Good Investing Talks - Can Babylon Health dominate digital health, Per Brilioth (VNV Global)?

Episode Date: March 19, 2021

With Per Brilioth of VNV Global, I discussed the history of the company, the current portfolio, and Babylon Health.

Hello, Pair. It's great to have you on for our good investing talks. How are you doing? I'm fine. Thank you. How are you? I'm good. I'm happy to have you here and have the chance to talk with you about Vostok NAFTA, Vostok New Ventures and V&V Global to get to know the company a bit better. And you've been 20 years in the company, I think, or already 21. Is this true? Yeah, yeah, it's of that order. Yeah, September. I joined September 2000. So then let me start with a bit of a challenging question for the beginning. What was what were your biggest mistakes in the times you've been at. But before you answer, I want to use the time to just show the disclaimer and show some information and you have some time to think about it.

You already know the message from the disclaimer. I'm giving you all we are doing here is a qualified talk. It's no advice and recommendation. And always do your own work. And in this point, I also have to disclose that I'm holding a position in VNV Global. So I might be a bit biased. So take all of my interviews and this talk from me as me being a shareholder. then coming back to you pair what is your answer on my bit challenging question

there's too many answers i think but uh i i mean you know we we're i guess you know all throughout these years we've been exposed to volatile markets and especially as we were very focused on eastern europe and especially russia for many years it's been a volatile market And you know, you, you, you, you become absolutely mad if you start to trade with the rearview mirror. But, but, you know, if you allow yourself that and you look at your mistakes, then of course there are certain points of time where you should have not stayed, you should have exited. You know, Russia has gone to zero twice, at least during my presence there. So there's been, you know, to see when things are getting out. of hand. But at that period, we were also involved in the public markets in Russia. And we are

very, very long-term investors. And the good thing about, you know, being doing what we do now is that you have to be prepared for volatility, but we're not traders. We are long-term investors. So that's one thing. And that springs to mind, you know, so to sort of be mindful of macro volatility. But and the other one I think is that I think we diluted ourselves many times too early in what we do today in that we we we let other shareholders in as a too low valuation. I think that's especially relevant for a veto, which was our large holding the Craigslist, if you will, of Russia. and that we we at when we when when that company eventually was sold or when we we exited we own 13 and a half percent but we were basically had the opportunity to own much more than that we diluted ourselves along the way which was a bad investment but

it became very good in the end and you know the IRA was very good and and and but it could have been better that's take the chance for the beginning of the interview to look a bit back in your history and I want to do this with free snippets from your annual reports. I've taken the portfolio from 2010, 2015 and 2020. I will share them with you in a second. Here you have the portfolio from 2010 and I hope you already see it it's it are the early science that you're turning into a tech investor in this portfolio and I will also show the portfolio of 2015 there are Vito is one of the biggest holdings but you also had some of the tech investments and the portfolio of

2020 is here they have they don't have a pie anymore so it's a different way of presenting it. But maybe let's go back a bit into the portfolio of 2010 and help me understand where you were coming from and this time as Vostok NAFTA and how also this kind of pink part of the portfolio became your biggest part of the portfolio. Why did you let me say it like this fall in love with this tech and a veto investments or a veto based tech investments? Maybe let's try like this yeah yeah no i think where we came from is of course that this this company was founded by a swedish oil and mining entrepreneur called adolf lundine and he sort of he had become you know liquid in for the first time in his life in the early 90s and that coincided with

russia becoming russia and not the soviet union and especially relevant for capital markets and he grew very fascinated, but that you could sort of buy the assets that he was drilling after in a very expensive way. You could buy those very cheaply on the Russian stock exchange. So he used the liquidity that he received from an exit that he done in Argentina to buy large parts of what was shares in the newly privatized industry from the Soviet Union into the very young Russian capital markets. And then he formed Vostok around that. And Vostok then was very focused on his type of sectors.

And then what you see there in 2010 was it, right? We have a lot large remnants. I think the largest source was TNK Holding, which is an oil company. And there's large, large mining assets also present there in different, within different commodities. And so the bulk of the portfolio was still very heavily exposed to the traditional sectors of where we came from. But the pink part is, I guess, is I guess me starting to apply what has always been very important for us and all the way from the mid-90s to today is to have a portfolio that our typical shareholder, cannot get exposed to themselves and uh you know russia in the 90s was very it was very difficult

to buy russian stocks it took two three months to settle there were no ADRs and so um the you know we were like T plus three exposure to russia and and with time sort of Russia became a more normal market and and anyone could sort of trade it and anyone could analyze it and and and and and we started successfully sort of exiting the parts of the markets, which were easy for anyone to access. And that led us to starting to look at private opportunities. I guess around about 2005, we started doing private investments. And there was a general skepticism around Russia. Can Russian ever become a normal country and a normal market? The Russian, consumers, do they really want to consume the things that we do in the West?

And we applied that to this concept of what works in the West also works here in Russia. And so we invested into business models that started to emerge in Russia that we saw were already very well-spread and very loved by consumers in Western Europe and the U.S., etc. And so that was the starting point for that pink part of the portfolio. and there were different sort of different aspects of that. But the one, the two, that sort of grew and became sort of very important for us was Tink of Credit Systems, which started as a credit card issuer, a consumer finance bank with a credit card as its main product,

which over time has developed into Russia's absolute leader in terms of a fintech bank. And the other one was. Avito, which is the dominant online classified player in Russia. And when did it make click for you that this is the way to go in this investments and to divest from the oil assets? Well, I guess it started around the time of that annual report being issued. Those non-tech investments are really sort of, you know, You know, that was the frontier part of the Russian sort of listed capital markets.

And the final decision was taken in 2012, where we sold the entire portfolio and gave that money back to shareholders in the autumn of 2012. And from then, we became a pure investor into private companies. But of course, then we had a hand, you know, we still had a handful of private companies which were exposed to, you know, not tech sectors, forestry and farming. And those eventually became listed and we distributed those listed assets to our shareholders and became, well, more pure tech around about that time. And then in 2013, 14, we decided to focus our efforts on. on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the on the we define us you could you could describe them as businesses with the potential of very

strong network effects so we can come back to that but we and then we we we had of course holding in this fintech play that fintech play uh listed in london in an IPO in london in November 2013. And so we sold most of the shares that we had into that IPO, but we still retained some shares. And if you remember, 2014 was a very volatile year for, certainly for Russia, oil price tanked, which is negative. And then also Russia had this, this old Ukraine mess happened, start with Crimea, et cetera. So listed Russian assets. went down a lot. So we didn't think it was good for our shareholders to sell the rest of this fintech bank

into the market because the price had fallen a lot. And at the same time, we also had investment opportunities around the fintech space that we thought were interesting. So what that led to was that we spun off the fintech portfolio and the opportunities into separate Vostok that was originally called Vostok Emerging Finance. and that happened in 2015. So from 2015 and onwards we were pure network effects company in in well what is now called VME global. What did it mean for you to relearn and unlearn certain things in investing because investing in oil and forest assets and infrastructure assets

is different to network effect platforms and the internet? I think the The common denominator is, you know, the ability to think and expose yourself to risk, right? And the and then that it's okay to take risk. And I mean, I've been brought up and this the culture of this company is an ability to take risk, but only take risk if you have the, you know, the reward to compensate. So I think we live and die by thinking about risk reward. And that's been that that that's very similar regardless of which assets you invest into. And of course, Russia was a visibility into Russia becoming a normal consumer place, I guess was lower in the mid-2000s than it is now.

Now there is full visibility into it. And so you can say that we applied, we applied sort of our risk appetite into that. So, so in that sense, it was natural. And on the tech side, I had, I was a small shareholder in the. Swedish version of eBay from the early 2000s, I think like 2003 probably. And I was on the board of that company's a company called Tradera. And in 2006, eBay bought Tredera and the and moved in their own management. And the old management, they were free to go and do business only in countries where

eBay wasn't present and such a country was Russia. So I convinced the guys to move to Russia to apply their knowledge from the tech world into sort of what was happening in Russia. I had that I bought a Russian business that was like an offline going to online business in Yellow Pages. And they started there. But as with good management, they quickly understood that this wasn't going anywhere. And they looked at an eBay model. But then they eventually settled for a classified model. And out of that, came abito that's quite interesting this move if we take a look back at your portfolio and look at 2015 you all already see what is now part of your name the the global footprint with in 2015 you

still had a strong russian footprint but there were more sprinkles coming on for global companies like blah blah car or get how did you develop this global way of investment investing and what helped you to become a global investor then instead of a niche investor for Russia? Yeah. So we we took to the we took the when we took the decision and this is I guess in around 2013 14 and eventually culminated in 2015 when we spun off the fintech portfolio. I mean 2012 we sold everything that was listed gave that money back to shareholders and we took the decision in 2013 14 we should only do a veto type of investments and then. And eventually we spun off the fintech portfolio.

But around that time, we also understood that, you know, yeah, that's a good decision. We'll apply what we've learned from having been part of Avito from the very first day to new opportunities. But Avito was so dominant in Russia. So there's nothing else to do in Russia. So at that point of time, it became natural to to open up the geographical sort of focus to elsewhere and so we applied that initially we applied that to other emerging markets feeling that developed markets we were we were not ready for but emerging markets we since we've been around Russia for such a long time we we knew we felt we knew and I think we knew you know what's important when you

invest into those markets so we started looking at other emerging markets in our time zone. And that led us to a few investments in the Middle East, which is sort of similar to Russia. It's often misunderstood. We only think of it as desert oil and, you know, violence. But it's, in fact, it's a large middle class there that's growing too. I've been brought up in the Middle East as a kid. So, you know, I felt comfortable in that part of the world. And so we started looking there. But with time, we found that there were also opportunities which fit. sort of what we do in more developed markets and our first investments I guess our first investments into more developed market one was delivery hero so which is essentially of

Germany and and blah blah car of France where we saw very very similar dynamics to Avito very clear network effects and we also saw that they had not been fully sort of perhaps understood by markets and and hence got involved in those two and with those two then we we felt more more comfortable we got more and more deal flow from from you know i guess all over the world and you know we capitalized on some of that deal flow the opportunities came elsewhere than russia we still look at russia we still do deals in russia but it's just that the the larger set of opportunities have come from elsewhere investing is Partly also about networking and how did you go about to build your global network for VNV?

Well, I think Avito there has helped a lot as well. Avito became such a large company and I mean, really one of the leaders and in the global sense, in the online classified industry. and us being part of that since day one and me being part of Traderas earlier than that and of course the team of Avito being part of Traderia. I think, you know, and in the mid-2000s, you know, online classifieds wasn't really an industry that anyone invested into, right? It was, Craigslist was private, Shipset was still, you know,

newspapers, Naspers was doing other stuff. and so and so I guess we were early in that space and as the avita grew you know you know the sector sort of grew in general as well and and then I guess we we became well known for being you know around you know we became well known with with sort of a veto becoming the kind of company it is today and I'm in a large large very well-run company. As you went on this journey, you always, as a listed company, you always have, like, if I think around 10,000 people standing behind you, or institutions and people, your shareholders. And it's also quite interesting. I want to show you a next chart. I also did get from your annual report. Sorry. Here we go.

And it's the list of your shareholders. It also changed since 2010 a bit. Here you see 2015 and here you see 2020. My question is what I found quite interesting in your list of shareholders. If you look at the 10 largest shareholders, you always had a high concentration of shareholders over like 58 or 70%. How does this help you? to run the company. Well, I think we run the company, regardless of all the concentration of shareholders.

I mean, we, for, of course, for many, many, many years, we were, we, we were, you know, we were our largest shareholders was also the same family that started the company. So they populated the board as family members and they were very they were very involved in the decision making. And so it's it's always been very natural for us to have one large shareholders. They eventually sold their shares to a US outfit called Luxor Capital, which Luxor was very focused and very attracted to online classified ships that and those type of industry still are. And they were also, you know, they're not, obviously not a family, but they were also quite active, not directly because they didn't sit on the board directly, but they were very, they were very sort of close and were very interested. And I'd still say that our larger shareholders today are all very sort of responsive and very supportive. and they share that with, you know, the kind of ownership that we've had in the past, but they're perhaps not as sort of directly involved as the initial family, at least.

And so that's digressed over time. I think it's, I think it's natural. When the founding families involved, they stay quite sort of involved directly. But as that moves over to more institutional capital, be it sort of, you know large percentages it becomes more passive even though they're very very responsive and supportive you use the term active shareholders for yourself um maybe before we go into a definition i want to go a step back if you think about the and already talked with your analysts about this that you're a listed company but you're investing in private companies so there's a

always a tension in between the information you want to share with your shareholders that they are confident that you're doing the right decisions and the information the companies you're investing in want to disclose how you're going about this and how you're managing this constant struggle well i mean the the uh the unwillingness to share information from uh you know from from companies typically is most sort of relevant or most sort of strong in the very early days when especially in the space where we are investing where with network effects we say that it takes about five years before you you've built enough liquidity in a marketplace or enough data in other situations to be able to you know to charge for your products at all so in those

early years it becomes very important to not to share too much information because there's still competition. Once you've moved out of that phase, you know, the whole sort of idea here of very high barriced entry being built and, you know, makes it assume characteristics of when it takes everything. And once you've sort of achieved that, then there is no competition, right it and and then it becomes more they are able to at a more lessially sort of rate share information like a veto went from sharing nothing to sharing revenue and margins and quite a bit of things and and so we we are mindful of that with our companies and and whilst they are not in a position to share information at all we instead then

help our shareholders of of of you know and trying to explain how we think about this investment and then and and to use sort of uh you know KPIs and metrics and data that's widely available perhaps from daily visitors or number of visits or that number of downloads etc so you can track sort of you know that something is happening in the right direction and then but then when the company starts to approach, you know, a kind of dominant position, then then we've prepared them and to hold the hand of them to be able to successfully start to share some information. And as you see in our portfolio today, Babylon and blah blah, have gotten to the stage where we we don't share the same kind of information that we did for a veto in the end,

but we, they are they let us share some information. And with that, information you can build like a crude even if it's crude but you can still build a you know some kind of starting point that's a financial analyst of how the company is doing how you're defining the active and shareholder or an active shareholders active well active active I guess stems from the early 2000s where we were very active in the in the Russian capital markets an active shareholder in Russian capital markets where you know in these early phases of emerging markets, you know, development, corporate governance is not, it's not,

it's not understood. And so we, we in the early days were very active about getting involved in situations which were very, very undervalued because of corporate governance risk. And then we were active about dismantling the risks of corporate governance. And so I think, I think the activity stems from those states when it's more of a traditional in the even in the western sort of space that you you inactive shareholders you know becomes a large shareholder and then you know helps the management in the other shareholders to understand why it's important to to to think about being a good corporate citizen a good good corporate governance but that but that i guess has a you know relevance not in the to what we do today not because any of these companies

are, you know, have, they're all run in sort of 100% good intent of corporate governance, etc. But it's, you know, we are active in other ways. So we're on the board of all our companies. I guess that's the most, that's the most relevant sort of check for being an active shareholders. If you know on the board, it's difficult to be active. Then I think we, we, we don't define active as running the companies. We try to be very clear to both our shareholders and also our portfolio companies that we are not going to run these companies. That's a bad idea. I mean, we've never run companies. We, you know, we spend a lot of time on investing, you know, when we do the due diligence of our investment work, we spend a lot of time on understanding that the founders

don't need that help from its shareholders. And so it's so active doesn't mean that we run the companies, but active in that we are board members and we are very supported board members, you know, for these companies as they sort of, you know, go through the early innings of their life. And I think that's where we, that's where we play a role in terms of activism. I think if you ask our difference around entrepreneurs and founders, I think they felt that it was good to have us around because it's a difficult journey, right? It's a volatile journey and it doesn't, it never goes how you think it's going to go, never. And so to have someone there who's, you know, is going to be there as long as you are there,

and that will always be, you know, supportive and someone to talk to. They, you know, they're, you know, V&V guys are not someone who, you know, are looking to take decisions to sell the company tomorrow. They're going to be here for the long term. I think that's the comfort. And, and I think we define activism in that way today. How has the concept of ownership and ownership, the concept of ownership change? for we and we because if you look at the shareholders list you're appearing there under the

top 10 shareholders in my free snippets the first time in 2020 did there something change in the concept of ownership just saying your members should or your team members should get more ownership over the years you mean you know the way we think about ownership in our portfolio company no how you think about ownership of the people working at we we and owning shares of we and we and having shares of the compensation and the share orientation that that's always been the case right I mean it's it's always been the case throughout the life of of this company that that the people who work here has been predominantly incentivized by by by being exposed to the share in in the

initial in the first sort of decades we were you know we had simple stock options Now, we have a more, it's essentially stock options, but it's structured in a way that's more standard here in Sweden. And so, but it's, it's, it's, it's very equity linked. And so over time, I mean, the shareholding of the of the people who work here who have all worked here quite a lot. I mean, I've worked at the longest, but all the others have worked here for quite a few years. And it's successfully been become larger, larger and larger shareholders. How do you think about giving capital back to shareholders or you did two interesting moves? I think the spin-off of Wostick Emerging Finance was one and then one or two years ago you gave back a certain portion of the capital you did get from the veto sale.

How you're thinking about this and how you're going about this? I think over ever since I've been at this company at least, we've been very, I think very disciplined with the. not sitting on liquidity if we don't have anything to do with that liquidity. We have all throughout the years been a buyer of our own stock in the market. If we trade at a discount to NAB, we've always been a buyer. And in that way, essentially distributed cash to shareholders. And then since we are incentivized by the stock, we're not incentivized to have this company large, just to have it large.

I mean, it's not a fund. We don't have a management fee. we don't take a percentage of a large portfolio so we're not incentivized for that we're incentivized for these shares to go up in value and if it makes sense to make it smaller for the one share to go up in value then then we'll do that and so so so i think i think that's very fresh i think it's very important and and and then and and it's led to us distributing cash when we've had too much cash or distributing assets when there was no need for our shareholders to get exposed to that asset to us.

So, and I think that's also led us to believe that if we then, you know, in a different scenario, have deals, investments that we think are in the interest of our shareholders do get exposed to, then we can go back and ask for this money. But then we, of course, have to explain that it's going to, you know, we're going to have to invest it into this company. this looks like this it fits our strategy and and that's so i i think that's worked well and how is the orientation about selling also with reference to your shareholders i think you have this law if something is listed you sell it and if the founders sell their stake you sell

it as well because shareholders can try to buy this themselves or what is the take on this It's not quite a law, right? It's not written into our company charter that if something is listed, then we immediately have to sell it. We can hold listed assets. And but it's not, we're never going to buy a listed asset because you as a shareholder or a big pension fund, they can do that themselves. They don't need us to do that, you know, the cost layer of us.

But if we have something that's in our portfolio that we've lived with us private company that eventually lists if it doesn't make sense for us to sell it either because it's you know they're still upside or for other reasons then then we can still sit on it for a while but i don't think you should see us long-term sitting on assets that are listed then we then we either sell them or we distribute them to our shareholders that's an interesting way of going about listed assets. But before you have something, the chance to have something listed, you have to find ideas. And how are you going about generating or getting ideas and V&V? Well, we, I mean, we, one thing is fixed in this volatile world, right? And that's what we

invest, what we look for when we invest. So we look for network effects. And we define that as the company, the product that the company sells becomes more attractive with one, every new user. With one more user, one new user, the product becomes a little bit better. That in turn attracts another user and makes the product a little bit better. So you're off in that spin. That's number one. Number two is that the markets that they are, you know, disrupting or active in has to be large.

And number three is that the founder has to be very strong and very able to, navigate, you know, things that will happen that we won't foresee right now. So, so that's fixed. But then you can apply this. I mean, we started in classifieds, which is maybe the holy grail of these network effects. It's a winner takes everything type of market. But then we found this in other situations. We found it in blah, blah car, delivery hero.

Those things are perfect for, you know, they have the same characteristics. And we've recently also found it in, in terms of, you know, the one who has the most data wins. But and in those spaces, we, we, we, we, we we we we have become quite well known in the concept of network effect. So we get deal flow, I.E. ideas what to do from founders who come to us because they've seen us, you know, as owners in other companies, VCs. We don't really. compete with VCs. We don't raise money from the same people. We typically stay longer than VCs. So they don't see us as competitors. They are we have a relationship where we invest alongside them. And then sometimes we we seek out situations ourselves as well. You know, so it's it's from a you know, the ideas come from a variety of different sort of sources.

You're having assignments and a few other companies that are shown if you're going on some portals that show them like for instance the orc.com how helpful are these assignments i mean this list i'm not sure if they are if this is the correct list but oh oh yeah okay that okay i see what you mean yeah no exactly i there's some i mean most of these things are very very small and private situations uh i i do invest some uh uh uh uh privately outside of Wostock. Nothing that sort of competes with Wostock. That's, I think, law. But I'm very interested in music. I have some investments into music. That's the main thing. Are this investments helpful for the work at V&B or are they a separated sphere?

Some of them are helpful in terms of a network of, of expanding the network. I think in that sense, they are helpful. But otherwise they're, they're more, you know, it's, you know, a company is a company. And you can see that there's some benefits from, you know, you learn. You always learn when you're involved in different companies and they have troubles or they have wins. But it's indirect like that. The benefit. And if you invest in music, just one question. What's your favorite music or do you have no favorite music?

you mean in terms of type of music or type of investment interview or what type of music you like most if you're yeah no no I'm I'm born in 1969 so I think you know we we are we um you know the music we listen to when we were in those very formative years of 13 14 15 16 that sticks with you

and I actually I actually I grew up and looking at this Irish band you too playing in Germany. I saw it on Swedish television and I got fascinated by that. So I think if you ask me, you too and Springsteen on the, I think I've seen those two groups 40 times over the years, 40 concerts. And so those are those those those those will be the main ones. Interesting. I also like them. But coming back to the ideas is also like a bit like music selection that you want to have the good music you can stick to and sort them out because

there's so much offering so what is your way to find on ideas the needle in the haystick on ideas for investments for v and v i mean you i think you have to be curious you know curious about new things um i think you have to be you know positive and really receptive to new ideas. And if you are that, then that, that's, I think that's attract people who are interested of building new things. And, and then, um, you, you get exposed to people that come to you, who, who, who know, you, the door is always open. They may not always invest, but they will, they will pretty much always listen. And, and that gives you a lot of inflow of ideas and then to sort of to choose which one you know you you learn over time i guess

often these companies that we invest to are so young so it's not there's not a lot of data to go through it's not a lot of history and annual reports etc so you have to you have to form a view for in using other sources spending time with the people mainly well looking at the markets How do you, how important is management in this process, the people, especially if the companies are smaller. I think that management plays a more important role compared to bigger companies. No, no. I mean, you're 100% right. It's everything. Right. I mean, especially when you're investing in these young companies and young companies active in spaces where they're sort of disrupting old industries, right? is you don't know like we do we're in health today and you know I think we all agree

upon that you know the health sector will be more digitalized in five years and in 10 years but you know to to understand exactly now how you know what kind of business models how will you know who will pay you know what will be important the visibility to that is very very low so you have to have management who is able to adapt and maybe have to change the direction from there to there, you know, in terms of, you know, the focus of the company. And so, so management is, is, is, is the most important. Absolutely, super important. I think where we've, where we have been very successful in, you know, in terms of investments, you know, the common denominator amongst those are that the management has been that's very

strong, very, I mean, strong sounds like they, you know, just strong in terms of muscular, but very, you know, intellectually, sort of creative and, you know, and have a lot of, you know, persistency, but also being able to adapt a lot. So the ones that have been successful, there's been management that's had characteristics like those and others where we have failed. It's often been that we've been wrong about the management, that they didn't have the, these sort of, you know, all these things that we thought that maybe had when we invest it. Is there some character trade over the years you found, I shouldn't invest with people that are like this? That's difficult to say. There's no, I don't think there's one, there's no ABC rulebook on that. You have to spend time and, you know, people can be different, but still, you know, have it.

You, you mentioned the other sources you're looking at to understand companies that don't have the big history, but you're interested in investing in what are. examples for this of the sources? Well, well, as you said, I mean, first and foremost management and, you know, management and the people that they have sort of gathered around themselves. And then we, we, I guess we, we, we try to be, we try to get to know them by spending time with them, but also spending time with people where they've been in the past, understanding, you know, them. But, but, but, but, but, but other more quantitative sources are. or perhaps, you know, if they have a product that's sort of been tested somewhat, you can look at how it's, you know, how it's, how many downloads, traffic, and conversion, there's, there's sort of, there's data that you can, that you can analyze. That's, you mind that data and you get a better picture of, of how they've fared. far. And some of your investments, and maybe if I'm thinking about a veto with this characters of the market, only the sky seems to be the limit. If you're assessing a company and getting to know them, how much do you want to look into the future? What kind of picture are you forming about the future the company can have and how you're thinking about

optionalities on this way that are coming up? Yeah. In some Sometimes it's easy. And like, you know, this concept that you took us back to what works in the West will work in the East is that also for a veto, we looked at Shipstead and we saw how much revenue there was per every, you know, user in the shipstead markets. And we saw that, you know, at a veto, it was, you know, one hundredth of that. And that was not relevant. It should go up. But in many cases now, especially, now in our portfolio we we are in companies that are maybe our global leaders in the space so that there is no one to benchmark against and then it becomes more difficult right to to know where where how does it look at maturity how does it look when you're done kind of thing and so

and so then you have to form a view around that in other ways what role do optionalities play for you if you're trying optionality is right find that's what you well try to value the company yeah it's all about optionality right typically a startup is is an option so so but beyond that we we typically don't put value on on the optionality and see that our subside so that um you know i don't know what's a good example but uh avito was a company for than Russia. And they were so strong in terms of tech and knowledge about running this space and building this space in emerging market. So that they at some point of time also decided to apply that to other emerging markets. And that was obviously that's optionality on the upside.

We never really valued that. But if it worked, it worked and then that would create value. And the same is present, I think, in the companies we have today. VoIP, for example, is the European leader in East Cooters. And I mean, they have applied for a license in New York. That's optionality on the upside. We don't, we don't, we don't, we don't put that in our, you know, the model we make when we decide of how to invest in DeVoy, but if it's, if it works, it's, it's, it's optionality on the upside on the upside on you already mentioned that thinking about risk and reward is something that I can wake you up the morning at free and you, we can talk. talk about risk and reward if you're happy to talk with me at this time um how do you what kind of risk of a new reward are you looking for in a in a company and an investment yeah well i think we we you know looking at network effects very high very strongly right i mean like businesses you want to own forever and then you know apply that to very large

markets like classified in russia for example very large markets i mean 150 million people you large GDP. So the potential is there. I think that's our starting point. I think that this works well, this could go up 100 times or 50 times, et cetera. Then, you know, okay, so, you know, what risk do we have to expose ourselves to have to be exposed to that upside?

And then we sort of, we look at that. You know, we probably have to put in this much money. we could lose it all and then we put you know the same amount money again and then then you basically see if the risk reward stacks up so i think that's in a crude way that we go about it then maybe let's go have a look again at the portfolio maybe help us to understand um if you have smaller positions um like um drop net a 0.1 percent Are there's the small bets where you're thinking they would double or how you go about this, this positions in the portfolio? No, the small bets will go many, many, many, many times.

I mean, so we, we typically start small. I mean, since we get involved, we can get involved early. We can get involved early. But we can get involved early. And you get involved early in this space where it takes, you know, our rule of thumb, it takes five years. years before you have any revenue at all. It becomes a very, you know, the companies are subject to a lot of risks in these first five years. Hopefully, you know, slowly coming down, the value coming up. But the point is that the, you know, the value in the beginning is low. The tickets are low. And so, so we get, you know, so hence they don't measure up very much in the portfolio. But if they

perform, rest with hope and think they will over these five years, then then, then, you know, there's enormous leverage on the upside on them and they will grow as a part of the portfolio. Avito started as a $4 million investment, you know, it ended up being a $540 million investment. And that's more than doubling. That's more than doubling. Yes. And then, you know, you know, but when we started a veto, we put that first money in, you know, it was 0.1% of the portfolio. If that, you know, I remember the, the family owned it.

they said that pair what's you know this is they call it parr's uh kindergarten you know you know play pair can play with these things it's there's no assets it's nothing but anyway you know so but if you don't do the small things you miss the big things and the small things grow and so so we have now a portfolio you know what is it now four or five names that make up about 70 75 percent of the portfolio and and those four or five names you know you would have mentioned I mean, if you talk to me two years ago, two and a half years ago, and, you know, we had a, you know, large holding in Avito. They were in the shadows of Avito. And in the same way today, we have companies that are in the shadows of Babylon, blah, blah.

And, you know, in time, they will come out of that shadow. And, and, you know, so small things grow. You mentioned the kindergarten picture about the portfolio. Is there any picture? are you using to describe your way of approaching the portfolio? Sometimes it's a soccer trainer who sets up the team and put some on the offends, or it might be the gardener who sets small plantlings that become the big trees, or how you're going about the picture or the composition of the portfolio. No, we, the composition of the portfolio, we don't think so much. about and I try to be very clear to our shareholders also about that that we're not

going to build a diversified portfolio for you if you know if if Babylon were to list and were to double it will be 50% of the portfolio fine we're not going to and if we think it will go another five times from there which we think it will not you know we will keep it you know and then it you know we're not going to sell it down so that it's exactly one third of portfolio or exactly 25% of the portfolio. So, you know, I, we sort of adhere to this old concept. I don't know who said it. I know Barton Bix or Morgan Stanley used it a lot. Maybe he minted it, but diversification kills the performance. And you have to be, you have to be able to understand the risks you have and not hide behind diversification. Anyway, I know the

mathematical sort of benefit of diversification, but that's, that's, we, we don't, you know, we try to be clear about that. So if, you know, we run a portfolio, that's obviously subject to a lot of risk and also, you know, I think very impressive upside. But if you want a diversified portfolio, you have to do that at the shareholder level. I, I, yeah, that's, I mean, that's that's to the extent of the composition of the portfolio. Did you, did you, but you said something else as well, remind me. Your picture, how you're going about. Oh, yeah, if you. Yeah, no, I, I, I, I, I, I, I recently wrote the piece about tennis. I'm a part from music. I'm a tennis fan and I don't

know you don't see my tennis racket here, but anyway, it's behind me. I, and we, I, I sort of, I plotted our portfolio in terms of tennis players and this is very nerdy and forgive me for that, but you know, if you think of Facebook, I love nerds. I love nerds. I think nerds is important and I'm very nerdy in my things. But and with the risk of being nerdy, then I would describe the tech world as the, you know, we don't invest into the Nadal and the Federers and the Jokovic. They are the Amazons and, you know,

they're established and very large. We, we invest into the very young players. And sometimes these young players grow up to the extent that, you know, Babylon still has, is, is, uh, a leader in his field for you know in where it's playing but it's not it's not it's not reach its full potential so this is like uh you know like the german player alexander swerre for example you know he's uh you know one of the best in the world but there's much more potential he will be number one in the world i'm quite sure uh and the same goes for it zizi pass

and you know the dmitri medvedev but then also in the portfolio we have you know this you know the stuff that's in the shadows today of the medvedevs in our portfolio, the Babylon's. We have companies like Swivel, Dostavista, and Buxi, which are all, you know, we don't hear about them much. And these are, you could, you could, you could compare these to, to some of the younger players, like Korda, for example, or Janek Sinner. But then we also have very young players, people who are kids, basically.

And those are the 0.1s in the portfolio. And there's this risk with them. Maybe they don't make it to the top in the world. But if they do, there's lots of potential. What do you like about this next gen stars compare or like Dostavista Buxi and S. We. L. What do you like about them and what made you invest in them?

Well, I mean, first and foremost, they all. We have three that we call the next gen, right? It's Dostavista, Buxi, and Swivel. I mean, all three of them, you know, they, they very much enjoy the potential network effects. They are, you know, one more user makes their product a little bit better. And that attracts more. And they all, they all have that. I mean, Swivel is, you know, essentially a bus platform for large emerging market cities.

Buxi is a marketplace for a beauty industry which is larger than the food industry and then Dostavista is a marketplace for last mile delivery and so all of that and then very very strong founders Dostavista is Russian Buxi is run by a Polish guy

who now lives in America is very focused on America and Swayvel I think is run by perhaps the strongest, tech entrepreneur from the Middle East that we have today, Mustafa can deal. So, so they're very strong and they're going after enormous markets. What does make this people strong in your definition? Well, they are, I mean, they are like we talked about before. I mean, they are, they're very passionate about what they do to the extent that they have a lot of patience and they're this is this is what they do in life. I mean, as you and I spoke about,

they're perhaps nerds about what they do. They've spent a lot of time thinking about this and they're very, very focused on it. But then they also are, you know, they don't, they don't have, you know, pride in that negative way that if, you know, no, the ship is going this way. And even though it may be better to go that way, I'm still going to keep this way. So they said like, ah, this was wrong. We have to go that way to succeed. And they will.

And so they're humble, I think, in that way, which I think is super important. How much data does data play a role for decision making of these people and all investments in your portfolio? Yeah. Yeah. I think that's a very common denominator. I mean, I think all companies we have are all all tech decisions based on data. They're data driven, very, very data. That's good to know. When you think about the established players, you already mentioned Woy in Babylon. What is the interesting thing about why there might be the public image of some of the youth that are just a scooter standing around the corner and they are trashing the inner cities. But what is in your eyes interesting in Voi? Well, from our perspective, we're investing. What's interesting is that they possess this concept of network effects that that and and it's and here it's more difficult to see maybe, but it's it's really quite simple in that you will not take a void or a tear or, you know, whatever it is if it's not outside your door, you know, if it's five blocks away, if it's five hundred meters away. I mean, you will you will go about your travel like you did before. These things were present. And the only reason it can be outside your door is if I have taken it there to come and visit.

it's someone in your building or visit you and so and so the one who has the most users will have its scooters most spread throughout the city and if they are more spread so that they are outside your door you will have more users and more users will make them more spread and so it's it's very very clear that in in you know voice a leader in pretty much all the markets that they're in and here it's very clear that they have you know they have a certain amount of scooters percentage-wise but they have a larger percentage of the revenues than they have a lot of percentage of the scooters so you know you for every new scooter they put out the revenue goes up on all the other scooters they already have out and so so so I think

that's the from our as for me as an investor in investing you know in in what we look to invest into what we do that they very clearly click check that box But then I think also the revelation there is then how popular this has become, both from consumers but also from city councils. People want to move around the city with the less and less cars. And the city councils, you know, because of their voters, want it, they want to reduce the number of cars inside the city. And this fits very well into that. And of course, it's, I mean, it's the most efficient means of transportation in terms of the environment. There is the only thing that's better is the metro.

And, and, but what, what this gives you that the metro doesn't is that it gets you point to point, right? It's not station to station. It gets your point to point. And that's, I think it's very attractive for people. So this has become infrastructure. This, I didn't, I didn't understand this when we started it. But now it's infrastructure. It's infrastructure that's licensed in the same way as maybe as the toll bridge is licensed.

Which is makes it also quite interesting. I, you know, if you think that at the initial point that this would be owned by, you know, the ubers of this world or this is now, I think could be owned by the same people who own a toll bridge infrastructure. So will Babylon also become infrastructure or when you see the trajectory there? Yeah, in some in some way you could describe it as that, but it's not as clear as it is with Voie. But what I think is very clear is that, you know, that we all agree upon that the health space, I guess is the last very, very large sector that is yet to digitalize. I mean, the online penetration

of primary care today is like reminiscent of e-commerce in 2000. It's 1%. And I think it's going to be going to be 100 percent, you know, over time. So it's a very, very large and large space. But I think it's the visibility, again, into exactly what is very, it's not super high. So you have to be, you have to back adaptable players. And you have to back players that digitalize this properly because also it's very expensive, the healthcare system in all our societies, right? you know the kind of countries you and I come from but also in the US it's even more expensive so so you have to you know and 80% of the costs here are in some way from employees so in order to make this more affordable for people you have to you have to

properly digitalize it and then their bubble and is the leader so I think it will become the heart of many many sort of health health systems in the world And in that way, maybe you could call it the infrastructure, but it's it's it's it's it's it's some different aspects to it now. So what makes them the leader? Well, well, I well, I think there's there's no one who is applied this concept of AI to the extent that they have. And and also there's no one who has been able to sell an AI by product to the same amount. of clients and very, very large institutions.

I mean, their customers are the National Health Service in the UK, TELUS in Canada, Prudentials and Tien, Bill Gates Foundation. These are all institutions and companies that are able to understand very clearly what's the best product out there. And they are able to, you know, become a customer of the best supplier out there. I mean, Bill Gates, Prudential is, I mean, they're world-class institutions. And they've all chosen Babelan and they've all chosen to extend their relationship with Babylon. So I think that sort of is, I mean, there's no one else who's done that with where, with the, you know, this pure digital product.

But isn't that at the heart of the business? Isn't that super hard because healthcare is such a national thing? It is hard. It is hard. But you know, if you want to fix the simple things, you're not going to. That's easy, you know. This is hard, but it also means that the upside is large. It is. Why do you see Babylon in like in three or five years? Well, I think they will still be building their products. I mean, this is a, this is a company that built product for five years before they had the first customer.

And so they'll still be spending, you know, lots of investments of continuing. continue to refine their product because even in three four or five years it's not we're not going to reach the end game of this right so but they will have um you know in in in in that number of years we'll look back to that you know they will be a multi-billion euro revenue company and so they will really have proven up that this works and you know this this this this this is in demand i mean they're all already today and you know you know you know have not large revenues, but in that number of years, there will be a proper, proper, it'll be much larger. I think it will be very US centric.

The US is, of course, a very broken healthcare system and one that needs a lot of attention. And so, and it's very large. So it's natural for the company to focus there. They're focusing there. So it will probably call it an American company in terms of their markets, but it will be based out of Europe. So, that's, that's, yeah, no, I also think it will be listed in that, certainly in that number of years. So listed company, multi-billion dollar revenue, very US-centric.

How high is the chance that you're still being on the side of Babylon then as an active shareholder? I think it's quite high. You know, I think it will be listed. It will be very large company. I think it'll be a $20 billion plus sort of market value company. I think at that point of time, there is a risk that we may have distributed the shares to the shareholders. But I'll keep mine. We will see how it plays out. We will see. Going a bit further up with the outlook or going away from Babylon, which areas of new investment opportunities, are eternally gravitating to where you find interesting ideas,

optionalities you want to go deeper into? Well, well, we know, we invest bottom up. So we look for these three things without we continue to come back to our network effects, large markets and strong founders. But we've that has led us to three sort of big macro teams. Classifies where it was where we started. We still have some of that. classified slash marketplaces.

But then we have a lot of stuff going on in mobility, which is a strong macro theme in itself that we've touched upon, right, with cities becoming non-cars and, but, you know, and, and, and that macro team drives the large market, but, you know, hand on the heart. It's the network effects company that we've been looking for and that has led us into that market. And the same goes to digital health. I mean, digital health is so, it's just something that's, you know, a macro theme that's so, so strong and it's been accelerated enormously by COVID, but that's going to continue

for a long time. But we are there because we found companies that can build very high badger entry. But if you, if you, if one allows oneself to sort of expand what we see today, that there's more and more opportunities that we look to, which are in the intersection of these network effects and a macro that has to be described as a climate matter. macro and so so there's many there's this we have a very fascinating opportunities in around food waste agri tech the way consumers are are looking to sort of source stuff locally and marketplaces around that that that we are that we are very some of them we are already supposed to, but there's an increasing amount of activity there.

So that may be a description of a new theme, if you will. Where do you see there the network effects coming in on the relation to climate or efficiency? Well, food waste, for example, there's a marketplace for food waste that we are very, very excited about. So that's a marketplace, right? fragmented demand fragmented supply you know lots and lots of lots of lots of liquid it in the middle you know 30% of the food is wasted or something like this yeah no no it's a horrible amount of food that's wasted in the world that that we have to you know fix uh you know if it's very

you know it's very you know as part of you know us being you know you know taking care of this planet better but beyond that I think we see a lot of a lot of data place around the agriculture which are perhaps no global niches you know small niches but on the global scale they become large and here it's sort of you know the network effects come around the same way as Babylon for example that the one who has the most data will win here that farmers will go to the company that has the most data and then And that gives them more data than you're off in that spin. So there's a couple of opportunities like that, weather data, other types of data.

And then there are other marketplaces like, you know, like your local corner store, you go there and you probably want to buy apples from your local orchard. But your local corner store has no market ability to source that efficiently. They can't go out and sort of, you know, contact all the local farmers directly. So there's quite a few marketplaces coming about, which helps. your local store to source local apples, but without, you know, and still do it efficiently. So those kind of opportunities are very interesting too. That's quite interesting. Looking five years out, where do you see we and we global then? And might there be a chance that you have another name or are you staying within week? No, I think V&B global is where we'll

stick. It's, uh, we, we, we decided to drop the Russian sounding Vostok, not because we don't Russia or like investing in Russia, but because we had so little Russia in Russia so that we sounded like we were only about Russia. But the global I think is generic enough. I mean, that doesn't put us in one bucket. I think we'll do what we do today. I think in that number of years, I think the, you know, there will be there will be five, six companies that probably are in the portfolio now that are quite large in comparison to what they are today in percentages of a portfolio that will have grown up that will become top 10 in the world in terms of tennis but and there will be a lot of new ones i mean we have a we started a scout program

last year where we have a handful of scouts that we know very well we trust very well and they know us very well and and and they they're typically entrepreneurs themselves so they get a lot of asks from other young entrepreneurs for help and those young entrepreneurs are always fundraising so if the scout decides to invest we say we'll invest five to 10 X what they invest and give them a little part of the upside for handling and so we we we our ambition is that we'll have 10 scouts and each scout will build a portfolio of 10 companies so we'll have a hundred very young companies in the portfolio and so and then and then you know as they hopefully grow then we'll be able to invest you have a very lean team do you see a chance a team will grow as well or do you

are you going about the growth with the scouts we you know maybe the team will grow somewhat but i think we are we are all much more interested in in running investments than running people So we like this concept of using the network here. You know, all these scouts, for example, are people that we've known from portfolio companies or in the industry. And so it's more efficient for us to use a network of people to do the work that we can't do in-house. That's interesting. I'm fine with my questions at this point. Do we have something to add?

we haven't discussed or you think that it's a good closing word for the interview yeah no i i have i don't have a i don't have a like a not not really i think we talked about a lot i as your questions were very good i i it's um you know this it's we are about taking risk right so it's a volatile journey but I'm I'm very very focused on not taking risk if the upside is not enormous so so and so the risk reward I at least I think I'm very confident about this very good and and then it's also when that's the case it's good it's good to be long term I guess it's the other it's the other important factor here you can write out the volatility thank you very much for the interview and taking the time and thank

you very much for the audience listening to it thank you and bye thanks bye