RIYADH: Venture capital fund 500 Global has brought its prolific funding pace to Saudi Arabia and is looking for the next tech unicorn — a startup valued at over $1 billion.
The San Francisco-based firm, co-founded by CEO Christine Tsai, has cast its net wide, funding more than 2,600 startups in at least 75 countries since it was founded in 2010.
It has $2.3 billion in assets under management, and its portfolio includes stakes in 41 firms valued at more than $1 billion and 125 firms worth more than $100 million.
Its unicorns include US credit broker Credit Karma, Australian online design platform Canva and Singaporean food delivery payments and ride-hailing app Grab.
In the Kingdom, it has backed young firms such as shipping solutions provider Nitros, sports management company TeamUp and female professional network Playbook. Tsai founded the firm 12 years ago with partner Dave McClure as 500 Startups, before changing its name to 500 Global last year. Both had worked as marketing executives at tech giants such as Google, YouTube and Microsoft. McClure eventually left the business in 2017.
In an interview with Arab News, Tsai said their background was an advantage when they began to raise capital for the business because they shared “a big network of high-net-worth individuals, many of whom were ex-Google and ex-YouTube people.”
“Our first global fund in 2010 was about $30 million. Not huge, but a good first one to start out with.”
500 Global spreads its bets over a large range of firms in a bid to find the startup that will make it big.
The fund’s investments are typically between $100,000 to $200,000 — a relative drop in the ocean compared to what many VC firms invest.
But Tsai points out that for a small operation, often with only two or three employees, “even a $100,000 check can be quite a lot”, to develop a product or hire extra staff.
“The traditional way of venture funding, concentrating capital into a small number of companies, is a risky asset class”, Tsai noted. “And certainly at the early stage, it’s even riskier.
“So our thesis was to make it a numbers game, investing much less in a larger number of companies, then using our experience and connections to help these companies to grow, and then doubling down on winners.
“From the start, it was very much a long-game venture. It can be 10 years from when we fund a startup to the potential exit or initial public offering. Now we’re at the 12-year mark, we can see how that strategy has played out.
“In some of the cases where we have taken early positions, the multiples on that have been very significant.”
The firm has received payouts from its early equity stakes in acquisitions such as the $403 million sale of 3D printing company MakerBot in 2013 by rival Stratasys, Google’s $350 million purchase of marketing software firm Wildfire in 2012 and the $200 million buyout of video streamer Viki by Japanese e-commerce firm Rakuten in 2013.
Tsai said she and her team focus not only on the quality of the founders and their products, but on the potential broad reach of the service being offered. The firm had international ambitions from the outset, initially targeting startups in Mexico, it quickly moved into the Far East, South Asia and MENA.
It has bases in more than 15 countries, with offices in New York, Lisbon, Shanghai and Mumbai. It has an office in Riyadh since 2020, led by partner Amal Dokhan, who is also a member of King Abdulaziz University’s female advisory board.
To spread know-how around its network of companies, its more successful firms act as mentors to younger firms in 500 Global’s 12-week “seed accelerator programs.”
One example is its December Sanabil 500 MENA Seed Accelerator, held with Riyadh’s Public Investment Fund-owned Sanabil Investments, where startup founders develop their management, financial and marketing skills during intensive programs.
“We have established Riyadh as our MENA hub,” Tsai said, “and it’s a big hub for tech now. We have more than 30 investments in the Kingdom.” We’ve really seen the Kingdom’s startup ecosystem flourish over the past six years. It’s now risen to be second to the UAE in the MENA region.”
Awsim Asmi, CEO of shipping solutions provider Nitros, which in December 2021 attracted a joint investment of SR1.1 million ($300,000) from 500 Global and KSA-based OMQ Investments, told Arab News: “Their network and experience are almost unmatched.
“We’ve seen unicorns such as Shippo thrive after going through a 500 Global acceleration program. We’re in the same space, we’ve gone through the same experience and we’re on the right track.”