Founder Fit — Having a strong founder fit is necessary because it gives you a head start. So for example, if you are starting off a fintech business, it is good to have a finance background to know the functioning of finance, solutions that exist in the market, and have contacts and a network in the industry.
As a part of our series about “Social Impact Investors”, I had the pleasure of interviewing Dheren Singh.
Dheren started his finance career at PricewaterhouseCoopers auditing software companies, before joining investment banking teams in Morgan Stanley and Standard Chartered Bank.
His entrepreneurial career was launched with him becoming the CFO of a venture capital family office fund, before becoming the CEO and co-founder of Supafin, a revenue based financing company based in New York City and Amsterdam that uses impact metrics to lower the cost of funds for companies.
Dheren also serves on various boards of directors, mainly those that can benefit society in some way, including the South African State Theatre.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what made you decide to become an angel or VC?
I grew up in a small conservative mining town in South Africa called Middelburg. I belonged to a very entrepreneurial community with my immediate neighbors being in finance, retail and agriculture. I started noticing the positive effects that entrepreneurs have on society and communities during this time. After pursuing finance qualifications at university, some of the investment banking transactions I worked on included Black Economic Empowerment investment banking transactions in South Africa.
I grew up witnessing extreme societal changes due to economic improvements in my early years as well as in my career because of fundamental shifts in the South African political landscape. I strongly believe the kindness of humanity combined with financial goals can enable radical positive change in broader society.
My financing career has taken me to the USA, Singapore and the Netherlands. These experiences enriched my professional career and inspired me to get into venture capital to support early stage businesses: planting the seeds from which larger businesses can flourish!
This career path eventually lead to me pursuing the Antler Amsterdam entrepreneurial program where I started Supafin. Supafin streamlines the social impact investment industry with a new finance product, as well as smart ways to use technology to measure social impact and financial return.
What you are doing is not very common. Was there an “Aha Moment” that made you decide that you were going to focus on social impact investing in particular? Can you share the story with us?
During my time in investment banking, many of my colleagues were not fulfilled and as a result, not motivated. My colleagues described their work as “soul destroying “and being stuck in the rat race, just going through the motions of what was expected of them. One of the main reasons for this was because they could not see the impact of their work and the result of the financings and deals which they worked so hard on. I knew that finance, which is the lifeblood of any business, can be channeled to make a difference not only in the business being funded, but also in society. Finance is a precursor to action in the business world, and the good actions that are positive for society and the environment should be rewarded.
It was then that I started asking myself: what if this impact, for which financing acts as a catalyst and enabler, could be measured, and made to be sustainable? Impact investing is a way to restore the positive humanity in finance, and inevitably a way to bring about lasting change.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?
In January, I joined Antler’s program in the Netherlands. Antler is a global early-stage VC which enables and invests in exceptional people to help them build the next wave of tech. By participating in their program, it forced me to think out of the box and provided me with an amazing opportunity to be surrounded by entrepreneurs. This is where I eventually found my co-founder. The idea of Supafin was born as a result together with my cofounder, Carlos Oliveira.
Supafin is a world first! Supafin is a New York and Amsterdam based investment company which offers companies revenue based funding with preferential rates for achieving impact. No other revenue based funders are doing this right now in the market, and revenue based funding is a new financial mechanism that can be used by impact investors to deploy funding in a very efficient manner.
85% of SMEs either do not have access to, or do not qualify for mainstream funding. That leaves a meager 15% that do have access. This is estimated to be a 40 Trillion dollars funding gap globally. It is possible to create impact initiatives with these SME’s resulting in massive effective and sustainable change.
We do not take equity in the companies we fund, creating more opportunities for financial inclusion with the talented entrepreneurs that we support. We provide terms that are the most entrepreneur friendly on the market. We do not charge any interest but a once off fee and are fully transparent. We retain a percentage of revenue as repayment of our facility.
Supafin funds entirely against revenue, so supports businesses with hybrid business models that achieve profit as well as impact.
Supafin is evolving to become a white labeled embedded marketplace lender. Being an embedded marketplace lender enables Supafin to fund high growth suppliers in a marketplace in a seamless and efficient fashion. This enhances loyalty to the suppliers in a marketplace and strengthens the revenue mechanism of marketplaces.
For example, Uber Finance funds driver vehicles and provides drivers with working capital, and Supafin aims to play the same role as Uber Finance in smaller marketplaces that can not afford to build this capacity internally.
None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?
When I was leaving investment banking my intention was to do an MBA at an ivy league school. One of my investment banking clients, had founded and listed the second largest media business in Africa, and was starting off a venture capital family office fund. I gave up on the opportunity to do my MBA so that I could join him in investing in high growth technology businesses, really this was my practical MBA experience. His name is William Kirsh and I can consider him to be a mentor. William taught me about the importance of leadership, and how it is possible to create a win-win situation between business and society. His uncle, Nathan Kirsh, is considered to be one of the wealthiest people in the US and I learnt a lot from the family in general.
You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?
Model two scenarios and then have a safety switch:
- Scenario 1: if this career path works out, what would your career and life look like? what would be the bare minimum for this to work out?
- Scenario 2: Assume that this is the best case scenario: if everything not only goes according to plan, but this path presents opportunities that make you the best in the world at what you do, and allows you to achieve success beyond your wildest dreams. What would it take to make Scenario 2 possible? Work hard at achieving this!
- Safety Switch: What is your backup plan that will allow you to get back into the game should there be a major setback?
The best entrepreneurs get from point A to point B while thinking about minimizing risk. If you miss a bus that can take you on your preferred route, there will usually be another one to catch. After you think about it, take a leap of faith, and enjoy the ride!
Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
I was the head of Diversity and Inclusion at Standard Chartered Bank in South Africa and learnt a few lessons from this. Several studies have proven that diversity leads to a more innovative company, fresh thinking and new ideas. Some things that can work on a societal level:
- Focus on sourcing and fostering the right talent: Create groups from universities and industry organizations which will grant you a pipeline of diverse talent. Create training programs that could help the right talent grow through the ranks.
- Undertake psychological education on racial profiling: Train managers and recruiters on biases in racial prejudices and stereotypes. Identify how these developed and break some of the pre-conceived misconceptions about people from a particular background or upbringing. This can be an extremely uncomfortable topic to delve into, but if done together as a team, vulnerability creates connection and strength.
- Set milestones for diversity and inclusion: set key performance indicators around diversity and inclusion initiatives and monitor this very closely. Assess what is working and what is not working and re-iterate!
You are a VC who is focused on investments that are making a positive social impact. Can you share with us a bit about the projects and companies you have focused on, and look to focus on in the future?
Supafin is still new, we have only been operational for just a few months currently, but are moving quickly to achieve impact:
- Over 50% of our portfolio consists of minority founders.
- We support social and environmental impact startups.
- Some of the environmental impact startups including flexible co-living, circular economy for furniture, and a company which minimizes electronic waste.
Going forward, we aim to become a fintech enabler to marketplaces, solving the working capital issues in marketplaces. 85% of SMEs either do not have access to, or do not qualify for mainstream funding. That leaves a meager 15% that do have access. This is estimated to be a 40 Trillion dollars funding gap globally. It is possible to create impact initiatives with these SME’s resulting in massive effective and sustainable change.
In general, which business sectors excite you most and which sectors do you look to invest in?
Covid has acted as a catalyst to the digitization of many industries and those are the industries that are our primary focus. Although we are sector agnostic, we are focused on industries worth at least a 100 Billion dollars, growing rapidly over the next 5 years:
- E-commerce — growth rate of 10%
- Digital Health and Wellness — growth rate of 28%
- Ed Tech — e-learning growth rates of 15%
- Proptech — growth rates of 19%
- Software as a Service (SaaS) — growth rates of 18%
Can you share a story with us about your most successful Angel or VC investment? Or an investment that you are most proud of? What was its lesson?
During my time in Tritech, we invested in a company called Tuyu which was later combined with an existing investment called Crossgate and then sold to a fintech investor called Crossfin. Tuyu was responsible at the time for managing rewards mainly to nonoffice workers, after they hit certain targets and KPI’s, in the restaurant and hospitality industries. One of their clients was a big brand burger chain. We could tell that Tuyu made a good fit with Crossgate which was a payments platform, and that the combination of these businesses could be successful as a market offering. The lesson was that it is good to keep a broad perspective and have insight to synergies in your portfolio.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
There was a governance failure in one of the companies that I was involved in, and this resulted in fraud. A very overbearing founder drove this agenda. In the book Good to Great, Jim Collins speaks about humility and Level 5 leadership. Level 5 leaders display a powerful mixture of personal humility and indomitable will. They are incredibly ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves. I learnt how to recognize Level 5 leaders during this time.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
There were no companies that we turned down that have become unicorns (yet!), but since I am only in this game for about 5 years, I could be proven wrong!
In general, I regret participating in more syndicate deals that are publicly available through platforms like Angelist.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why? Please share a story or example for each.
No other revenue based funding provider in the USA and Europe is measuring and rewarding SME’s for impact currently and Supafin aims to fill that gap.
Supafin uses the 17 Sustainable Development Goals (SDG) criteria derived by the United Nations to measure impact. These clients could qualify for a cheaper rate of funding by complying with 3 of the 17 SDG criteria.
Other investment criteria which I consider –
- Industry size + growth: For example, Airbnb : When the founders were raising an initial funding round, it looked like a small market with no room to scale because they were targeting conference attendees! However, they could target the vacation and corporate travel market with the same product, which is worth hundreds of billions of dollars! This has made Airbnb one of the most successful startup stories this decade.
- Founder Fit — Having a strong founder fit is necessary because it gives you a head start. So for example, if you are starting off a fintech business, it is good to have a finance background to know the functioning of finance, solutions that exist in the market, and have contacts and a network in the industry.
- Defensibility: For example, network effects create defensibility against competition. A network effect is as more users use the product or service; it becomes more valuable to the existing users on a platform. This creates a ‘snowball’ effect. Looking at Facebook, the more friends who join Facebook, the more powerful the network becomes because it is easier for you as a user to connect with more friends and exchange messages and now you see the newsfeed and you see a lot of content shared.
- Traction and Testing: The market should be tested in some way to get feedback from customers. Ideally, a startup should be on its way to product-market fit. This is the degree to which a product satisfies a strong market demand. It is good to consider what milestones need to be achieved to obtain product market fit.
- Business Model: How will the business make money and what is the business model? Example: advertising, subscription based, marketplaces like Uber which get a commission etc.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
Automate the measurement of social and environmental impact metrics, so that it becomes easier. This is important in business because governments and the public sectors around the world are pushing reporting on the triple bottom line and initiating carbon taxes. We currently have some ideas around this and are working on it! Results are achieved for what is measured, and the more prevalent and easier it become to measure impact then the more impact will occur.
If you could tell other young people one thing about why they should consider making a positive impact on our environment or society, like you, what would you tell them?
Try to find a way to have exponential positive effects — do things that have impact that is sustainable and wide reaching. What can you do now to reach millions of people to create lasting change, and how can you make them pay it forward? Investing in early stage businesses that have impact is one way to achieve this. Besides business, the other way to achieve exponential change is influencing politics in a positive way.
We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch with, and why? He or she might just see this. 🙂
Oprah Winfrey! Oprah has such strong positive energy and can form emotional bonds and repour with people from different backgrounds. Her positive energy shines through despite having persevering through incredibly tough trauma. She grew up in different homes, suffered severe childhood abuse, experienced poverty, and worked her way from being a journalist to become one of the most successful talk show hosts of all time. I feel that Oprah will not only have immense knowledge to share because she has delved into the world’s greatest minds, but she has done a lot of good for society. For example, in collaboration with Nelson Mandela, she opened a girl’s school in South Africa.
How can our readers further follow your work online?
The best way to follow my work is through my Linkedin.
Thank you so much for this. This was very inspirational, and we wish you only continued success!