Khyber Venture Partners

We are very happy to announce that we have closed our Syndicate's first investment in DealCart's $3m Seed round. Shorooq Partners and Sturgeon Capital led the round, with 500 Global, Evolution VC, and Rayn Capital also investing. Our investment thesis is built on the following pillars: 1.) DealCart’s unique Social Commerce Model: Through leveraging its viral group buying mechanism, DealCart is able to aggregate demand by reaching first-time online users at low acquisition costs thereby creating an efficient platform to directly connect FMCG manufacturers with customers. 2.) Strong traction in terms of Growth, Margins & Working Capital: Since launching in July 2022, DealCart has shown a combination of topline growth, improving contribution margin and better working capital terms with suppliers. 3.) Exceptional Founders with clear short & medium-term Strategy: Ammar Naveed's & Haider Raza's focus on (i) sound fundamentals in terms of margins and path to profitability, (ii) the underserved lower-middle class customer segment & (iii) the long-term vision of becoming an online platform for the masses will be critical to build DealCart into an eCommerce success story. 4.) Pakistan's large TAM & nascent Online Penetration: With a large TAM (~$62bn for retail spending) and a low online penetration (<3% eCommerce penetration), Pakistan is an attractive long-term market for disruptive business models that seek to formalise the fragmented retail space. 5.) Macro Backdrop benefitting lower-cost Channels: Pakistani consumers spend an increasing share of their income on groceries amid soaring inflation rates, driving consumers to look for alternative channels to purchase lower-cost grocery items. We have known Ammar & Haider from DealCart's very early days and are grateful to now be part of their journey and look forward to supporting them in the future. Omer Zabit Kiyan Zandiyeh Saad Hasan Misbah Naqvi Kalsoom Lakhani

Pakistan’s & Bangladesh’s Unsung Heroes - Concluding Thoughts We hope to have taken a first crack at shedding light on what in our view is one of the largest (by economic value and number of people affected) and most pressing (by the degree of injustice being inflicted) inefficiencies in the markets we cover. What has become abundantly clear to us is that despite being the most important lifeline to their countries, Overseas Workers remain one of the most disenfranchised customer segments across emerging markets. At the same time, their characteristics make them arguably one of the most attractive segments in emerging markets for fintech businesses to solve for: High LTV: Overseas Workers have a high demand for financial services ranging from loans to fund the upfront cost of their journey to remittances transfers to send back home their savings on a monthly basis. Geographically Concentrated Customer Base: Most aspiring Overseas Workers from both countries come from a few specific districts. Similarly, most Overseas Workers work in the GCC countries, namely Saudi Arabia and the UAE. This concentration presents an opportunity for targeted go-to-market strategies to reach a large number of customers efficiently. Dollarised Inward Flow of Capital: Bangladesh & Pakistan both faced strong currency depreciations over the past years due to an imbalance in their current accounts (i.e., less capital flows into the economy than what flows out). Having access to Overseas Workers’ remittances transfers offers an opportunity to build a marketplace for local businesses to avail foreign currencies. With our series of posts, we hope to have provided a glimpse at the theme of Overseas Workers. If you share our passion and interest for this theme and are building around, investing in, or learning about it, we would like to get in touch. We conclude with another fitting quote we came across on our trip. It is from a local investor and best describes a vision that does more justice to the Unsung Heroes of Bangladesh & Pakistan: ‘Migrant Workers should be the ones using the VIP lines at the airport and not us [the local business elite, politicians, or white foreigners] because they carry this country on their backs, lifting not only their community but also our economy.’

Pakistan’s & Bangladesh’s Unsung Heroes - Part 4/4: The unholy Alliance with the Hawala System As mentioned in Part 1/4, there is an informal system called Hawala (or Hundi in South Asia) of transferring money across borders. Those money flows ($50bn p.a.) are not reflected on the central bank balances and therefore cannot be used to shore up foreign exchange reserves to stabilise the local currency. A Hawala transaction is typically structured as follows: 1.) The money sender goes to Hawala broker A in the sending country and gives him the details of the transaction such as the amount, the name of the relative who is supposed to receive the money and a password. After agreeing on the exchange rate the sender gives the amount to the Hawala broker A. 2.) The sender contacts his relative and provides the password. 3.) Hawala broker A reaches out to Hawala broker B, who lives close to the money sender’s village. Broker A shares with broker B the amount to be paid out and the password. 4.) The relative meets with broker B and receives the amount after stating the password. 5.) Now, broker A owes broker B the transaction amount, which is recorded in their books to be balanced out in the future. Overseas Workers use the Hawala system frequently for several reasons, including (i) the speed of transaction, (ii) no requirement for legal documentation, and (iii) the trust and relationship with the Hawala broker in the local community. The key reason though for why the Hawala system remains as competitive is that it can offer a better exchange rate than formal channels. To better understand the driver behind this, one needs to take a closer look at the outward capital flows from Bangladesh & Pakistan. Both countries tend to import more goods than they export, building up macroeconomic imbalances that put pressure on the foreign exchange rate, which in turn drives capital outflows. One measure to combat these outflows is to introduce capital controls limiting the amount of capital that can be send abroad. As a result, a black market with an exchange rate higher (i.e., less foreign currency per unit of local currency) than the official one will originate. Local Hawala brokers (broker B) use this black market to periodically balance their books with the foreign Hawala brokers (broker A). Because of the higher black market rate, Hawala brokers are able to offer more competitive rates. Building a better product for Overseas Workers that addresses their needs for speed of transaction, ease of usability and ubiquitous cash-out methods in their communities back home. Such a product would not only help strengthen central bank reserves by driving remittances through formal channels but also make it more difficult for dubious actors to transfer money out of the country. Link to Part 1/4, 2/4 & 3/4 in the comment section.

Pakistan’s & Bangladesh’s Unsung Heroes - Part 3/4: Dream of an Overseas Worker There is an underlying driver behind the over 1 million Overseas Workers who migrate from Bangladesh and Pakistan every year: the promise of a better-paid job abroad that will help them truly transform the lives of their families back home. Our conversations with Overseas Workers allowed us to hear a few inspiring success stories. More specifically, visiting the communities gave us visual examples of modern-built family houses (shown in the picture at the bottom) that stood out from the other houses in the village erected with corrugated sheets and wood. A look at the unit economics behind these stories helps to understand under what conditions they occur. Most successful Workers were hired for skilled jobs such as electricians, steel welders, or carpenters because they have been able to certify their job experience at a local skill-testing facility. The monthly salary for skilled roles can be significantly higher at the equivalent of $400-500 compared to $300-400 for unskilled roles. Deducting living costs of around $150-200 (the employer often provides housing and transportation) allows a Worker to remit home up to $350 monthly. The other critical determinant of the unit economics is the upfront cost the Overseas Worker has to pay for the job, visa, and other related fees. Many success stories had in common that the hiring process skipped at least a few layers of recruitment agents or subcontractors or was directly with the employer. Reducing the upfront costs brings forward the ‘breakeven point’ (i.e., from where savings can go directly to the family instead of repaying the upfront cost). However, turning to the data explains why these success stories have been rather the exception than the rule. According to the International Labour Organisation, more than half of the Overseas Workers leaving Pakistan every year are categorised as unskilled, with the majority working as labourers in the construction sector. Skilled jobs such as mason (3%), electrician (2%), or carpenter (2%) remain a small percentage. Our insights shed light on the opportunity to improve the current migration process for Overseas Workers by: 1.) Ensuring their skills are adequately certified. 2.) Bypassing intermediaries such as recruitment agents or subcontractors. 3.) Reducing the upfront costs. Eventually, these steps could help increase the likelihood of success for Overseas Workers. Link to Part 1/4 & 2/4 in the comment section. Picture: Houses of the families of successful Overseas Workers in Chandpur (Bangladesh).

Pakistan’s & Bangladesh’s Unsung Heroes - Part 2/4: An arduous Journey In the over 30 interviews conducted, we focused on understanding the process of finding work abroad and the costs associated with it. The first step typically involves a recruitment agent offering a job in his local village. Agents are the lowest layer of the overseas labour supply chain. They work together and pick job candidates for the larger ‘manpower companies’, who aggregate labour demand from employers in the host countries. Next, Overseas Workers have to go through a myriad of mandatory steps such as seeking approval from the passport office, undertaking medical tests, or taking orientation classes to familiarise themselves with the host country’s culture. Questioning our interview partners on the challenges they faced through the process, we gathered three main problems: 1.) Usury fees: Overseas Workers paid on average $3,000-6,000 in total to the various layers of the labour supply chain. Considering the official visa fees in the host countries are government-mandated and are at maximum $400, the amount Overseas Workers pay is owed to an opaque process with many extorting actors. 2.) No access to credit: Few of the Workers have access to formal credit and as a result has to sell assets (e.g., land, cattle, etc.) or avail informal loans from their family or even loan sharks. This worsened financial situation added to the real cost of an overseas job. 3.) Fraudulent job offers: Many recruitment agents offer fraudulent ‘open’ or ‘free’ visas, promising Workers they could move to the host country and look for a job themselves. However, most countries do not offer such visas and require an existing job offer from an employer. Consequently, many Workers on ‘open’ or ‘free’ visas have been deported within their first two years in the host country. The fundamental root cause for these problems is that the hiring process resembles a reverse auction. Whereas normally, an employer has to spend time and effort to find suitable candidates for the job, actors in the overseas labour market take advantage of the Workers’ desire for a better life (and hence a great demand for overseas jobs) to have them bid for an opportunity to earn a better salary abroad. When asking our interviewees about their thoughts on the process, they expressed frustration about a situation in which they have the least power and are being taken advantage of. However, the desire to improve the lives of their family still outweighs the risk of ending up with a fraudulent job offer for which they have to pay a hefty fee. At the same time, they were adamant on what changes would need to be made to, with one person summarising a sentiment we heard at every juncture of our trip: ‘If the world didn’t have any [recruitment] agents, it would be a better place.’ Link to Part 1/4 in the comment section. Picture: Impressions from our interviews in Chārsadda (Pakistan) and Chandpur (Bangladesh).

Pakistan’s & Bangladesh’s Unsung Heroes - Part 1/4: Providing a Lifeline in Times of Crises Who is keeping the economies of these two South Asian countries afloat during the macroeconomic turmoil of the past decades? Some might say it is the textile industry, bringing in $64bn of revenues per year for the two countries, or foreign aid and bailout packages from international organisations like the World Bank, which has a total budget of $10bn for both countries and the IMF with $11bn of stability programmes in Pakistan & Bangladesh.  However, whoever has flown from the airports of Dhaka or Peshawar to the Middle East with their eyes open would have an idea of the actual answer - it is the more than 18m of Overseas Workers who save a large part of their monthly salary to send it back to their families. Total remittances to Bangladesh and Pakistan through formal channels (i.e., sent via banks, money transfer operators, or digital platforms) reached $48bn in 2023. The plot twist is that the actual amount might be larger by the factor of 2x, reaching up to almost $100bn according to industry estimates, when including informal remittances channels known as Hawala or Hundi system (we will dive deeper into the phenomena of this system in a later post). Most importantly, the money arrives in the hands of those most in need. In both countries, the districts with the highest share of workers abroad are the ones that are the most deprived of economic opportunities - in fact, the lack of jobs and ways to improve the lives of their families is what drives their search for work overseas. Additionally, a crucial factor is that a single Overseas Worker is often the most important breadwinner, contributing to the wellbeing of his extended family. Finally, because Overseas Workers primarily work in the Gulf countries, their salaries are paid in currencies pegged to the US dollar. This effectively means the families receiving remittances have an implicit hedge against local inflation and currency depreciation as the money sent back will keep its value in US dollar terms. All these factors make remittances probably the most powerful tool in seeding socioeconomic development in areas otherwise hard to reach by conventional governmental interventions or programmes of development organisations. Sparked by the gravitas of this theme, we travelled to both countries over the past weeks to conduct interviews with current and former Overseas Workers as well as with their families to learn more about their dreams, challenges & realities. We specifically went to the districts with the highest share of workers abroad, namely Peshawar and Swat in Pakistan and Chandpur in Bangladesh. In the next parts we will summarise the key findings of our conversations with the Unsung Heroes of Bangladesh & Pakistan. Picture:  Overseas Workers checking in at Dhaka airport, wearing a t-shirt of the outsourcing company that contracted them.

After a fruitful visit to Karachi, our Pakistan-Bangladesh tour takes us to Dhaka, a bustling metropolis known for its vibrant culture and thriving business landscape. Here we explored exciting opportunities for collaboration in the agri-commodity supply chain. Our discussions with innovative agritech startups like Agroshift and iFarmer opened doors to potential partnerships that could bridge the gap between Bangladesh and Africa. Agro Shift's pioneering spirit and iFarmer's impactful initiatives inspired us to explore avenues for mutual growth and development. At Fluna, each connection we make and every opportunity we explore moves us closer to our vision of a world where African trade knows no boundaries. Join us as we embark on this journey of exploration and partnership in Dhaka and beyond! sourcing.fluna.co #Fluna #TradeRoadshow #GlobalTrade #Partnerships

Fluna is on an exciting journey across Pakistan and Bangladesh, uniting African agricultural exporters with global buyers. This trade roadshow led us to the bustling streets of Karachi, Pakistan, where we engaged with industry leaders, traders, and processors, forging connections that promise mutual growth and prosperity. Our first stop took us to Progressive Traders, a prominent bakery input producer. Exploring their state-of-the-art facilities and engaging in fruitful discussions, we identified opportunities that could elevate the standards of their bakery products, delighting consumers with every bite. We also connected with Pioneer Foods, a leading animal feed producer. Through insightful discussions and on-site visits, we explored avenues for collaboration, leveraging our expertise in connecting high-quality African agricultural exporters with global buyers. Our heartfelt thanks go out to Finn Wulf and the visionary team at Khyber Venture Partners for their support. Their dedication to fostering global trade and connecting diverse ecosystems has been instrumental in facilitating this transformative trade roadshow. As we continue on the next leg of our trade roadshow, we look forward to unlocking new opportunities. Together, we're shaping the future of agriculture and trade, one partnership at a time. You can get started today: sourcing.fluna.co #Fluna #TradeRoadshow #GlobalTrade #Partnerships

We are excited to share that we are officially announcing the launch of Khyber Venture Partners (KVP). KVP is an emerging market (EM) dedicated investment partnership operating an angel syndicate and a research platform focused on early-stage ventures. Our mission is to bring capital and insights to the most nascent startup ecosystems across the emerging world. The Syndicate includes over 30 professionals who are founders, operators, and investors based across emerging and developed markets. We invest in pre-Seed to Series A rounds in all sectors, with a focus on Pakistan and a view across South Asia and the Middle East. In addition, through our research products, we endeavour to offer insights into the venture landscape in the emerging world. We have three key research products: 1. KVP Coverage Notes: Investor-grade research reports diving deeper into marquee ventures in emerging and frontier markets. Our first Coverage Note is on the Pakistani fintech Abhi (YC S21) (more details below) 2. KVP Index: Monthly share price index of publicly listed internet companies in emerging and frontier markets (launching in Q1 2024) 3. KVP Globalisation Tracker: Deal activity tracker for businesses focused on integrating emerging and frontier economies into global value chains (launching in Q2 2024) For us to achieve our mission, we will open-source all our research products on our website to maximise our reach and drive investor engagement in ventures across the emerging world. We are looking forward to working towards our mission and are excited for the learnings we will uncover along the way. If you have any feedback, questions, or suggestions for our research products, please reach out to us. KVP Coverage Note on Abhi (YC S21) The Note provides a comprehensive overview of Abhi’s business model and the market it operates in and includes interviews with customers and investors. Additionally, it takes a closer look at publicly listed EM comparables in the fintech and banking sectors to better understand key valuation drivers. Finally, it offers illustrative medium-term projections for Abhi based on an operational benchmarking of EM Challenger Banks. It concludes with an indicative valuation scenario based on multiples of the public comparables.