In today’s challenging climate, Radiate Ventures is betting on companies developing the technologies that will drive change and the leaders persistently following through on their goals.
A new venture fund launched by global thematic investment platform MarketX and founder Cathryn Chen, Radiate Ventures is designed to leverage investment opportunities due to volatility.
The fund will look at seed and Series A rounds, growth, and late-stage private companies in Asia, the Middle East, and the United States. While Radiate Ventures invests in disruptive environmental- and sustainability-focused companies, a primary focus is on disruptive technologies in fintech, deep tech, and vertical SaaS.
Chen looks for leaders with qualities similar to her own. The child of parents who came to the United States with only a few dollars to their name, Chen worked as an investment banker for Deutschebank and JPMorgan in Hong Kong and New York before cofounding a startup in her parents’ garage that earned $80 million in funding from Lightspeed Ventures and Sequoia Capital. It was sold to Dun and Bradstreet.
Where Radiate Ventures focuses and why
In 2014 Chen began envisioning a technology platform to help high-net-worth individuals, family offices, and accredited investors access quality opportunities. That became MarketX, which connects top pre-IPO tech companies with more mass affluent audiences.
Chen spent time in Asia, Europe, and the United States in her youth. That nurtured an interest in international relations and how innovation can help the world.
“We focus on deep tech, fintech, and vertical SaaS,” Chen said. “In the past few months, we’ve invested in a supersonic company, an electric boat company, and natural resources. We’re looking at LatAm for lithium batteries.”
“But over the last nine years, our main focus has been helping cross-border transactions and focusing on investments that will change our world drastically.”
Radiate Ventures diversifies its investments, half directed to American companies and half internationally. Roughly 80% are mature companies, and 20% are seed and Series A.
“Some of the companies we invest in have proven track records, so they have reached a certain level of revenue,” Chen said. “They have done quite well in terms of a proven record. We are helping them expand globally and find businesses with scalability and potential. When investing in companies, we target seven to 10x return for early-stage investments and two to five-x return for later-stage investments.
“With those numbers in mind, we had to look for a certain type of company. What’s our current valuation? Can we find a business doing well without a crazy 100x multiple? We’re no longer in the 2018 to 2022 timeline. In the next few years, there will be a lot of m&a acquisitions. So who are the most likely acquired targets?”
Company qualities to watch for in a changing environment
What’s changed since those heady days of a few months back? Chen said valuations have taken a nosedive. Investors focus more on the bottom line, annual recurring revenue (ARR), and how a company can increase those numbers. VCs are investing less, and that’s hurting startups.
Chen wants to help those startups with a more robust support system. Radiate Ventures works beside them, introduces them to investors, and provides liquidity to those wishing to sell some shares. How to find liquidity is the first question she considers.
The second is the company’s approach to AI in an increasingly competitive world. Which companies are here to stay, and which ones will be obliterated? Separate those building the foundation from the FOMOs.
Adapting to a multi-polar world
Given her interest in international relations, Chen is keenly aware of its changing polarity. We’re moving to a multi-polar world requiring a different skill set. Leaders have to be anti-fragile. That means persistence and dedication. She doesn’t care where they’re from but focuses on what’s inside.
Chen believes the best companies are forged during difficult times. That draws her team to ones founded by immigrants who know the struggle. Many Chinese entrepreneurs, for example, are leaving because of the increased risk that decades of labor can be taken away in a flash.
They’re heading to Latin America and the Middle East. On a recent trip to Dubai, Chen saw many Chinese and Russian speakers. Even Americans are founding companies elsewhere.
“Maybe this is controversial, but there’s an American dream, right?” Chen asked. “Everyone wants to have the American dream. Look at the portfolio companies. We have DoorDash and Patreon. They’re all founded by immigrants in this country.
“But I think everyone’s also noticing Africa, for example. There’s quite a bit of opportunity in terms of population growth. Nigeria is one of the fastest-growing populations.”
How can you leverage people and resources? How can you find people with good experience? Can they use that skill set outside the U.S. in a multi-polar world?
Increasingly, the answer is yes. Chen sees more companies with potential in Africa because, while most of the talent gravitated toward China and the U.S. in the past, that’s no longer the case.
With a network of 300 family offices worldwide, Radiate Ventures can help portfolio companies with critical customer adoption. Within two weeks, one company secured five family offices as key clients.
“That is the beauty of having a global customer base,” Chen said. “Everyone can help each other out.”
Overcoming racial bias
Given our increasingly multi-polar world, Chen sees a surprising and controversial investment gap. Often, entrepreneurs are judged, and opportunity is given by skin color and location, a lousy yardstick that’s increased over the past few years. It bothers Chen, and she fights back.
She likes people with a chip on their shoulder who won’t give up on their dream of a better future. She said many VCs stay away from immigrant-founded companies because they look a certain way. It happens often, and with history’s tendency for repetition, she wants to stop it.
“That’s one thing we hopefully can address — the systematic discrimination against people who should be viewed a certain way, which should be taken seriously by VCs,” Chen said.
“Instead of looking at people by which nation they’re from, how about the fact that they’re just digital adopters who like to innovate? We’d like to be at the forefront of everything. Maybe we can look at people differently…
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“That’s why I pledge to work with founders worldwide. Our team has people from 10 different nationalities because I believe that diversity is power. There’s a reason why America is the best. We take people the top people from everywhere, so why are we going back on our original mission?”
How the rich are different from the rest of us
The ultra-rich handle their money differently than the rest of us, not just because they have more. There’s a different risk mindset. Don’t invest in Apple; that’s already a trillion-dollar business. Look for a company with the potential to be the next Apple. That’s where the significant returns over the next decade will be.
It takes experience and the ability to reflect to identify them. When she was younger, Chen wondered why one company received $50 million when a similar company didn’t.
Part of the answer lies in the return. How does one consider entry and exit prices? What’s the acquisition potential? Who are their allies?
Chen said that is one part of the world that hasn’t changed much. Find the best partner matches and allocate resources appropriately. Radiate Ventures’ global network knows how to deploy that strategic capital.
Priorities change in a turbulent world. In good times, there is the bandwidth to think about sending people to Mars.
Not today. There are pressing problems, or at least increased focus on them. Society needs to figure out some basic things, like how we move energy. How do we feed people? In fintech, how do we enable people to deploy money and generate wealth efficiently?
“These are all really big issues to solve,” Chen concluded. “I feel like we’re not paying enough attention, so that would be the area I will focus on.”
