May 25, 2023 · 53m · capital-allocators
Kiyan Zandiyeh – Empty Rooms: Venture Capital on the Emerging Frontier at Sturgeon Capital (Capital Allocators, EP.317)
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In this episode of Capital Allocators, Ted Seides interviews Kiyan Zandiyeh, Chief Investment Officer at Sturgeon Capital, exploring his investment journey, operational lessons from frontier markets, and Sturgeon's institutional framework for venture capital across Central and South Asia.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 11.1% of the talking time here. How this is scored →
Ted as informed peer 2.1 Guest teaching 4.1 Guest disagreement 0.4 Ted pushing back 0.7
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 30:20 Critique of oversized venture funds destroying DPI
Kiyan rejects mainstream venture asset-gathering behavior, using mathematical calculations to demonstrate why fund size destroys returns and caps industry-wide DPI.
Hardest push from Ted ▶ 29:19 Challenging frontier liquidity and capital droughtTed confronts Kiyan with the core institutional LP critique that frontier markets fundamentally suffer from structural illiquidity and a persistent lack of capital.
Biggest teaching moment ▶ 12:50 Explaining digital resilience during severe FX devaluationsKiyan educates the audience on why traditional EM investing failed due to FX devaluations and how high-margin software platforms can still double USD revenue amid 80% currency collapses.
Ted holds their own ▶ 41:16 Connecting public deep value to frontier venture disciplineTed displays his allocator expertise by synthesizing Kiyan's trajectory from liquid deep-value public markets to illiquid frontier venture, challenging him to define the unifying compounding principles.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Family Background, Early Influences, and First Entrepreneurial Ventures | 1 | 2 | 0 | 0 | Ted opens with friendly biographical prompts exploring Kiyan's early childhood influences and side businesses. Kiyan recounts reading Buffett and Ben Franklin and running teenage arbitrage hustles. | |
| Launching a Teenage Investment Fund and Deep-Value Trading Lessons | 2 | 3 | 0 | 1 | Ted prompts Kiyan on the specifics of his teenage investment fund and concentrated portfolio positions. Kiyan explains his deep-value strategy and a lesson learned from using leverage on an Egyptian gold mine. | |
| Macro Research at Roubini Global Economics and the Frontier Tech Thesis | 1 | 4 | 0 | 0 | Ted asks about Kiyan's first role after university. Kiyan explains how macroeconomic research at Roubini Global Economics revealed rapid smartphone penetration and the potential of tech business models in frontier markets. | |
| Joining Sturgeon Capital, Operating in Iran, and Managing Devaluations | 2 | 5 | 0 | 0 | Kiyan describes launching Sturgeon's Iran strategy and operating two tech businesses through two separate 80% currency devaluations. He educates on why digital models withstand severe macro currency shocks while offline models fail. | |
| Target Frontier Geographies and Sturgeon's Hybrid Operating Model | 2 | 4 | 0 | 1 | Ted probes how Sturgeon manages on-the-ground presence across diverse regions like Central Asia and South Asia. Kiyan details their hybrid model combining London regulation with local ex-operators and sovereign fund managers. | |
| Investment Selection Framework and Bangladesh Textile Case Study | 2 | 5 | 0 | 0 | Ted asks about Sturgeon's core investment criteria. Kiyan provides a detailed walkthrough of customer acquisition economics, monetization layers, and a Bangladesh textile aggregation platform with hard-currency revenue hedging. | |
| Founder Archetypes and Underwriting Execution Risk | 2 | 3 | 0 | 0 | Ted asks how Sturgeon balances founder quality versus sector themes. Kiyan explains that the macroeconomic opportunity is obvious in inefficient markets, so Sturgeon focuses purely on underwriting management execution risk. | |
| Valuation Dynamics, Governance, and Downstream Capital Management | 3 | 5 | 1 | 2 | Ted raises prominent institutional concerns regarding national governance and political risk in frontier markets. Kiyan reframes the issue by contrasting easily expropriated private equity tangible assets with digital tech assets that align with state interests. | |
| Addressing Liquidity Skepticism, Fund Sizing, and Competitive Edge | 3 | 5 | 2 | 2 | Ted presses on investor skepticism around frontier market illiquidity and lack of capital. Kiyan pushes back forcefully, citing fund-sizing math to show that bloated venture fund sizes globally destroy DPI performance. | |
| Operational Deep Dives: Uzbekistan SME Lending and ZoodPay | 2 | 5 | 0 | 1 | Ted asks for concrete operational examples. Kiyan details their incubation of an SME lending platform in Uzbekistan and the rapid scaling of ZoodPay across Central Asia as an integrated commerce and lending ecosystem. | |
| Venture Ecosystem Maturation, Compounding Philosophy, and Sturgeon's Vision | 3 | 4 | 1 | 1 | Ted connects Kiyan's public deep-value background to frontier venture investing. Kiyan discusses compounding capital, the public market blind spot regarding managerial variance, and Sturgeon's long-term firm vision. |
Statements from this episode (23)
Zandiyeh: Laundry businesses could be acquired for 2x earnings with $20k-$30k
“You could buy laundry places for two times earnings and you only need around 20, 30,000 dollars to buy them.”
Zandiyeh: Launched a teenage investment fund with 0% management and 25% carry
“So I had a structure which was zero percent management fees and 25% performance fee above six percent.”
Zandiyeh: Raised approximately $3M from three investors as a teenager
“It was around three million actually, which actually came from basically free investors, which were largely Individuals that had known me since I was a little kid”
Zandiyeh held 60% portfolio concentration in a single stock
“So at some points I would have one company that was 60% of the fund, which means extreme volatility, but actually the performance was pretty good.”
Zandiyeh: Sturgeon's Iranian tech startups reached $110M in profitable revenue
“For a period of years, we built those businesses up. They do around a hundred and ten million dollars in revenue. They're profitable businesses. They're the leader in their own sector and have a very long runway to grow ahead of them.”
Zandiyeh: Kaspi completed a $15B London IPO out of Kazakhstan
“Two, you had just had the IPO of a company called Caspi, which is a fifteen billion dollar business listed in London, a technology business out of Kazakhstan of all places, which had validated that you could build a sizable business there.”
Zandiyeh: Bangladesh and Pakistan have a higher GDP per capita than India
“There is basically two countries, Bangladesh and Pakistan. We're combining about four hundred million people. GDP capital actually higher than India. But still, sub-one percent e-commerce penetration, low levels of digital payments, and low levels of BTP softw…”
Zandiyeh: Tech will capture 20% to 30% of Pakistan-Bangladesh GDP
“And that combined, you have roughly about a trillion dollars in GDP, that probably over the next 1020 years, 20 to 30% of that is up for grabs by technology companies that can service that revenue base.”
Zandiyeh: Sturgeon Capital avoids pre-revenue businesses, targeting $500k to $10M revenue
“So we never invest in pre-revenue stage businesses. Typically, there are companies that are, at the time of investments, their revenues on the lower end are around half a million dollars, and at the upper end, around ten million dollars.”
Zandiyeh: Customer acquisition costs in frontier markets range from $5 to $10
“And typically in these countries, customer acquisition costs ranges from around five to 10 dollars each, which is very low.”
Zandiyeh: Major fashion brands quadruple volume with Bangladeshi portfolio startup within year one
“Now, in this case, and specifically, the company has already the relationships of the likes of the Inditex, the H&Ms, the large brands of the world, where what we see is basically in the first year, as soon as these brands start working with them, they almost …”
Zandiyeh: ZoodPay founder previously built an $800M business and sold one for $100M
“And one of our large investments is that, I mean, it's a company called Zootpay. The founder started his first business when he was in his twenties. He sold it for about a hundred million. Second business built an eight hundred million dollar business. And thi…”
Zandiyeh: Frontier market startups must reach profitability faster than Western peers
“The dynamic that I think is different also in these markets relative to, let's say, the US or Europe is generally because these countries have not had a deep pool of funding available to them. The entrepreneurs from the get-go understand that basically they ha…”
Zandiyeh: Tech startups face lower expropriation risk than frontier industrial assets
“The difference is that you have a tangible asset that it relatively is operationally simple to run. There's a positive correlation between the success of it and the willingness of the government to ultimately want to take it off you at some point in time, beca…”
Zandiyeh: Frontier governments champion tech FDI to eliminate economic inefficiencies
“So what you typically see is actually the governments are the largest champions of FDI, specifically in the technology sector. Because they understand it as a reset economically for their country, where they can reshape a lot of the inefficiencies that exist t…”
Zandiyeh: Average upper-quartile venture capital DPI is only 1.76
“I think it explains why the average upper quartile DPI is 1.76. The fund sizes cannot even cope with generating that much enterprise value.”
Zandiyeh: Bangladesh has 170M people, 8th largest smartphone base, only 2 VCs
“So you take a country like Bangladesh, hundred and seventy million people, eighth largest smartphone user base in the world. As I said, GDP per capita higher than India. You only have two VCs in the whole country.”
Zandiyeh: Uzbek banks ignore SMEs despite driving 60% of GDP
“If you look at the banking sector, effectively, 80% of that banking sector only does corporate and government lending. There's no real retail banking. There's no real banking to small to mid-sized businesses. Small to mid-sized businesses are about 60% of the …”
Zandiyeh: Sturgeon-incubated Uzbek SME lender turned profitable in six months
“And so we incubated that company in a way where we found the investor. We found the management team. We own around 25% of it. I'm on the board of it myself and almost got started from scratch. And that's doing tremendously well. And it's only in a six month op…”
Zandiyeh: Kaspi generates $2B annual net income in Kazakhstan
“For context, to introduce a comparable business model to start, I mentioned briefly this company called Caspi listed in London. Now that business is fascinating because Kazakhstan is a population of nineteen million, and these guys have managed to build a busi…”
Zandiyeh: ZoodPay reaches 2M MAUs and 50,000 merchants across Central Asia
“Zootpay, the company in question, that business model, but operating in four or five different countries. Where on the initial side, we purely started with e-commerce, build the infrastructure to enable e-commerce to happen in these countries, and build up a d…”
Zandiyeh: Pakistan venture funding surged to $300M in 2022
“If you look at a country like Pakistan, they went, on average, for three years, raising twenty million dollars in total for the venture ecosystem, where in twenty-twenty-one, it got to two hundred fifty million dollars. In twenty-twenty-two, it was three hundr…”
Zandiyeh: VC fixation on product-market fit ignores underlying business economics
“For many years now, what I think has been a disservice to the venture industry is this concept of product market fit. What it effectively has entailed from an investment strategy perspective is that when a company reaches or sees some level of demand, Irrespec…”