New Frontiers | Portico Advisers

A review of the accounts reveals that Covid-19 drove a 60% decline in Portico’s revenues compared to our 3-year average.

Oof.

Not keen to repeat that gut punch.

Onward.

I’ve been thinking about the mission that animated me to launch Portico ~5 years ago: closing the finance gap through the creation and dissemination of knowledge.

As it says on our website:

Though the world is awash in capital, a variety of bottlenecks inhibit its flow to productive users of financing — particularly in markets where capital is a relatively scarce factor of production.

I conceived of the finance gap through the prism of geography, in large measure because that’s where my journey started.

However, there are other “markets” where capital scarcity is a pernicious problem.

At its core, Portico helps carve out channels so that financial capital can flow to productive enterprises that increase the general welfare.

As we step forward into 2021, we’re going to adopt a more expansive view of this problem.

The approach is two-pronged: expanding the market for our existing services; and creating a separate business that can address our mission at scale.

* * *

Expanding the market for our existing services

Though we will still serve long-term investors and entrepreneurs in emerging and frontier markets, we will target two additional “markets” where capital is relatively scarce:

Science — I discussed the gamification of U.S. venture capital back in 2019, placing a spotlight on the evaporation of funding for life-sciences innovation.

Advancements in deep science push humanity forward and enhance well-being.

Yet, the superabundance of capital chasing software startups is contributing to a “diversity breakdown” in venture investing.

We’re excited to be starting the year working with Europe- and U.S.-focused VCs investing in leading-edge science.
Enabling infrastructure — We’re targeting opportunities with companies that are addressing the “variety of bottlenecks” mentioned above.

The priority bottlenecks are currency risk management, liquidity solutions / secondaries, and pipeline development.

* * *

Creating a separate business

It is manifest that a new model is needed for providing risk capital to entrepreneurs, particularly — but not exclusively — across Africa, Asia, and Latin America.

Businesses need long-term, equity / equity-like financing.

Investors want faster liquidity.

And legacy capital market solutions have proven inadequate to the challenge.

I think an answer lies in crypto and the tokenization of assets.

Look. There’s a lot of nonsense in the crypto space, and many of its boosters are delusional, petulant children.

Be that as it may, crypto offers a refreshingly open design space that could enable new configurations of economic exchange.

I’m still in learning mode and am wrestling with new ideas and business models.

But I think crypto has the potential to distribute wealth creation and capture more broadly than our current system.

And that is needed urgently.

Stay tuned!

Alla prossima,
Mike

Jake Cusack on Frontier & Fragile Markets

In the latest episode of the Portico Podcast, I interview Jake Cusack, co-founder and Managing Partner of The CrossBoundary Group — a firm that unlocks private capital for sustainable growth and strong returns in underserved markets.

I first reached out to Jake ~10 years ago, after he and one of his co-founders published a study on entrepreneurship and private sector development in Afghanistan.

That initial contact kicked off a series of conversations on how to harness markets and mobilize private capital to build businesses in frontier and fragile markets — the overarching topic of this episode.

Jake and I discuss:

His journey from the Marine Corps to founding CrossBoundary;
The critical role that investment facilitation plays in creating investable pipeline;
The rationale for CrossBoundary’s expansion from an advisory firm to a group that also manages investments;
The suitability of the traditional private equity model in frontier markets;
Recruitment, and how to inculcate a shared culture across a globally dispersed footprint;
CrossBoundary’s recent initiative to open source its approach to project financing mini-grids;
And much, much more.

Check it out on: Apple Podcasts | Google Podcasts | Spotify

Grab Bag

Boom in private companies offering disinformation-for-hire (FT)
When deep-pocketed companies, individuals, and governments can amplify misinformation, how healthy is the marketplace of ideas? And how likely is it that the truth will prevail? It’s worth revisiting Episode 4 of the Portico Podcast on The Rise of Kleptocracy.
Private Credit in Emerging Markets (IFC)
European Unicorns (Benedict Evans)

From the Bookshelf

For this is your home, my friend, do not be driven from it; great men have done great things here, and will again, and we can make America what America must become.

— James Baldwin, The Fire Next Time (Vintage: 1993)

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The information presented in this newsletter is for informational purposes only. Portico Advisers does not undertake to update this material and the opinions and conclusions contained herein may change without notice. Portico Advisers does not make any warranty that the information in this newsletter is error-free, omission-free, complete, accurate, or reliable. Nothing contained in this newsletter should be construed as legal, tax, securities, or investment advice.