The Nest Investment Network: A Conversation with Raj Kulasingam
“The network effect you’ve created, whether money, people, connections, or ideas, is probably the biggest thing that The Nest has contributed to a very nascent market. I think the timing has been incredible.”
_ Raj Kulasingam, Senior Counsel at Dentons & angel investor
When we thought about creating our inaugural Impact report for #TheNest, in mid-2021, Raj Kulasingam was top of mind. We met Raj at the start of the COVID 19 pandemic, just as we launched The Nest investment pitches — a live Zoom pitch show that connects entrepreneurs in emerging markets to global investors. Since then, Raj has become a familiar face at The Nest both as an angel and audience member.
Raj Kulasingam is Senior Counsel at international law firm, Dentons, and an active investor (through SM River) on the continent, often investing with his partner Vishal Agarwal, Chairman and CEO at Full Circle, a private investment firm based out of Nairobi. Together, they are a dynamic duo focused on funding early-stage startups in Africa in logistics, fintech, healthtech, edtech, and others.
I sat down for an interview with Raj Kulasingam to discuss his involvement with The Nest and his journey into angel investing on the African continent.
Tell us more about yourself and how you became an angel investor.
I grew up in Malaysia when it was still an ‘early-stage developing country.’ I see a lot of parallels between the Malaysia I grew up in and the African continent today, and I believe that many African countries have the potential to grow as quickly as Malaysia did. I came to the UK to study law, qualified as a barrister, and then requalified as a solicitor when I realized I was happier in a corporate environment than donning a wig and going to court. I started my legal career advising on corporate M&A deals in the UK. I then transitioned into advising on energy/infrastructure project finance, private equity, and venture capital while at Dentons, where I was a partner for ten years. In 2010, I stepped down from the partnership and moved into a business development role. This change also gave me the time and flexibility to accelerate doing something I was passionate about — investing as an angel.
I started my angel investing journey in 2001 when I invested in my neighbor’s media technology company which wassold to Dow Jones in 2005. This gave me my first exit and a healthy return, and I’ve continued angel investing since then. I currently have more than 50 companies in my portfolio, five VC funds, and one private equity fund. All VC funds are early stage — four in Africa and one in the UK.
Over the past five years, I’ve invested almost exclusively with my partner Vishal Agarwal. We’re both keen on great companies and founders solving challenging problems. We are largely pre-seed to Series A/B investors because we believe that’s where we can add the most value.
For example, Vishal and I are investors in Welo, a South African health tech company that delivers healthcare services directly to people’s homes. Previously people had to get up at four o’clock in the morning, take a bus or taxi to access healthcare, and now that can be delivered right to their homes. That’s massive impact!
Are we impact investors? We don’t go into it thinking ‘we must invest in an impactful company.’ But we do know what we won’t invest in — we don’t invest in sectors such as gambling and gaming because we don’t feel that there’s any real impact there, and it doesn’t align with our values. We must be able to understand the problem being fixed, and add value with our experience, rolodex, and global networks.
How did you come across Untapped Global and the Nest?
It happened early on in the pandemic. Jim Chu reached out to Vishal and I after an initial introduction by a colleague. We hopped on a Zoom call, and he said, ‘look, I’m starting a pitch competition over Zoom called ‘The Nest,’ would you like to come on?’ We both said, ‘sure!’ At the time, no one knew what that meant, but we both felt that it would be impactful, exciting, and fun.
Pre-Covid, I was constantly on a plane traveling, meeting people, building and maintaining relationships, and trying to develop business for Dentons. At the same time, I was also looking for companies to invest in. When the pandemic struck, my life changed, and I suddenly found myself sitting at home. So, when Jim approached us about the Nest, I thought, what a fantastic idea that we can meet founders online via Zoom from home when everybody is figuring out how to engage with startups without physically meeting them. But what excited me was that you could reach companies you would otherwise not be able to reach. In the past, you had to meet founders, shake their hand and look them in the eye before investing. However, suddenly we had this virtual medium where you can meet founders/teams virtually and make investment decisions. It’s not quite the same as meeting in person, but it’s still brilliant when the pandemic prevented travel. We also enjoyed the fast-paced ‘Shark tank like’ deal-making of The Nest.
Vishal and I have invested in 33 companies in 2021 alone, and we’ve done them all via Zoom calls. We’ve only met two founders in person (in the UK and even then, after an initial Zoom meeting) prior to investing. So, meeting in person is no longer a prerequisite to investing. I think meeting virtually is a great leveler and a huge boost to our ability to invest in great startups. For founders, the opportunity to gain access to investors and capital virtually in a way that was not possible pre-pandemic can be the vital difference between success and failure.
I’ve been reading a great book, “Good to Great” by Jim C. Collins, that talks about the flywheel — every little bit of acceleration you put in makes the flywheel go five or ten times faster.
I think what Jim did with The Nest was start the flywheel. As a result, the Nest catalyzed a lot of different things. It’s been a good experience, and everybody wins — the investors, the founders, the advisers, and the ecosystem. Everyone who came onto the Nest or interacted with the Nest just made the flywheel go faster, and it continues.
What do you think The Nest has achieved so far?
The Nest has normalized Zoom pitching for emerging markets in a way that was unheard of. It’s given founders access to capital from all over the world, and investors access to founders. So, I would say the conclusion to draw is that The Nest has accelerated the pace and growth of the Africa tech ecosystem because you’ve given startups more capital and exposure. And I think the exposure piece is crucial. The coverage the Nest provides, just on social media alone, has got people excited about tech in Africa and investing in African startups.
What do you think The Nest should focus on more? And how can we further strengthen our proposition to entrepreneurs and investors?
The Nest works by connecting interested investors to founders after a pitch, but people get busy and connections slip through the cracks. If you could streamline the process, make setting up a meeting automatic at the click of a button, and if people can invest in a few clicks on the spot, that would be very cool. It would be interesting if you could do that for emerging markets.
Have you invested in any startups that have appeared on The Nest, and which startups?
Vishal and I invested in Yobante Express, a Senegalese logistics startup that appeared early on The Nest. We also invested in OnePipe, though Vishal had talked to the founder prior to his appearance on the Nest. We’ve also invested in Semoa, a Togolese startup that presented on The Nest’s Francophone vertical. We are also investors in Amp Global and introduced them to the Nest team, who selected them to appear on the Nest.
What metrics do you track when you are considering an investment?
That depends on the company’s stage. We have invested in founders that have just an idea. We’ve also invested in companies where we look at all the usual things like revenue, customer acquisition costs, churn, product-market fit, etc. However, probably the most important metric we use is IEI — integrity, energy, and intelligence of the founders and what their values are.
When investing in early-stage startups, we’re ultimately always betting on the team, their ability to execute, their experience and, if they have the right advisors and supporters around them. So, it’s about the founder, the team, and the space.
Everyone is doing remittances today, so it feels like a very crowded space. We like spaces which we understand, but we also like spaces that are a bit out of the box for us. For example, we just invested in Momint, a South African NFT company. We know very little about NFTs but we’re keen to learn about the space. This investment was one to learn about the space — fortunately for us, it looks like it could become big with web 03!
I think there’s a bit of messaging around us when we invest. International investors and VCs who may not have had much experience investing in Africa may be more comfortable investing in a startup if it has experienced local investors like us putting our own money into a deal. I think that this messaging piece is becoming more important for startups who want to attract quality value-add investors.
Why do you invest at the early stage?
I think that’s where we can add significant value. The valuation uptick between Pre-Seed and Series A can be anywhere between a multiple of 5x to 20x. As an early investor, that’s the range you’re looking for. In contrast, the multiples from Series A to Series B could be 2 to 3x, if you’re lucky. However, there are a lot more casualties between Pre-Seed and Series A, and you have to take that into account as an investor.
Amazingly, none of the African startups in our portfolio have gone bust. I’m sure one or two might. That will be unfortunate, but hopefully, even then, there would be positives coming out of it, such as jobs, experience and lessons learned.
Another important piece for us is that as our portfolio gets bigger, how can we cross-pollinate between our portfolio companies? So, we recently connected Welo, a healthcare startup in South Africa, to Flare, who are providing ambulance services in Kenya on an Uber-like platform. We’ve also invested in Life Store Pharmacies in Nigeria. Is there a play for them to work with Welo as a delivery service? Let’s see. For us, it’s about how we can help our portfolio companies connect to create value and grow. We have had founders we know refer other great startups to us as potential investment candidates. Value creation is multi-faceted and not one-dimensional and we are always looking for opportunities to connect people and create value.
With our backgrounds, we have historically been largely fintech investors, this year we aim to be extra focused on Healthtech deals.
What need is The Nest filling in the market?
The network effect you’ve created, whether money, people, connections, or ideas, is probably the biggest thing that The Nest has contributed to a very nascent market. I think the timing has been incredible. In February 2020, there was a lot of despair. I had one company that thought they were never going to be able to raise in that market. Then, when everything was shutting down, no one understood what the impact would be. However,18 months later, we’ve had the best year in cumulative capital invested in African startups.
I’ve been hugely privileged to be part of this process. The word that often comes to mind is serendipity. My grandparents are from Sri Lanka. Sri Lanka is also known as ‘serendip’, and serendipity is a word I love a lot because it’s the confluence of lots of different things. You don’t know how and why it happened, but it creates momentum. I think it’s very serendipitous that we came together last year, and something remarkable has come out of it.
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Click here to access The Nest 2020 — 2021 Impact Report developed with Aequalitas Capital Partners !
