save this term sheet for later

save this term sheet for later

If January was a trial month, would you cancel your annual subscription?

 

Back to reality. Those of you who didn’t intercept Clara releasing their updated Term Sheet for Series A investments – I got you covered.

 

Their Term Sheet provides a balanced and fair draft of key terms and conditions, endorsed by various venture capital firms, investors and law firms in the Middle East, including Arzan VC, 500 Startups, Wamda, MEVCA and TaylorWessing.

 

Scroll down for the download link.

 


 

Term Sheet template for Series A rounds in MENA ecosystem (by Clara)

 

Founders, you’re all well-aware that a term sheet is one of the most important documents that you will negotiate and sign, and so it’s super important that we are all aligned with the latest legal standards in our market.

 

Do you know what a good Series A Term Sheet looks like? And do you know what provisions are worth fighting for? (Short answer: Not just the valuation…)

 

 

Clara team took it on their shoulders to update their Term Sheet for Series A with the help of leading VCs and law firms in the region – and we thank Clara for spearheading this initiative.

 

Clara’s Term Sheet is what a Series A term sheet should look like with standard, clean and balanced terms. Remember that this is a template and it’s been developed for use in common law jurisdictions, such as ADGM, DIFC, the Cayman Islands and BVI.

 

Download your copy here.

 

You’ll notice that it comprises 37 sections, including Price (+ Valuation), Liquidation Preference, Anti-Dilution, Voting Rights, Conversion Rights and, equally crucial, Information Rights. Also, your Board composition will hint on your power dynamics and how much control the investor wants to exercise when it comes to operational decisions. (Note that Clara’s Term Sheet is non-legally binding, intended for discussion purposes only, with the exception of the last six of the 37 sections, which are binding.)

 

Schedule 1 presents Pre- and Post-Closing Cap tables, Schedule 2 outlines a sample list of Board Reserved Matters and Schedule 3 outlines a sample list of Shareholder Reserved Matters.

 

 

A serious last note:
I’d say Clara’s term sheet is very straightforward and it’s a solid foundation to build on. Ping me if you got questions.

TL;DR (too long; didn’t read)  
Clara released a Term Sheet for Series A investments, which entails of standard, clean and balanced terms and conditions, endorsed by various venture capital firms, investors and law firms in the Middle East, including Arzan VC, 500 Startups, Wamda, MEVCA and TaylorWessing. Link in the text.

 

Family Postcard

 

Nearpay at Seamless Singapore

Lucky One was lucky in 2023

Merit recognized as leader of Saudi growth

Carseer became closer to Islamic International Arab Bank customers

Citron offers free replacement parts until Feb 11

Retailo + Starlinks

Subsbase + Wadi Degla

 

Latest Jobs @ ArzanVC Family

 

  • Community Sales Executive at Money Fellows (Cairo)
  • Senior Product Manager – Payments at Money Fellows (Cairo)
  • Product Innovation Manager at Qoyod (Riyadh)
  • Full Stack Engineer (Lead) at Khazenly (Cairo)
  • Product Owner at Khazenly (Cairo)
  • Partnership Executive at Merit Incentives (Singapore)

 

 

See you around,

Hasan

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our 2023 Wrapped

our 2023 Wrapped

HAPPY NEW YEAR. (It’s only the second week of Jan, so it’s still ok to say it.)

 

We don’t like to release our Wrapped before the year ends because who knows what the last few days may bring…? And it turns out that the end of our December was just that busy – ahead of Beban’s airing of its first episode of Season 3, in which I took part. (Did you miss it? You can watch it over and over here for free).

 

 

What we at Arzan VC treasure most about our 2023 is the old and new faces we got to meet at events … and there were so many of them – you can tell by the amount of photos below! Our wish for 2024 is to continue doing so – while having a chance to witness the comeback of events in Palestine️

 

Let’s unwrap.

 


 

2023 Wrapped… by Arzan VC

 

This is how the ride began.

 

 

Hope 2024 is treating you well so far… see you on the ride!

TL;DR (too long; didn’t read)  
2023 allowed us to focus on housekeeping while continuing to add value to the portfolio (46 startups since our inception!). We made 2 follow-on investments and witnessed 1 acquisition (by our existing Fund II company). Take a ride on that roller-coaster above for moooore details 😛

 

Family Postcard

 

$14 million for Nearpay

Merit Incentives delivered over 1 million rewards & gifts in Saudi

Money Fellow’s Ahmed Wadi featured on Bankawy’s 2023 Influencers list

Klaim is Future 100

4th Tajerthon event by Zid

What are 2024’s big marketing trends? And edtech trends?

 

Latest Jobs @ ArzanVC Family

 

  • CRM Specialist (User life cycle management) at Money Fellows (Cairo)
  • Software Back-end Engineer (.Net) at Money Fellows (Cairo)
  • Account Manager at Khazenly (Cairo)
  • Account Manager at Cartlow (Dubai)
  • Operations Lead at Retailo (Riyadh)

 

 

I’ll be in Dubai on Jan 17. Coffee?

Hasan

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how do we communicate in times like these?

how do we communicate in times like these?

The tone of our issue #70 is different from the previous sixty-nine.

 

I’m sharing some thoughts on how we should communicate in these times and how each of us can ensure that the concept of free speech in the workplace survives the ongoing war on Palestine.

 


 

How do we communicate when striving for entrepreneurship suddenly becomes striving for mere survival?

 

Gaza’s startup ecosystem has been blown up and its founders are being killed. Gaza Sky Geeks, the largest tech hub in the Strip run by Mercy Corps, had their offices demolished and some staff lost their life. The startup community in West Bank remains operational albeit with a very uncertain future. (I wrote about the Palestinian startup ecosystem here in June 2021 – amid another aggression.)

 

Over the last two months, several individuals in the West lost their jobs or had their events cancelled because of what they said or what they did not say, students lost their job offers and were publicly shamed… and often times they ended up being offered better jobs in more supportive environments, they found new audiences and support groups. These excessive firings and cancellations showed that such actions are indeed extreme measures and can spark more outrage in response.

 

Not sure how about you, but I’ve seen my LinkedIn feed turn acutely political or should I say acutely humanitarian?

 

How do we communicate in these times and how can we ensure that the concept of free speech in the workplace survives the ongoing war on Palestine?

 

In MENA, many VC partners, founders, teams are choosing not to stay silent. Some are actively posting, others are fighting the battles in the comment sections, some startups adapted their logo to reflect colours and symbols associated with Palestine and some founders even rejected investments after finding out the money was in some way affiliated with the occupying party. It’s their right. We should only do what our conscience tells us to do – and that certainly includes fundraising for your startup.

 

Earlier in November Fortune, Forbes, Inc and others began to dwell on the correct approach to talking about the ongoing conflict in the workplace. Geopolitics has become the no.1 challenge for CEOs. Google, the hub for employee activism, has been retaliating against Muslim employees. Communication advisors have full hands advising management teams around the world on how to respond while not offending the other group… and who are the groups? Should we label them by religious affiliation, or should we label them by their political beliefs, because the two do not seem to be interchangeable? A tricky quandary.

 

Free speech comes with responsibilities. Free speech means that not only bosses get to have a real freedom of speech. Free speech in the workplace means not retaliating against employees. Free speech means we sometimes have to stick up for people who have said things that we don’t like (unless what they said is pure hatred and source of threat to others and hence a good subject for cancel culture).

 

As a founder, ensuring the well-being of your team, safeguarding the culture you’ve created inside your startup and protecting the relations with your investors and clients is a must, but so is addressing sensitive issues that may disrupt that well-being, culture and relations. Whenever we’re talking about contentious topics, let’s not forget:

 

  1. 1. Our emotional intelligence & compassion
  2. 2. Our workplace policies and to what extent we can express our solidarity
  3. 3. Our company’s social media policies and how to make sure our opinions are voiced as our own
  4. 4. The language and tone we speak with
  5. 5. The sources of information we share
  6. 6. To keep documenting our conversations as a form of protection (evidence)
  7. 7. To stay calm and professional

These are difficult times to be a leader. However, it is possible to address issues involving human suffering in a diplomatic and compassionate way, starting by referring to our own values and principles. In an ideal world, leaders should bring people together, not divide them, and they should nurture healthy conversations – even when politics is involved. I believe that no matter what our opinions are, if we ready ourselves for listening to one’s opinion without immediately arguing back, if we don’t resort to aggression (although yes, emotions are high right now), if we work harder to create that safe zone, that neutral gathering space, where arguments can be voiced, heard and acknowledged, only then we will be able to progress – as companies, as communities, as countries, as humanity. I’m not daydreaming; if we don’t realize this now, we can as well forget about any lasting progress. 

 

I wish for a future where our communities’ culture will be robust enough for all of us to have open discussions – even if they frustrate us. Frustration is better than silence and denial. 

 

I trust that Palestinian entrepreneurs will be able to rebound and rebuild, except that this time they will do so without fearing that someone will come again and shatter everything they have built. 

 

#FreePalestine 

 

© Symbol of Hope by Sliman Mansour (1985)

TL;DR (too long; didn’t read)  
Gaza's startup ecosystem has been blown up and its founders are being killed. Many VC partners, founders, teams are choosing not to stay silent, some founders even rejected certain funding. How do we communicate at times like these? If we work harder to create that safe zone, that neutral gathering space, where arguments can be voiced, heard and acknowledged, only then we will be able to progress - as companies, as communities, as countries, as humanity.
 

Family Postcard

 

$15 million for Retailo

 

Khazenly becomes Content partner for Tech Her Program

 

Lucky Talabat

 

Merit + Alshaya Group KSA

 

Klaim + Huawei Cloud

 

Zid discussed how to grow business with modern financing

 

Latest Jobs @ ArzanVC Family

 

  • National Operations Manager at Retailo (Riyadh / hybrid)
  • Partnership Executive at Merit Incentives (Singapore)
  • Scrum Master at Money Fellows (Cairo)
  • BD Representative at Swvl (Cairo)
  • Digital Marketing Specialist at Qoyod (Cairo)
  • Cash On Delivery Coordinator at Khazenly (Zamalek)

 

Stay well & warm,

Hasan

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messy cap tables

messy cap tables

How are you coping?

 

In a parallel world, I’d like to take a more holistic look at cap tables – their shape and health, because some cap tables out there could benefit from some tidying up

 


 

Fixing (un)investable cap tables

 

Your cap table (CT) may not always look like your dream team, but a messy CT structure is sometimes the sole reason why an investor decides to pass on an investment.

 

Before I get to the types of messy tables, recall my recent address to founders: You should treat your equity like gold (or diamonds?). It’s about finding a balance between how much you want to own and how much faster you want the business to grow. Not striking that balance can often turn into an obstacle and render your startup uninvestable. Have no fear though; most messy structures can be tidied up over time. I think it should always be a joint effort of all shareholders – founders & existing owners/investors alike – to work together to avoid a state/situation when the startup becomes uninvestable due to an unhealthy ownership structure and cannot raise – which will negatively impact ALL existing shareholders.

 

 

Types of messy cap tables & how to fix them:

 

– Founders with <70% before Seed. Imagine a startup with 3 co-founders holding collectively 75% of shares before Seed, while no investor on the CT has more than either of the 3 co-founders… – this is quite a common scenario. What could raise an alarm are founders with <70% before Seed and an investor with a relatively high share standing out from the rest of investors. Founders that find themselves over-diluted before Seed may not feel as motivated and incentivized as founders with healthy ownership. That’s why it’s important to achieve the MVP phase without giving up too much equity for a relatively small amount of funding (usually hundreds of thousands of dollars). If you need to raise that initial round, use SAFE notes or vesting schedules. Also, be careful about the initial valuation and ensure it reflects your peers and the prevailing market conditions.

 

– An investor with a major stake. An investor with a stake of >50% can pose a clear threat to the health of the startup’s overall ownership structure and its investability in the future. Examples include startups that are products of spin-offs. Or startups that relied heavily and/or repeatedly on one investor. Example: a post-B startup with founders owning collectively 5% (over-diluted!), a major investor owning >50%, two other investors collectively owning 30% each and an ESOP pool. If new investors are to come aboard, it will be imperative for them to bring that one majority owner to a healthier% – perhaps through a secondary where the already-very-small founders’ ownership won’t suffer from dilution.

 

– No ESOP for C-level employees. Example: a startup owned by another company (55%) and a pool of investors (45%). The startup’s CEO has no shares although, in a fair world, he would have been given the co-founder title a long time ago. Unfair practices should have no place in 2023. (Don’t pick on my use of “a fair world” – we’re all aware that the meaning of that phrase has recently become a kind of mirage.)

 

– Unhealthy amount of inactive equity. Inactive equity belongs to shareholders who are not actively involved in the startup. Shareholders such as Friends & Family (F&F) and/or business angels who came in at a very low valuation in the founding phase. I’d like to argue here against the proposition that ex-founders’ equity should also be also considered a kind of inactive equity, because – in case of any founder – we shouldn’t forget their long-lasting contribution in the early years of the business and, as thus, they cannot be simply put in the same basket with F&F and other actual inactive equity owners.

 

– Too many investors. Having a CT resembling a colorful palette is not uncommon and it doesn’t have to be a bad thing as long as all investors are aligned with the founders’ vision. And quick to sign documents.

 

Any other (un)investable tables that you’ve seen out there?

TL;DR (too long; didn’t read)  
I analyze (un)investable cap tables (= messy cap tables) and come up with 5 types that are standing out: (i) Founders with <70% before Seed, (ii) An investor with a >50% stake, (iii) No ESOP for C-level employees, (iv) Inactive equity and (sometimes) (v) Too many investors. I also explain how each can be fixed because, although your cap table may not always look like your dream team, a messy ownership structure is sometimes the sole reason why an investor decides to pass on an investment… so let’s tidy it up.

 

Family Postcard

 

Dtonic Corporation’s $1.5m investment in Retailo

 

Swvl’s FY2022 results

 

#PeopleOfEndeavor: Ahmed Wadi

 

Another proud #MadeInSaudi brand

 

Decoding fintech jargon

 

+1 photo from this week’s /MoneyTech in Kuwait:

 

Latest Jobs @ ArzanVC Family

 

  • Treasury and ALM Manager at Money Fellows (Cairo)
  • Strategy Lead at TruKKer (Dubai)
  • Senior Graphic Designer at Subsbase (Cairo)
  • Senior Payroll Specialist at Hala (Riyadh)
  • Quality Assurance Engineer at Gameball (remote)
  • Content Validation Specialist at Cartlow (Cairo)

 

The Team’s Whereabouts

 

Adeel will be leading NIC Karachi’s FI Session 13: Investor Pitch Review on November 17, where he will be mentoring startups participating in the NIC Karachi FI Summer 2023 Semester.

 

Take good care.

Hasan

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M&A winter?

M&A winter?

We’re physically heading into winter (at last!), the VC world has been in a funding winter for some time now and instead of the predicted M&A wave one could assume it’s an M&A winter. Except that… in MENA, it’s more like autumn.

 


 

Signs of life in MENA’s M&A market (Q1-Q3 2023)

 

If you want to see MENA’s M&A numbers right away, scroll down to the pretty info-graph. If you want some background first, continue reading.

 

General observations:

 

– M&As are an inevitable product of the current economic environment and the declining trends in VC funding (although October numbers are painting a better picture – at least in MENA)

 

– The anticipated surge in startup M&As in 2023 remains anticipated

 

– Carta saw 543 startups shutting down due to bankruptcy/dissolution since the beginning of 2023 (a record high compared to any previous year) – more here

 

– Growing regulatory pressure in US and Europe has brought big tech M&A activity to a halt

 

– Europe witnessed more tech acquisitions than the US in Q2’23, and that’s a continuation of a trend of the last 6 quarters

 

– Between Q1’22 and Q2’23, US tech M&A revenue multiples dropped from 16.3x to 7.3x

 

– Alternative deal terms such as earnouts and seller notes are becoming more common

 

– Hot M&A areas: healthtech, cybersecurity, fintech, AI

 

And the region?

 

Our inhouse data indicates that the # of startup M&A deals in the region has been tumbling. There were 37 M&As in the ecosystem since the beginning of 2023 vs. 60 during the same period a year ago.

 

Even though that’s a drop, 37 is a decent number given historical stats. Only in 2022 had the same time period registered a higher figure of deals.

 

 

Where does this leave the founders?

 

Though there have been several new-fund announcements in the past couple of weeks, these funds will take some time to deploy and overwrite the funding slowdown. Until then, startup founders will (i) keep trimming their operational costs and (ii) be more likely to opt for the next logical option (-> get acquired) to overcome their inability to raise.

 

If you don’t think your company is sellable (e.g., you got high burn, team deficiencies, high customer churn, etc.), explore this option: trim the product fat, focus on whatever works from the current offering and spin it off as a standalone product. And also…

 

What’s your runway?

 

Exiting early is not what most founders envision for themselves – and the scenario can be often avoided. Stay conscious of your runway and start planning for the next fundraise earlier than you initially planned to.

 

P.S. We got one freshly cooked exit in our Fund II. Details to be revealed soon.

TL;DR (too long; didn’t read)  
I analyze M&As in MENA startups ecosystem since the beginning of 2023: there were 37 such deals vs. 60 during the same period in 2022. Amid the record-high number of startup shutdowns (as per Carta) and slow-down in M&As (global and regional), I discuss what options founders have going forward to avoid exiting early (or, in the worst case, shutting down).

 

Family Postcard

 

Made in Egypt apps feature Money Fellows & Lucky

 

Khazenly in Batch 1 of 500 Global Scale-Up Program in Egypt

 

LinkedIn’s Top 10 Startups in Saudi Arabia

 

300,000 insurance claims

 

Merit + Riyad Bank

 

A newsletter for class providers

 

Latest Jobs @ ArzanVC Family

 

  • Software Engineer (Ruby on Rails) at Qoyod (Riyadh)
  • Machine Learning Engineer at Carseer (Amman)
  • Head of Growth at Money Fellows (Cairo)
  • Credit Collections / AR Specialist at TruKKer (Riyadh)
  • Junior Accountant at Cartlow (Cairo)
  • Last Mile Coordinator at Khazenly (Zamalek)

 
Gitex? Dealmakers (Cairo)? Ping us.

Hasan

Twitter     Medium     Website     LinkedIn     YouTube     Email    

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