Saurabh Gupta is Managing Partner of DST Global. He is currently an observer on the Boards of Brex, Dada, Rappi, Swiggy, and Udaan and led DST’s investment in Airbnb.
DST is a venture capital firm focusing on late stage technology investments globally. DST has invested in leading global technology companies including Facebook, Twitter, Alibaba, JD.com, Didi, Whatsapp, Snapchat, Airbnb and Spotify. In Latin America, DST invested in Nubank and Rappi.
In this interview, Saurabh talks about his investment strategy for Brazil and Latin America, analyzes the entrepreneurial ecosystems of China, Silicon Valley, Brazil and offers key advice to startup founders.
BayBrazil: Since DST Global was found in 2009, the tech industry has been changing in many ways, including the innovation’s speed. Is there any change on the way DST evaluates startups since then?
Saurabh: As a firm, we are structured as one global integrated team with offices in Hong Kong, Beijing, London, New York, and Silicon Valley – we believe this structure helps us keep pace with the speed of innovation. For example, understanding which new business models are doing well in one geographic region helps us identify and evaluate opportunities in others. Since the very beginning, partnering with strong founders, who are passionate about solving large problems and able to build world-class teams, continues to be the most important criteria in our investment decision.
BayBrazil: DST Global has most of its investments in non-U.S. companies, focusing on China. What’s the main difference among entrepreneurs from China and Silicon Valley?
Saurabh: Approximately one-third of DST Global’s capital is invested in U.S. based companies. Comparing U.S. and China, both markets have an exceptionally deep and talented pool of entrepreneurs. Given the relative maturity of the offline players in the two markets, Silicon Valley-based companies are more often disrupting an incumbent in
the industry while Chinese companies are more often laying the foundations in underdeveloped industries. Historically, Silicon Valley entrepreneurs have had a more global focus; however, there are early signs that the ambitions of Chinese tech entrepreneurs are becoming increasingly global.
BayBrazil: DST Global doesn’t have board seats in invested companies. What are the most important characteristics when analyzing a startup for potential investment?
Saurabh: Although we don’t take board seats in any of our portfolio companies, we are very actively involved in helping and advising them. The reason we don’t take board seats is that we believe that the founder(s) and their team are well qualified to make the best long-term decisions for the business – our job is to be an advisor and thought partner. Given that we are putting our trust in the founder’s vision and execution capabilities, we spend a lot of time with them prior to making an investment decision. This is a critical element of our investment process.
BayBrazil: Do Brazilian economic and political issues interfere in your decision of investing in Brazil?
Saurabh: We certainly pay close attention to what is happening in the macro environment; however, we believe the best teams will survive and thrive even in adverse external environments. Many of the most successful consumer internet businesses today were started or scaled during the last two financial crises.
BayBrazil: DST Global has led the more than $200 million financing in Rappi, the Colombian on-demand delivery startup. Both Rappi and Nubank are Latin American startups backed by DST that have surpassed a billion-dollar valuation with new venture capital funding in 2018. Could you talk about investment perspectives on Latin America startups and if you see Brazil as a leader in the region?
Saurabh: We see Latin America – and Brazil, given that it contributes 40% of the region’s GDP – as attractive geography for a few reasons:
First, with over $5 trillion of GDP, $2 trillion of retail spend, a population of almost 600 million, and over 350 million internet users, the market is very large.
Second, we see significant room for the internet economy to grow – for example, e-commerce penetration across Latin America is under 3%; we see no fundamental reason why over time penetration won’t reach the 20%+ level currently seen in China.
Third, local conditions create uniquely attractive opportunities: e.g., in the case of Rappi, large densely populated cities make on-demand delivery economically viable; in the case of Nubank, the fact that the financial services market has until now been oligopolistic makes the product very attractive.
Fourth, similar to what we’ve seen in China and India, the uniqueness of local markets in Latin America make them well suited for local and regional companies to win.
BayBrazil: Brex, San Francisco-based startup with Brazilian founders, received a $125 million Series C round of funding with DST Global as one of the leaders. Do you think starting a business in the Bay Area is easier to reach investors or the competition makes it harder?
Saurabh: While it may be somewhat easier for startups to get connected with investors if they are based in the Bay Area, given the increasingly global nature of capital, strong companies are increasingly able to attract high-quality investors regardless of geography. I believe the decision of which market to start in, should be influenced by – where the problem that the founder is trying to solve is most acute, and by his or her confidence in being able to hire and execute in that region.
BayBrazil: Is there any advice for an entrepreneur in Brazil looking for international investors?
Saurabh: Try to find large problems that you are passionate about and then focus on execution. I would also suggest having a mix of local and international investors who can be complementary in how they help the company.