NEW VENTURE CAPITAL FIRMS
Meet the Latest Arab VCS to Launch
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’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 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.
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.