No one in the United States has probably ever heard of Georgia-born Mikheil Lomtadze. But in October 2020, he surprised the world with one of the hottest tech IPOs in the world. Lomtadze isn’t from our Georgia. He is from the Black Sea nation of Georgia. He emigrated to Kazakhstan, of all places, created successful fintech firm Kaspi.kz and took it public in London last year. Since then, Kaspi has outperformed Nasdaq, Tesla, the MSCI Emerging Markets, and even Bitcoin, up around 80% since inception.
Newcomers to new nations must bring with them some sort of drive that the natives don’t quite match. Lomtadze isn’t alone in being a stranger in a strange land who, with years of sleepless nights and typical entrepreneurial obsession, launches a new tech company and becomes a rock star in their respective corner of the market.
Foreign Founders. Fortunes Found.
At some point in 2016, in a knee-jerk response to the early Trump years, the financial press became obsessed with immigrants. Tech companies were complaining about H1-B visas. Journalists were busy writing feature articles about the next new foreign-born founder as if to rub it in Trump’s face just how amazing our immigrants were, though the former president never said they were not. An immigrant success story was on the cover of every magazine.
It’s an old story, however. Sergey Brin was born in Moscow. He founded Google with Larry Page and became a billionaire. Andy Gove was born in Hungary and was one of the founders of global semiconductor giant, Intel.
Still, one truism remains. The latest crop of new tech IPOs have foreign-born founders from a big emerging market behind them, usually a Russian or a Chinese. What’s up with that?
A report published last week by the New American Economy Research Fund shows that 44% of Fortune 500 companies have at least one immigrant or child-of-immigrant founder. Research from the Kauffman Foundation has found that these New Americans are twice as likely to start businesses than their native-born American peers. The Kauffman Foundation’s Jason Wein notes, “There’s something inherently entrepreneurial about leaving your home to start a new life in another country. Perhaps that is why immigrants tend to start businesses at a disproportionately higher rate than native-born Americans.”
MORE FOR YOU
Immigrants from emerging markets, like Russia, China, Brazil and India, in particular often grow up experiencing hardships that drive them to be more open to take risks in order to achieve upward mobility. On top of that, these same emerging markets countries consistently produce some of the best global tech talent, according to Coursera’s Global Skills Report.
If they’re that hungry and that successful, maybe their companies are worth investing in, too.
Here’s a few of the ones I found that are newcomers of the last two years, or soon to be newcomers, to the U.S. stock exchange. I should have bought Zoom. Instead, I’m stuck with KraneShares China Healthcare (KURE).
Check out these guys…
Oleg Shchegolev and Dmitri Melnikov of Semrush (NYSE:SEMR)
Semrush makes online visibility management and content marketing software. They went public in March. They’re up nearly 100%.
One of the underlying drivers of Semrush’s growth has been the tectonic shift toward online business-to-customer interactions – a trend that has intensified due to the pandemic.
Its founders, Oleg Shchegolev and Dmitri Melnikov, have been friends for more than 30 years and are both from Russia. They immigrated to the US and now work from Semrush’s Boston offices. The friends started developing the platform as a hobby, but soon discovered it had the potential to help marketers worldwide. From there, Semrush was born in 2008 and has since grown to a public company with a market capitalization of $2.5 billion.
The company reportedly has over 72,000 paying customers in more than 142 countries, and over 1,000 employees.
Goldman Sachs analyst Vyacheslav Degtyarev wrote in a recent research report that “Russian entrepreneurs and individual tech developers are increasingly seeking to enter international markets given materially larger addressable markets, advantaged by an abundant and relatively cheap domestic technology talent pool.”
Translation: Russian techies will do the work. Their founders will move where the money is. Bam. Success.
Arash Ferdowsi of Dropbox (NASDAQ: DBX)
Dropbox is now a household name and practically eponymous with cloud storage. The company IPOed on Nasdaq in 2018 with a valuation of $8.2 billion, but its market capitalization has since grown to $11.9 billion. Their share price is up over 35% year-to-date, and is beating the Nasdaq by a country mile.
Cofounder Arash Ferdowsi is an American, but his parents came here from Iran and moved to Overland Park, Kansas. In an op-ed in his local Kansas City Star last year, Ferdowsi said that, “Kansas welcomed my family and gave me the confidence to succeed in ways my parents could never have dreamed of. I want future generations of immigrant families to get the same opportunity — so that they can build bright futures here and lift us all up along the way.”
He got out of Kansas. Went to MIT and founded Dropbox with his college roommate, Drew Houston. Arash’s net worth is now estimated by Forbes at over $1.1 billion, and Dropbox has more than 15 million paying customers.
Tony Xu of DoorDash (NYSE: DASH)
Food delivery platform DoorDash couldn’t have gone public at a better time, smack dab in the middle of the worst pandemic since the Spanish flu, only with lockdown orders that didn’t accompany that killer virus. The company’s revenue in the first quarter of 2021 nearly tripled compared to the first quarter of 2020. They’ve also signed new partnerships with chains like Albertsons, Rite-Aid and PetSmart.
Dash is up 23% year-to-date, besting the Nasdaq.
Chinese immigrant Tony Xu created DoorDash. Nope, his parents weren’t physics professors. They were blue collar riff-raff like most of us, and had to work multiple jobs, Xu told the South China Morning Post at the time of the IPO in December 2020. Xu was a lowly dishwasher and pizza delivery man, which is how he came up with the concept of DoorDash.
In a letter accompanying the DoorDash IPO prospectus, Xu wrote, “I was five years old when I immigrated from China with my parents. Like many immigrants, my family came to this country to pursue the American Dream… DoorDash exists today to empower those like my Mom who came here with a dream to make it on their own.”
DoorDash now has over 18 million customers and over 2 million “Dashers”.
Eric Yuan, Zoom Video Communications (ZM)
Like DoorDash and Xu, Yuan’s Zoom IPOd at the right time, a year before the pandemic, when the world would equate video conferencing with “Zoom calls.” Zoom is now to video conferencing what Coca-Cola is to soda. If you think video conferencing, you think Zoom, not Skype, not Cisco’s Webex. Zoom’s share price is up over 500% since its IPO in April 2019.
Yuan was born in Shandong province in China. In an interview with Forbes in April of this IPO year, Yuan said that as a child, he collected scrap metal to sell.
With annual revenue of $331 million, up 118%, Zoom was the ultra-rare tech unicorn to make its IPO debut with a profit, boasting 50,000 corporate customers, including Samsung, Uber, Walmart and Capital One. Yuan shuns the spotlight. Beneath the buzz, Yuan’s is a story of perseverance, perfect timing, an a product that makes Zoom top of mind over the old players already in the market.
Vlad Tenev of Robinhood (soon to IPO)
If you’ve been following the Gamestop and AMC meme stock stories of 2021, then you’re no stranger to Robinhood, the financial trading app that aims to “democratize finance for all”.
Co-founders Vlad Tenev and Baiju Bhatt are both from immigrant families. Tenev was born in Bulgaria, but moved to the Washington D.C. area with his family when he was five years old. Bhatt is a first-generation American and the son of Indian immigrants.
They aren’t public yet, but unless Wall Street wants to really punish the Reddit Wall Street Bets crowd, then Robinhood should do well, especially if it becomes one of the only traditional online stock brokerages that allows for the purchase of crypto as well. You can’t do that on E-Trade.
Lastly, Wall Street is looking at a number of tech-related IPOs coming from the developing world. Some of the two in the spotlight at the moment: Vietnamese EV startup Vinfast will try to be like China’s NIO and collect a huge American IPO payday.
Another is Malaysia’s Aztech Global. Though this one was for the big boys who have brokerage accounts in Singapore. They listed in March. Just how sexy is Aztech GLobal? Their IPO was 18-times oversubscribed.