Victory Square Technologies is a tech-focused incubator backing the ‘fourth industrial revolution’

Science fiction very often becomes science fact and, with a plethora of cutting-edge technology breaking through currently, it could be said that the world is on the verge of a fourth industrial revolution. AI (Artificial Intelligence), Robotics, Blockchain, Cryptocurrency, Energy Storage, DNA sequencing are all examples of technologies aimed at disrupting sectors as diverse as fintech, insurance, health and gaming. But given the broad-ranging nature of all these new technologies, how can investors hope to find a way to try and get a slice of the opportunities offered. One way is to look at Victory Square Technologies Inc, a technology-focused incubation firm that looks to invest in and develop game-changing entrepreneurs. Proactive sat down with Victory Square Technologies CEO Shafin Diamond Tejani to learn more about the future. Proactive: Victory Square Technologies (VST) aims to invest in and develop game-changing entrepreneurs, building toward the 'fourth industrial revolution'. Can you explain what you mean by this? Shafin Diamond Tejani: So, I'm a bit of a science fiction nerd and there's a quote by the author, William Gibson - a pioneer of the cyberpunk genre – and he says, founders who live in the future have the best chance of winning big. At VST, we believe that extraordinary performance comes from seeing things that other people can’t see. And these game-changing entrepreneurs we work with, they're the ones living in the future and sharing what the world's going to look like in the next 10 years with us. So for this fourth industrial revolution, at Victory Square we see disruption across every industry over the next decade - disruptive tech that cuts across sectors, geographies, markets; that creates rapid cost declines and stimulates growth over extended periods of time. I think we've seen this in the past. The first industrial revolution was propelled by the steam engine. The introduction of steam engines improved productivity, technology, and transport applications became possible (boats, railways, farms and road vehicles). Then we saw electricity in the 1800s, which we would define as the second industrial revolution. The third then being computing in the late 1990s, when personalized computers and the internet changed the way we work, play and communicate with one another. This fourth industrial revolution, we kind of define as the intelligence revolution. Where we’re seeing five multi-trillion-dollar innovation platforms all converging at once. This intelligence revolution is powered by AI (Artificial Intelligence), DNA sequencing, Robotics, Blockchain and Energy Storage, and each of these platforms creates breakthroughs and opportunities. I started in the dotcom boom in the mid-1990s and, thinking back to that time, if you had asked me would I believe that companies like Netflix and Amazon would defeat giant corporations like Sears and Blockbuster, I don't think people would have taken that bet 25 years ago. Now, obviously, we've seen how that story has turned out. The next decade is going to usher in a new breed of companies that will be seeded around the world, leveraging new technologies to re-imagine every industry as we know it. These game-changing companies and entrepreneurs are the ones we work with at Victory Square. You have around 30 investments currently, what would be the maximum number that you think you can handle? We started this process in 2017 when we had three portfolio companies and today there are about 28. We evaluate hundreds, if not thousands of deals a year, and maybe select three to five that meet our criteria for new investments. As a business we are set up to handle three to five new investments on an annual basis, but the reason we can do that is our business model and investment process. People always ask how do you find these companies, or these needles in a haystack? And I say, we built a magnet, and this magnet is our venture build model. It starts by identifying a pain point or an opportunity that we see, we then reach out to about 80 accelerators around the world. Given that our team has been in the tech space for over 20 years, we've established phenomenal relationships around the globe - in Africa, India, Europe, South America. So we then put an RFP to all these accelerators, and tech is borderless so there's brilliance coming from all over. We then get inbound companies pitching to us for what we're looking for, we identify the top ones, and then we spend about 12 to 48 months working with them. We are usually the first check-in, and our model is not as a passive investor - we roll up our sleeves and provide time, knowledge and money. We act as co-founders to help these businesses commercialize, and then in 12 to 48 months, hopefully, they're mature enough to be spun out. And once they're spun out as their own public company, we then help them raise additional capital, conduct M&A, or grow and scale on their own. So our investments are all driven by a competitive advantage we have or solving a pain point in our ecosystem. Last year was an inflection point for us as the first couple of companies graduated and were spun out, which created liquidity events for us, and we were then able to reinvest those profits to refresh the funnel. And so I think from an investment perspective, we'll probably continue to grow by three to five investments a year. And every so often companies that are hitting that 36 to 48-month mark, spin out and create liquidity events that allow us to reinvest and also to issue dividends to our shareowners. The company achieved a record fifth consecutive quarter with positive net income and earnings per share in Q12021 helped by the diversity of its portfolio in current challenging times. What other areas would you consider investing in? So the four main sectors that we focus on are all investments based around the quality of life - improving the way people work, play, eat, and communicate. Those four main sectors are next-generation internet, digital health, climate change and the creator economy. Within the first three categories, when I say next-generation internet, that includes artificial intelligence, deep learning, big data, cloud computing, cybersecurity, blockchain, crypto – again innovations that will change the way the world manages information and analyzes data, as well as how people purchase, consume goods and communicate. The second is the digital health revolution. I mentioned DNA sequencing earlier, and we've seen massive advancements in DNA sequencing, gene editing, CRISPR, and molecular diagnostics. These are innovations that are going to help cure diseases and improve quality of life. The third sector is climate change, which is something that's become a new part of our portfolio that we've taken more of a focus in over the last 18 months. I think our survival as a species will depend on addressing this issue and a lot of the founders who are thinking 10-20 years ahead realize this is something that is not simply an environmental issue, it's also an economic issue, a $26 trillion opportunity. So those three sectors are core and we think they're going to contribute to our success over the years to come. The Creator economy, meanwhile, is something we've always been kind of dabbling in, but we've now made it more of a priority where we have a portfolio company called Creator.co in that space. Creators are businesses that are creating real economic value, but they’re so poorly understood. This is a segment of the economy that has seen significant growth, but there aren’t many options for them to find the right tools that can help them reach their full business potential. Creator.co is a fully automated platform that connects brands with creators to drive awareness, content and conversions on Instagram, Facebook, Twitter, Youtube and TikTok. We’re working with them on a feature which will allow the 90,0000 creators on their platform to launch their own digital currency powered by the blockchain. One of the things I’m most excited about is giving power back to creators, and extending the options for monetization even further — to their followers. A number of Victory Square Companies are advancing towards listings themselves, do you then tend to realise your investment or plan to keep some “skin in the game”? So last year, we spun off one of our companies, FansUnite and since then they've raised close to $50 million and hit a high of a $300 million market cap. So this is a portfolio company that we owned 100% of for $2 million in 2017 and is a really key example of how our model works. But if we don’t spin an investment out, we have the option of operating the business as a wholly-owned subsidiary, such as a company like Hydreight in our portfolio which is in the digital health business, where we are continuing to grow and scale the business. And then the third way is that we could potentially sell off one of our assets. Now, in all of these cases, we generally create a little bit of liquidity for ourselves at significantly higher valuations, to take some money off the table to reinvest in building the funnel out, or issuing a share dividend, which we did with GameOn to our VST shareholders. But we always keep skin in the game because again, a lot of these bets we believe are going to be game-changing companies over the next decade. So we have this approach of being able to take money off the table at a higher valuation to replenish the funnel, dividend out shares to our shareholders so they can benefit from that ride, but continue to build our asset base like keeping skin in the game and see those companies grow and scale. What do you think you yourself bring to the company as its CEO? So we're sports junkies here at Victory Square, and building a company is the ultimate team sport. Our venture build model is such where my role is like a GM or a coach because you’re having to set the vision, put the game plan in place, assemble the resources, recruit the team, and then lead that team to execute. I think that for me, having been in the tech space for 25-plus years, I bring experience, strategic guidance, relationships, access to funding, and I've lived the entrepreneurship journey/roller coaster many times over. I think just remaining calm and keeping the team calm through market volatility is what I bring to the table. So, what should investors expect from Victory Square Technologies in the near to medium term? So I'd say that, in the near term, Victory Square gives investors ground floor access to a diverse portfolio of 28 companies from around the world in key areas like digital health, esports, crypto, AR/VR, the creator economy, cybersecurity and green tech. Investors are not getting a one-trick pony, they're getting over 20 chances to knock it out of the park and catch the next unicorn company early. We mentioned our five consecutive quarters of positive net income and earnings per share, and I think that pattern will continue. Numbers for our second quarter ended June 30, 2021, should come out at the end of August 2021 and investors will continue to see a healthy balance sheet with positive net income and earnings per share. We paid a share dividend in June and when we spin-out our next company, Immersive Tech later this month, investors will get a share dividend from that as well. We have another company, Stardust Solar that spins out in November, so I think investors can look out for that too. And investors should also keep an eye out for new investments around the Creator space, and expansion in our digital health business, which is really scaling up in Brazil. I would say those are probably the biggest highlights that investors can look out for over the next 90 to 120 days and I also think that where our shares trade today is a great entry point given the number of catalysts on the horizon. Contact the author at jon.hopkins@proactiveinvestors.com