American venture capital firm Lumia Capital is the kind of investor that start-ups dream about: they focus on the people as well as the business. And while they understand that the US will always be a strong and vibrant market for them, they also see huge opportunities for start-ups in upcoming markets – like the United Arab Emirates, with its established regulatory frameworks and huge market potential.
Partnering with thriving tech ecosystems and financial centres is one of the top ways Lumia keeps its finger on the pulse in the tech world while also keeping an eagle eye on lucrative potential investments in the pipeline.
One such financial centre is Abu Dhabi Global Market (ADGM) and its twinned tech ecosystem, Hub71 – two organisations attracting the attention of global tech start-ups and VCs worldwide. Lumia Capital’s Christopher Rogers spoke to Verdict about what he looks for when investing in a start-up and why Abu Dhabi is a great place for investors and start-ups alike.
How should start-ups make themselves investment-ready?
We have investment opportunities around the world; we are not just MENA investors. But we’re also very choosy about where we invest. That means in the universe of deals we see, the options for us are relatively small, so few deals are applicable to us.
But the keys for us are a relative maturity from a revenue perspective and being part of a financial centre. That could be a Delaware corporation or a UK entity – it just needs to be something that is globally recognised. So it’s great that ADGM runs a world-class regulatory regime for start-ups – it’s a huge selling point. ADGM has done a great job putting in place a common-sense approach and then getting the word out. Now, obviously, the word will have to get out more and more to be acceptable.
As for being investment-ready, when you are a Series B- or Series C-type company, you should be actively making your decisions on the data you derive from the business. So at that point, you have revenue, you have customers. You have some sense of the product you’re selling and where it can develop, the geographic areas that get traction and what segments of the population are getting traction.
What approach do you have with start-ups and their founders?
Because we invest at the later stage, we don’t base our decisions on a hunch or an intuition. Based on the numbers, we can look at comps and derive valuations. But we wouldn’t be talking to them if we didn’t think it was in an area where growth could arise.
We could pick a zillion sectors, but it has to be an area where we believe there’s growth, and we tend to focus on enterprise SAS areas where there’s been a sustained pattern of new, efficient, innovative ways of doing business.
But the people are also important, and what I look for is a team. There tends to be a stereotype of the “extroverted start-up leader” who is constantly cheering on the team. Being an introvert myself, I look for the person who is taking the inbound, whether that’s from the customer or the employees, or the product – the person who’s got the open mind and the open ear to hear what’s really going on in the market and to be the listener rather than purely the talker.
Do you, as a partner, like to meet start-ups in person?
Yes, it’s actually important to meet them as an investor at our stage. I do it because I want to add value to the companies where I invest. And typically, my path to doing that is through the management team. It’s not hard to meet people, and I always make time for that. They want to meet us because we have written some cheques and so they know there’s value in that. And it isn’t that we are any better or worse than their local funders; it’s just that what we bring is a bit different. And so “deal flow” is relatively easy.
There are times when I meet exceptionally smart people but we end up speaking past each other simply because there is no connection. As a venture capitalist, it’s important to bring efficiency to decision making. If every sentence is a puzzle, it’s not efficient. So there are times, if I can’t communicate efficiently almost from the outset, then that deal isn’t going to get done.
What are the benefits of being in the Hub71 ecosystem?
I am very lucky to have developed good relationships with the companies we invest in. I think the Hub71 concept is one where you have a strong and centralised focus on working together, whether that’s the Hub71 involvement or them helping start-ups network with other Abu Dhabi entities. So it has succeeded. They’ve put in place a real structure from top to bottom where everybody is on board and it has moved quickly. So there is a proper ecosystem, and you can meet other investors.
And then you have the regulators nearby. It really is an amazing accomplishment. It’s hard to enumerate the things I get out of each visit, but it always ticks more than one box.
Has Covid-19 changed the way that you invest?
It absolutely changed the way we invested. We really put things on freeze in terms of new deals, with the belief that we are not distressed investors [looking for] companies in trouble that need funding at the last minute.
We still don’t really have a sense of the economic toll. But we’re seeing more information that we do understand, and we’re still talking to companies.
Learn more about the Hub71 Incentive Programme in our free white paper Roadmap to Abu Dhabi: How to unlock new opportunities for your Tech Startup, which includes information on page 19 for how to be one of the few start-ups chosen to join the programme and best tips for success. Download white paper.