Accelerator programs can generate plenty of noise—demo days, pilots, and press releases—but not necessarily much business, says William Bao Bean, managing general partner of Orbit Ventures, a venture fund and accelerator program focused on emerging markets.
Done wrong, he tells AgFunderNews, “It’s innovation theater. It wastes corporates’ time and it wastes startups’ time. Startups have died because they engage with corporates who wanted the PR but didn’t actually want to sign contracts and implement [the startups’ tech].”
Orbit, which evolved from SOSV’s Chinaccelerator and MOX programs, helps startups tap a network of multinationals and conglomerates to find customers, partners and routes to market, and engage with corporates when the time is right.
“What we try and do is make sure that there’s an actual need on the corporate side, and we smooth communication. Our corporate partners like it because we’re an innovation partner that they don’t have to pay.”
AgFunderNews (AFN) caught up with Bao Bean (WBB) to discuss why the Silicon Valley playbook can be risky in emerging markets, how AI is impacting the space, and what Orbit Ventures looks for in founders beyond the ability to take advice and adopt a more data-driven approach.
“Founders fail, and hopefully with data they fail faster and get to success,” he says. “But if they’re not super passionate, if they don’t have that sense of urgency, when they fail, they tend to give up. There’s nothing that kills a company faster than a founder that gives up.”
AFN: How did you get into tech investing?
WBB: My first job out of college, I worked for the Foreign Service. It was a little bit like a super interesting podcast on 0.25 speed… very interesting, but also pretty slow. So after about a year, I switched over to equity research, so investment banking, as a stock analyst covering technology.
That was quite exciting, and I did that for 11 years, and did quite well at it, to the point where it got a little boring, because I was [ranked] as the number three stock picker in China and Hong Kong and number one in tech, media, and telecom [by Thomson Reuters StarMine], and if you’re right all the time, or at least more right than anybody else, it gets a little monotonous.
I’d done a couple of angel investments, and so I partnered up with my counterpart on the banking side at Deutsche Bank, and he got backing from SoftBank to do an early-stage VC fund covering China and India [Softbank China & India Holdings].
The total value of all the China tech companies when I started covering the space was about $1.5 billion in 2003, 2004 and fast forward to when I stopped investing in China in 2018 and that number was $3.5 trillion, so it was a wild ride.
AFN: What is Orbit Ventures?
WBB: Orbit Ventures is a rebrand of Chinaccelerator and MOX [accelerator programs operated by SOSV] which I joined in 2010 as a mentor. I became a general partner in 2014.
We diversified out of China in 2015 and stopped investing there at the end of 2018. In 2022 we rebranded everything to Orbit Ventures.
Orbit is an accelerator that doesn’t stop. I help companies [that Orbit invests in] by leveraging my background in corporate venture to help them connect the dots. We’re bridging startup innovation with large corporates, so we’re lightly engaged with 240+ multinationals and conglomerates.
Instead of just working with startups, we also work with corporates to understand their needs. Startups trying to sell into large organizations is a little bit like spear fishing into a mud puddle. You don’t know what you’re aiming at, you end up blunting your spear point.
What we try and do is make sure that there’s an actual need on the corporate side, and we smooth communication. Our corporate partners like it because we’re an innovation partner that they don’t have to pay.
AFN: Do accelerator programs always help startups?
WBB: One of our pet peeves, or one of the things that we think definitely doesn’t work, is innovation theater, which is basically like, ‘We’re doing innovation, we’re having lots of big events and PR press releases,’ but nothing ever happens. It wastes corporates’ time and it definitely wastes startups’ time.
Startups have died because they engage with corporates who wanted the PR but didn’t actually want to sign contracts and implement [the startups’ tech].
A lot of times a startup that goes into an accelerator has a solution that’s not mature enough to complete a successful pilot or a successful commercial engagement. Through our program we help startups get to a point where they can have a successful commercial engagement.
AFN: What accelerator models work best in your view?
WBB: We’ve seen many come, and most of them go. There are two main economic models that seem to have worked. The first is a consulting business, where oftentimes they don’t have equity, but the money is coming from the corporate side, so the client is ultimately the corporate, not the startup.
And then there’s our model at Orbit Ventures, which is we invest, and deliver value to the portfolio through our platform. So we invest $180,000 up front, but we use a very traditional financing model, where we also take some common stock like founders’ shares for the program. Our ownership target is investment plus common of 5-9% depending on the stage of the company.
AFN: Which markets are you concentrating on at the moment?
WBB: We’re very much focused on emerging markets, so Asia, Africa, Latin America, and we also help our companies in and around MENA [Middle East and North Africa].
A lot of our companies go to MENA to get revenue. I wouldn’t say they’re really developing markets, but they’re going through a similar type of economic transformation that China did previously, a shift from a fossil fuel economy to a more tech-driven economy.
AFN: Your portfolio spans multiple industries; how do you build up expertise in them all?
WBB: While it looks like we invest in everything, all of our companies are part of an ecosystem where they feed into and support each other.
We’re running a playbook, so we’re looking at what we did in China and India, and move west, digitizing very traditional industries from farming to infrastructure, to transportation to logistics to health, to retail, distribution, commerce, and financial services.
We digitize farmers, for example, help them get inputs and learn how to farm better, but then we also digitize the supply chain so they can move their crops and get market pricing. And then we digitize retail from small mom and pop shops to large corporates such as supermarkets. And finally we digitize the consumer, so we’re active along the entire chain.
We can also help companies cross borders because we have a network of companies that serve farmers all around the world. We have a company called Dastgyr that’s like an Alibaba for cross-border food trade, so farmers from Africa, Latam, and Asia can sell food through a marketplace to UK and EU supermarkets, for example.
It started from Pakistan, digitizing the local food supply and supply chain, and then added on international cross border trade.
AFN: How can plugging into your ecosystem help portfolio companies?
WBB: We recently did an investment in Atarraya, that enables people to do shrimp farming in a box; they’re growing shrimp in the desert. We also invested in a company called QuicKart, which works with local UAE farmers and dairies to connect them to homes and restaurants and hotels. So Atarraya fits perfectly into our ecosystem because we invested in another company that has a sales channel.
Likewise, we invested in a company [MySara] that does auto repairs, car washing, and oil changes, which has 130,000 active car owners [as customers] in the UAE. Those car owners buy groceries too, so we can cross promote.
More than 60% of all VC money goes to customer acquisition, user acquisition and sales and marketing, and we can reduce the need for that through our platform so our companies can get to profitability or positive unit economics a lot easier, and it reduces the need for capital.
AFN: What unique challenges do companies face in some developing markets?
WBB: Sometimes they are regulatory, but usually the challenges are super fragmentation, gangsters, grift, bribery, all sorts of other things that are quite difficult to navigate. And that’s why we back local founders, as opposed to trying to bring international founders to solve local problems. You need people that have a deep understanding [of the local market].
The founders that we back, they might have international degrees, and they might go away for school and come back, but they have that local understanding.
AFN: How is AI impacting your space?
WBB: AI is going to have potentially an even bigger effect on the poorer markets than the richer markets. In the richer markets, you’ve had SaaS for decades. Emerging markets couldn’t afford it. Now they can. The cost of delivering software now has gone down significantly.
As an example, we have a company that’s leveraging AI to provide farmers loans. You can get a human to do that, but if you’re doing loans of $500, you can’t put a human against that, really.
One of our companies puts the entire process into WhatsApp and Facebook Messenger and integrates into the entire back end of the bank, all the way from application to approval to dispersal and collection. The cost to the bank for the entire process is $1.
It looks very simple, but the entire process is digitized and automated, and it’s leveraging AI. The farmers aren’t talking to the AI, the farmers are talking to an agent, and the agents are driven by the AI. So we call it AI with emerging markets characteristics. The AI is driving the product, but AI is not the product.
AFN: How available is non-dilutive funding to startups in the markets you’re focused on?
WBB: We tend to focus more on debt than on grants, which can sometimes drive some unnatural behavior plus they come with strings attached. We tend to focus on helping our companies partner with a group of debt providers who understand the local challenges in the markets where we operate.
We have a group of partners that we work with like SixPoint, for example, and they’ve been amazing in terms of not just providing debt but also providing education and best practices, and they actually organized some very useful forums on the debt side that we participate in.
AFN: Has your investment strategy or criteria changed over the years?
WBB: We haven’t changed anything; the list of problems Orbit Ventures is trying to solve remains the same. What changes is the tech, which keeps getting better. The only thing we change is that we added geographies, so it [Orbit’s playbook] worked in Asia, so we added Africa. It worked in Africa, so we added Latam.
It’s not necessarily copy and paste, it’s more like learn and localize.
AFN: What kind of returns are you expecting?
WBB: We’re not necessarily unicorn hunting. We’ve got a unicorn, but most VCs do 10 investments at seed and make money on one or maybe two. But with our ecosystem, we’re making money on the one, but then we’re also making money on a second, a third, or hopefully a fourth out of 10.
The companies have revenue; they have positive economics. They might not grow as quickly, but when there’s a shock, they don’t die. And not dying means they have another shot, and we’re working hand in hand with them to navigate the volatility.
AFN: Where do you see exits in your portfolio?
WBB: There’s trade sales and IPOs, and you can either IPO yourself or you can combine with a couple other companies that do something similar, maybe in different neighboring countries or regions, and then go IPO together. We have 50+ portfolio companies that digitize micro and SMEs, so there’s the opportunity for individual companies to go IPO, and one of our companies in this space is set up for that.
AFN: You’ve talked about helping portcos with financial modeling…
WBB: Founders are very busy solving problems; they’re not so busy learning how to build financial models, and that’s where our program comes in.
We help them put what they’re doing into a financial model. With one company, after we finished the model with them, it was a case of, By the way, did you know that you’re profitable? They had no idea.
AFN: What raises red flags for you in a pitch?
WBB: I tend to like working with founders that are data driven. We’re not telling them what to do, but we are helping them design and run experiments, and if they’re not particularly data driven, there’s a good chance that they might ignore the output of the experiments.
The second thing that’s very, very important is, can we actually help? Because we’re an ecosystem, and if they don’t fit in the ecosystem, if we can’t help and we’re charging equity for it, we’re going to end up with disappointed customers: the founders we serve.
As to what we’re looking for at Orbit Ventures, it’s passion and hustle. Founders fail, and hopefully with data they fail faster and get to success, but if they’re not super passionate, if they don’t have that sense of urgency, when they fail, they tend to give up.
There’s nothing that kills a company faster than a founder that gives up.
AFN: What mistakes have you made as an investor?
WBB: The biggest one is partnering with the wrong debt providers who don’t know our markets. Most people who are building a business don’t understand debt. It comes with covenants; it comes with strings attached. So we work with debt providers to help our founders become master level debt managers because they might be great in supply chain, farming, or coding, but they’re oftentimes not the best at finance.
The second learning is that the Silicon Valley VC model does not work in emerging markets. There’s this thing called Blitzscaling, which is a model where you grow unprofitably and make money later. You grow very quickly burning money, and then you raise more money, and then you grow bigger, and you raise more money, and then before you know it, you’re a leader, and leaders have great exit opportunities.
The problem people fail to understand is that one of the key elements of Blitzscaling is having an investor base to support the next round and the next round. And the only thing that is for sure in an emerging market is that the capital is going to disappear on a regular basis.
One of the most dangerous things for investing in emerging markets is other investors. They read a lot of blogs about how things are done in Silicon Valley, or maybe even China, and so you get somebody who says, okay, I’m going to drop $30 million on you, or 15, or 20 and you’re going to spend it and grow unprofitably.
And so the company grows and builds a giant asset base, but then it can’t raise the next round because the capital evaporates.
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