Rising Stars Q&A – Taraec Hussein, FGV

Thomas Tsao, a co-founder of Malaysia-headquartered venture capital firm Gobi Partners that manages various corporate venturing vehicles, said: “Taraec is the investment head of Fatima Gobi Ventures, a corporate venture capital (CVC) fund managed by Pakistan-based [conglomerate] Fatima Group and emerging markets VC specialist, Gobi Partners.

“Taraec has been instrumental in the establishment of Fatima Gobi Ventures and its maiden fund in Pakistan, Techxila Fund I in 2019. He played a key role in fundraising, secured $12m for the first close, deal sourcing as well as execution, completed five investments to date, and helped secure follow-on funding for portfolio companies from notable investors in the US, Middle East and Southeast Asia, most of which were first-time investors in a Pakistan-based startup.

“In less than one year since launch, Techxila Fund I has already generated an uplift, achieving a MOIC (multiple on invested capital) of 1.3-times as of September 30, 2020.”

1. First, just give us a quick overview of who you work for, what you do, and how long you have been doing it.

My name is Taraec Hussein, I lead the investment team of a CVC and VC hybrid called Fatima Gobi Ventures (FGV).

FGV is a GP partnership between a Pakistan-based CVC Fatima Ventures and emerging market VC Gobi Partners. I lead the establishment of FGV in 2019 and in May 2020, we launched our maiden fund, Techxila Fund I Limited Partnership (LP), a $20m early-stage fund targeting startups in Pakistan. Following the launch, I led the investment in five tech companies across mobility, fintech, B2B (business-to-business) commerce, industrial software and travel.

We are currently the most active CVC in Pakistan and our investees have drawn some illustrious backers from the West including Y Combinator, Draper, First Round and more. I lead the following functions for the GP and fund: fundraising, investments, monitoring, LP engagement, LP reporting, hiring and other general administrative functions.

Prior to my role at FGV, I was an investment vice-president (VP) at Gobi Partners since 2017. I was mentored by Thomas Tsao, the founding partner of Gobi Partners and learnt VC best practices under his guidance. Prior to joining Gobi Partners, I was an investment banker for six years with the largest bank in Malaysia, Maybank.

2. What attracted you to CVC?

I believe VC and CVC is a great tool for social benefit. I was attracted to leading the establishment of a new hybrid structure of bringing together the best CVC and VC to invest in relatively risky emerging market such as Pakistan. I believe in order to navigate a highly complex local market context and ensure the best chances of success, we needed to work with a best-in-class player on the ground and leverage the best practices of a regional VC. I believe we have achieved this through our structure and we are well positioned to be the premier CVC and VC in Pakistan.

3. What have been your greatest successes at your unit?

It is still early in our progression but we have achieved little successes to date, such as:

Building a great lean team on the ground, with an emphasis of giving opportunities to women in tech. To date, we have a team of seven professions, of which three are women.

Investing in five deals that were executed quickly given significant demand in these deals. Two of the deals we invested in were backed by YC and secured funding from blue-chip VCs in the Valley.

Generated an uplift for the fund within a year from launch. FGV’s first investment Airlift completed their series A funding securing First Round Capital at a valuation uplift relative to FGV’s entry price at the seed round. As a result of this, the fund is now trading at a MOIC of 1.3-times.

Airlift has also broken records in Pakistan, raising the largest seed round in Pakistan of $2.2m, raising the largest series A round in Pakistan of $22m and attracting blue-chip VCs such as Frist Round and Quiet Capital into the Pakistani tech ecosystem.

Designing and implementing an environmental and social due diligence and monitoring process for the fund as well as for our investees.

Achieving the first close of $12m, raising money from local corporates and investors, most of which were first-time investors in a CVC or VC.

4. What have been your biggest challenges?

Navigating the impact of covid-19. We advised companies to be capital efficient and conserve cash during the lockdowns. We were forced to make difficult decisions such as choosing to hibernate the services of one of our investees and retrenching and furloughing non-essential employees of our investees. We also had to convince foreign VCs to invest in our investees to ensure they are well capped to weather the pandemic.

All our LPs are first-time investors in a fund so securing our first close was a key challenge as we had to educate our LPs on the CVC and VC space and how an investment in a fund works. In addition, we had to compete with returns from the public markets in Pakistan that were generating an average of 20%-plus IRR, similar to VC funds but with a much lower risk profile.

Working with groups that are deemed competitors of our parent company, Fatima Group. We focus on building a comprehensive investment strategy and an inclusive platform to encourage competing LPs to work together and collaborate for the success of our investees.

5. What is your main professional ambition for the future?

My ambition is to design and manage more funds under FGV. I would like FGV to be a key component to the growth of the Pakistani tech ecosystem, help build multiple unicorns in the market and provide healthy returns to our LPs. I would also like to connect the Pakistani ecosystem with other developing ecosystems such as Southeast Asia and the Middle East in order to generate more liquidity in the market and provide value for our startups. Lastly, I would like to help guide our parent company, Fatima Group to new tech opportunities and explore ways we can integrate these new businesses with their heritage business units.

6. What do you think all CVCs could do better to make it a stronger industry?

We need to see more CVC collaborate to ensure key technologies that help improve efficiency for an entire industry is available for key stakeholders. CVCs should be encouraged to co-invest with other CVCs similar to how VCs co-invest together to minimize risk.

CVCs need to engage in an open way to discuss opportunities and risk in the industry and discuss pain points as well as best practices for a CVC. With this, smaller CVCs can learn from established CVCs and we can get ensure all players are towing in the same direction.

CVCs need to be fully committed to empowering the next generation of founders and not just establish a CVC for branding purposes.

7. What are some of your corporate parent’s technology needs and corporate strategy amid the pandemic, as well as your CVC unit’s pain points?

Our parent company is in the agricultural and power industry. A number of their tech requirements are as follows:

Digitising internal processes to achieve greater efficiency. At present, most of their process are manual.

Using technology to encourage documentation of the economy. In Pakistan, most small and mid-size enterprises (SMEs) do not record financial information so they can evade paying taxes. This is a challenge for many SMEs our parent company works with. We have a focus on the fintech space in order to identify opportunities that solve his challenge.

Streamlining recruitment with technology. Our parent company employs over 3000 professionals and incur a significant cost at the moment. We are looking at technologies that will help our parent and other corporates to reduce HR cost and enhance the efficiency of the managing talent.

Enabling greater productivity among SMEs that work with our parent company such as distributors, wholesalers and ultimately farmers. One opportunity we have identified is providing credit to these smaller players that are typically unbacked, giving them the tools to generate more sales and broaden their reach.

8. And, finally, for colour, what did you do prior to CVC or in your spare time?

Before joining FGV, I was an investment VP at Gobi Partners since 2017. Prior to joining Gobi Partners, I was an investment banker for 6 years with the largest bank in Malaysia, Maybank. I graduated with a bachelor of economics and finance from University of Manchester in 2010. In my spare time, I enjoy playing golf, travelling and reading.