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Founders of Seedstars Portfolio
Since launching nine years ago, Seedstars has invested in 81 companies in more than 30 emerging countries. Now with a goal of investing in 100 more startups, the second emerging market seed-stage fund, Sidestars International Ventures II (SIV), is close to $20 million in initial funding. The fund is valued at a total of $30 million and its limited partners include the International Finance Corporation (IFC), Visa Foundation, The Rockefeller Foundation and Symbiotics. The firm will invest in pre-seed and seed-stage startups in Asia, Africa, the Middle East and Latin America over the next three years, with Series A to Series A investments.
Some examples of Seedstars portfolio companies include Pakistani e-commerce startup Dastgyr; Saudi Arabia’s cloud-based point-of-sale and restaurant management system Foodics; Indonesian workforce marketplace MyRobin; Latin American restaurant CRM OlaClick; and Nigerian B2B marketplace Omnibiz.
Patricia Sosrodjojo, a partner at Seedstars, told TechCrunch that the investment research of the second fund is the same as the previous one: looking for startups that are still in the early stages, entering emerging markets in tech ecosystems and can make a broader impact.
“I think of it as three different levels,” she said. “The first is that we’re getting in early, we’re usually one of the first institutional checks next to angels, so we help raise capital. Second, in the countries we cover, the ecosystem is not that developed yet. And thirdly, we are looking for business models that can grow quickly, similar to the traditional VC model, but can affect more people. We align ourselves with many ESGs.
One difference between SIV II and the original fund is that it can write larger checks. Initial checks will be between $150,000 and $250,000, with potential investments of $500,000. It will also have a tighter geographic focus. The first fund has invested in 30 countries, while the second fund will also have a global view, but will focus on one to three countries in each region.
In particular, these include Indonesia, Vietnam, and the Philippines in Southeast Asia (although Sosrodjojo SIV II mentions other countries as well). Pakistan and Bangladesh in South Asia; Egypt in MENA; and Mexico in Latin America. The view on Africa is more widespread; He has invested in Kenya, Tanzania and Nigeria.
SIV II plans to follow 25% of its portfolio.
“We are looking to diversify our holdings by offering education from one market to another,” Sosrodjojo said. “For example, if we invest in a B2B supply chain game in one country, we can take the learnings from there and apply it to other geographies. We see that different trends can come at different times in different markets, so it helps us to see the typical direction of an industry.
The fund focuses on key areas including finance, business, health, employment and education. In particular, “financial inclusion is a challenge in many of these markets. It is an issue that we will continue to pay attention to,” Sosrodjo said.
One of the things that makes SIV II unique is that it has an integrated financial structure with a facility provided by the IFC. As part of the fund’s mandate, it invests up to 25% of the fund in IDA countries or low-income countries. This reduces the risk of these investments, because the initial loss is guaranteed. That means if SIV II invests in an IDA country like Senegal and the company does not perform well, a portion of the investment will be covered by the structure.
To help them scale, Seedstar portfolio companies participate in a three-month “mentor-led sprint” program called Growth Track, a value creation platform with a network of 1,300 mentors. Backed by Seedstars’ Entrepreneur-in-Residence John Atwell, formerly of Naspers and Process, with operators who have experience working with high-growth organizations such as Careem and SkyScanner. While staying in the value creation arena, companies can experiment to see what growth strategies work best for them.
“Startups can cover different modules, for example if their key is acquisition,” Sosrodjojo said. They work with their mentor and our entrepreneur-John, create a strategy, run with it, track it and see if it works. Each startup decides what they want to experiment with and whether they want to translate it into their work.
Gender equality is also important to Seedstars, with data showing that only 11% of enterprises that receive seed funding in emerging markets are led by women. The Seedstars team has already achieved a 50:50 gender split, and its first fund had 26 percent female-founded businesses. Seedstars has made it a challenge for a second fund to have at least 30% of its portfolio with female founders or leadership. Another requirement is to support local founders.
“There are cases where there are expert founders who have very good startups, but we try to develop local talent,” said Sosrodjojo.
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