Leading venture capitalist Matthew Salloway is on the hunt for innovative technology startups on behalf of his family office and fund and says the 5G economy is a 15 trillion-dollar economic opportunity.
Salloway is the chief executive of GSI Ventures, a top 50 Global Family Office, with a focus on venture capital and portfolio market expansion into the Middle East and North Africa region. He is also the co-founder and managing partner of SIP Global Partners, an international performance venture fund investing in global technology companies.
The University of Pennsylvania Law School graduate was the founder and managing partner of Salloway Law Group PC, a law firm based in Manhattan, representing members of family offices, private equity firms, royal families, professional athletes, investors, celebrities, media companies, and other high-net worth individuals. He is also a movie producer and made films starring Robert De Niro, George Clooney, Ryan Gosling and Oprah Winfrey.
Salloway will be one of the distinguished speakers during the virtual Campden Wealth Family Alternative Investment Forum, on 18-20 May. Before his address, he spoke with CampdenFB about his family office strategy, the startup opportunities he doesn’t want to ‘MISS’ and the new fund he is investing with prolific partners across North America, the Middle East and Japan.
What are the key messages you want families to take from your address during the Campden Wealth Family Alternative Investment Forum?
I would like families to benefit from the knowledge and experience I have learned from running a large global family office. While each family office has unique challenges, I think there are certain lessons that are relevant across the family office spectrum.
How did you get started in the family office space?
I started my career as an attorney and personal adviser, working with royal families and high net worth individuals. These clients needed someone trustworthy who could advise and protect them, structure and diligence their investments, assist with tax and corporate structuring, negotiate legal agreements, hire staff and manage personal affairs.
One of the individuals I have been assisting for over 10 years asked me to launch his global family office—GSI Ventures. ‘GSI’ stands for Growth, Sustainability and Integrity—the core pillars of the family office that we created together. We wanted to make sure the values reflected our core principles and operating philosophy.
What criteria do you consider when investing in startups on behalf of your family office?
I’ve come up with an acronym—MISS—that summarises my diligence process. I look for a startup company that I don’t want to MISS.
‘M’ stands for management. We want to work with an experienced team that can execute on the vision. A lot of people have great ideas, but that does not mean that they are going to be successful startups. We look for teams that have experience building and exiting prior successful start-up companies.
‘I’ stands for integrity. We want to work with people that we trust, who share our same ethical principles and values.
S’ stands for size. We look for companies that are addressing significantly large markets for the product or the technology. If the market isn’t large enough, the company may not be commercially viable.
The last ‘S’ is sales and it is critical that the team has the right sales and marketing strategy and process. You can have a great idea, but you unless you are able to get that strategy and product out into the marketplace, you cannot succeed.
How has Covid-19 pandemic impacted your investment strategy?
What we have tried to do is be opportunistic in terms of our investment strategy. There are certain critical themes that have come to the forefront. As an example, we have looked closely at technologies that represent the future of work—the pandemic has certainly changed the way we traditionally used to think about it. We also want to be careful because themes that happen during a pandemic may not last forever so, we want to make sure that we are thinking long-term.
Tell us about the aims of GSI Ventures as a family office.
In general, we hope to be one of the top performing global family offices in terms of our ability to source and diligence investments and with respect to portfolio construction and management. We want to create the proper long-term balance between capital preservation and portfolio growth.
But one unique aspect is that we are not only an investor, but also a strategic partner. We often look to find investments where we can be a strategic bridge between that company and the Middle East.
In this sense, we hope to bring best-in-class technology and partnerships into the region, which can help benefit jobs, the quality of life for the people and the economy.
Overall, we hope to continue to grow our reputation for being a smart, trustworthy and valuable partner.
How does GSI Ventures go about bringing new tech from the USA to KSA?
Initially, we need to find the right technology product and team. Next, we do a significant amount of diligence and market research on the local economy and how this technology fits into the regional ecosystem. Finally, we need to determine the proper structure for the international expansion and find the best local partners, if needed. We try to be helpful in navigating the marketplace as the Kingdom of Saudi Arabia is different from many countries in terms of doing business. There are a lot of nuances you need to be aware of, so we try to help the company deal with that and assist them with finding the best way to find the right and best partner in the region.
Tell us about an investment you are especially focused on now.
There is one investment that is particularly interesting and compelling and fits perfectly with our thesis.
We are investors and the co-founders of a fund called SIP Global Partners. The fund grew out of our thesis of investing in best-in-class technology and being a bridge between North America and the Middle East. We partnered with two individuals who were working towards the same concept; however, in their case, they were focusing on building a bridge between North America and Japan. If we could combine North America, Japan (ASEAN) and the Middle East, it could be quite unique and powerful. That is how we founded SIP Global Partners. The fund is anchored by one of the largest global tech corporates in the world and focuses on the 5G economy—which we think is a once-in-a-generation opportunity.
The 5G economy is an over 15 trillion dollar economic opportunity. It includes areas such as telecommunications infrastructure as well as the technology layers on top of the infrastructure, such as artificial intelligence, augmented reality, virtual reality, smart cities, gaming, machine learning, robotics, digital health and media, and cybersecurity.
This fund was launched about 15 months ago and we’ve had tremendous success and access into the best deals, mostly in North America. People want us on their cap table because they want to be able to grow their technologies into the markets where we have connectivity and infrastructure.
For example, Japan is the third largest economy in the world and often a springboard to the rest of Asia. Additionally, Saudi is the largest economy in the Gulf. If you can get your companies into those regions, it can have a tremendous impact on your own growth.
Our fund was able to get one of the few licenses from the Saudi Ministry of Investment, which gives us their support in growing our portfolio companies into Saudi. In Japan, one of our partners was the former chairman of the Japan Venture Capital Association for over 10 years and helped companies like Amazon and Netscape grow into Japan. The fund has a tremendous team of advisers and investors, including a Harvard Business School professor, the former CEO of GE Asia, the former CIO of Lockheed Martin, a Supreme Court justice from Japan and the former co-head of BlackRock Alternatives.
What has been your approach to impact investments?
We are a big supporter of impact investing. In fact, we were one of the first families to participate in a programme at Harvard University’s Kennedy School of Government that brought together the leading global families who are focused on impact.
We were so inspired by the programme that we created our own workshop in Saudi Arabia about two years ago. It was really the first of its kind in the region and brought together some of the top next-gen families and thought-leaders in the community to learn about impact investing and how they can get involved.
Overall, we seek to be a catalyst for this philosophy in the region.
There are many lessons that I have learned—some of which apply to other areas of investing as well as life in general. For example, VC requires patience. Many of these investments are long-term and companies go through many challenges along way. Having the patience to stay with a company and support its growth and trajectory is an important part of the process.
Another lesson is to understand that venture is a highly risky asset class and in general, the losers far outweigh the winners. I believe one statistic I read was that out of five million investments, something like three become unicorns, so the odds are stacked against you, but the winners can also make up for the losers because you can have very big returns.
Diversification is an important lesson as well. It is critical to make sure you diversify, both in terms of industry and in geography.
Finally, your reputation is everything. Always be gracious and build the right reputation for being a good and respectful investor.