Yazan Al Homsi has guided many companies to financial success as an expert in the venture capital space. This is his story of entering the small-cap investing space, launching his own enterprise, and helping companies in the technology and healthcare sectors grow. He also shares the ins and outs of small-cap investing as a specialist in the field.
The Story Behind Yazan Al Homsi’s Entry Into the Small-Cap Space
Al Homsi has led a varied career in the Middle East and Canada since completing his bachelor’s degree in finance at McGill University in Montreal in 2004.
Before entering the small-cap investing space, he started in a sales role for Imperial Oil. He then accepted a mergers and acquisitions (M&A) and initial public offering (IPO) advisory role at PricewaterhouseCoopers (PwC). Working in the Middle East, he progressed from the role of consultant to director at PwC over ten years.
During this decade, he also built the undercurrent that finally led him to launch his own small-cap investing venture. He:
- Became a chartered financial analyst (CFA).
- He experimented with large-cap investments to discover where he could create or generate alpha. Through these investments, he realized that small caps often have a lot of alpha, or a solid ability to beat the market, because only some investors have discovered them at that point.
- Developed a network of contacts in the small-cap world in Canada and further afield.
Entering The Small-Cap Space
Al Homsi then launched Founders Round Capital in Vancouver, investing in small-cap stocks and getting innovative businesses the traction they need to thrive. He sought companies with solid business plans, inspiring stories, and impressive management and guided these companies through the private to public route.
While running this venture, Al Homsi also spent much time travelling between Canada and Dubai to retain his extensive network of connections in the Middle East.
Medicago’s Acquisition
One of Al Homsi’s highlights from running this company was overseeing Mitsubishi Pharma and Philip Morris’ 2013 acquisition of the pharma company Medicago, which created vaccines out of tobacco.
Before the acquisition, Medicago had a small cap of less than $10 million. With the acquisition, this rose to $357 million. This success showed Al Homsi that the small-cap space was his area of specialism.
“It showed me how much significant alpha you can create if you find the right diamond in the rough,” Al Homsi says.
Canada’s Legalization of Cannabis
In 2016-18, Canada started to legalize cannabis. As a result, many companies entered the cannabis space and developed pharma-driven business models. Many companies at the time received huge valuations simply because they had a license. But this didn’t mean they had a sustainable business model that would generate revenue.
Given Al Homsi’s investing experience leading to the acquisition of Medicago, other companies turned to him for assistance. Al Homsi helped these companies decide whether to take the often-difficult pharma route, as Medicago had, or create a product and focus on generating sales.
Al Homsi still holds a position in one of these cannabis companies, which has grown from inception to generating nearly $9 million.
Timing Is Everything in Small-Cap Investing
Al Homsi emphasizes that timing is essential when it comes to small-cap investing: “It’s not just having the right investment thesis, but also the investment thesis has to have the right time for it,” he says.
For example, Shopify and Teladoc offered huge returns during the Covid-19 pandemic. But these returns “evaporated the minute the feds started tightening.”
However, COVID-19 then shifted the small-cap investments space, opening the door for many more trading platforms to enter the market. This triggered a rise in many small-cap stocks’ valuations.
This is good news for small-cap investors, who previously had to jump through hoops to invest in many nano- and micro-cap stocks, which weren’t available to buy unless they were buying from fully-fledged service brokers.
Connections And Communication in Small-Cap Investing
Al Homsi explains that small-cap investing can be much more accessible than mega-cap investing. Although finding information about mega-cap stocks online is possible, it’s impossible to dig deeper without communicating with the company and asking for a demo.
With this communication, it becomes possible to understand the bigger picture surrounding the company and the “overriding arc” of whether its technology is likely to be adopted.
For example, while it would be difficult to schedule time with the CEO of a major corporation, like Apple’s Tim Cook, booking a call with the CEO of a smaller company should be more accessible.
“This makes a big difference,” Al Homsi says. “You can do better due diligence.”
Avoiding IRAs and TFAs for Small-Cap Investing
Large-cap funds are often the funds an investor would include in their individual retirement account (IRA), tax-free savings account (TFSA), or a similar account. These accounts tend to generate an average return.
Al Homsi explains that beating the market with these accounts isn’t common unless you have a great hedge fund. However, hedge funds rise and fall, don’t offer excellent access, and rarely appeal to investors who have million-dollar accounts. As a result, these accounts aren’t usually a great fit for small-cap investments.
About Yazan Al Homsi
Specializing in financial due diligence and valuations, Yazan Al Homsi is an experienced managing partner in the venture capital space. Holding high-profile financial advisory roles, he has supported several start-ups and growth-focused companies in the healthcare and technology sectors.
Al Homsi is currently a managing partner of Catalystwire Communications DMCC and Founders Round Capital. He has also been a director of the audit and assurance, consulting, and tax services company PwC for over a decade.
Follow Yazan Al Homsi on LinkedIn.
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