That is actually a piece that –
ED: That you bring to the table?
DS: Yes. I mean, you’ve got to be able to identify a serial entrepreneur. I do believe in AI. But actually, even in applying AI or recognising are you a serial entrepreneur or not, I think, you are looking for outliers, so you need a lot of data on outliers. And still, we haven’t received so many serial entrepreneurs in the world that we can even do statistical analysis, even less than AI analysis on it. So how am I going to recognise if you are a winner? I need to see you in the eyes. I need to see how you react and how you do? It’s not something you should be outsourcing.
ED: And so the question there is that how do you get 40 people with the same vision?
DS: Well, I have been building it for ten years. I am building it step-by-step. In the beginning, between 2005 roughly, and when I started in 2010, I did syndicates. And the best people from those syndicates were then part of what was then officially True Global Ventures One. And then we were 16. And then we created True Global Ventures Two in 2012, and then True Global Ventures Three in 2015, going from 16, to 32, to 40. So, it is step-by-step. But it's a human resource (HR) thing, you are right.
But the criteria are very clear. So, the DNA that builds us is that we build companies together, and that we also have some experience on the internet – there is a common DNA there. Unfortunately, in that common DNA, with the criteria we have chosen, there are not enough women. We only have one woman right now, and that is a problem with diversity. I am a lot focused on identifying female quality entrepreneurs to get that into the game as well.
So that is, if I would be doing some self-criticism, that is also why I've donated money to a few of my entrepreneurs. That is a piece that is really, really missing. Actually in our conferences, we are trying hard to identify female entrepreneurs to inspire other female entrepreneurs to start businesses, to sell businesses, to start new businesses again. That would be the weakness of the model.
ED: Do you see ethnic or social differences in the different regions that you are operating?
DS: Yes, I mean, obviously everybody is different. But, I think, that kind of everybody that has built a company within fintech is actually what unifies it. And that is much stronger than the cultural differences. Obviously you have cultural differences when I call a fund and everybody has to put in money, you have enormous differences between countries, but I know them by heart. So I know that I need to send out, to call a fund a little bit earlier to certain countries where people normally always pay a little bit later. So you do have these cultural differences for sure, but the DNA that you want to put a bet on a really good entrepreneur, that is much stronger.
ED: And you trust each one of them. Are there dropouts in the community that you have?
DS: Of course. And you know I don’t actually ask everybody to renew and go into the next one. It is very much like an HR. Like, there are a couple of people that are extraordinary, and the majority are really good, and there will be one or two or three that are maybe too busy, or have other things to do, personal things that could have happened, including divorces or whatever that makes it to say they don’t want to or they can't continue. You will always have that. But also, they might just don’t fit into the model.
They are maybe fit for a while, but not for the long term. It is an open system from that point of view. Maybe it is good for somebody for four or five years, and then they say: “well, I'm doing something else.”
Bringing the talent is the key to successful fintech hubs
ED: What do you make out of the competition between countries to try and become fintech or start-up hubs? You’ve got the natural hub, which is Silicon Valley. And then sort of a pseudo natural hub, which would be New York and London, where you get a lot of city support for building the hub. And then you have Israel, Singapore, and Hong Kong, all trying to create a critical mass to be a hub or a focal point in that way. What do you think is happening there and how does that serve your interests?
DS: For me, the absolute main criteria is: can these cities bring talent? That is the number one. Everything else is secondary, including the money, conferences, and regulatory sandboxes, name it. If you cannot bring in talent, there will not be good companies. If you ignore that, you are dead. I think most of the cities that you have mentioned have recognised that, but quite honestly, some are better than others to attract talent. And in this world, sorry but this is the first time we need to talk about politics, it's going in the wrong direction, right?
So those countries, which start to become protectionists, and I want to be very clear on that, I think they are stopping growth. If you are stopping your boarders to bring in the best talent across the world to create a new company in your country, I think it is not a good thing. Those who have an open mind, and can take advantage of that change kind of environment now, slightly right, they will be the winners. I don’t think you can be selective, because you can't be, you can't feel good in a city or a country, where you are permitted to be there because you are an elitist, and others are not.
You will feel it in everyday life, right? You go out in the street and they treat you like whatever and not in a nice way, or your kids, or your wife – you don't want to live there. You can't say, “Oh, you are an exception.” You’ve got to have an open mindset and bring in talent. And those cities or countries who have an open mindset and continue to bring in talent will continue to grow.
ED: But there are cities, in larger countries like India and China, which could be natural hubs because they have a critical mass.
DS: For sure, absolutely.
ED: But they're not.
DS: They will be. I mean, I think what you mentioned there is the future in both cases, and especially India. It is actually a country that I'm not covering, but I'm looking into. They are not yet developed, but they probably will be.
ED: Do regulators stand in the way in some cases?
DS: Yes. So you asked the main position, what is important?
DS: The second most important thing, I think, it is not the second most important thing, but one of the most important thing is customers. So number one, you have talent. You create a product. I take it as given that the team can create a product. And then you need to sell it, you have the customers there, that is essential. Now whatever you do, you should be allowed to do. If you are not allowed to do what you are planning to do, well then you won't do that business in that city. That kind of regulatory sandbox has started coming up, I think there have been 60 in the last five months, is extremely good news for Southeast Asia because you have the three things potentially.
The talent is coming, from what I see. Number two, the customers are there in some of those cities for sure. And you are allowed to do what you want to do. I mean, not everything right, but at least there is an open mindset about that. And that can fuel a lot of growth. And I think, right now, these three criteria are the strongest in Asia. So we see a lot of our U.S. companies coming over here. We are investing here.
We're taking over teams here. I think it's a very, very positive environment. And also a little bit of that healthy kind of competition, between Jakarta, Thailand, Sydney, Hong Kong, and Singapore.
ED: But at the same time, you know, unless you externalise your business, you don’t have critical mass. I mean, the largest banks in Asia are in China and –
DS: Yes. So I am talking about Southeast Asia. The reason why the regulatory sandboxes are there in these countries is because they do not have the critical mass as much as India and China, so they need to compensate to excel in something else. But for sure, you know, Shanghai is extraordinary. India, I know less well, but I was supposed to go under production in a couple of weeks, and I have been meeting people from there.
It sounds very attractive. It has a very strong agenda having 1.3 billion people in biometrics potentially implementing blockchains on property registers. I see enormous potential in India. It is a very, very fascinating market. So that's where we are today. I think China is there for sure today, and fintech is number one, but I do believe that India will become very, very strong.
ED: What would you consider Ant Financial, Tencent, maybe in India it's Flipkart. These are the big guys, who in the case of Ant Financial, actually dominate the payments landscape, they’ve stolen it, and also Tencent.
ED: But that is business-to-consumer (B2C) in a lot of ways.
ED: And that is not an area that you invest in?
DS: Well, I wouldn’t be able to beat Ant Financial, that's why I don’t invest there. How could you? Look at the company that they have. How can you beat that with any money? I mean, basically to win that game, you would need to invest hundreds of millions and millions to win the consumer game. I am ultra-focused on B2B, which this is not, right?
I would like to have Ant Financial as a customer for the blockchain companies that I'm discussing. I would love to a discussion with them on some aspects where they are B2B. So they would be a customer, Tencent would be a customer. I wouldn’t be committed.
But I think there is another point there. I think it's going to be hard to beat them for anyone who would beat them. Because what you see, especially with Ant Financial, is that it is still entrepreneurial-driven. Google is entrepreneurial-driven. Facebook is still entrepreneurial-driven. Amazon is still entrepreneurial-driven. PayPal is not, guess what is going on? Tesla is still entrepreneurial-driven.
I'm really a good believer that a company should be kept entrepreneurial-driven for a long time. Actually the executive that I mentioned to you, he’s still there, the original founder, but the old investors sold out, still entrepreneurial-driven. These are the winners for the future. You can clearly identify them because why they keep innovating, they never stop. They are not happy just because they have a lot of cash. And they are sitting there and saying: well, it's good enough. Why? Because they had a passion, which is beyond money.
They want to change the world, which is beyond the money. So, you see at least the skill sets that we try to identify, and the entrepreneurs we try to back.
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