Pod Insights Equity Podcast Steering through venture's global correction with the GPCA's CEO About this episode Long-time Equity listeners and TechCrunch readers should be familiar with LAVCA, and association of capital managers in the Latin America region. We have reported on its data a number of times. Well, it turns out that LAVCA is part of the larger Global Private Capital Association, which keeps tabs on a host of markets that we're working to cover more carefully as startup activity becomes an increasingly global phenomenon.
So to cap off the second quarter, and to get our claws into what is going on around the world, we had Cate Ambrose, the CEO of the GPCA on the show to riff with us about Asia and Africa and Latin America and Central and Easter Europe. Here's what we wanted to find out:
How wild was the 2021-era venture peak in less mature startup markets?
How resilient are smaller startup ecosystems in a more conservative venture and macroeconomic environment?
Are we seeing green shoots anywhere in the world? Or put another way, where is the rebound kicking off?
We closed with a short discussion on the role of government in startup markets and squeezed in an AI question because how could we not!
We have another interview coming your way Friday, so stay tuned!
For episode transcripts and more, head to Equity’s Simplecast website.
Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders, one that details how our stories come together and more!
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript 0:11 Speaker 00 Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. My name is Alex Wilhelm and this is our Wednesday show, where we niche down to a single person or topic, think about their work, and then unpack the rest. Today, we are talking to Kate Ambrose, the CEO of the Global Private Capital Association, or GPCA. So what is that? Well, you may know it as the Emerging Markets Private Equity Association. It changed its name a couple of years ago, and it is a nonprofit org that represents private capital investors with more than $2 trillion under management in Asia, Africa, Central and Eastern Europe, the Middle East, and Latin America. That Latin American point is very important, because Equity listeners and TechCrunch readers should be familiar with LAVCA, or the Association for Private Capital Investments
0:55 Speaker 00 in Latin America, because we tap them for data all the time, and they are part of the GPCA. Kate, welcome to the show. How did I do on that intro?
1:02 Speaker 01 You did a great job, Alex. So good to be here. I think maybe I would just take the moment to explain why we're no longer in PIA, Emerging Markets Private Equity Association. So I came into this global role after building LAVCA for a decade, and it was like emerging markets. You know, I don't think I can run an organization called emerging markets. That terminology is 40 years old.
1:22 Speaker 00 Yes.
1:23 Speaker 01 It really doesn't define anything. China is the world's second-largest economy, was the world's largest venture market in the world at this point in the year. And let's just rethink, you know, how we're talking about what's going on in the world. So there was a process where we debated with board members, the community, how to rename the organization. We were working on an acronym of Africa Latin, you know, you try to put all the letters together, impossible.
1:45 Speaker 00 Oh, yeah.
1:46 Speaker 01 And ultimately just settled on global, because it's, we're talking about 88% of the world's population, an enormous percentage of global wealth and opportunity. And really, but you described well, the markets that we're in. Our headquarters is in New York, and we have an office in Singapore with four people on the ground, co-founded by the Monetary Authority of Singapore, so we have a big hub there, and soon to be institutional presence in the Middle East as well.
2:09 Speaker 00 Well, fantastic. And the reason why I wanted to let you kind of list that off is today we are going to spin the globe and take a look around the world at what has been going on. It has been a very busy, I would say, Q1 and Q2, not always in the best positive terms. Not every headline has been fantastic, but certainly a lot going on. And so we're going to take a peek at the ebb and flow of venture dollars and similar investing categories around the global market as everyone adjusts to a higher interest rate environment. And frankly, I love to not talk about the United States, so this should be a good time. Just to kick off though, I want to just kind of lean back. I'm curious, from your perch atop really a mountain of global private market investing data, how wild was the 2021 era boom in private markets that had historically not received as much capital?
2:51 Speaker 01 Yeah, I mean, 2021 was an incredible year. The numbers that we tracked for that year were, again, off the charts in terms of, you know, the amount of venture activity. And it was the first, it was one of the first years that we saw venture become a bigger part of the total private capital pie, as opposed to infrastructure, private equity and other pieces. And it was really just that narrative that was driven through the pandemic that everything is tech and digitalization, right? I mean, you know, whether it's tech infrastructure, whether it's digitalization of traditional businesses, ed tech. I mean, fintech, there were sectors that were already really dynamic, but with everything moving to a tech space. So it was extraordinary to see, maybe one, one way of thinking about it is markets that had already been so hot for so long,
3:36 Speaker 01 like China and India, and then even Latin America, you know, were red hot. And valuations were just so high that you saw investors looking to markets where you never would have seen them looking before. You know, it's always interesting saying anecdotally, so seeing like a Sequoia or a Tiger go into Africa.
3:57 Speaker 00 Yes.
3:57 Speaker 01 You know, that's the kind of sign of like, they wanted to get in at the ground level, where can we go? Where money is not a commodity and we can actually get into the ground level somewhere.
4:06 Speaker 00 I just find it really funny, the idea of Tiger looking for like a discount or a cheap deal because who caused all the expensive valuations? Like it was Tiger.
4:13 Speaker 01 Yeah.
4:14 Speaker 00 And Square and Andreessen. So like, I mean, I appreciate they've been bargain hunting, but like, oh my gosh, you're driving up the inflation domestically. So irony in venture capital.
4:23 Speaker 01 Yeah. I mean, frankly, this is one of my biggest premises in running the organization is the extraordinary liquidity that exists in the world today. So, you know, on an annual basis, 1.2, 1.3 million, uh, excuse me, 1.3 trillion dollars raised for private capital strategies across all asset classes is just by fund managers. Then you've got all the sovereign wealth funds, you've got TMSec, you've got GIC, you've got the Middle East sovereign funds. You've got all the Chinese billionaires that have been minted over the last decade. The pool Canadian pension plans that are now also launching like tech and venture strategies. I mean, the amount of capital to be invested is just so extraordinary. And then you have SoftBank coming in when they, I remember perfectly when they announced their $5 billion fund for Latin America.
5:07 Speaker 01 That was the kind of where were you then? My phone started ringing off the hook because, oh my God, SoftBank's coming in with $5 billion. It felt like so much at that time. And so there really is, I think, a bit of a mismatch, frankly, between the available capital and money is the commodity and finding something that really can scale and deliver a successful exit can be challenging.
5:28 Speaker 00 Yeah, no, no. Well, that's the challenge everywhere. I mean, even in the United States, I'm going to say the leading venture capital market in the world exits have been moribund for 18, 24 months now. So it can happen to anybody. But going back to the explosion of capital we saw in 2021, I'm curious if it felt more like the entrepreneurs and founders in the area were finally getting the attention and investment they had long deserved, or if it felt like there was so much money sloshing around that it actually kind of surpassed the local needs in markets that did see kind of a huge boom in, in capital during that period.
6:01 Speaker 01 You know, I mean, let's face it, there's a happy medium in there somewhere. So it's never good when a capital is so abundant, some irresponsible deals get done and there's a learning cycle for sure. We've watched this movie many times. And by the way, none of this is specific to, you know, global markets. I mean, the FTX, I mean, I say more, you know?
6:20 Speaker 00 No, you do not.
6:22 Speaker 01 So I think I'm hesitant to sort of pick out individual markets, but I mean, China was in a different place, right? Because China had grown and already was incredibly well established. It was kind of coming off of some peaks in 2021, was still a robust. And then they were in the midst of the transition away from some of the consumer and with the political intervention that moved towards hard tech, you know, and electric vehicles and other strategies. I'm thinking of India, you know, India is a place where it's an enormous opportunity. It's a great opportunity. We just had Modi in Washington. It was a lot of coverage and talk. But again, how developed is the local ecosystem in terms of the number of managers that, you know, can deploy that capital? It's a pretty good ecosystem, actually, in India. Then you get down to the, where are the incentives?
7:07 Speaker 01 Where are the investment bankers that are driving the deals that are saying, you know, let's get this out? It's the same trend we'll see anywhere in the world. So I think the interesting thing about Latin America is kind of a right-sized market in some way, and that it's not China or India. But you have an ecosystem of startups in the region that have not had abundant capital, have a greater sense of, I think, discipline in terms of needing to be profitable. I mean, even if you look at a company like MercadoLibre, you know, going all the way back. I mean, I've read they're one of the most efficient, you know, e-commerce companies in the world compared to other, you know, loss leaders that we've seen in other places. And then you go to, you know, a region like Africa where we're still in the early stages and there's really an opportunity and need for so much more investment.
7:52 Speaker 01 In answer to your question, it really depends on what country you are sitting in. But I'm assuming most of the people that you talk to today, whether they like it or not, would admit that the tech correction we're going through is a somewhat healthy cycle.
8:04 Speaker 00 Somewhat healthy cycle. I think that's true for everybody. But like much medicine or medical interventions, that doesn't mean it's pleasant. And you guys had some data that I was just looking at when you were talking about India. I mean, just to pick a data point, you guys put out that in Q1 of this year compared to Q1 of 2022, we've seen a 52% decline in capital invested in the Indian market. And that's after 2022 was off 30% from the 2021 peaks, a pretty sharp correction. Actually, not even, not even the sharpest. I mean, if you look at your data from Central Eastern Europe and the Middle East, the numbers are even a bit, a bit more stark. Were you surprised at how far things changed that quickly in those markets?
8:42 Speaker 01 You know, it's easy to look at the percentage changes and focus on that. And also, you've always got to take into account the anomaly year. So the thing is, 2021 was an anomaly. And you've got to go back and look several years and, and it was much more about the extraordinary year that was 2021. If you go back to the historical trend, for example, in India or several of the other markets, you'll see that actually 2022 and even, you know, first quarter of this year is not so unusual. So I think, you know, that's always important to take into consideration. And, and also the correction effect, there was a drag in global markets as compared to the US. So first half of 2022 was actually still a pretty strong year.
9:23 Speaker 00 Absolutely.
9:24 Speaker 01 There, there was still a lot of momentum. It took a while to filter through and we still saw a lot of deal activity where, you know, I think we knew better than to say, oh, we're immune. This isn't going to happen globally, you know, but it just took a little longer to get there. Having said all of that, because there is a lower base of investment overall, because there's less, like if I was talking in private equity terms, there's less leverage, there's less debt, there's less, you know, valuation inflation. Business models are typically forced to be more efficient from the get-go. I do think that there is much less hot air to be let out of the markets that we focus on than there is in the US.
10:02 Speaker 01 And it goes back to what I was saying before. I think what we focus on in an organization, we believe that you can put dollars or, you know, euros or yen to work better in our markets in the long term. It just takes a lot more effort and you've of course got the currency risk, which is one of the key challenges to performance. But there's so much more meaningful work to be done, building from the bottom up than in a market like the US.
10:25 Speaker 00 Yeah, absolutely. On the resilience point though, I want to go back to that because that's one thing I was very curious about. Because there was less hot air to come out of certain markets, I'll just pick, you know, parts of Asia, Africa, Central Eastern Europe, whatever. Does that mean that the startups there that are going through this correction will take less or fewer body blows? Than some of American startups that may have been even more inflated during the 2021 peak?
10:49 Speaker 01 Yeah, I remember waiting again during 2022 to see like when those first half, when layoffs were going to happen, when you saw some of the big public market, I'm thinking of Grab and some of the companies that, again, the public market valuations. And then, you know, I mean, there's no question that there have been some big hits there. I think the scale of the downsizing has been, you know, just less relatively compared to other, because you have less companies that are so much more of what's out there, right? Let's face it, are are smaller scale in terms of the money that they've raised. They're not as highly capitalized and there, you know, there are a few that have gone public. Maybe another way of thinking about this is the fact that the trend we observe now is the investment that we're seeing today is much more at the early stage. So, right, when you see that those that inflated 2021, and when you're thinking
11:33 Speaker 01 about the rounds and the stages of investment, it was really the soft banks and the tigers and the people coming in writing those great big, you know, later stage check. And frankly, not only B C's, private equity, public market investors, I mean, the amount of money that was going into some of those really late stage rounds and some of those tech companies was extraordinary. What we see today is a lot of the capital for series C, series D, I mean, those are the rounds that we're not seeing today. But in terms of a number of investments, we actually see quite a bit of early stage investment that's still dynamic today.
12:06 Speaker 00 Just to put this into perspective for everybody, a seed round could be a couple million dollars. In 2021, a series C could have been $200 million. So if you have one fewer of those, but 10 more seed rounds, it still looks like a very sharp decline in total dollars invested. So that's why you should care about deal and dollar volume. And that's why I try to break them out whenever I can into distinct categories to make this point. But if we're going to talk about early stage, the most obvious question is very simple. Which markets that you track are seeing the most burgeoning early stage market? Because I'm very curious where we're seeing the most, where should people be looking to see the next generation of superstar companies being fomented today?
12:42 Speaker 01 Yeah, I just want to make a quick distinction also on that last point you're talking about, which is how much of it is local capital, which is how much of it is international capital? Because it's so typically, that's one of the things we track really closely as well. A lot of times, the later stage rounds are is coming in from international investors that are, you know, either parachuting in or starting your staff Footprint or something else. Whereas the early stage is what's happening, you know, by the local DCs on the ground. And I think, you know, there's two ways of thinking about where the opportunity is today across global markets. Because it's another part of the narrative we're trying to shift. There are actually so many places where the rest of the world is ahead of the US in light years. Let's face it, you know, the US is at the tail end of digitization of payments.
13:24 Speaker 01 And when people laugh when they hear that we're still walking around with paper checks, you know, in the United States, or how our banking sector, you know, is still dominated by fintech is barely even a sector in the United States. Whereas fintech basically runs all of Africa. We were talking right before we started about new bank in Brazil that incredibly disrupted, you know, where Warren Buffett put 500 billion in. So, and actually some of the regulation around crypto and Bitcoin and that kind of thing, again, well ahead, Brazil and other places in the world where they're well ahead in thinking not about, I shouldn't have used the word crypto, but rather Bitcoin or blockchain technology that is, you know, disintermediating traditional financial players like banks, et cetera, et cetera.
14:06 Speaker 01 And that's an incredible opportunity. So I'm just throwing all of that out there because it's a big opportunity across markets.
14:12 Speaker 00 I just want to point out that if I didn't have paper checks, how could I pay my dog's groomer? I joke.
14:17 Speaker 01 There you go. There you go.
14:19 Speaker 00 I'd write literally one check a month. It's to, it's to, Kixi's grooming in Providence. And so she does our dogs. No, you're, you're done. I mean, I remember one of my earliest European trips from the States. It did feel like going into the future in terms of just their approach to like, even like chip and pin technology and cards back in the day. I mean, America does lag in a lot of ways. And yet here we are, still somehow, you know, you're in New York, I'm in Rhode Island, just around the East Coast. But like, we're still, it feels the leading edge. So are we seeing markets that, please?
14:49 Speaker 01 Yeah. There's a distinction between technological innovation and business innovation, well, and the application of technology to solve problems, right?
14:57 Speaker 00 Yes.
14:58 Speaker 01 So again, I think AI, you know, OpenAI happened in the US, sure. And there's obviously an enormous amount of money, you know, chasing after AI and now I'm thinking about how it's going to be affecting all kinds of business. And opportunities going forward. However, I do believe that there is again the scale of opportunity. When you have in India, for example, the unified payments system that they've put into place. UPI. UPI. Absolutely. All of the the infrastructure and you know, India remarkable. I used to go to India actually quite a bit and then was away during COVID or probably a couple of years before. And when the first time I went back after COVID, I was like, wait, I'm getting a better cell phone signal,
15:37 Speaker 01 you know, and data download in Jai Por than I was getting in Midtown Manhattan. I mean, what they have done with geo networks and, you know, building the whole geo platform. So I think the fast advancing capacity building and integrated approach, you know, in a market like India. I just want to come back though to your original question because what I'm trying to answer is there are a whole host of opportunities across markets. So much of it has to do with the manager, right? Who you're giving your money to and the cohort of entrepreneurs. So what's frustrating is when you see great opportunities, but because of a dearth of risk capital or a local ecosystem to back,
16:16 Speaker 01 you see things going unfunded or companies scaling to a certain stage and then not able to raise, you know, a B round, a C round. You know, Southeast Asia is really interesting. Actually Philippines is like an incredibly hot market that everybody's been talking about. All of Southeast Asia is just on fire because of the shift out of China. So there's so much more money that's flowing, you know, into those markets. Philippines again is an individual case where there's a lot happening with remittances and a whole host of other social media platforms and other things that we've been tracking. But again, you've got the influx of the Chinese capital. So is that a net good or a net challenge? It's again, driving up valuations in Southeast Asia. And I think a lot of the local VCs would tell you it's not necessarily making it easier.
17:01 Speaker 00 Well, I mean, what is a VC's favorite thing to complain about? Well, first of all, it's why they weren't upgraded to first class. And the second is why prices are so high for seed stage companies.
17:08 Speaker 01 Right.
17:09 Speaker 00 You and I have been in our respective chairs long enough that we know that it's rain, shine, the tides come in, tides go out, and VCs are mad about seed prices. So I don't have a lot of sympathy for it because they were willing to invest at peak prices in 21. So why not slightly cheaper prices in 23? But I do agree, capital can be distortive. And certainly the change in focus from, I would say, investing in China to investing in markets that have a more amenable business climate, India to pick one, is material. So to answer the question, it sounds like Southeast Asia in general is a place where you would say early stage activity, burgeoning, super interesting, and people should look there for companies that are going to come up in the next generation.
17:46 Speaker 01 I mean, there's a lot happening there. There's an enormous amount, a lot of people are already focused on that. That was kind of a natural shift. So China happened, and then everyone, India and Southeast Asia, there was this rapid redirect.
17:57 Speaker 00 Yeah.
17:57 Speaker 01 Again, in the case of India, you've got this market of incredible scale.
18:00 Speaker 00 Yeah.
18:01 Speaker 01 So.
18:01 Speaker 00 The most populous nation in the world now.
18:03 Speaker 01 Yeah, absolutely. The most populous nation in the world. Again, all the infrastructure they built, I think, has suffered a little bit from some of the distortive effects of the amount of money and some of the discipline. But there are some incredible startup opportunities there. And it's incredibly entrepreneurial country, as we know. You know, you just look at just the Indians that have emigrated around the world. So I'm also just back from Abu Dhabi and Dubai. And I hope to be in Saudi very soon. And very early days there, very early days there. But incredible commitment from local investors, and we know that there's significant capital to be committed from local governance to developing a local ecosystem. So I was meeting with some VCs in both Abu Dhabi and Dubai, had some conversations with some investors active in Saudi.
18:47 Speaker 01 And I'm really interested to see what develops there. Again, it feels like a small part of the world, and I'm not saying that there's suddenly going to be, you know, 10 unicorns in the next six months. But it's just interesting to see when you've got capital and so many resources, not only financial capital, but also training and everything else going on. You know, what's going to be coming out of that part of the world?
19:10 Speaker 00 We have to take a very, very, very short break. But when we do get back, how governments can hinder or help their local startup ecosystem.
19:21 Speaker 00 One thing that I'm trying to track, and I'm going to phrase this in a way that doesn't get you in trouble, is the impact of different local governance structures on capital formation and startup growth. And my earlier hypotheses about China have mostly borne out, I think. And so I think when we talk about business advancement versus technological advancement in the US example, I think it's a great way to look at the issue from both sides. And I think it'll be fun to see which nations are able to build a startup, seeing through sheer dent of will and capital versus who already has some vines growing in the garden that they can tend and help support versus create whole cloth.
20:00 Speaker 01 Yeah. Wow. I've spent a lot of time on that in Latin America. So, you know, just to go back quickly, I joined Lovca to build it and open the office in New York in 2007. And a big part of what we did, we used to have a scorecard that tracked the investment ecosystem and the investment regulatory environment with 12 indicators, including minority shareholder rights, you know, local institutional investors, really detail that we produce for the Economist Intelligence Unit and the IDB. And the thing is, government support is so important, but you've got to manage it extremely carefully, right? We actually took one of the founders of Yozma in Israel on a road trip through to Colombia and Argentina and had him speaking to some of the governments in the region as they set
20:45 Speaker 01 up startup Chile back in the day, Fundo de Fundos, which was one of the Mexican, you know, initiatives. Brazil had Ban de Assa and other initiatives where there was, we were government sponsors fund of funds that were helping to develop those ecosystems. You know, it's hard to get the formula right. It's really important to have some, but unfortunately, trying to draw a straight line conclusion of this is exactly how you do it. There are just so many different factors that are going to influence.
21:10 Speaker 00 I would throw in just a sheer X factor. Like, you know, sometimes people come across the right idea at the right time with the right partner, with the right investor, and it goes gangbusters and then they recycle that capital back into their local area. Or it could not. It could be the right idea at the wrong time with the wrong investor. Or just, I think there's still always a little bit of luck in business, and I don't think Fully extract that from any particular work. But the way that I was thinking about this is there's two ways that governments can help or try to help start up ecosystems. And like I was thinking direct is, you know, fund of funds, using state capital to, you know, invest directly, perhaps sponsoring visas or just things that are very active. And then there's more indirect or passive things like tax structures and so forth. And I'm curious, when you talk to governments on your travels,
21:55 Speaker 00 do you have like a recommendation which way they should go if they want to be intelligent yet active?
22:00 Speaker 01 Well, I could tell you, I've had some, a couple of interesting conversations over the years. I'm thinking of one in particular in a Southeast Asian nation where, or Ecuador. I'm just sorry, I'm going to get in trouble now. I'm picking on Ecuador.
22:11 Speaker 00 Shout out Ecuador.
22:12 Speaker 01 Yeah. And there are absolutely investors in Ecuador. There are things happen there. We actually had a person on the research team in Ecuador for a while out of Latvia. But if from the top down, the government is controlling the economy in such a way, it is not, it's just, it creates an environment in which it makes it extremely difficult for entrepreneurs to feel incentivized. Or frankly, for investment capital flow.
22:35 Speaker 00 Yeah.
22:35 Speaker 01 I think I'm speaking more at the investor level than the entrepreneur. Because an incredible entrepreneur can pop up anywhere, right? But if you're trying to promote international capital flows into your market, and the conversations I've had is, oh, we're going to sponsor, we're going to offer this, we're going to offer this very small sort of symbolic, but you're running fundamentally a system that is not going to inspire any confidence from investors. Individual targeted programs, it's much more the bigger picture environment.
23:04 Speaker 00 Yes.
23:04 Speaker 01 You know, that's going to be, and I can't not mention Argentina in this mix as well, because let's face it, the Argentine entrepreneurs are incredible. They've been so successful. And it's a very difficult market to invest in. So I actually think we're starting to come into a situation, I noticed this in other places as well, where you would think that the public policy and the macro environment is what's going to support local entrepreneurs. But we have a lot of really poor governments around the world, frankly, everywhere. And if we were relying on the public sector. To drive innovation or create an environment that would allow startups to flourish, I think we'd be in a difficult position.
23:41 Speaker 00 Yeah, picking up on that. So the way that I think about it is if a government wants to help engender more startup activity, it can do things like invest into venture funds, whatever, as a passive partner. But having a business climate that is amenable to risk taking, where capital formation is protected, where there's good IP rights, it is just like there's things you can have put in place and then you have to kind of wait and then hopefully water things and things will sprout up. But you can't stop entrepreneurs. They are everywhere. And you've just got to give them the room, in the plant analogy, the soil and the water and the sun to grow. I was a terrible farmer. But sticking to that theme, though, I want to talk about green shoots before I let you go, because it sounds like things are a little bit better around the world than I thought. People are doing a lot of good work and there's
24:23 Speaker 00 a lot of conversations going on to make sure there's capital available for founders around the world, which is good. Where are we seeing green shoots? Are markets kind of perking back up? Has investor sentiment bottomed out? I'm trying to figure out when do we begin to regain our footing and mojo around the world and move back towards a less pessimistic narrative?
24:39 Speaker 01 You know, Alex, I'm smart enough to not answer that question. I give you your best, but I don't know if you're speaking to anybody who will predict, you know, where tech is going to go. I think we're still, we haven't seen the bottom yet. This is going to be a difficult year through the end of the year, for sure. I think like people are predicting at kind of the highest levels, you know, that 2024 will be a better year.
25:00 Speaker 00 Yeah.
25:00 Speaker 01 And I think what we will get, for example, is what are the other sources of capital that the industries will also not be the same? Just being at a level of venture, the industry is evolving a lot in terms of, you know, where money comes from, where it's going and how it's structured. It's much more difficult today to raise a blind pool of capital as a fund manager. And I think that's going to be true in the US for sure, definitely true globally. Institutional investors are concentrating their relationships with a shortlist of big fund managers, like KKR has an impact fund, KKR has a private credit fund, you know, they've all got strategies that are across.
25:36 Speaker 00 Sure.
25:37 Speaker 01 And actually, just to use the example of Africa, you've got like Helios or Africa Investor, DPI are all launching a venture platform. So it's much more the established managers. You've got a bit of a scenario in which you've got a handful of big winners that have been able to successfully establish themselves and raise larger pools of money. Beyond that, what you see is investors or even entrepreneurs bootstrapping and finding an individual deal and then doing club deals where they're looking for other investors to come around and partner in that. You know, there aren't that many really established VC funds, for example, in the Middle East. But again, you have a lot of wealth. Some of the trends that we see driving this going forward are the role of family offices and individual investors, which is, you know, there's a whole retail market thing, but
26:21 Speaker 01 even beyond that, just family offices and individuals targeting venture and wanting to get greater exposure and investing in their own markets because it's something that they're interested in. And frankly, the other thing that I see is the blurring of the lines between impact and tech investing and sort of mission-driven investments. So in a lot of our markets, we see commercial institutional investors or commercial GPs, but that are just focusing on outcomes other than purely financial returns. You know, hitting unicorn status, we've all seen how that scenario has played out globally. Again, you're a unicorn today and then what happened, you know?
27:00 Speaker 00 You're a horse the next.
27:01 Speaker 01 Exactly. Somebody just ripped that horn right off your forehead. So I'm thinking of like Flourish Ventures, for example, which grew out of a mid-yar, you know, as an active investor. So many of the investors that we see today focused particularly on Africa, but on other markets as well. Gates Foundation has a venture fund. You know, there's a whole host of different types of investors that are deploying money and thinking about how they invest and what outcomes they're looking for in a different way.
27:28 Speaker 00 So you will not go on the record predicting when we shall reach the market bottom and rebound from there on out, but I'll do it. I'll take a shot at that. I'm going to say halfway through Q4 of this year, Kate, we are going to see the end of sad times and the very beginning of green shoots towards a more happy macro climate. Because I think interest rates are going to go up a little bit more, but not too much. I think we've had enough pessimism and whining around in our sadness. China's real estate market didn't entirely implode and the American consumer is still going strong and we're seeing reshoring. So, cool. I'll say back half of Q4.
27:59 Speaker 01 Yeah. I mean, listen, I just think it also depends on where you're sitting because interest rates affects investors. And other parts of the world less than it does investors in the US, right? We're sitting kind of in the in the framework that we think about what's going to drive a turnaround. A lot of what's driving the challenges in the markets that I focus on is this risk off mentality, right? This reversion to kind of like the mean and geopolitical risk. Let's say that's such a big part of what's going on. China, you know, Ukraine, I mean, there's just so much geopolitical risk in the perception of, I won't go down a rabbit hole with China, which is very tempting to do.
28:30 Speaker 00 I know.
28:30 Speaker 01 But, you know, I mean, just all of the different types of risk perception and the lessons that we've learned in barreling into an economy and thinking then after the fact. So having said that, again, there's a lot of liquidity floating around in the global markets. I don't think I mentioned this, TMSIC, the Singapore not sovereign corporate fund is on our board. You've got GIC, you've got so much money pouring out of the Middle East. So I think thinking differently, an answer to when are things going to come back? Middle East is on now and money is flowing from the Middle East into China, into Southeast Asia. They're looking into Africa, they're looking to build. So I think we're seeing all kinds of changes in terms of where capital is coming from and where it's flowing to.
29:11 Speaker 01 And yeah, I would say 2024, I certainly hope and expect will be a better year than 2023.
29:17 Speaker 00 Well, I think that's going to be true, pretty much no matter how you slice it. I can't imagine a situation short of a war that none of us want to have happen happening, that we would end up in a worse place next year because we're going to have just, I think, more certainty and more time to have worked through the current kinks in the system. It's just going to be, you can't really hold down capitalist economies for too long. They always find some way to grow forward. So I'm staying bullish to that degree, if that makes sense.
29:40 Speaker 01 Yeah, absolutely. And again, the beauty for the markets that we cover is there's just so much growth opportunity.
29:45 Speaker 00 Yes.
29:46 Speaker 01 It's extraordinary. There's so much to be done. And that's again, our baseline thesis is you want to put a dollar to work really efficiently, put it into these markets, you've just got to find the right partner and the right, you know, opportunity. But there's so much to be built and, you know, large populations, again, increasingly digital penetration, just not only for the infrastructure, but, you know, mobile penetration in terms of, you know, whole societies are running everything on mobile, on a mobile phone, all purchases, payments. You know, are in places like Africa and much of India are running on mobile phones. So there's a lot to build on top of that.
30:20 Speaker 00 I just want to say everyone PCs are better. I hate this. I hate this mobile first world because the internet, the internet is always terrible on a mobile device. I'm like, I want a 40 inch monitor, you know, anyways, before I let you go, I have to ask what I'm calling the earnings call question. Because every time you dial into earnings call, there's always some poor analyst who stuck there who says, what's your generative AI strategy? Even if the company sells like shoes. So anyways, I'm very curious, just from your perspective, I know this is not your main focus, but generative AI hype around the world today, overhyped, underhyped, just about right.
30:50 Speaker 01 We just had a big conversation about this on our global tech council, which has VCs from Brazil, you know, Africa, Southeast Asia. And the thing is, I think this is another place where it's about business model innovation and the application of that technology, rather than the innovation itself. So it's like talking about technology. We came to a place where we were looking at our data and when you talk to investors and it's like, well, what business is not a technology business? If you don't have a technology element to your business in some way, even if it's a hundred year old family run business, digital strategy has got to be a part of what's going to create opportunity for you going forward. And this was exactly the conversation we have with our global tech council where they all talked about the many, many ways that they're not thinking about investing in some cutting edge AI chat GPT sort of knockoff,
31:34 Speaker 01 but rather how they were going to apply the technology to the businesses that they're running today. And then the other big question that we're asking, which really depends on the geography you're in, is how is it going to affect workforces? Right? Because there are places in the world where you have very large workforces. But again, there are a lot of places, Japan and others where, you know, this is a real, I've had this conversation with Canadian Pension Plan Investment Board. You know, they're looking at it in a big way and in what ways are robotics and AI and the rest of it going to fill some of the gaps and labor markets in some of those aging countries?
32:05 Speaker 00 Are you trying to tell me that in some parts of the world, birth rates are below the replacement rate? Cause that's going to be a, I mean, this is a super odd topic from what we brought you on, but you hit one of my favorite notes. I'm very curious, or I'm curious why we've managed to reach a point where AI and robotics is advancing to the point in which it's going to be able to replace more humans at a time which we've stopped making as many humans. And the fact that they seem to be kind of coming together at the same time to me, makes me wonder about like the future of our species, not in a bad way. Just I'm very curious about what we're going to see in the next, like I have a six month old. I wonder what the world's going to be like for her, because it does seem that these are changing very rapidly and very big ways.
32:39 Speaker 01 Yeah, Alex, I love this topic. I mean, you're putting it out at the end. Let me, I mean, I'll kind of put it in a bigger way.
32:45 Speaker 00 Yeah, sure.
32:45 Speaker 01 The way I think about it is the extraordinary liquidity that exists in the world and putting that money to good use to actually create an environment in which we are like putting a toilet in every home in India.
32:56 Speaker 00 Yes.
32:56 Speaker 01 Or, you know, solving basic problems rather than certain types of businesses that are not, I'm just, I'm trying to avoid picking on anybody.
33:05 Speaker 00 I know. You did a very good job. Except for Ecuador, you've been perfect.
33:08 Speaker 01 Right. Yeah. But I think that there is a real question around the scale of capital to be invested, how, where it's going to go, how that will influence and, you know, return expectations, all of these things. And frankly, as an organization, what I find is that when I have these conversations today, I'm sometimes thinking I'm going to be asked to leave my post and I can no longer represent the industry. But everyone is asking these questions. I mean, you know, there's an awareness, I think, particularly when you think about long-term investors, like again, there's sovereign funds, the Canadian pension plans.
33:42 Speaker 00 Right.
33:42 Speaker 01 The short term is at least in maybe more privately than venture is kind of gone because there's just an awareness that there are some fundamental drivers changing our societies and that we're going to have to do things differently in the future. One of the things that really makes me more optimistic is that this generation of young people in their twenties thinks so differently and they're focused on such different outcomes. I don't know if you see that among the entrepreneurs that you interact with. I'm really proud of our research team. We have someone from Mumbai, you know, a couple of people from Singapore, someone from Nigeria. We have an amazingly diverse, our most recent hire covering China. So we have an incredibly diverse team and we sponsor actually a lot of H1 visas and green cards here at GPCA.
34:25 Speaker 01 You know, the ideas and the perspective that they bring to the table is so different. No one wants to go work for Goldman Sachs anymore. So I put a lot of faith into the fact that the young generation is thinking differently about how this capital is going to be deployed and the kinds of companies that they want to work for.
34:40 Speaker 00 Absolutely. The only thing I'll add to that is I don't approve of people in their twenties because they run around too quickly and have too much energy. But if they do put that to good use, climate tech. Sustainability in general, reforming agriculture, making things a bit more equitable in terms of where goods get, I'm totally in favor of it. So Kate, I mean, told by my producer, we have to stop talking, but we'll have you back on and we will talk about life expectancy and robotic assistance and the future of the human race because-
35:03 Speaker 01 And climate, you mentioned climate. That's a, that's a whole other conversation.
35:07 Speaker 00 If we go any longer, Teresa will walk here from Jersey and slap me. So we'll let you go, but thank you so much, Kate. We really appreciate it. And we'll have you back on in a couple of quarters to talk about what happened in 2023 and how right I was that it was the back half of Q4 when the rebound began.
35:20 Speaker 01 Okay. Excellent. Thanks so much, Alex. Great talking with you.
35:24 Speaker 00 And that is our show for this fine Wednesday morning. A big thanks to Kate from the GPCA for jumping on. She's not on Twitter, amazingly enough, so you have to go to her website, which we will link to in the show notes. Now, a quick programming note, I am actually on vacation this week, so I recorded this last week, and that means that this Friday, we will not be hosting our usual Equity Friday news rundown show thing. Instead, we are going to have an episode of the TechCrunch Podcast hosted by none other than Daryl Etherington. It's tremendous. I love the guy. You're gonna have a great time. And this show is back on Monday. In the meantime, we are on Twitter, where we tweet under the handle EquityPod. I'm Alex. I tweet under the handle Alex, and we'll talk to you soon. Have a good one. Goodbye.
36:02 Speaker 00 Equity is hosted by myself, editor in chief of TechCrunch Plus, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azvedo. We are produced by Teresa Locan Solo with editing by Kell. Bryce Durbin is our illustrator, and a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening, and we'll talk to you next time.
Previous Well done, Pismo and Visa! You gave SoftBank a win Next Hey, stuck startups, reducing growth could make you less fundable Page updated October 26, 2026 · transcript and summary are machine-generated
