Bireme ad(ven­tures)

The lure of mi­grat­ing to the US

Executive Magazine - - Entrepreneurship - By Thomas Schellen

Startup ecosys­tems in the United States con­tinue to be ma­jor mag­nets for young Le­banese com­pa­nies that want to ben­e­fit from val­u­a­tions that the lo­cal mar­ket seems un­likely to gen­er­ate. Ex­ec­u­tive learned of a new fund called Bireme Ven­tures from Elie Habib, the fund’s man­ag­ing part­ner. In an in­ter­view dur­ing the cen­tral bank’s in­ter­na­tional startup con­fer­ence BDL Ac­cel­er­ate 2015, Habib tells us that the fund has a tar­get of $20 mil­lion and wants to achieve a first close of $5 to 10 mil­lion by the se­cond quar­ter of 2016 to be de­ployed in fa­cil­i­tat­ing the so­journs of Le­banese and Gulf-based star­tups across the At­lantic Ocean.

“We are see­ing more and more com­pa­nies ma­tur­ing and fac­ing the need to ex­pand into the United States to ac­cel­er­ate their growth and ac­quire new cus­tomers. Th­ese com­pa­nies need cap­i­tal to reach the place from where they can reach the next level in their per­for­mance,” Habib tells Ex­ec­u­tive.

Habib, a Le­banese-Amer­i­can who spent most of his ca­reer in Sil­i­con Val­ley and has been in­volved with fund­ing ef­forts in the Le­banese startup scene since 2009, says that the move into the US is as chal­leng­ing as it is nec­es­sary for those lo­cal star­tups that have po­ten­tial to pen­e­trate global mar­kets. He ar­gues that such com­pa­nies will do best if they take ad­van­tage of the US mar­ket for rais­ing funds and later on for re­al­iz­ing the fairy­tale re­turns that peo­ple as­so­ciate with the Amer­i­can en­trepreneur­ship ecosys­tem.

Ac­cord­ing to Habib, en­tre­pre­neur­ial com­mu­ni­ties of many coun­tries are rep­re­sented in the US mar­ket by funds that en­able star­tups from na­tions such as In­dia and China to en­ter the Amer­i­can scene but the Middle East is lack­ing such rep­re­sen­ta­tion and this is the gap that Bireme wants to close.“The only re­gion that does not have rep­re­sen­ta­tion in the US [through] cap­i­tal from or di­rect in­flu­ence on star­tups com­ing from that re­gion is the Middle East,” he claims.

He warns that it is very dif­fi­cult for young com­pa­nies to trans­plant them­selves into the US be­cause of the Amer­i­can mar­ket’s le­gal and or­ga­ni­za­tional re­quire­ments and that be­ing ac­cepted by Amer­i­can ven­ture cap­i­tal (VC) and pri­vate equity (PE) firms is es­pe­cially chal­leng­ing for star­tups from the MENA re­gion. “Many US VCs are very hes­i­tant to deal with Middle East­ern star­tups and in­vest in Middle East­ern com­pa­nies. The bar­ri­ers are cul­tural, le­gal and per­cep­tion based, and [about] in­tel­lec­tual prop­erty rights. [US VCs] are not go­ing to in­vest into an in­tel­lec­tual prop­erty that is not cor­rectly pro­tected – that is where their as­sets are,” Habib ex­plains.

Bireme aims to build re­la­tion­ships be­tween Arab star­tups and US VCs in or­der to present the Amer­i­can fun­ders with Middle East­ern com­pa­nies that meet their in­vest­ment cri­te­ria. Ac­cord­ing to Habib, this ap­proach po­si­tions the fund out­side of the realm cov­ered by BDL Cir­cu­lar 331 by ad­dress­ing the needs of Le­banese com­pa­nies that seek in­ter­na­tional ac­cel­er­a­tion. Startup pro­files that will be a good fit for Bireme will none­the­less in­clude com­pa­nies that re­ceived fund­ing from a Le­banese VC un­der the 331 frame­work, or com­pa­nies that have been nur­tured by VCs in the United Arab Emi­rates.

In this con­text, Habib points to his ties with Middle East Ven­ture Part­ners (MEVP), with whom he has been a ven­ture part­ner for sev­eral years al­ready. Within the now bur­geon­ing en­vi­ron­ment, the pos­si­bil­i­ties for sail­ing star­tups to the US un­der Bireme’s par­tic­i­pa­tion are much im­proved, Habib en­thuses. He says that the fund has a pipe­line of “around nine com­pa­nies that are at var­i­ous stages of de­vel­op­ment but are gen­er­ally post-A” in their fund­ing stages and Bireme is ready to source com­pa­nies from any VC in the re­gion. While MEVP is a strate­gic part­ner, “this is not about [work­ing with] any spe­cific [VC] firm but about in­vest­ing into break­through best-in-class Le­banese or Middle East­ern en­trepreneurs that have the ca­pac­ity, po­ten­tial and prod­uct to go global,” Habib em­pha­sizes.

Bireme Ven­tures will have a struc­ture of lim­ited part­ners (LP) and gen­eral part­ners (GP). The man­age­ment team com­prises three Le­banese-Amer­i­cans un­der Habib’s lead­er­ship. In le­gal terms, it will be a US-based part­ner­ship with a man­age­ment com­pany in Delaware and a GP-LP fund in the Cay­man Is­lands in or­der to fa­cil­i­tate par­tic­i­pa­tion by in­ter­na­tional in­vestors. The fund will re­quire no li­cens­ing from the Le­banese cen­tral bank, Habib says. He ex­pects LP par­tic­i­pa­tions to com­prise ap­prox­i­mately 60 per­cent in in­vest­ments from mem­bers of the global Le­banese di­as­pora and about 40 per­cent from in­di­vid­ual and in­sti­tu­tional in­vestors in Le­banon.

Plan­ning for a to­tal life span of eight to 10 years, the fund’s strat­egy hinges on bring­ing in US-based VCs and mo­ti­vat­ing them to co-in­vest in the com­pa­nies in Bireme’s port­fo­lio. Be­yond the en­vi­sioned US money, the fund at a later stage will also grant its LPs the right to co-in­vest di­rectly into the com­pa­nies. As Habib notes, the whole en­ter­prise is based on a cal­cu­lated ex­pec­ta­tion of high mor­tal­ity among the in­vested star­tups with an aim of de­vel­op­ing a group of win­ners that will pro­vide high re­turns. He says, “What we are fo­cused on is an [in­ter­nal rate of re­turn] of 25 per­cent and a re­turn of 3 to 3.5 times money for the fund. We are go­ing to play the role of the phys­i­cal plat­form that is go­ing to im­pact the three stake­hold­ers (the fund’s par­tic­i­pants, the star­tups and the US VCs), but we are ul­ti­mately go­ing to look for cre­at­ing ex­its — this is not a de­vel­op­men­tal fund; this is for profit.”

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