NEW VEN­TURE CAP­I­TAL FIRMS

Meet the Latest Arab VCS to Launch

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Arzan Ven­ture Cap­i­tal launched in late 2014 as the ven­ture cap­i­tal arm of Arzan Fi­nan­cial Group in Kuwait to sup­port the en­tre­pre­neur­ial ecosys­tem through their starter $5 mil­lion fund. Some of their port­fo­lio com­pa­nies in­clude Id­i­naidi.ru, a residential real es­tate por­tal in Rus­sia; MENA Com­merce, a big-data startup that fo­cuses on the re­tail in­dus­try; and Ecosys So­lu­tions which man­u­fac­tures the PET Re­cy­cler ma­chine. We in­ter­viewed the in­vest­ment team at Arzan Ven­ture Cap­i­tal: Has­san Zainal, Anurag Agar­wal, and Ah­mad Takatkah.

What com­pa­nies are you in­ter­ested in in­vest­ing?

We fo­cus on early growth (se­ries A or pre-se­ries A) star­tups be­cause we have the nec­es­sary skills and ex­pe­ri­ence to bring added value to this seg­ment. We look for star­tups that uti­lize tech­nol­ogy in gen­eral. The VC mar­ket is very new and we’re build­ing our ex­per­tise as we go, so fo­cus­ing on spe­cific tech­nol­ogy seg­ments will not be suf­fi­cient to build a high­qual­ity pipeline.

We like to in­vest in star­tups in the MENA re­gion who have the pos­si­bil­ity to ex­pand abroad. We also look at star­tups out­side the MENA whose prod­ucts or ser­vices could even­tu­ally come to the re­gion. The tech­nol­ogy sec­tor isn’t ge­o­graph­i­cally lim­ited, so there can’t be such a thing as an in­vest­ment purely for a MENA startup. When we in­vest in in­ter­na­tional com­pa­nies, we gain ac­cess to a big­ger net­work of VCS and an­gel in­vestors, which helps us learn more about their

strat­egy and oper­a­tions. This will also have an im­pact on our deal­ings with en­trepreneurs in the re­gion.

What is the size per ticket you are aim­ing to in­vest? They start at around $150,000 or even $100,000 and go up to $1M.

On what ba­sis do you choose the startup you want to in­vest in? We have a very de­tailed fil­ter­ing process. The first things we look at in a startup are its growth po­ten­tial and its team. Af­ter that, we delve into more de­tails be­fore the due dili­gence process. We then seek to un­der­stand its po­ten­tial in terms of the so­lu­tions it pro­vides to the re­gional and global mar­kets. We also look at the startup from the com­mer­cial and fi­nan­cial points of view (such as fees and val­u­a­tion) be­fore we go for the fi­nal ap­proval.

Why should star­tups choose your fund? To be­gin with, we have a big net­work of in­vestors and wealthy cor­po­ra­tions in the GCC and in Sil­i­con Val­ley. We also have ex­pe­ri­ence with in­ter­na­tional star­tups, which con­sti­tutes an added value. We have a lot of sis­ter com­pa­nies in tra­di­tional busi­nesses and in tech­nol­ogy sec­tors. Ba­si­cally, what we try to do is sup­port our early growth com­pa­nies by in­tro­duc­ing them to our net­works and to our sis­ter com­pa­nies that might be­come their clients. So in a way we’re boost­ing their rev­enue and we also im­prov­ing their cost-ef­fi­ciency. I think it’s all about build­ing the first ini­tial touch and then the ball will con­tinue to roll.

In ad­di­tion, we pro­vide men­tor­ship to en­trepreneurs and help them when­ever pos­si­ble in plan­ning and re-plan­ning strate­gies, or putting up their fi­nan­cial model or busi­ness plan, and we might even sug­gest ideas to them, but we do not in­ter­fere in their man­age­ment de­ci­sions. We’ve in­vested in them be­cause we are con­vinced that they are able of ex­e­cut­ing their own plans—oth­er­wise, we would have started the com­pa­nies our­selves.

What is your strat­egy for sourc­ing deals? We par­tic­i­pate in all the events in our re­gion, like the Arab­net or MIT con­fer­ences, where we have the chance to meet with star­tups who then come back to us. We also con­tact some star­tups our­selves, and we as­sess their idea. If a startup’s idea is fit for growth and in­vest­ment, we visit them and do the anal­y­sis.

MO­BILY VEN­TURES

Mo­bily’s cor­po­rate ven­ture cap­i­tal fund was launched in mid-2014 and has so far an­nounced its in­vest­ment in Easy Taxi, Ang­hami, Hel­lofood, and Dokkan Afkar. In this in­ter­view, we talk with Daniel Sil­vestre Dosreis, Di­rec­tor at Mo­bily Ven­tures.

What com­pa­nies are you in­ter­ested in in­vest­ing? Mo­bily Ven­tures is in­ter­ested in in­ter­net­based B2C or B2B star­tups that are ei­ther based in the MENA, or op­er­at­ing in the re­gion, or serv­ing it. We’re not lim­ited to in­vest­ing in Saudi star­tups only, but it’s cer­tainly dif­fi­cult for us to find more com­pa­nies abroad when we’re based here. We have 6 fo­cus ar­eas when it comes to the star­tups we se­lect: 1) Online and mo­bile bank­ing and pay­ments; 2) Dig­i­tal media and en­ter­tain­ment like Ang­hami mu­sic stream­ing, or stream­ing ser­vices; 3) Re­tail in­no­va­tion and ecom­merce; 4) Data monetization and dig­i­tal advertising; 5) B2B IT and Cloud com­put­ing, i.e. in­fra­struc­ture as a ser­vice (Iaas), plat­form as a ser­vice (Paas), or soft­ware as a ser­vice (Saas); and 6) a broad prod­uct cat­e­gory re­lated to online and mo­bile ser­vices.

What is the size per ticket you are aim­ing to in­vest? They start at around $250,000-$300,000 and could reach up to $2M or $2.5M.

On what ba­sis do you choose the startup you want to in­vest in? The num­ber one thing we look at is the team. Our sec­ond cri­te­ria is the startup’s model. Third, we con­sider the op­por­tu­ni­ties in the mar­ket (com­pet­i­tive in­ten­sity, num­ber and size of in­vest­ments, etc.). Then we study the eco­nom­ics. We look at the com­pany’s busi­ness plan model and its val­u­a­tion, and we try to see if we can find a fair val­u­a­tion that is ac­cept­able for both the en­tre­pre­neur and us as the in­vestor. Fi­nally, we look at the long term and con­sider the exit prospec­tive. We think about po­ten­tial ac­quir­ers if we ever con­sider selling the com­pany. We also con­sider whether it could be an IPO can­di­date, but this is rarely the case. For now, we be­lieve that an IPO can be re­al­is­tic prob­a­bly in the ecom­merce base—souq.com for ex­am­ple.

Why should star­tups choose your fund? First, we’re present in Saudi Ara­bia, the most im­por­tant mar­ket in the GCC in terms of to­tal pop­u­la­tion size, high pur­chas­ing power, and high mo­bile and smart­phone pen­e­tra­tion. But KSA is also a dif­fi­cult mar­ket to en­ter for for­eign play­ers. Ang­hami can sell sub­scrip­tions with­out hav­ing on-ground oper­a­tions in the coun­try, but if you con­sider e-com­merce com­pa­nies who have of­fices and ware­houses with a need for em­ploy­ees on the ground, it’s not so easy to set up a busi­ness in Saudi Ara­bia from a com­pet­i­tive land­scape. All these fac­tors com­bined make it a very at­trac­tive mar­ket where you don’t have many es­tab­lished play­ers to com­pete. And we are an es­tab­lished player in the coun­try, with a very well-known brand.

Our added value is that we can help star­tups in their cus­tomer ac­qui­si­tion phase be­cause we have a strong mar­ket­ing power with mil­lions

of sub­scribers. For ex­am­ple, we can run their cam­paigns on Mo­bily’s so­cial media chan­nels. We can also help with off­line and above the line mar­ket­ing with TV and bill­boards. We can also make it eas­ier for star­tups to mon­e­tize through billing in­te­gra­tion. Be­cause we have data servers in the coun­try, we can also pro­vide star­tups with a dat­a­cen­ter and host ca­pac­ity. Ad­di­tion­ally, en­trepreneurs mostly have only B2C cus­tomers, but since we serve en­ter­prises of dif­fer­ent sizes, we can in­te­grate soft­ware as a ser­vice (Saas) star­tups in our port­fo­lio and pitch it ac­cord­ingly. This way, we are en­hanc­ing the prod­uct propo­si­tion.

What is your strat­egy for sourc­ing deals? First of all, we con­sider the source. For ex­am­ple, a startup that is re­ferred to us—for in­stance by IMENA—IS treated dif­fer­ently than another that comes through email. We also look at who the ini­tial and cur­rent in­vestors were – if any. Star­tups that al­ready re­ceived in­vest­ments means that some­one did their home­work and an­a­lyzed the com­pany in de­tail to be will­ing to write a check.

ALKHABEER CAP­I­TAL

Alkhabeer Cap­i­tal is a Saudi-based in­vest­ment firm with over SAR 3.3B worth of as­sets un­der man­age­ment. In De­cem­ber 2014, it launched a new busi­ness unit, Alkhabeer Ven­tures. We in­ter­view Khalid Suleimani, Head of Ven­ture Cap­i­tal at Alkhabeer Cap­i­tal.

What com­pa­nies are you in­ter­ested in in­vest­ing? Alkhabeer Ven­tures fo­cuses on high­growth op­por­tu­ni­ties in tech­nol­ogy, mo­bile apps, new media, e-pay­ment and e-com­merce sec­tors, in ad­di­tion to new and dis­rup­tive tech­nolo­gies such as 3D imag­ing and in­ter­net of things (IOT).

What is the size per ticket you are aim­ing to in­vest? They start at around SAR 1M (~$266K) and go up to SAR 10M (~$2.7M).

On what ba­sis do you choose the startup you want to in­vest in? First of all, we check if the startup is in­cor­po­rated. We then look at the history of sales or if there is a strong cus­tomer val­i­da­tion as well as a clear con­ver­sion path. We also check if there is a strong com­mit­ment from the found­ing team. Hav­ing high scal­a­bil­ity po­ten­tial is very im­por­tant, too. Last but not least, the com­pany should show it ben­e­fits the Saudi econ­omy by ei­ther be­ing a Saudi com­pany, hav­ing at least one Saudi founder, or by adding value through job cre­ation in Saudi.

Why should star­tups choose your fund? Our belief in entrepreneurship is strong, and is em­bed­ded in the com­pany cul­ture. Many mem­bers of the Alkhabeer team come from an en­tre­pre­neur­ial back­ground. Also, Alkhabeer has the po­ten­tial to de­liver sig­nif­i­cant re­turns for in­vestors and star­tups alike, through sev­eral exit routes such as trade sale to an SME fund or any other third party or even a pos­si­ble IPO – all avail­able un­der one roof.

We will be ac­tive on the board level men­tor­ing, mon­i­tor­ing, pro­vid­ing solid ad­vice on restruc­tur­ing, open­ing new mar­kets, and pulling some strings to help the startup grow when needed.

Alkhabeer Cap­i­tal is the first Au­tho­rized Per­son who es­tab­lished a busi­ness unit to man­age a reg­u­lated fund by the CMA to in­vest in Se­ries “A” star­tups. Many other ad-hoc funds ex­ist, but they are more of hold­ing com­pa­nies, or ex­ist out­side Saudi Ara­bia, and do not have the reach nor the con­nec­tions that would help the star­tups to grow. We are not bi­ased by the in­ter­est of a mother com­pany. Our only fo­cus is to grow the as­set and fa­cil­i­tate a most lu­cra­tive exit.

What is your strat­egy for sourc­ing deals? We de­pend on a num­ber of chan­nels. First, we are very ac­tive on the startup scene in the re­gion, be­ing part of many eval­u­a­tion com­mit­tees and judg­ing pan­els. We are also ac­tive par­tic­i­pants in re­gional events, which help give the fund ex­po­sure to the en­tre­pre­neur­ial scene. Sec­ond, we have very strong ties with pro­grams such as Badir in­cu­ba­tors, Sirb an­gels, KAUST Pro­grams, Ac­c­makk, and Flat6labs ac­cel­er­a­tors to name a few, which have the po­ten­tial of har­bor­ing fu­ture star­tups, and would al­ways be on our radar. Fi­nally, so­cial media pres­ence helps at­tract deals to our online ap­pli­ca­tion por­tal, where all deals even­tu­ally pour.

LEAP VEN­TURES

Beirut- and Dubai-based Leap Ven­tures of­fi­cially an­nounced dur­ing Arab­net Beirut last March the clos­ing of its first round, at $71 mil­lion. Henri As­seily, Found­ing Parter at Leap Ven­tures, tells us more about the VC.

What com­pa­nies are you in­ter­ested in in­vest­ing? We like to in­vest in com­pa­nies where we add value. Mostly, this means tech­nol­ogy com­pa­nies, whether hard­ware, soft­ware, or a com­bi­na­tion of the two – which is gen­er­ally the case. This is pretty broad, I know. When you’ve been in this busi­ness for long enough, it’s a lit­tle dif­fi­cult to find some­thing we’re not in­ter­ested in. On the other hand, for ex­am­ple, I am not look­ing to in­vest in e-com­merce, even though I have a lot of ex­pe­ri­ence in this.

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