Podcast Summary: E119 - How the Visa Foundation Invests w/Najada Kumbuli

Title: How I Invest with David Weisburd
Host: David Weisburd
Guest: Najada Kumbuli
Episode: E119: How the Visa Foundation Invests w/Najada Kumbuli
Release Date: December 10, 2024

In Episode 119 of "How I Invest with David Weisburd," host David Weisburd engages in a comprehensive discussion with Najada Kumbuli, Head of Investments at the Visa Foundation. This episode delves into the strategies, challenges, and insights associated with institutional investing, particularly within the framework of the Visa Foundation's mission-driven approach.

Building an Investment Program from Scratch

Najada Kumbuli shares her experience of joining the Visa Foundation approximately four years prior and spearheading the creation of its investment program from the ground up.

Key Insights:

• Alignment with Mission: Kumbuli emphasized the importance of ensuring that 100% of the endowment aligns with the foundation's mission, focusing on supporting entrepreneurs globally, with a particular emphasis on women entrepreneurs.

  "We started with the challenge of aligning strategically with the mission, focusing on women entrepreneurs, which allows us to invest in diverse fund managers and, in turn, support more entrepreneurs." (01:02)

• Regional Nuances: The Visa Foundation invests across five regions, each with unique impact considerations. This regional focus enables tailored investment strategies that address specific local challenges and opportunities.

• Investment Policy Development: Crafting the investment policy involved building an asset reallocation model and setting targets for each asset class, ensuring a balanced and strategic investment portfolio.

Entering New Markets and Manager Selection

The conversation shifts to the complexities of entering new markets, a topic Kumbuli addresses with practical strategies for institutional investors.

Key Insights:

• Learning Approaches: Kumbuli advocates for a combination of bottom-up and top-down approaches to rapidly gain market intelligence. "We listen a lot," she notes, emphasizing engagement with local colleagues and co-investors to understand both macro and micro-level dynamics (02:39).

• Firsthand Experience: Visiting and interacting with companies in targeted regions provides invaluable insights into the operational aspects and customer needs, aiding in informed investment decisions.

• Market Archetypes: By analyzing investments across diverse markets like Nigeria, India, Colombia, and Brazil, the Visa Foundation identifies patterns and opportunities that can be replicated, while respecting local nuances.

Navigating Challenging Venture Fundraising Environments

Discussing the tough fundraising landscape of Q4 2024, Kumbuli outlines the Foundation’s strategic responses to macroeconomic challenges.

Key Insights:

• Diversification of Fund Managers: "We are bullish with our strategy of diversifying across the maturity of fund managers," Kumbuli explains, balancing first-time fund managers with more established ones to mitigate risks (04:09).

• Performance and Conservatism: Selected fund managers exhibit strong performance and a conservative approach to navigating the uncertain economic environment, rethinking fund sizes and fundraising strategies accordingly.

Best Practices for Emerging Managers

Kumbuli offers valuable advice for emerging fund managers aiming to thrive in the current economic climate.

Key Practices:

• Perseverance and Agility: Managers must navigate economic cycles adeptly, adjusting strategies as needed to manage fundraising effectively ([04:53).

• Realistic Fund Sizing: Instead of aiming for large fund sizes that may be unattainable in a challenging market, emerging managers should consider smaller initial fund sizes to build track records and secure foundational investors.

• Diversified Fundraising Strategies: Engaging a mix of family offices, high-net-worth individuals, successful entrepreneurs, and risk-tolerant organizations enhances fundraising resilience.

• Professionalization: Establishing a robust back office and demonstrating institutional readiness are crucial for attracting and retaining Limited Partners (LPs).

Indicators of LP Interest and Engagement

Understanding LP behavior is critical for General Partners (GPs) seeking investment.

Key Insights:

• Serious Engagement: Kumbuli identifies that serious LPs request data room access, indicating genuine interest (06:33).

• Clear Communication on Commitments: Prompt and clear communication regarding ticket sizes helps LPs determine their capacity to invest.

• Soft Indicators: Referrals and endorsements from other LPs signal a fund's credibility and potential for success.

The Art of Storytelling in Investment

A significant portion of the discussion centers on the pivotal role of storytelling for GPs in attracting and maintaining LP interest.

Key Insights:

• Tailored Narratives: "A good storyteller gets back to understand who your audience is," Kumbuli emphasizes, highlighting the need to tailor presentations to the specific interests and expertise of the LP audience (14:13).

• Balancing Detail and Clarity: Effective storytelling involves presenting numbers and complex concepts in an accessible manner while grounding the narrative in realistic risks and opportunities.

• Personal Touch: Sharing personal motivations and unique perspectives differentiates GPs from larger firms, fostering deeper connections with LPs.

Building Trust and Preparedness

Kumbuli underscores the importance of being thoroughly prepared to answer detailed questions from LPs, which serves as a trust-building exercise.

Key Insights:

• Depth of Knowledge: Being able to explain intricate details, such as specific footnotes in presentations, demonstrates thoroughness and reliability (19:37).

• Long-Term Relationships: Building long-term relationships involves understanding LPs' goals beyond mere financial returns, including leveraging their networks and insights for future fund successes.

Reflections and Lessons Learned

Towards the end of the conversation, Kumbuli reflects on her tenure at the Visa Foundation, highlighting the challenges and lessons learned.

Key Insights:

• Communication Skills: Transitioning from an investment professional environment to one where board members may not have investment expertise required enhancing her storytelling and communication skills (17:52).

• Technical Expertise: Expanding knowledge in asset classes like absolute return was essential for strategic diversification and effective investment management (20:18).

• Team Collaboration: Recognizing the strengths of her team and delegating effectively was a crucial step in scaling operations and enhancing overall performance.

Conclusion:

Episode 119 offers a deep dive into institutional investing through the lens of the Visa Foundation's strategies and Najada Kumbuli's leadership. From building mission-aligned investment programs and navigating new markets to mastering the art of storytelling and fostering robust LP relationships, the discussion provides actionable insights for both emerging and established fund managers. Kumbuli's experiences underscore the importance of adaptability, clear communication, and strategic diversification in achieving long-term investment success.

Notable Quotes:

• Najada Kumbuli on Storytelling:
  _"A good storyteller gets back to understand who your audience is." (14:13)

• On Fundraising Strategy:
  "You probably want to rethink about the fund size and you probably want to build your track record first." (04:57)

• On LP Engagement:
  "At the end of the day, what are you getting out of them beyond the check?" (17:23)

• On Communication Skills:
  "The importance of communication, storytelling, setting the strategy and the vision." (17:52)

This episode serves as a valuable resource for institutional investors, emerging fund managers, and anyone interested in the strategic intricacies of mission-driven investing. Najada Kumbuli's expertise and candid reflections provide a roadmap for navigating the complexities of the investment landscape with purpose and precision.