E32: Paul Asel, Managing Partner at Nokia Growth Partners – Interview

June 17, 2016


This podcast is with Paul Asel, managing partner with Nokia Growth Partners. Paul is a fascinating investor. He has 30 years of investment experience, much of it is international. He was investing in Russia soon after the Soviet Union reign ended.

His investment experience and track record is impressive, especially in Asia. He has had several $1 billion plus exits in China, including UCWeb and Ganji. And he’s had a number of other successful exits. This whole interview could just be about Paul’s background.

Instead, we touch on Paul’s background and then focus more on the internet of things. Nokia Growth partners just launched a $350 million fund focused on IoT. These areas include Digital Health, Consumer IoT, Connected Cars and Connected Enterprise. Before this fund, Nokia Growth Partners had invested in IoT companies, including Whistle, which was acquired.

Other questions Paul answers:

-How do you go into a new country and understand its investment potential and network?
-What are some of your favorite cities to visit/live in?
-What type of IoT companies are you looking for?
-What are your investment criteria?
-How did you become an early investor in Chinese startups, UCWeb and Ganji?


Dave Kruse: Hey everyone. Welcome to another episode of Flyover Labs. This is Dave Kruse from Madison, Wisconsin and today we are lucky enough to have Paul Asel with us. And Paul is a Managing Partner at Nokia Growth Partners and has been doing investments for over 30 years now. So his investment experience and track record is quiet as impressive, especially in Asia. He’s head several $1 billion plus exits in China including UCWeb and Ganji. Hopefully I pronounced that right. Paul can correct me later, and he’s had a number of other successful exits. So this whole interview can just be well, going over Paul’s background and what he’s learnt, but instead we’ll just touch on Paul’s background and then focus more on the internet of things as the Nokia Growth Partner just launched a $350 million fund focused on IOT. So I’m really excited to hear about, well you know, their geographic regions they are going to focus on and kind of the investment criteria. So we have lots to talk about, so let’s get started. So Paul, thanks for joining us today.

Paul Asel: My pleasure.

Dave Kruse: And so like I said, you have quite an impressive background, but this is going to be more of IOT, but let’s talk a little bit about your background. You background includes being an investment analyst in private equity and venture capital, and so that’s a great experience, but you also have a lot of international experience. How did you start getting into the kind of international investment and why was there thought processes when you started getting more into the international side of things.

Paul Asel: Well, I’ve always interested in international. I have done a lot of international travelling from – when I was a – from a child and so when I had opportunities at different stages, I always had a preference for moving international. So I did an internship in Thailand when I was in business school. Prior to that had done a language study crowd program in Mexico and then post business school when I was considering different opportunities, Russia was just opening up and had an opportunity to go over and advice the central government in Russia on a consulting assignment and took my bags over there not knowing whether I’d be there for three weeks or three months and end up being there for 20 years and being part of the first venture capital firm that was established there. So I guess you know some serendipity. It was a time when in life where one could take greater risks and the opening up in a place like Russia is a seminal event. So did think in a non-conventional way and had no regrets about that.

Dave Kruse: Interesting. What was one unconventional way you did things back in Russia?

Paul Asel: Part of the – the intriguer about Russia was that first it was the super power that we looked across the Atlantic task for 40 years and so there was tremendous geo-political interest in this; the opening up of that. What the learning’s there for me were that Russia needed to go from a 70% military industry complex to 70% goods and services, which is the composition of our GDP in the U.S. and the process of the doing that involved investments in a number of basic industries that had venture capital like growth. And so we had a transformative time in that economy in which to invest and the type of investments we were making were commercial banking type of investments in the US, but they had venture capital type of returns possibility and so it was a very interesting time to think through how a whole economy, not just an industry has transformed. And that lens I think served well when coming back to the United States and thinking through industries and how things like mobile and the internet can transform and disrupt different vertical industries.

Dave Kruse: Interesting, that makes sense. And later you went to China. So how do you – when you go to a new country, how do you get your arms around that country and figure out what’s interesting, who to talk to. Because how many different countries have you invested in over the years?

Paul Asel: Well we, we’ve been in probably about a dozen different countries. I have invested in about that many. So when going into new countries, the first couple of countries I went into, Mexico, India, Russia, I had actually started living with a local family and did that for the first six months or a year and that helped me understand the local culture and appreciate the culture more as in a way that would have been to do from just a business perspective. And what I found over time is that while the local culture helps inform us how to think about how to run businesses that with fundamental economics are consistent across country. Once we understand the stage of an economy and an industry that those basic rules apply, and then having cultural sensitivity about how to invest, I think enabled one to be quite effective in investing globally. What we try to do is take a global pattern recognition and look at how industries develop and particularly in new technologies and think, are we going to invest in the global best of three player and help them expand internationally in a quick way, or is this a type of market opportunity that allows for local winners and investing, making multiple investments in different companies across the same theme and applying that approach has helped us be quite effective.
So for example, we invested in Ganji which is a local classifieds business in China and based on the success that we are having there, a year later made an investment in Quikr in India and both of those have ended up being the leading local classifieds companies in their respective markets.

Dave Kruse: Interesting, and the last question and then we’ll get into IOT, but of course we could talk about your international investment all day. But how – with Ganji how did you know – I mean how long were you in China before you invested in it? How did you know that was the team to back. Did you have – did you also have local investment partners who you partnered with as well in their investment.

Paul Asel: It’s a good question. We believe that we are industry experts, but not local experts and so with any investment that we would make, we would want to have a strong local partner involved. And so in this case we observed the global industry and we saw how the online classified space was playing out in the U.S. and Europe and then looked to be an earlier mover in that space in China. I talked with all the companies and thought that Ganji was going to be a well placed and we went in with investors that we knew and trust, but had a local expertise in that market.

Dave Kruse: Interesting, makes sense, okay. So let’s switch to your new fund that you raised, and so is that kind of your focus, the internet of things fund that you just raised?

Paul Asel: Right. So we have four funds under management and in total over $1 billon across those four funds. The fourth fund that we just announced is a $350 million fund focused on the internet of things. That category is a very broad category, so we don’t see that as necessarily limiting, but we do believe that we are at an early stage and an industry that could be quite transformative, similar to what we are seeing in the internet and mobile over the last couple of decades.

Dave Kruse: And do you have a geographic focus in that fund?

Paul Asel: Now we are global, we have offices in China, India, Europe and the United States. So we very much take a global perspective in investing.

Dave Kruse: Okay and in one of the articles that I read, you mentioned that China you think could be a big player in this space. Can you expand that a little bit more; why you think that’s the case?

Paul Asel: China is a market that has been able to produce hardware innovatively and very efficiently, and we’ve seen significant innovation that has come out of China over the years and so we believe that the internet of things, which is more a molding of hardware and software sensors is something that plays well to China’s capabilities. We are seeing significant innovation happening in China and I think we will see that start to influence how innovation is happening globally in the IOT space.

Dave Kruse: And okay, so allowed, that IOT in China do you think will be spread across the world. I know you mentioned before for international investments that can be more of a local investment or you will take that company to other countries. Do you see a lot of the China IOT influencing IOT across the rest of the world?

Paul Asel: We look for companies that have global potential and try to accelerate their global engagements. So an example of that is, when I invested in UCWeb it was a China only play with about 40 million users and we helped them to expand to over 40 countries, I actually think it’s over 100 countries and ultimately had over 500 million users. So we very much look to see companies that have a distinctive technology, a management team that can execute at scale and who are interested in going abroad and U.S. has been able to accelerate that process.

Dave Kruse: Got you, okay. And I think, it looked at some place the fund here focuses on consumer and health and enterprise. Is there o ne area or is there some type of an allocation that you think you are going to have, you know 30% of consumer or are you looking at all ears right now for with that fund.

Paul Asel: We had neither geographic nor sectoral allocation. We do take a thematic approach to investing, so we look at specific sectors, we look at them deeply over a number of years and so we do have a significant commitment to – for example the health sector, the connected enterprise, but we don’t make specific allocations to those. We very much we’ll move in and out of markets depending on where the opportunity exists at that time.

Dave Kruse: Got you and what’s your investment criteria? You have been doing this a long time, so you probably have somewhat of a gut feeling that’s hard to describe, but also it sounds like you want a strong local partner to invest with, probably a strong team. But yes, is there – do you have any certain criteria? Do they have to have revenue or they can just be a very young start up?

Paul Asel: Well, Nokia Growth Partners as the name suggest is a growth stage investors. So we look for companies that have a product in the market with customers that validate both, the technology and the underlying business model. Our sweet spot is companies that have $2 million to $25 million in revenue, but are at a point where they are really looking to scale the business and we look for companies that can be disruptive, that can be global, very large iconic companies, $1 billion plus type opportunities with management that can execute on that.

Dave Kruse: Got you, it makes sense. And in another article, you main view – it’s the same one that you mentioned that the ecosystem is critical for- IOT. Can you tell us a little bit more about your thoughts behind that?

Paul Asel: Sure. So if you look at the mobile space as an example, the initial generations of phones were great voice telephones. But when the applications, when an app ecosystem developed, the phones became much more than that and what we found was that it was not the best hardware that ended up winning, but it was rather the best ecosystem. And Apple was an early mover in that and they were able to establish a mode around the handset based on the ecosystem that they had. So we anticipate that we will see ecosystems developing around other devices as well. The Smartwatch will be an example of that. Within the home we may see devices that will emerge that develop an ecosystem. For example, a Television and the developed or a gaming device that has an ecosystem around that. The Xbox is an example of – and gaming devices are examples of ones that depend more on the games that have developed rather than the superior or the hardware. So that’s what we mean by having an ecosystem and how being able to develop an independent developer network around device is very important in establishing both growth, consumer traction and ultimately defensibility of that product.

Dave Kruse: Got you, okay. So and I’m curious how do you guys kind of make investment decisions. You have local offices in multiple countries. Does that local managing partner, do they kind of have the final say or do you bring it to your broad or how does it work since you guys are spread out so geographically?

Paul Asel: Well, we have an investment community and partners which was comprised of our senior group who make those decisions and so it is very much a collaborative approach. We do believe in the benefits and power of having a global perspective. So we – while we very much value and rely on the opinions of the local sponsoring partners, it as a global decision.

Dave Kruse: Got you, that makes sense? And so do you travel a lot? Where are you based out of?

Paul Asel: In California, and I do travel a lot. I certainly log well over hundred thousand miles a year.

Dave Kruse: Really! Wow, okay. That keeps you busy. You must be – we could have a whole interview just on how to deal jetlag I think with you.

Paul Asel: Well we used to have the joke within Silicon Valley of the bridge rule, an investment that involves crossing a bridge. It was not worth doing, and the venture community has become I think much more global and broader in perceptive and I use the two flight rule. If an investment is within two flights, its fair play.

Dave Kruse: Nice. That’s quite a few cities you can go to then.

Paul Asel: That’s true.

Dave Kruse: Got you, okay. And so we are kind of coming to the end and I’ve got a couple of more fund questions. But before that, what – have you invested any IOT companies right now with this current fund or do you have some in the pipeline or are you just kind of starting out?

Paul Asel: We’ve actually been investing around the internet of things for about two years and we have about a dozen investments in that space. We’ve already actually had an exit. We invested in Whistle about a year and half ago, which is a connected dog collar, which has a GPS capability and also sort of like a Fitbit for pets. It allows one to track the health and activity of a dog. The company that took off and did extremely well and was scooped up very quickly by Mars, which Mars we think of as the candy bar company, but they are actually the world’s largest pet food and veterinary company in the United States.

Dave Kruse: Interesting. I would never have thought, yes. That’s a little outside of health consumer cars and enterprise, but that’s what you said, you are pretty flexible. But it’s definitely an IOT company; interesting, okay. And what’s another example of a company you’ve invested in that you can share?

Paul Asel: A company called Zoobi which has – it’s under connecting car space and they have a device which goes into a car and allows unconnected cars to be connected and provides wireless capabilities, GPS location capacities. It’s being used to monitor driver behavior for the insurance industry, it helps with predicted maintenance, working with auto dealerships and so that’s a company that is doing very well in the auto space and a variety of services that come out of that.

Dave Kruse: Got you, okay. Do they sell direct to consumers or do they sell – I always thought once kind of should sell through like dealerships, but how do they…

Paul Asel: They primarily sell through partners.

Dave Kruse: Okay, okay, that’s smart, I like that, okay. All right, and I’m curious, how do you stay current with all the trends in IOT? Do you follow certain blogs or who do you read in order to – I mean you talked to obviously lots of companies too, but is there other ways you stay current.

Paul Asel: We read a lot. There is a lot that’s available on the internet, so we read most of the major publications and blogs within our space. We – there is also an informal network and so being well connected with the thought leaders in this space is something that’s important. And then we do a fair amount of independent research, hence with the growth stage investors. This is less about finding the next needle in the haystack and more about indentifying companies as they are emerging early and so much of that is available on the internet.

Dave Kruse: Yes, true, true, okay. And last question what’s your favorite city to visit or live in since you visited quite a few in your time?

Paul Asel: That’s a great question. I have enjoyed living in every city that I have been in. I spent seven years in Russia and in Moscow and that is a – it’s a wonderful city with a very deep culture. I love San Francisco. I like the outer doors and its one of the few cities where I guess like a number of cities in the North West that you can enjoy the amenities of the city and the proximity of the outdoors. I enjoy the international environment as well and there are a number of international cities that I enjoy. I always enjoy going to places like Vienna and Paris and London.

Dave Kruse: Yes, those are some great cities. Never been to Moscow, but I have been to London and Paris and those are – Paris as I always say, it’s the most beautiful city I have been to. But I haven’t been to as many cities as you, but definitely some great cities. Yes, and so I think that’s it. So Paul, I definitely appreciate your time to chat with us today. This has been great and excited to see what you guys do, you guys have one exist and you only have been doing this for a couple of years, so that’s pretty impressive. So definitely wish you luck and…

Paul Asel: Sure. Well Dave, it’s a pleasure talking with you and if I can be helpful in the future, let us know.

Dave Kruse: That sounds good and thanks everyone for listening to another episode of Flyover Labs and we’ll see you next time.