From Poultry Farming to Venture Investing with ZX Ventures
Updated: Jan 5, 2022
AB InBev is the world’s largest brewer. Although AB InBev has a centuries old history, very little is known about how this leading brew house is reimagining the possible through its venture & innovation arm, ZX Ventures. Recently, we sat down with Daniel Obaseki to learn more about ZX Ventures, his journey as an investor and his advice for the next generation of venture investors at London Business School.
Who is Daniel Obaseki?
Daniel is an Investment Partner with ZX Ventures leading their Europe & Africa Beverage fund. He was born in Nigeria, raised in New York and has invested all over the world. Although investing has been a common thread throughout his life, he is passionate about making an impact at the grassroots level whether it’s seeing his hard work create long queues outside of Zimbabwe’s first KFC or whether it’s through finding the next beverage that satisfies our ever-evolving wellness palate.
The spectrum of investing across the board
Daniel has worked in public equities, development finance, private equity, growth equity and now venture investing. Although finding alpha is in Daniel’s DNA, what differentiates a great investor from a good investor is the ability to find the singular truth in the investment opportunity. As investors are in an increasingly digitized world, it is an underrated skill to cut through the noise and stick to your core investment thesis.
What characterizes different investing roles
In public equities, don’t try to be the smartest guy in the room. Rather, focus on managing the tension in decision making that exists in the nexus of the macro environment, the fundamentals of the company and the technical signals from the markets.
In development finance, stakeholder management matters the most. The deals are inherently impactful but are hard to manage due to regulatory or bureaucratic concerns.
As we move towards private equity and growth equity, it’s really about scale. Finding a platform that has the potential to scale is important because scale attracts stellar management teams. This combination of people and proposition creates the right tailwinds for a late-stage capital investment.
In venture, it is strictly about people (at least in the early stages). You’re backing world class individuals who know what it means to take the leap. Partners at ZX Ventures spend majority of their time with founders and will often act as sounding boards for those entrepreneurs.
What’s trending in VC
Health & wellness. In the wake of the global pandemic, consumer awareness and demand for wellness has been trending upwards and investors like ZX are highly bullish on products that provide us with cleaner ways of living. In fact, according to an April 2021 survey from Mckinsey on the future of the wellness market, “Consumers are keen for natural/clean products in an array of areas, such as skincare, cosmetics, multivitamins, subscription food services, and sleep enhancers”. If you find yourself developing a food product or a beverage that is radically transforming our lifestyle, you may want to reach out to the ZX team.
Sourcing deals at ZX
The beverage fund particularly looks for Seed through Series B deals aligned to its investment thesis. The fund sources deals through a healthy mix of inbound (AB InBev’s network) and outbound (conferences, demo days and the team’s network capital).
For late-stage deals, there is a growing trend of investment banks getting involved in the sourcing process. If you think about it, it’s an interesting way for banks to get involved in the asset class, especially in a world of increasingly expanding growth checks.
The value proposition of Corporate Venture Capital (CVC)
Much has been written about how CVCs provide a competitive edge to founders, but the fact of the matter is that many founders want to work with a strategic investor early on. The strategics bring a range of capabilities as former operators, supplemented by synergies arising due to their distribution, marketing and sales networks. For example, one of Daniel’s team members ran a craft brewery for 6 years and is now working with founders on their expansion strategy. Sounds about right, yes?
Furthermore, it is important to understand that decision making at a CVC is split evenly between generating a return for shareholders vs. finding an investment that complements the strategic’s business goals.
Daniel’s most proud investment
CHICKEN! When Daniel was doing growth equity early in his career, he helped scale a large poultry business to ultimately become the 2nd largest poultry operation in West Africa and a pan-African platform operating in 15 African countries. He helped de-list the company in South Africa, organically grow the brand to other nations such as Zimbabwe and proudly share his memories of operating a business with the LBS students in attendance.
The importance of supply chain in today’s world
Addressing the elephant in the room, the issue of supply chain disruption in the wake of COVID was brought up by a student. It is increasingly important for companies to build sustainable supply chains as geopolitical concerns are disrupting global trade and logistics. For companies manufacturing tangible products, a CVC such as ZX can inherently add a lot of value in putting the products on retailer shelves and helping founders reach their audience in a faster and more sustainable way.
Breaking into VC
For budding investors, here’s a non-exhaustive list of what investors value in their Investment Associates:
Be self-aware and have high intellectual horsepower
Be comfortable making decisions with limited data
On the flipside, don’t be blindsided by a ton of data in developed markets; leverage the data to generate insights that underpin a differentiated investment thesis
Have empathy; entrepreneurship is tough
Be creative; hustle and find ways to get in front of people
After conversing with an Investment Partner at ZX, it was easy to understand why founders value CVCs on their cap table. A CVC does bring in an element of competitive advantage that a traditional VC cannot. However, founders must be wary to not solely base their expansion plans on the strategic’s vast resources. After all, a sustainable business model is a sound business model that can ride the ups and downs of market conditions.