Meet Murat Abdrakhmanov, one of the largest business angels in Central Asia

Murat left the VC firm to invest independently; now he enjoys it more

Venture capital has evolved from a niche sector into a booming industry, with a surge in both startups and the funds available to support them. In this series, we explore the emerging venture capital firms and investors focusing on early-stage rounds.

Who are the players in this space? What types of investments do they prefer, and how do they perceive their role within the broader venture capital ecosystem?

We’re profiling influential members of this community to uncover their strategies and perspectives.

Murat Abdrahamanov is one of Central Asia's leading business angels.

His portfolio comprises 52 startups across the U.S., Northern Europe, and Asian markets, with a total investment of $25 million.

Murat has over 30 years of business experience. He founded Astel, one of Kazakhstan's largest telecommunications companies, in partnership with the U.S.-based operator Sprint (acquired by T-Mobile). Murat is also a co-founder of the Dent-Lux chain of dental clinics in Kazakhstan and 10 other diverse companies.

Murat's desire to share his knowledge with young entrepreneurs and his continuous drive for growth led him into the venture capital business. He has been investing in startups for the past nine years. During this time, he has made 12 exits, with some, like food delivery Choco, payments platform 2C2P, and hydrogen fuel cell systems developer HyPoint (acquired by ZeroAvia), yielding a return of 6-8 times the initial investment. In 2023, Murat earned $7.2 million by selling stakes in five projects.

Another passion of Murat's is yachting; he is the commodore of the Almaty Yacht Club.

VatorNews: What led you to angel investing and why is this the most effective path for you as opposed to, say, teaming up with a VC firm?

Murat Abdrahamanov: I began to feel constrained within the main business as the telecommunications market in Kazakhstan had long been stagnant, with all services covered 100% and no room for growth. I started seeking out markets with the potential for tenfold growth and yearned to expand beyond Kazakhstan. Additionally, I was no longer interested in running businesses myself and wanted to share my experience with young entrepreneurs. Considering all these factors and my immense love for technology, venture capitalism turned out to be the perfect path for me.

I made my first investment as an LP in a venture capital fund. I believe this is the best way for beginners to start their venture capital careers: investing through funds, syndicates, and clubs. I observed, analyzed, and learned how professional teams selected projects. This experience was invaluable when I later became a business angel and started investing independently. I wanted to work directly with startups, as investing through a fund felt boring and uninteresting to me.

I haven't compared the profitability of investments as an LP versus a business angel. Considering the different life cycles of startups, this is not easy. However, I find working independently far more enjoyable. Being a respected expert in the market, sharing my knowledge, and expanding my network is incredibly rewarding. Through venture capital, I've met many talented individuals, fellow investors, and experts in various fields. It's an environment that energizes and inspires me.

VN: Please talk about your areas of focus. I see that you have backed startups in AI, e-commerce, HR, Edtech, and fintech. What are some especially exciting things going on in these segments?

MA: The technological revolution that began 30-40 years ago with the advent of mobile networks and the internet has radically transformed our lives. The fields of fintech, edtech, deeptech, and AI are driving this revolution forward, making them particularly compelling to me.

I am convinced that in the next 5-10 years, AI will do more than just automate and simplify business processes—it will revolutionize entire roles, from sales managers and designers to stock market analysts. SaaS will evolve into FaaS (Function as a Service), transforming how we interact with technology. Additionally, I anticipate significant breakthroughs in biotech, such as AI-driven advancements that could dramatically shorten the development cycle for new pharmaceuticals or enable the creation of novel proteins not found in nature.

Similar groundbreaking developments are happening in fintech. For instance, in my home country of Kazakhstan, I can travel without documents or cash—just with my smartphone. It feels quite unusual to visit Europe, where cash is still widely used and remembering my credit card PIN is necessary.

Thanks to fintech companies, we have replaced plastic and paper money with our phones in just a few years, and we can instantly get a loan or installment plan for any product, even for a drink at a bar. But this is not the limit. Many countries are already using FaceID to verify identity. The main problem is that it is not 100% accurate; the more precise biometric identifier is a palm of the hand. The use of the human palm print as an identification method is already in use in China, the United States and even in Kazakhstan, where it can be seen for payments in stores, public transportation and entrance control at the office. All of this is also part of fintech, and I think that such services will gradually appear in other countries as well.

Fintech will impact not only individuals but also businesses. Currently, fintech services are automating the approval process for small business loans. I believe that soon, large businesses will also be able to apply for loans quickly and without unnecessary bureaucracy.

VN: How many investments do you make in a year? What does that come to in terms of check size in the initial check, as well as over the life of the company?

MA: On average, I make about 15 investments a year. For instance, last year, I made 17 investments in total, with 12 being new and five follow-on investments. I invest between $150K and $500K in startups, totaling around $4 million annually. The size of follow-on checks usually increases, but not by more than double. If I initially invest $150K and see steady growth, I might offer $300K. However, I avoid investing significantly more because, despite current success, risks remain. A startup can still fail even at Series A.

VN: Do you invest at a certain stage of a startup’s journey? What are the specific metrics you consider before moving forward at all?

MA: I invest $75-100K in startups at the pre-seed stage, $300K-$500K in seed rounds, and up to $1.5M at later stages. A few years ago, I didn't consider pre-seed startups, but I’ve been approached by more and more talented entrepreneurs with good ideas that I want to support. If I like the team and the project, I may invest $50-75K at the pre-seed stage. However, I realize that this is a high-risk investment, so I adhere to the principle of a samurai who mentally dies before the fight: I say goodbye to my money before I invest in a project. Although I don't have a large sample size with pre-seed startups, I can say that I support about 70% of them in subsequent rounds, while the rest don't live up to expectations or simply fail.

When deciding on follow-on investments, I first consider whether the startup has met its commitments. If the project aimed for a 3X growth for the year, and I see a 4X in the report, I believe the team has accurately assessed their capabilities, knows how to calculate, and can align their ambitions with reality. I also look for stable product-market fit and good traction. Additionally, if the startup previously grew only in the local market, I evaluate whether it has expanded into external markets and how successful it is there.

VN: What’s most important: team, product, or market?

MA: It depends on the phase of the project. At the pre-seed stage, the most important factors are the team and the market. The product can change significantly from pre-seed to seed, as startups test new hypotheses and sometimes make radical pivots. A good team can quickly acknowledge mistakes and find new solutions. Regarding the market, it's ideal if the team finds a product-market fit right away in a large market, such as the US. Success in a small market doesn't guarantee the same results in a larger one.

VN: What are you looking for from the product?

MA: The product should address a genuine pain point in the market and be user-friendly. I examine many metrics, but I particularly focus on retention and NPS. These metrics should be high: NPS should be above 70%, and retention varies depending on the project. For B2C services, I can personally go through the user journey. For B2B services, I ask employees from my companies to test the product and provide feedback. Founders often embellish their successes and might overlook certain product shortcomings, so it's crucial for me to get an accurate picture.

VN: What do you like to see in the team, and the CEO specifically? Is the level of past experience important, and are there any personal qualities that make a good company leader?

MA: I value entrepreneurial experience, but it’s crucial that it aids rather than impedes the startup's development. The founder must stay flexible and be willing to admit mistakes. More importantly, the founder should have expertise in the industry they are developing the startup in. A deep understanding of the market's pain points significantly boosts the project's chances of success. Additionally, I always assess the founder's passion for their work, as the startup development cycle can take 7-10 years.

To gain deeper insights into the team, I might invite them for a sailing trip on a yacht. This experience presents a challenge, adventure, and a bit of danger, providing a unique setting for people to reveal their true selves. A week of close communication in such conditions helps me understand how they handle stress and behave in unusual situations.

VN: 2023 was a bad year for venture fundraisings in the U.S. What was it like at the international scale? How have things changed, and what do you expect from this year?

MA: The situation in Europe mirrored the decline seen in the U.S. In the first half of 2023, venture capital investment in Europe fell by 61% compared to the same period in 2022.

However, Central Asia presents a different story. In Kazakhstan, the volume of deals in 2023 reached a record $80 million, up $11 million from the previous year. Notably, 80% of these deals were closed by local funds and business angels, with most transactions occurring in pre-seed (52%) and seed (38%) rounds. Unfortunately, we still lack significant funding from large Western funds that could support local startups at the Series A stage and beyond.

Despite these challenges, I remain optimistic. Startup valuations have become more realistic, moving away from the inflated $30-40 million pre-seed valuations of the past. With unprofessional investors exiting the market and competition decreasing, now is a promising time to invest. The market is cyclical and will recover; investing now could yield returns in 3-4 years.

VN: What makes your approach different? How do you participate as an advisor?

MA: Young entrepreneurs often struggle to recognize and address their own challenges. I assist my portfolio companies by breaking down their projects, pinpointing problem areas, and implementing solutions. This approach helps them save both time and money.

For example, a startup might initially operate on trust alone, lacking defined responsibilities or formalized processes. As the company grows, this oversight becomes problematic. I step in to help establish proper business processes.

Similarly, some startups, thriving in a booming market, may never have faced a crisis and assume their growth will continue indefinitely. They often fail to build in a safety margin. I help them adopt a realistic perspective on their projects and adjust their strategies accordingly.

As an investor, I also offer entrepreneurs a valuable gateway to the world of venture capital. Having a recognized supporter behind their projects boosts the startup's credibility, which facilitates negotiations with major funds necessary for later-stage funding.

VN: Please tell the story of your favorite startup child in which you participated.

MA: A few years ago, a graduate from Kazakhstan’s prestigious Republican School of Physics and Mathematics—an institution known for producing many of the country’s leading entrepreneurs and researchers—came to me. I always make an effort to connect with such promising individuals.

Yerzat Dulat explained that he was working on an AI framework designed to significantly enhance data processing speeds. Despite being offered a position at OpenAI, he and his partner chose to focus on developing their own AI startup and were seeking investment. At 27 years old, Yerzat had left university in his third year, stating that he felt it no longer offered him any value.

Yerzat made a strong impression on me, but I decided to gather some references. I reached out to prominent IT companies and was consistently told that Yerzat was their consultant and a highly skilled specialist.

Later, I was invited to serve on the jury for a startup contest, where Yerzat was also a member. When we were introduced, the audience barely reacted to me, assuming I was just another business angel. However, when Yerzat took the stage, the crowd erupted in applause, revealing that he was a true idol among young IT professionals.

Impressed by his reputation and the enthusiasm he garnered, I decided to invest $250K. Moreover, at that time, Erzat and his partner had yet to incorporate the company; in fact, I gave them money to formalize all their developments in the form of paperwork.

Thus, Higgsfield AI was born. Their flagship app, Diffuse, leverages a specialized text-to-video conversion model to create videos from scratch or generate clips featuring a person from selfies. Unlike OpenAI's Sora, which caters to professional filmmakers, Diffuse is designed for a broader audience.

Last year, Higgsfield AI successfully raised $8M in a pre-seed round, with Menlo Ventures leading the investment. I view this investment as a significant achievement; I never imagined I'd have the opportunity to fund a project of this caliber. From the outside, it often seems impossible to break into such a field without substantial backing, typically reserved for major U.S. corporations. Yet here we are, with a team having built a remarkable project, and I am confident in their potential for success.

VN: What do you love the most about angel investing?

MA: I've spent my entire career in the tech industry, and I can't imagine another field that allows me not just to witness technological advancements but to actively contribute to them. For me, personal growth is crucial, and investing provides that opportunity. Each startup pitch is like a new lesson from which I gain fresh insights.

Additionally, investing helps me expand my network and connect with talented individuals from around the globe. Of course, angel investing also offers financial rewards, with an average return of 4X on my initial investments. However, money is not my primary motivation. What truly matters to me is being helpful; it's incredibly fulfilling to have a lineup of founders seeking my advice.

Image: Murat Abdrakhmanov