Hammad Aslam, Investor Susa Ventures

by

Transcription

Pemo: Welcome Hammad. So great to have you on the show! I’d love to hear a lot about Susa Ventures and what you’re interested in investing in.

Hammad Aslam: Absolutely! Thank you for having me. It’s a pleasure to be here. Let me start off with telling you a little bit about Susa, and a little bit about me.

Pemo: Okay, okay.

Hammad Aslam: Susa, we’ve been around for many years now, 8 eight nine years at this point. Historically, Susa has been a seed stage fund. But now we are a seed stage and an early-stage fund. We focus on Seed investments and Series B and C investments. We have four focus areas – the way we view the world. We think about it in terms of SaaS, Fintech / Insurtech, Supply Chain / Logistics, and Healthcare. We recently closed on $375 million in our latest family of funds: $125 million is for the Seed Fund and $250MM is the Opportunity Fund, which we use for existing and net new Series B and C investments. Some of our big investments that you must have heard about include Robinhood, Flexport – We were first money in both businesses, Expanse on the SaaS side, Viz.ai on the Healthcare side. Stord is another logistics business that we’ve invested in, and we recently participated in their last round. So, you know, really exciting, really exciting track record. Our goal is always to partner with amazing businesses and to provide our help and support, and anything that we can do to help them succeed.  My background is in software and fintech investing. I joined Susa earlier this year. Prior to Susa, I was at Vista Equity, focusing on growth and buyout software investing and prior to that, I spent some time at Morgan Stanley as a Tech Investment Banker. So, it had been an amazing transition coming to Susa.

Pemo: And wow, some great names there and obviously, a good overview of the market. Tell me how it has been since the crisis? I know initially when I started doing podcasts when the lockdown happened in Palo Alto last year, that basically everyone just had lots of question marks about where things were going but now the market has really heated up. How’s it in the B and C series investing?

Hammad Aslam: Yeah, absolutely I think there are a few things that have happened over the last year, year and a half, and that’s really supercharged the VC market across all stages. But I think, in the beginning, and I’m sure you know this already, but in the beginning – in the first few months there was a lot of uncertainty, a lot of questions and then in the beginning of the summer, the market came roaring back.

Pemo: Yeah, yeah.

Hammad Aslam: I think there are a couple of things that have happened broadly when you think about early stage companies. When you think about their target customers – I think broadly across the entire US and even in the global economy – I think customers have started to become a lot more results and goals oriented. They’ve started to realize the importance in having high ROI solutions that can propel them in doing their business efficiently and effectively, and press on cost savings and all of those things, and I think that gives young growing companies a great opportunity to align with their potential customers and with their existing customers to really offer solutions that have hard ROIs, that provide a very real benefit to customers and as I think about the world, I think this is a trend that has definitely propelled us many years into the future, in terms of digital transformation. I mean, you see that in healthcare with telehealth just becoming the main and huge part of the conversation today. Whereas 2 years ago, before the pandemic, it wasn’t as front and center as we would have thought. And that’s just one example. Folks across the world, across industries, are looking for technology solutions that can solve the bottlenecks, that can solve problems that they have. Another great example that I want to highlight here is what you see with the global supply chain crunch that we’re facing right now.

Pemo: Oh yes, yeah.

Hammad Aslam: Folks like Ryan Petersen, the founder of Flexport are doing an amazing job trying to identify the problems that we have in the non-digitized world and figuring out solutions to those problems and how you can marry the interests of these young growing companies with solving broader customer problems and broader global problems. So that’s a very exciting trend that we’re seeing, even on the B and C side, and I think that’s something that’s a very, very good sign for startups.

Pemo: It’s like we’ve all been pushed towards more innovation very quickly, correct?

Hammad Aslam: Exactly! More innovation is always a great thing so as I see the world today, I think that’s going to be a big part of our conversations going forward.

Pemo: Sure. Yes and more innovation is exciting and it’s so great to be on that cutting edge of passion and creativity. But the other thing that’s emerged, which is a bit out of the conversation, the human use of technology like a lot of the social media sites are really being exposed for their lack of humanity. So, I think that’s another balance that needs to be addressed obviously and the crisis has done that. And it seems like we’re going to have to live with it. it’s not going to go away and we’re having to adjust to a whole new world. So a really interesting perspective.  Tell me, Hammad, what do you see coming out of the global supply crisis and shipping crisis, that has just been going on for a very long time now. What do you see are the opportunities there?

Hammad Aslam: Yeah, absolutely. We, at Susa, have a history of and we always get really excited about looking at solutions that are focused on what we like to call “dusty” industries. That’s the supply chain, the logistics of the world. And insurance being another play there. Really what defines these dusty industries is that they’re way behind in their digital transformation relative to everyone else.  So as we think about the kind of solutions that will come out here I think, folks, entrepreneurs and founders are doing a great job at identifying specific problems that exist within our global networks. Specifically within the supply chain, what Flexport for example is doing, is incredible. Thinking about how to invoice better, for example, is another interesting idea. How to think about cross-border logistics, be it trucking or maritime [is another].  There are significant and substantial gaps within our networks. When I say networks, I really mean all different facets of our life that haven’t been digitized as much as they should have. So I think there’s going to be an increased focus on some of those areas as we go forward. I think one thing that I’m realizing a lot is that as humans and as a global community, as individual nations and societies, we, with the globalization of the world and the way things have trended over the last fifty years, have  taken on a lot of these global systemic risks. Shipping lane, for example, is a huge systemic risk for us. You saw when a ship got stuck in the Suez Canal, everything across the board was impacted for multiple weeks. Being able to mitigate some of those systemic risks, as you would put it, by the use of effective and efficient use of technology both in terms of predicting it and also implementing solutions that would be that would play a major role in potentially averting some of those problems in the future, I think [this] is a pretty exciting way of how to think about the future from here.  And we’re going to see the same types of innovations and exciting things coming out in some of the other industries which are ahead in Digital Transformation. Fintech, for example, is one thing that you focus on quite a bit.

Pemo: Yes.

Hammad Aslam: There’s a lot of excitement around aligning end-customer  interests with the company and also end-user interests with each other. There are a lot of companies that are doing some very exciting stuff in that regard as well. So, I think the pandemic has definitely shifted people’s opinions, customers’ opinions, companies’ opinions into a wider adoption of some of those things as well.

Pemo: It’s very exciting that the crisis has definitely propelled fintech innovation and acceptance so fast. It is fantastic. So, it’s obvious you know two sides to the sword as they always say – a negative and a positive side. The other question I was going to ask you, you mentioned that your firm invested in Robinhood. What do you think? What’s your perspective personally about the drama that happened with GameStop a while back?

Hammad Aslam: Look, I think ultimately…

Pemo: And it was just another drama in the whole drama period. But it was pretty amazing, wasn’t it?

Hammad Aslam: Yeah, yeah. I mean it was, you know, certainly remarkable to see the strength of retail investing really coming out and if you set aside everything about what happened, and you know, whether GameStop is overvalued or undervalued. Setting all of that aside, I think at the very core of it, one thing that we really saw coming out of it is just how different investing is in today’s world for a retail investor and I think a lot of that has been done because Robinhood has democratized the way investing happens in the US. I mean, we all remember 5 years ago, 7 years ago – it’s not too long ago, right? This is not even a lifetime ago – we had to go to Fidelity and open a brokerage account and it took a long time to get it done. If you wanted to trade options or if you wanted to trade something illiquid, you had to pay commissions: really high commissions on top of it, which was just not very conducive for a retail investor. And the market was [and] the market structures that were in place were just really there to help and assist institutional investors or accredited investors. But an average retail investor just didn’t have an avenue to participate in the market. So when you think about the GameStop saga and everything that’s happened since then, I think this is a power of where we’re headed, where we are democratizing these stock markets or generally, investing. We’re putting it in the hands of people and giving them the choice, in many ways, giving them the choice to act on what they think, which I think is a brilliant idea. So, I think ultimately it shows the strength of the Robinhood platform and what the founders of Robinhood and the company itself has been able to achieve in terms of the goals that they’ve set forth. And you can argue a lot about the GameStop saga and there are a lot of things within the market structures that that caused that, but I think at the very core of it, this is sort a sign that that things are getting a lot more democratic and people are getting their hands on structures that were initially out of bounds for them.

Pemo: And it’s also interesting with startups definitely [that] timing is a big factor, which is something no one can control really. And I would say that the millennial market, once the crisis started, basically took that opportunity to be trading online and learning about that, which is great because there’ve been a lot of setbacks for the millennial market. So they took their own power, empowerment and did something about it. So yeah, definitely another positive sign to democratize that function that we never had the opportunity years ago. Thanks so much. Hammad. Where do you think things are going generally as far as innovation? You have such an enviable seat at the table as an investor. What’s your perspective about it?

Hammad Aslam: That’s a great question and you know, we can honestly talk about it for hours, in terms of where innovation is going. But let’s… I think maybe it would be helpful if we just talk about some of the things that I’m seeing in fintech. I think we can do that.

 Pemo: Okay, that’d be great. Okay.

Hammad Aslam: So, there are a few things that I’m really excited about in terms of where innovation is going.  The first thing I want to highlight is just the level of growth and innovation that’s coming out of emerging markets, which is very exciting in today’s world. You know, I’m originally from Pakistan. So I’ve been following the Pakistani landscape very closely. You see a lot of very interesting solutions coming out in recent years, in the last 12 – 24 months and it’s been very exciting to see that. Upfront, some of things that I want to highlight there are digital ledger and short-term working capital loan solutions coming out for SMB retailers which form a substantial part of the economy there. There are solutions that are more focused on agriculture and offering farmers ways to be able to sell their product better and be able to get the loans that they desperately need from a working capital perspective. There are solutions that are tackling some of the huge underbanked population within the Pakistani economy. Some of them are consumer-facing solutions that are creating neobanks, which are offering you know bank accounts and debit cards to people who previously didn’t have them. Salary advances and other things coming out of that. So, you know, a lot of innovation is happening, and Pakistan is just a case study here. We’re seeing that across the board – we are seeing that in Africa as well. There’s a company that we invested in, Okra, which is essentially developing something close to a Plaid for Nigeria, which is very exciting.  And we see similar innovations happening in LatAm as well. I think what people are doing at the end of the day is that they’re looking at existing structures and they’re saying: “Hey these are very inefficient. There’s a lot of leakage within these existing systems and there are ways that we can improve that. We can reduce this friction when it comes to some of those existing structures and find creative ways to offer that to their customers – both consumers and businesses alike.  Same thing with Latin America. Susa has been very focused on Latin America in recent history. We’ve made quite a few very interesting and exciting fintech investments in Mexico and Colombia, and we’re looking at the Brazilian market as well. So, we see all this happening a lot and that’s one area that I think is very exciting.  The other piece is when you think about the way the rails of our financial system are set up, there have been a lot of very exciting innovations that have happened historically, or call it in the last 5 to 10 years. And these are full stack solutions that provide fintech infrastructure but they provide it in their own offering. So, the companies that I’m thinking about here are the PayPal’s of the world, the Stripe’s of the world, Marqeta on card issuing. What they’re doing is very innovative within the current structures of the infrastructure both in payments and on the other sides. But now we’re seeing a lot of very exciting companies that hate to use this word again, but they’re democratizing this for their end customers: businesses in this case.

 Hammad Aslam: You have Finix that is just drastically changing the way payment facilitation happens. The way you think about the payments layer cake is changing and moving away from the traditional PayFac by offering a white label solution. So, this broader idea of white labeling things, I think, is going to be very exciting. We invested in Treasury Prime that’s doing something very similar on the banking services side. So, certainly an exciting place there and I think there are going to be more innovations happening on that front as well. Definitely a pretty exciting area for me as I think about fintech. The last thing I would highlight here is that these existing rails and these existing pipelines often tend to have friction that comes either in the form of incorrect improper data and in terms of lack of precision in the data. Maybe there’s a lag or maybe there’s some sort of those challenges. As we think about the role of data within fintech, that’s evolving very quickly and companies are also thinking about that, and in drastically different ways. Certain providers that are focused on reducing friction in terms of how data gets transferred, how it gets ingested and how it gets processed will definitely have a very strong future here. That’s another trend that I’m digging into. I want to sort of learn more about it and definitely one that I think is particularly exciting as we think about the world ahead.

Pemo: And that’s a great overview Hammad. it’s so interesting that countries that have a lot of unbanked people have actually come out with a lot of new innovations. And I guess when you have a problem, some people in the community will try and solve it. So, it’s interesting because it has certainly supported the fintech community in the US. I came from Ireland and London over 11 years ago and I was sort of amazed that it was such a slow uptake of Fintech in the US and asked people you know why this is? I guess the incumbents just had a very strong hold on everything and now they’re having to open up to a lot of fintech innovation particularly with the crisis but also with all these innovations that are coming from countries that in the past they wouldn’t have paid too much attention to so it’s you’ve got to have the problem and for it to be painful enough to try and solve it. Would you agree?

Hammad Aslam: No absolutely! Absolutely! I mean taking off my VC hat for a second and just thinking about it from a consumer perspective. The first time I visited London was many, many years ago and I remember the thing that blew me away about the payment system in England was that you had this idea of contactless cards! At that time, contactless cards were not a thing in the U.S. It’s just not something that banks here were doing at that time. You think back to it, and you realize – and this is a great example in many ways – how Europe has been ahead of the U.S. in terms of the fintech revolution and digitalization in some respects. These are the crazy dislocations that you see sometimes. You think there are some ideas that seem so obvious in terms of customer ease of access, in terms of removing some of the friction we talked about, in terms of creating a better experience and improving security – a lot of those aspects.  It’s a great example of just how many different dislocations we have in today’s world, and we have a long way to go. Sometimes, people think about fintech as reaching its crescendo, but I think we are still in very early stages. And this is not even talking about Web3 and Crypto. I would think of it as a completely separate animal relative to the traditional fintech that we think about. But there’s a lot of exciting stuff going on there.

Pemo: Yeah, yeah, it’s why we’re still involved. That’s for sure! Thank you so much, Hammad, for such an interesting conversation. And yeah, looking forward to having you back on the show later down the line.

Hammad Aslam: Absolutely! Pleasure talking to you today as well. Thanks for having me!

Pemo: Thank you.