Catalyst in Georgia & Armenia

An update on Georgia

2008-08-14T08:43:00.000-07:00

Only a few days after our arrival back in the UK the conflict in South Ossetia has escalated into a war and is making headlines. When we were in Gori (home town of Stalin in Georgia) no one could have imagined that Russia would find reason to bomb it a couple of weeks later and move in with tanks.

Here are two comments by GML International (who have a Georgian investment fund) which I found helpful:

- "We believe it is absolutely not possible that Russia is planning an extensive occupation of Georgian territory beyond South Ossetia and Abkhazia, although Russia appears to be seeking to create a demilitarised zone in Georgian territory adjacent to the borders with these two regions, in order to undermine Georgian military capabilities. We expect a cease-fire to be agreed in the next couple of days, and for Russian bombing of Georgian territory to cease, if it has not already ceased. Then the long diplomatic wrangling about the security situations in the two regions will begin. Russia hosts the Winter Olympics in Sochi on the Black Sea coast in 2014 (which is seen in Russia as at least as important for Russia's "coming out" on the world stage, as this summer's Olympics in Beijing is to China). Sochi is only 60 km from the border with Abkhazia, and Russia cannot afford to have a war going on so close to its showcase for the world."

- "The mood in Tbilisi is defiant and very patriotic. The universal feeling of Georgians with whom we have spoken is that it was necessary to bring the situations in South Ossetia and Abkhazia to a head, and to seek a resolution 'once and for all'. There is strong support for President Saakashvili among everyone we have spoken with, even among those who have been very critical of his actions in the past. The 'end game' as our Georgian clients and friends see it, is to have a United Nations or other international peacekeeping force replace Russian 'peacekeeping' troops in both South Ossetia and Abkhazia, in order for residents to be able to return to their homes and live peacefully (including the approximately 300,000 eithnic Georgian refugees from these regions, who were driven from their homes in the early 1990s during extensive civil strife). The Georgian Government has been actively seeking reconciliation with both regions, offering large measures of autonomy but under the sovereign umbrella of Georgia, and the Georgian Government believes that once the situation stabilises, Abkhaz and Ossetian people will find that Georgia has more to offer than Russia. The Georgian Government's calculus has no doubt included the view that Russia cannot be too supportive of independence (from Georgia) for South Ossetia and Abkhazia, due to the separatist ambitions of various of its own regions, including Chechnya. Our own view is that the Georgian Government has significant responsibility for provoking this conflict over the last several weeks, and we are not sure that the timing of bringing the issues to the fore was optimal."

A life's work can be a place far away

2008-07-29T01:13:00.001-07:00

When Malkhaz was in prison as a political dissident under the Soviets he fell in love with a passage from a book that talked about "a place far away", in Georgian a place far away translates "shorety". In a KGB prison you didn't know how long they would keep you or where you would be taken. After he was released during the Perestroika he read archeology and history books and found there was a place called Shorety with ruins of an ancient monastery. He went and found it in a remote forest. Malkhaz has spent the last 21 years excavating and restoring the place (by organising summer expeditions for students). First he had to build a road, about 4km up the mountain through thick forest. Often he uses his own money when other funds run out. His dream and passion is to hand it back to the Church fully functional one day, even if it were to take him his entire life.

(We went to Shorety as a family and spent few days in tents with the students of this summer's expedition.)

Financial experts in the region

2008-07-25T07:17:00.001-07:00

On Tuesday I had an opportunity to meet Aieti before going to the mountains on holiday. Aieti is CEO of the fastest growing financial services company providing things like micro loans, leasing, company research data, electronic banking, corporate finance. I met Aieti last year for the first time. He struck me as someone who could be successful anywhere abroad but he loves his country and engages in its reconstruction. He would be an important partner in identifying projects with a social agenda (he mentioned a few current examples in our conversation) and in the relationship with the management of a company especially when a strategic portion of funding is provided. Aieti is a key partner to the newly launched Caucasus fund by GML International, a London based firm (who's director I also know). We spent the evening having dinner together with my family in the old capital Mtskheta and then went to see one of the castles where Malkhaz has a team of students excavating.

Short mission accomplished

2008-07-20T11:37:00.000-07:00

I feel very privileged to be able to meet special people with great passion and determination to transform their country.

Stepan is co-founder of the Centre for Leadership Development (= CLD, see their website under the "links" column of this blog) which has been going for 8 years and offers a curriculum taught by visiting professors and business people which is unique for Armenia. He is also director of a pharmaceutical distribution company which apparently everyone knows: if it comes to buying expensive drugs where origin and quality matters, they are the undisputed source. Otherwise they are more expensive (and lost market share) because they pay all their tax. His mother-in-law, former member of parliament, who set up this business is also known to everybody because she did not abuse her position to monopolise the market in a time when she could have. Their integrity comes still at a high cost which they are prepared to pay. The same applies to several of the CLD students who decide to stick to ethical standards and take no bribes. They will be the winners - long term (and perhaps very soon as mny are hoping). That's why I know that investors will back them.

We meet Matt. Matt is an American with global experience in branding and advertising. 4 years ago he and his (Armenian) wife decided to take the risks of a new start and live here in Yerevan. He has his own branding and advertising company, above all he has a vision (and been patiently working at it over the last 4 years) to set up new businesses that will develop managers of the future who can take on new companies. Our discussion on possibly investing in Armenia comes soon the key point: finding the right people.
In Matt's and Stepan's view there are only very few people who you can trust will uphold integrity. You need a way to identify them. The CLD has been a great platform for this because you watch students over time and in various simulations. Hence Stepan gets a loot requests nowadays of the kind: "do you know someone who would be good for ...?".

We meet Tigran, formerly at the Central Bank, and now set up a small investment banking and asset management firm. I learn some surprising facts. E.g. that out of 7 publicly listed companies only 1 is effectively traded. That he was underwriter of the first Armenian corporate bond issue this year. Most surprisingly that (apart from the EBRD) there are NO funds investing into Armenian companies yet. If you walk through the centre of Yerevan (and see all the growth) and then hear this, it sounds unbelievable; I had to ask several times. Well, I leave you to guess what went through my head next.

Then we meet Samvel (Sam). Sam is a young alumni from the CLD. Hardworking, faithful and with authentic passion to impact society through enterprise. He set up an NGO for underprivileged and orphaned children. In the last 4 years he and volunteers spent time with these children doing homework, playing, helping. Now he steped forward to help taking the CLD to the next level. The idea is to create a business oriented curriculum and see enterprises emerge from it.
Our discussions go on until late night. Now you understand perhaps what it means to say that the CLD is a platform that helps to identify the right people.
Oh ... nearly forgot to mention that I was kindly introduced to Stepan's mother-in-law and to the wife of the first Armenian president who many put their hope in to come back restore their nation.

It is Sunday now and I stand again on the brige connecting Georgia with Armenia between the two border controls. As I look back to Armenia to re-enter Georia I feel a richer man and also humbled; inwardly I take my hat off before the wonderful people I have met back in Yerevan.
My mission is acomplished: I know now I want to come back. Next time with friends and to make plans for business.

A banker, an ambassador, a journey to Armenia

2008-07-18T12:57:00.000-07:00

When people (here as well as in the West) hear "social enterprise" they think immediately of certain sectors (like green energy, sustainable farming, organic anything, educational something) and ask me "what sector would you like to focus on?". I propose to Lado to view social enterprise from a different angle. Lado was head of finance of a leading Georgian bank until very recently when he set up his own corporate finance firm. I propose to him that almost ANY sector can make a direct 'social' impact by HOW they operate So I would prefer to select enterprises based on their 'impact niche' rather than their sector niche. After I say this, Lado looks around (we are having breakfast, again meat soup for breakfast!) and says "we need a breakfast place where families can go and eat quality food, the only places open are fastfood... quality family experience is a social impact!" (says he, not I ...). Then he adds: "if we managed to set up a joint Georgian-Armenian venture of any kind that would be unprecedented for recent times and a significant step against the grain of under-investment in conflict areas with ethnical minorities." ...again his example not mine - I take it as a confirmation of my proposal.
Lunch is with another one of Malchaz' amazing connections, a Georgian ambassador. According to him and the government the key next economic priority for Georgia is tourism. Other than that he deplores the lack of a long term strategy for the economy, but they both agree that "one great thing" this government has achieved is "no corruption and no bribes".
This apparently distinguishes Georgia from its neighbours as I can later witness through many stories of my Armenian friend Stepan who picks me up at the Armenian border. Our drive to the capital Yerevan takes us through fertile land, wilderness (the pharmacy-owner friend who kindly helps with a flat tire hunts bears in his spare time), neglected vinyards, amazing scenery (but unusable because of occasional bullets, being territory contested with Azerbaijan), past a once flourishing now delapidated factory (because its raw material is on the other side of the bullet line), lots of simple and brave traders along the road, plenty of donkeys and carts...until we reach the maximum contrast - buzzing Yerevan.

Restoration (of old ruins and of passion for the customer)

2008-07-17T14:01:00.000-07:00

Tbilisi airport seems to get only really busy at 3am at night. That's when I land and am picked up by my friend Malkhaz, entrepreneur and archeologist. Later in the morning over a chicken soup (for breakfast) we meet Ilia who used to be deputy country representative of the Millenium Challenge Corporation. Together they would like to restore ancient buildings in remote locations and then create a quality tourism experience: visitors would learn about the different Georgian regions (there are huge differences, regional identity can be more important than national) and then go and stay in these places of heritage depending on their preferences. I learn also very interesting facts about Millenium Challenge and what large resources it apparently deploys to monitor the impact of their grants and investments.
Then I walk around Tbilisi for many hours following Dato in and out of cafes. Dato spent 4 years in London, has a great passion for coffee, for providing great customer experience and for training/inspiring others to do so. It is a delight to listen to him describing the nuances, the science, the art of coffee making. He feels there is a need in Georgia for role models of customer service (strongly agree). His vision is to be successful by doing it and to apply and transfer that skill to other business initiatives. And oh...according to the maestro there is no real coffee in town yet (strongly agree) - I hope next year I will taste the best cup of coffee in central Asia at Dato's ...and I would like to help him.

Keep going despite the hurdles

2008-07-13T20:37:00.000-07:00

Imagine a Starbucks cafe where you would have to pick up a cup and
walk past three different baristas, each with its own queue, and
where something else is added to your coffee each time. Imagine that
when you get to the final desk (and chocolate powder added to your
foam) your coffee is cold and you have to pour it away.
This is what happened to me at the flybmi checkin desk at London
Heathrow. I was there 1h15min before departure to Tbilisi. By the
time I had came to the third stage (after the weighing queue, the
electronic boarding pass queue and had moved to the front of the
baggage drop queue) I was told the computer is closed for luggage
despite having been guided by staff first and been issued a valid
boarding card and allocated seat 13D later.
The taste of cold coffee is having to cut my trip short by 3 days (no
other flights to Georgia operate before Wednesday). But when you have
a mission you can't give up because of a bad coffee.

The plan

2008-07-11T05:03:00.000-07:00

... is to spend my first week meeting potential future partners in my new venture and looking at a few projects. I would like to discuss a possible structure that we can set up to start to gain experience and proof of concept for a Social Venture Capital fund. A bit ambitious for one week especially if you include driving to Armenia and back ... I know ...

... let's see how it goes!

Thereafter we hope to travel around and explore the region as a family.