XA Podcast 028 | Backing Founders For Life | Allen Taylor, Endeavor Catalyst

What would you say about a VC that uses all its profits to help establish economic opportunity in emerging markets? Or one that professes to back entrepreneurs for life, rather than on the strength of their business plan? Hear all about it from Allen Taylor, managing partner of Endeavor, a one-of-a-kind VC explicitly trying to use capitalism for good.

Discussion Topics: Backing founders for life w/ Allen Taylor, Endeavour

• About Endeavor.
• Importance of Southeast Asia to Endeavor
• Endeavor’s unique economic model
• Southeast Asia and parallels with Latam
• How Southeast Asia’s tech ecosystem could become a model for other markets
• Backing entrepreneurs for life
• Measuring impact
• Value of the Kaufman Program for General Partners

Transcript: Backing founders for life w/ Allen Taylor, Endeavour

Belinda Ong: It’s our honour to welcome Allen Taylor, as our guest speaker. So based in Northern California, Allen is part of the global leadership team at Endeavour, a mission driven organisation focused on supporting high growth companies in emerging and underserved markets. As the managing partner of Endeavour Catalyst, Allen leads Endeavour innovative co-investment fund that has been recognised as one of the most active global venture investors in markets like Latin America, and the Middle East. Since launching in 2012, Endeavour Catalyst has raised over $500 million across four funds, and made 280 Plus investments in one and 37 countries. This includes 50 unicorns. Allen, thank you so much for taking the time and welcome.

Allen Taylor: Thanks for having me. And I’ll have to get a shorter bio in the future so you don’t have to read quite so much. But I’ll try to live up to expectations.

Belinda Ong: No pressure. So before we dive into the crux of today’s discussion, it would be great if you could start by quickly outlining your journey to become a Managing Partner at Endeavour Catalyst. And also to share a little bit more about Endeavour with those of our audience who might not be as familiar with it.

Allen Taylor: Endeavour is an organisation that has been around now for 25 years. But I joined the team in 2006, so that’s about 16 years ago. And most of my professional career has actually been at Endeavour. So I joined, three years out of undergrad at 25. And I was just very, very lucky to land in a place where Endeavour at that point was a model that was working in a few countries in Latin America. That was really only in four or five countries. I think it was like I was like employee number nine. And now we have 600 people in 41 different countries. So the work is all about entrepreneurs. We’re a nonprofit model, we’re really trying to think how do you create jobs, how to create wealth and economic opportunity, in markets all around the world. It’s like there are amazing people everywhere. There’s incredible talent and founders and entrepreneurs. So you just have to find them, and then surround them with the networks and the capital and the partners to really grow and scale. So, I’ve had four, five different jobs over the 16 years. And then for the last decade, we’ve been building Endeavour Catalyst, which is a co-investment fund owned and operated by Endeavour kind of built right on top of the organisation. So we can talk more about how that works as well. But that’s been a little bit of my journey. I’m American, obviously, you can tell by the accent. But I have lived and worked kind of all over emerging markets for the last 20 years.

Belinda Ong: Excellent. And can you just walk us through the history of Endeavour in the Southeast Asian region? And its ongoing importance at a global level?

Allen Taylor: Yeah, well, I’ve been for the last seven or eight years, every single year, Southeast Asia has been our fastest growing region in terms of entrepreneurs supported investments made, you know, it’s clear to us with Indonesia as our first market there and the big driver, you know, we opened in Asia just over a decade ago. But now having since added the Philippines, Malaysia, Vietnam, you know, we have a lot to do. I think if you think about Endeavour’s model it has worked really well in Latin America, where we’ve been for 25 years. It has the potential, I think, to have that kind of an impact in Southeast Asia over the next 10 or 15 years. We played a very long term game on this kind of stuff.

Belinda Ong: Okay, great. Before we dive a little bit deeper into that, I guess one more thing I wanted to touch on. And something that you mentioned very briefly in passing is the Endeavour economic model. I understand it’s a little bit different from a typical venture capital fund. Could you talk a little bit more about how you align the ambition around the fund along those economics?

Allen Taylor: Yeah, for sure. And look, it’s a very unique animal. And so I’m happy to talk about it. But the basic part is, Endeavour is a nonprofit, we have a global parent, that’s a 501(c)(3) here in the US, every country where we set up, we’re also a nonprofit. So Endeavour in Indonesia, or Malaysia, or the Philippines, we have a board and a foundation nonprofit structure. And we’re set up in that way. We then own and operate a for profit venture fund, that’s Endeavour Catalyst, whose entire goal is to not only invest in great companies and make money for our LPs, but to make money to fund the future of Endeavour. So essentially, the GP, you know, I’m one of the GPs of the fund. But the economics don’t flow to me, they flow back to the nonprofit. And so we donate 100% of all the money we make back into the nonprofit to kind of try to create this virtuous cycle. As a result, the twist on the model is that today, we actually run a premium carry structure.
So most folks know that you know, a lot of venture and growth equity funds use a 2 and 20 model, there is a 2% fee on the assets managed and a 20% carried interest. We have a much lower fee, so we don’t charge that management fee because essentially Endeavour already exists. But to get true alignment with our LPs on kind of Endeavour’s mission, we charge a 50% carry 50. So that’s a premium carry 100% of which gets donated back to the nonprofit. And so that’s kind of the fun twist is all of our LPs are individuals, family offices, entrepreneur’s founders, who not only see this as a great way to make money, you know, our first fund is about an 8x DPI fund, like fully returned money back like the thing works. But it’s also a great way to help fund Endeavours initiative into the future. And someday to make this non-profit model actually self-sustaining. So we’ve raised over the decades a few 100 million dollars of philanthropic capital to fund Endeavours work. But within the next five to seven years, we won’t actually need to raise any of that, you know, knock on wood. But the idea is that the fund itself will actually fund all of Endeavours non-profit activities.

Belinda Ong: That’s amazing. So it becomes like a self-sustaining model and that 50% Carry. So I think I’ve only heard of one other fund who can charge that much like given your eight times CPI and understand.

Allen Taylor: It, by definition, almost excludes us from raising capital from pensions or sovereigns, or folks who have kind of a mandate to invest only for financial return. But it does create a really interesting, almost like community owned model behind the fund. So we have this very long tail of LPs. We literally have LPs in every single country where we work. And everybody’s very bought into the endeavour’s mission, probably the most notable part, we’ll talk a little bit about our theory of change on founders. But when we select someone as an Endeavour entrepreneur into the network, it’s a bet on them for life. And so we’ll go with people for years on their journey through their first company, their second company, their third company, you know, we hope that they have a hit somewhere along the way, they become a mentor, they become an investor, they even become an LP and what we’re doing, and on our most recent fund, almost 40% so over a third of our LPs are our own entrepreneurs. I think that’s a very cool thing that you can see growing over time.

Belinda Ong: Yeah, there’s a very different sort of LP profile than the usual fund. So you mentioned that you’ve been in the Southeast Asian region for 10 years, starting with Indonesia. Curious to know when it comes to all these early stage companies compared to other regions what characteristics have you noticed about the market here, like specifically around competition for opportunities, and also the prevalence of serial entrepreneurs?

Allen Taylor: Yeah, so a couple of things to unpack there. But I think the first observation I’d make is that as a Latin Americanist, by training, I speak Spanish and Portuguese, that’s kind of where I grew up. The first thing I really noticed in my first 10, or 15, trips to Southeast Asia, is that it looks a lot like Latin America. And there aren’t that many people have the lens where they really study Latin America and Southeast Asia, but the region’s actually have quite a bit in common. In terms of Indonesia is Brazil, to some degree, Vietnam is Mexico. And then you have this other kind of set of economies that you kind of cobbled together. And when you draw a circle around the whole thing, you get a pretty big region. But it’s not actually all that integrated, and so some of the numbers in the region, you know, it’s actually hard to build a business across all of those. So, we see pretty similar trends in Latin America, that we do in Indonesia. So for example, Brazil is Endeavours number one market for our fund. It’s our number one market where we invest the most capital, support the most entrepreneurs, have had the most exits the most US IPOs, all of this, in every single one of those metrics, Indonesia is now number two. And so as an organisation that works in 41 markets, basically every major emerging market beyond India and China. So we don’t do this work in China, we don’t do it in India, but we do it essentially, everywhere else. It’s very clear, there’s a very real kind of analogy between Brazil and Indonesia, and in between Latin and the region as a whole.
The other thing we see in this has been kind of an evolution over the last decade or so. And I’m sure a lot of you observed the same thing when Endeavour started 25 years ago, I think the rate of learning and the rate of change around New Business Model formation or call it kind of category, creating businesses still really came from Silicon Valley, and then kind of spread out all over the world. These days, we actually think a lot about the new company creation, the new business model innovation, it’s emerging market native, so maybe it started in India or in China or even Indonesia, or Brazil for the first time. And then it spreads very quickly across regions and across markets. And it turns out, you know, we were actually just talking about Carson at the top of the call it turns out business models like __ (09:47 inaudible), while they exist in the US, are actually much more suited for emerging market contexts. You know, we’re investors in one called Kovach, which has become like an $8 billion company out of Mexico. And we see Carson the same way, we see Autocheck in Nigeria the same way. So there’s very interesting parallels. So, my main observation is if you really work in these markets in detail, they’re more alike than not. And so that’s been a very interesting kind of learning.
Now, having said that, we’re very reliant as Endeavour on our model of having kind of a local team on the ground and every market where we work, because I can’t pretend for a second that I understand, Vietnam after three trips there, even Indonesia, after 30 trips there, I’m still an outsider. But our team on the ground, I think, really does understand kind of what’s happening in the market. And one of the things I’m interested in these days’ kind of studying is, Endeavour talks about something called the multiplier effect, which is sort of like one entrepreneur then touches a lot of other entrepreneurs. And that’s how you end up building an ecosystem. I think particularly, this ends up forming almost like generations of entrepreneurship. So there’s the first gen of companies that come up, and then you get kind of the second wave and the third wave. And I’m really interested in seeing kind of the compounding of human networks of what happens in that second and third generation. And we’ve seen it in markets like Brazil or Latin America. And you’re seeing it now in Indonesia, and Southeast Asia, and it probably includes some of the folks here. It is kind of the new generation of entrepreneurs that will come out of that first generation of companies.

Belinda Ong: Excellent. Yeah, you’re exactly right. That’s a good parallel with some of the members in the XA Network, where some of them have founded their own unicorns or are soon to be unicorns, also, other founders of younger companies. One thing I do want to kind of dive a little bit deeper into is one of your comments about how the Carson model can also be extended to Nigeria. Just abstracting that to a higher level, does this mean that some of the Southeast Asian technology ecosystem can become a model for an earlier stage frontier type of market in the world. Is that what you’re saying?

Allen Taylor: Yeah, I actually think that’s exactly right, that that was not the original thesis of Endeavour if you go back 25 years, but certainly in the last decade, we have found that the original model of like, Oh, we’ll get these great mentors from New York and Silicon Valley, and they’ll mentor entrepreneurs in emerging markets, there’s still value in that. And we still do that. But consistently, if you look at the 1000s, actually, today, like 10s, of 1000s, of mentoring sessions and conversations that get tracked across the Endeavour network, and, you know, we are a little bit American, and being hyper metrics driven around everything. So we collect NPS on everything and things like this, the most valuable stuff is the peer to peer learning. It is that founder in Egypt, talking to the guy in Brazil, who is building the same business and started 18 months ahead of him. And so there’s so much of that going on today. And you can look at these different kinds of category creating businesses, essentially happening because as technology comes to emerging markets, and as venture in real volumes come to emerging markets you know, frankly, there are these kinds of very predictable, in some ways waves of what happens. My view is that, wave one, and essentially every one of these markets is consumer, so you get E commerce, and then you get payments and logistics and things that enable, like the digital infrastructure for that, pretty shortly after, then you start to have people coming out of those first wave companies, bringing tech to disrupt the biggest parts of the economy. And so then you get, certainly financial services, but also healthcare, education, transportation, agriculture, food and beverage, like disruptive or enabling models with tech for all of those. And then typically, after that, in kind of a third wave, you get more of this B2B kind of enterprise type stuff. And you can see that in all the different ways.
Now, one interesting note on the third wave, the digitization of the SME economy, so many of those SMEs, the businesses are so small, they almost look like consumers, and so then you get a lot of overlap there. And we started to hear now, like B2B E commerce popping up all over the place, the digitization of like, the mom and pop corner store, you know, that’s happening in Jakarta, and in Mexico City and in Brazil, and Istanbul and Cairo, like all at the same time. And so it’s a pretty interesting and rich way to do it. You know, Endeavour is industry agnostic. So technically, we’re not looking for any of these models. We’re just saying, hey, we want to back the fastest growing companies and the best entrepreneurs. But what happens is in every kind of 18 months’ cycle or so things bubble up like, oh, that’s clearly a new business that’s getting built everywhere, because they end up in our portfolio, kind of organically sourced through all the local offices.

Belinda Ong: Actually, that’s a good segue when you say these best entrepreneurs source from all the local offices. Could you talk a little bit more about maybe some of the serial entrepreneurs in your portfolio that you back, like, how early on did you meet them?

Allen Taylor: Yeah, good question. So Endeavours core programme is very geographically focused, we work in certain markets where we have an on the ground team. So even if I meet amazing entrepreneur’s tomorrow from Bangladesh, I can’t actually support them yet, because we don’t have an office there. Now, we’re pretty stage specific on when Endeavor first gets involved with a company. And so that is to say, you know, we’re not really product people. So this is not an early stage accelerator programme, we’re kind of once you have product market fit, you have some revenue, like something’s really working, we are company builders. And so that’s what we talked about, kind of scale ups, not startups, you know, in venture terms, traditionally, that was kind of around before or after sort of a Series A of like, okay, this thing is really working, and now it’s starting to scale, you know, that was probably the right time for a company to become part of Endeavour. But that’s kind of the lens. Geographically specific, not super early stage, but really focused on scale ups and industry agnostic.

However, the idea you’re brought up of kind of repeat entrepreneurs, or serial entrepreneur is a really important one, because we bet on the entrepreneur for life, that then gives us the opportunity to be involved very early in second and third companies from those same founders. And so that’s where the generational part is kind of interesting. You know, we have a few of these in Indonesia now, because we’ve been working there, like I said, kind of 8 to 10 years. So actually, several of the founders, we back in the first few years of our work there, have now gone on to start new companies. So when it comes to maybe to give a couple examples, you know, something like Boku cars, now Lumo, or even Nikki Lahore is new business with Vida, these are companies we backed very early, essentially at seed, because the founders were already Endeavour entrepreneurs and already in the network, and to give you an example, Mapan, or Ruma was the first business we ever selected in Asia. The first one we ever invested in was the founder, although he sold that business to GoJek and ran GoPay and did these other things. You know, he’s going to start another company at some point. And we will invest in all the day one, the first chance that we get, because that’s really kind of how we think about Endeavour entrepreneurs for life.

Belinda Ong: Interesting. So in that case, the fact that Endeavour is able to back founders looking to solve B2B problems, B2C problems, it sounds like the commonality is that impact on all these different emerging markets. So I’m curious to know, there is another popular way to measure impact, which is the UN Sustainable Development Goals. How would you compare the way that Endeavour considers impact with how the UN SDG considers and frames impact?

Allen Taylor: Yeah, good question. So Endeavour, oftentimes, we find ourselves having that kind of impact related conferences or conversations. And candidly, we feel very capitalist, when we’re in those conversations, then we find ourselves in kind of traditional venture conversations, and we feel very impact oriented, because we’re somewhere in the middle. The way I would talk about it is that Endeavor’s fundamental belief is that as an economic development organisation, you really have to get kind of the bedrock of your economy, right to be able to do any of these other things. And so it’s almost like a bottom of the pyramid foundational thing of getting kind of robust real employment for people is what will enable us to work on clean water or health care or so many, these other initiatives that are part of the SDGs. And so for a long time, we’ve pursued economic development as the main thing we focus on. And so that aligns us in a very real way with most of the regular kind of for profit venture capital investors, because that’s what we’re really aiming at.

Now, our ultimate goal of investing in and supporting these founders is also to create a culture where they believe in giving back or we call it paying it forward, like helping the next generation and overtime, kind of harnessing the power of the entrepreneur ecosystem, or you can think about as leveraging the power of venture capital for this social goal around economic development and job creation, but we don’t have any kind of specific, we only want to do things that are green or only things for this population like nothing narrow like that. It’s very kind of like this is all about economic development. Now, if there’s one thing that I think we’re spending time thinking about, it’s that in some of the places where we’ve had real success doing this we’ve created a lot of wealth. But frankly, it’s also driven a bit more of a problem around wealth inequality. And so that we think more about, okay, well, what do you what do you do with that? Like, how do you kind of help the generation that then does accrue the wealth and to be thoughtful about what a new kind of approach to philanthropy would look like or a way of redistributing some of that within the economies where they’ve had success.

Belinda Ong: Interesting. So it sounds like very much the focus for Endeavour is on reducing the income inequality gap. How does climate tech, which is a pretty popular sector right now how’s it kind of fit into your thesis?

Allen Taylor: The good thing about Endeavour, I think, is we’re a learning organisation so we’ll always question our own assumptions and see if we need to change them. But so far, we don’t have any kind of specific focus related to climate tech, I guess, as a Californian, I hope that we don’t blow up the world like that we kind of take care of it. But there’s no programmatic initiative right now with an Endeavour related to it.

Belinda Ong: Got it. Okay. I think one last question for me. I understand that you’re on the board of the Kauffman fellows network. Could you speak a little bit more about how the network has been educating the next generation of GPS in Southeast Asia?

Allen Taylor: Yeah, sure. So there’s two major things I do kind of outside of Endeavour and they’re both extremely connected. So I sit on the board of an early stage, global emerging market, seed and precede fund that’s called Alter Global. Alter has also made some investments in Indonesia and Southeast Asia. Frankly, that’s very connected in that I hope I can mentor and personally help out and partner with entrepreneurs early, who will someday grow up to be Endeavour entrepreneurs. So there’s kind of a very direct focus behind that work. And then I was lucky enough a decade ago to go through the Kauffman fellows programme. And it made a really big impact on my life. You know, this is at the time where Endeavour was just starting a fund. And frankly, I’m very lucky to have amazing people on our board and on the funds committee kind of around me. So I get to learn from guys like Reid Hoffman at Greylock who was the original co-founder of LinkedIn, Jason Green and emergence Nick Beim of Venrock. Like these guys, were helping me and they said, Look, you really should go get this kind of formal training in venture. And so that’s when I did the Kauffman fellows programme.

Fast forward 10 years, I was invited to join the board. And again, the theory of change is actually fairly similar to Endeavour, it’s like, hey, if we can actually help the next generation of GPS around the world, become really good at investing, particularly at the early stages and kind of learning the call it kind of the human side of venture capital, not the number crunching, but the how to be a good board member, and how to manage with empathy, and how to really help founders will make a really big impact. And so, I think in some ways, it’s a loose analogy, but kind of what Endeavour does for founders, is what Kauffman fellows does for GPS, in terms of putting them in a network and trying to surround them with amazing talent. And so, I’m one of the more internationally oriented people on the Kauffman board, you know, about 50% of the fellows are from the US, but more and more, they’re from all around the world. And I think if we can get kind of robust and thriving venture ecosystems going in more and more countries, it will only be a good thing for the world. So if you’re an emerging Fund Manager, check out the Kauffman fellows programme.

Belinda Ong: Excellent. But are there any investors in Southeast Asia that you respect and look up to?

Allen Taylor: Oh, for sure, yeah, in fact, quite a few of them are also Kauffman fellows. So, thankfully, these days now that we have Kala and an official Endeavour kind of office in Singapore, I don’t come to the region quite as much as I used to. But I used to come four or five, six times a year, and spent a lot of time with the teams in Singapore at Golden Gate at open space, at jungle, you know, all these guys, insignia with __ (23:57 inaudible), and then also mostly in Jakarta, with folks like AC ventures, Alpha JWC, etc., I think, essentially, this is the early stage ecosystem, together with Angel Networks and other networks actually, like XA, that are really kind of forming the base of where Endeavour is hoping to come in, and really help some of these companies go to scale. And so, it’s also another place where you can see a very real analogy between the way the venture ecosystem developed in, say, Brazil, and what happened in Indonesia, just over the last six, eight years. So it’ll be interesting to see how it all plays out. But yeah, lots of friends and people I respect a lot in the venture business in Asia.

Belinda Ong: Yeah, we’ve definitely living in interesting times. And we really appreciate the perspective of someone who’s lived through a couple of cycles.

Allen Taylor: Well, I did have hair when it all started. That was a long time ago.

Belinda Ong: Oh, yeah, let’s not go there. But thank you, Allen, for sharing your perspective on Southeast Asia and the Latin region, and also how Endeavour has built a network of like minded entrepreneurs that want to give back to the emerging economies as well as the GP equivalent that you’re on the Board of the Kauffman network.

Our Guest: Allen Taylor

Allen Taylor leads Endeavor Catalyst, Endeavor’s innovative co-investment fund that has been recognized as one of the most active global venture investors in markets like Latin America and the Middle East. Since launching in 2012, Endeavor Catalyst has raised over $500M+ across four funds and made 250+ investments in 30+ different countries, including 47 unicorns. He also serves on the boards of several entrepreneurship and venture capital-focused organisations, including Kauffman Fellows, Alter Global and Scale-Up Ventures (Brazil).