Kiyan Zandiyeh – Empty Rooms: Venture Capital on the Emerging Frontier at Sturgeon Capital (Capital Allocators, EP.317)

Risk Factors

In emerging markets, investment risks mirror those found globally, but with unique challenges. Kiyan Zandiyeh highlights the importance of understanding the economic model and capital needs of businesses, emphasizing the necessity of having co-investors to mitigate funding risks 1. He shares a lesson learned from investing in businesses with strong models but inadequate management, stressing that even the best business model fails without capable leadership 2.

The greatest business model cannot work with average or suboptimal management teams.

--- Kiyan Zandiyeh

Zandiyeh also notes that liquidity and exit strategies are critical concerns, but successful businesses can still find exits in emerging markets 1.

   

Governance

Governance issues in emerging markets pose distinct challenges for investors. Kiyan Zandiyeh contrasts traditional private equity with venture investments, noting that technology ventures often complement rather than disrupt existing systems, reducing governance risks 3. He explains that these ventures typically lack tangible assets, making them less susceptible to government interference compared to industrial businesses.

You're not really taking market share away from anyone, you are not disrupting anyone in any means.

--- Kiyan Zandiyeh

Zandiyeh argues that technology investments can drive economic growth by increasing tax revenues and creating jobs, often making governments champions of foreign direct investment in the tech sector 3.