Few weekends ago Laith took part in a discussion panel titled “The Endgame: Winning Exists For Startups & VCs” at RiseUp Summit in Cairo, and he’d like to share his views with those who weren’t there. Take notes.

How can founders win exits?

1) How do you as a founder decide whether to exit or not, and how do you seek advice/guidance from your investors?

I was on the panel as an investor, however this question brought back memories from when I was a founder of a fledgling startup called Jeeran – you’d know it if you have grey hair. At the time we had grown to over 7M users and we were at the leading edge of the internet in MENA. We had exit discussions with different parties ranging from full acquisition and takeover to majority stake acquisitions with a partial exit for founders. These discussions never materialized because we didn’t really know how to think about them. I can say, however, that we approached all of them with a defensive mindset. Our answer was always “Never! But let’s talk”. I have also witnessed this attitude from other founders during my work as a VC and have seen them pass on great offers only to crash and burn later. Always approach these discussions with a “Yes, let’s talk” attitude and the knowledge that these opportunities may not come around again, especially in MENA.

The second mistake we made was involving investors too early in the thought process. In fact, our investors were in some of those initial meetings, which centered the discussion around cheque sizes and valuations. We had more discussions about what we wanted to do with the company with our VCs than among each other as founders. We pretty much did not think of any other stakeholder when in fact there were many at the time: our team, families, customers, and the broader ecosystem.

Founders can feel burnt out, unable to scale or under immense pressure, resulting in a desire to exit. You will know when that feeling comes. And when it does, don’t ignore it. One of my mentors once told me: “You want to be the guy who sold it to the other guy. You don’t want to be the guy who held onto it for too long.” 

Deciding to pass and continue building the business is a very exciting option. It’s also a significant undertaking that requires careful consideration of individual goals and objectives. It’s like finishing a marathon and being asked to run it again, immediately, for double the prize.

2) Do investors need to be part of that initial we-got-an-exit-offer conversation?

Selling your company is (usually) a once-in-a-life decision. So, as a startup founder, the first person, aside from your co-founder, that you should talk to when you receive an exit offer is your spouse/partner because your partner is the person you’re probably most aligned with when it comes to you and what you want to do with your life.

Before bringing in outside parties, founders must discuss and align their priorities internally. It’s more important to involve team members since they are the backbone of the business and will provide support if the decision is made to continue with the venture.

Investors will try to tell you that they are always aligned with you in the exit discussions. That’s not true. They will have different objectives and priorities depending on their entry point, fund size, overall fund performance and other factors. Investors are diversified while you only have one company & one shot.

You should involve investors only once your desire to exit is crystal clear.

As an investor myself, I will always say that if the founder makes money, everybody else makes money. And when that time comes, then that is the time. Investors should then help push the deal towards a successful outcome for everyone.

3) What should be the investors’ role?

When the founders agree and decide they want to pursue an exit, that’s when investors should go out and try to connect with these potential buyers through their networks. Having investors involved in the conversation at that point can bring valuable perspectives and expertise to the table, which can help the founders make a more informed decision. It’s important to carefully evaluate each offer and consider all the factors involved, such as the potential for future growth, the financial benefits of the offer, and the impact on the company’s employees and customers. Investors should focus on helping with negotiating deal terms, doing DD on the acquirer and guiding founders through the process.

There is a good example of a portfolio company of ours that decided to sell “early”. We felt it wasn’t the right decision, but we supported it anyway. This was just before the global financial conditions took a turn in 2022. We’re now thankful they took that exit. Interestingly enough, that company was in Egypt. Phew!

As investors, we are there to support the founders in their journey from start to exit and help them maneuver it – as long as the founders know what they want to do. We shouldn’t provide an answer to the question of whether to exit or not; only guidance and advice once that decision has been made.

—
My co-panelists were Zeid Husban (founder of POSRocket – acquired by Foodics), Sameh Saleh (founder of Hawaya – acquired by Match Group) and Bassem Raafat (Principal at A15), and we were moderated by Qusai AlSaif (CEO & MD of Sadu Capital). It was a fired-up one!🔥

Outliers

Zid and Money Fellows are part of Endeavour Outliers list of companies for 2023 = top ~9% out of ~2,500 companies.

Moved to Riyadh

As part of the first joiners for the RELOCATE Initiative: Move to Saudi Arabia, Merit relocated its regional HQ to Riyadh. Also, Merit’s founder Julie Barbier-Leblan became President of Incentive Marketing Association IMA MEAPAC.

+1 partnership

Klaim partnered up with Dubai Healthcare City to help healthcare providers manage insurance claims and cashflow.

Fashion innovator

The Luxury Closet was featured in the Khaleej Times’ wknd. magazine as an innovator in the fashion resale market.

+1 article about us: “MENA-based investors with the highest portfolio exits” by Magnitt (note: we made more than 7 exits; Magnitt doesn’t count secondaries)

• Legal Associate at Retailo (Karachi)
• Operations Onboarding (Back Office) at Zid (Riyadh)
• Sales Executive (Outbound) at Zid (Jeddah)
• Senior Graphic Designer at Lucky (Giza)
• Graphic Designer at Cartlow (Cairo)
• Quality & Authenticity Assistant – Luxury Watches at The Luxury Closet (Dubai)
• UX Copy Writer at Money Fellows (Cairo)

Blessed Eid! 🌙

Hasan

P.S. 1 wish: Can MENA banks become more startup-friendly?

Earlier this month we organized a soirée in Riyadh for our Saudi investors, founders and several key local stakeholders… And we didn’t discuss tech for about 20 minutes thanks to Ali Husain of Husaak Adventures.

 If you weren’t at Cairo’s Startups Without Borders summit, below are the key arguments that I presented at the panel on How to maximize diversity & inclusion in investment.

More women-led startups? It starts with parents.

62 investments out of 795… < 1%
$51M out of $3.92B… 1.3%

That’s a snapshot of investments into MENA’s women-led startups in 2022.
The gender gap in funding is a global problem. It was 2% in the US in 2021 and 1% in Europe in the same year. Although it’s a fact that founder teams with women are more likely to exit and have a higher IRR (112% vs. 48%).

So why can’t we reduce the gap?

1. Women get less VC money because there are less women founders in general (an ownership gap) – that’s a wrong assumption. IFC says that 1 in 3 of the region’s tech startups is founded by women (a higher % than in Silicon Valley).
2. Women-run businesses tend to provide only women-related products and services. Another wrong assumption.
3. Some investors lack interest and/or knowledge in a particular sector/model – and that applies when a VC doesn’t have enough women on the team who can relate to that model… A platform accelerating women’s career growth may not be fully grasped by men because we (men) don’t face the same career challenges as women.
4. Though there are women-led startups, they can’t raise because they lack certain skill sets and abilities to deliver. Low financial literacy and inability to find the right co-founder could play a role, too. However, luckily for all of us, none of these is a dead-end reason.
5. Up to 57% of STEM grads in Arab countries are women (much more than in unis in the US/Europe), though many of them end up not pursuing their careers. They stay at home either by choice or due to cultural, social or family pressures. But no one should dictate the limits of women’s roles in a society.

The change begins in our mindsets. And the mindsets of parents who need to make sure all their kids get an equal chance at anything, including founding a startup one day.

As investors, we should ask ourselves: Do we have enough women on our own teams?

Apple’s Tim Cook recently admitted there are still not enough women at the table at the world’s tech firms (including Apple).

Answering with Arzan VC in mind, my response is Yes. Arzan VC team is ~44% women representing 4 nationalities (super proud of this).

Investors need to look inwards and start at “home”: Let’s have more diversity in our structures and in decision-making roles… but only as long as these new hires fit in based on their abilities and skills; not because “we need to hire a woman, so let’s do it”. The fact that our team is so diverse only proves that the talent pool out there is equally diverse.

Next: Are we assessing female founders the same way as male founders?

At Arzan VC, we do not have mandates to invest in women-led startups. We approach each startup with the same checks & balances. So far we invested in several women-led (co-led) startups: Citron (Sara Chemmaa), Merit Incentives (Julie Barbier-Leblan), Mejuri (Noura Sakkijha), Cartlow (Nour Sleiman), Munch:on (Dana Baki) and Fatura (Salma Barkouky).

Investors should not discriminate any founder/team based on their gender, race, ethnicity or religion. We must assess them only based on their talent, skill set and ability to innovate and solve a particular problem.

I don’t believe we should force ourselves to invest more money in women-led startups just because there’s a gender gap. Creating a VC fund for women-led startups or setting up mandates on allocations – these are actions that are “forced”. And rather than forcing, we need to focus on the root causes of the gender gap: mindsets.

There are people around us who still prefer to invest in men-led startups, because they believe men are better than women, but there are also others who think the opposite. We shouldn’t think in either direction. Both are wrong. We should only discriminate by skill sets and abilities.

The low investment in females is not a failure of females – there is nothing inherently failing about any gender. If there are not enough women entrepreneurs to choose from and fund, then the issue is in the lack of support for women to become entrepreneurs in the first place.

Obviously, improving the skill sets and abilities of startup teams is something that we all need to focus on as an ecosystem. IFC organized a training/networking event in Dubai earlier this week for selected 100 female-led startups and 10+ VCs/accelerators (She WINS Arabia), and our Asia was representing Arzan VC. In the future, I wish to see every large event (like LEAP or Gitex) having a panel dedicated to female entrepreneurs – so that there’ll be attention given to female founders at large events and real synergies can happen; rather than organising just standalone female-focused events.

If we allow our minds to think outside the gender/cultural/ethnic differences and if we improve access to mentoring and networking for all – then something good will happen.

+1 acquisition

Paymennt.com got acquired by Hala. Both are our Fund II companies. Mabrouk guys!

+$3.5M for Gameball

Gameball closed a seed round of $3.5M – we participated along with 500 Global, P1 Ventures, Launch Africa, SEEDRA Ventures and others.

Saudi unicorns

TruKKer and Zid are part of the Saudi Unicorns Programme by Blossom Accelerator, which will help regional start-ups achieve billion-dollar market values.

18🤩

Mejuri opened its 18th store – in Montreal.

Goodbye to screenshots

Nearpay customers can now receive their receipt instantly through NFC.

• Growth Lead at Retailo (Riyadh)
• Technical Lead at Zid (Egypt)
• Partnerships Manager at Qoyod (Riyadh)
• Product Sales Manager at Merit Incentives (Dubai)
• Digital Marketing Director at Cartlow (Cairo)
• SaaS Sales Specialist at Repzo (Amman)
• UX Copy Writer at Money Fellows (Cairo)

Happy national days to our dear Kuwait 🇰🇼

Hasan

Our 2022 Wrapped is certainly more insightful and fun than Spotify & Anghami combined 😛

I guess what we treasure most about 2022 is that it was kind enough to let us attend physical events and gatherings🙏

Let’s unwrap?

2022 Wrapped

This is how the ride began.

… and that’s how it’s ending.

Region in 5 points:
1. Despite the global funding slowdown, our region outperformed last year. MENA-based startups were injected with 22.01% more funds than in 2021.*
2. BUT. Valuations reset continues. Globally, declines in mid- and late-stage valuations further accelerated in Q3’22. However, seed stage valuations (<$2.5M round size) remain 37% above 2021 levels.
3. Bootstrapping strategies made a comeback.
4. M&A on fire: 74 MENA-based startups got acquired since January’22 (vs. 42 in 2021).**
5. Lessons learned: NO to overhiring.

Arzan VC in 5 points:
1. We prepped for the launch of our 3rd fund: Arzan VC Fund III 💰.
2. Our portfolio grew to 46 startups (3 of which are warehoused for AVC III).
3. In total, we invested in 9 startups in 2022 (3 of which were follow-ons).
4. We hit 9 exits since inception (~20% of our portfolio).
5. Team-wise, Captain CFO Adeel Shahid joined us aboard.

Ready for the next ride🎢 ? We are.

* Data as of 16 December 2022. Source: Racha Ghamlouch’s amazing Digital Digest
** Data as of 22 December 2022. Source: our in-house research

MENA’s top 50

TruKKer, Zid, Lucky, Retailo and Money Fellows were featured in Forbes Middle East as MENA’s 50 Most Funded Startups in 2022.

🎁

CB Insights gave us all an early Xmas gift with 120+ maps of tech markets. Featuring Haseel, iKcon (REEF), Lucky, Merit Incentives, Cartlow, Money Fellows, Qoyod, FlexxPay & Onfleet.

Best workplace

Qoyod was ranked 18th best place to work at in the Middle East for 2022.

Paris in January?

Citron will be exhibiting at MAISON&OBJET in January.

+1 photo with Khazenly team at their new office and with a new logo 😉

• Sales Account Manager at TruKKer (Cairo)
• Inbound Sales at Zid (Kuwait)
• Procurement Specialist at Qoyod (Riyadh)
• Talent Acquisition Specialist at Money Fellows (Cairo)
• Junior Accountant at Lucky (Giza)
• Junior Accountant at Cartlow (Dubai)

Happy holidays, careful on the ski slopes and see you in ’23,

Hasan

This period before we say our Goodbyes to the old year is always a rollercoaster, but this year it’s all another level because every day we have a chance to sit down for a bit (a long bit) and feel *united* with the whole world. No matter who’s playing, there’s always a team to cheer for, and that’s just beautiful.

Today is all about tech associated with the Qatari World Cup – both inside the stadiums and beyond them.

Unbundling the World Cup… and Qatari tech scene

$300B went into this Cup and that figure includes the tech spending, too. For many reasons, this is the most tech Cup ever. It uses AI to check on all the fans around the 8 stadiums, predict and tackle overcrowding and keep the stadium temperature under control. Plus, there is network of 15,000 cameras with facial recognition tech. This may be on the creepy side… But in general, controlling the crowds is important to prevent chaos, because chaos at a packed football stadium is the last thing anyone wants…

AI is also deployed during matches to help match officials make better offside decisions with the help of 12 tracking cameras mounted below the stadium roof as well as 29(!) data points on each player. Oh, and there is a sensor at the centre of each match ball, which submits ball data 500 times per second. Just wow. 😶

Since the 2018 World Cup, match referees have been relying on VAR system (Video assistant referee) developed by Hawk-Eye Innovations Ltd. It helps them make decisions about goals, penalties, direct red cards and even mistaken identities of players. And when it comes to the players, for the first time ever they can track themselves through the FIFA Player App, which monitors their on-field performance and offers player-tailored insights shortly after a match is over. (So they can keep replaying those goals on repeat :P)

Outside the stadiums, tech is also thriving. Let’s break down the many ways tech is accompanying the hundreds of thousands of fans in Qatar these days.

7 distinct categories, but the list is far from complete. Consider it as a teaser of Qatari tech startup scene. Bear in mind that when compiling the list, I thought of services that World Cup fans would require or need most during their stays.

Esports – and sportstech in general – have obviously gained on importance and Qatar Sportstech is the country’s leading sports accelerator program supported by QDB, Ministry of Economy and Commerce and others. Its alumni are both local and international startups.

When it comes to food, the pockets of F&B businesses in GCC should swell by $6B, most of which will go to Qatari businesses, followed by Dubai (a popular stopover on the way to Qatar). Virtual kitchen operators have felt the most impact in Dubai and their major target are the fans who enjoy watching at home.

And for those tired of Airbnb lofts – would you rather spend the night on a cruise ship? No problem, you can choose from 2 floating hotels.

What shall I add?

Hats off, Qatar.

Image credit: FIFA

+ Poland + Kazakhstan

TruKKer expanded its operations to Poland & Kazakhstan, the two key logistics centres in the EU and Commonwealth of Independent States.

Fintech PSP of 2022

Paymennt won the Fintech PSP of the Year award at the Gulf Capital SME Awards.

Mona Kattan’s closet revealed

The Luxury Closet launched its Celebrity Closets series. The first episode is about Mona Kattan’s closet and the series is featured in PEOPLE Magazine.

deliver now

Armada Delivery partnered up with Otter and this integration will help restaurants in KSA and Kuwait automatically request delivery couriers for their D2C needs.

10M

Lucky has hit 10 million registered users. Here’s to the next 10M!.

• Business Development Manager at TruKKer (Riyadh)
• Business Development Manager at Cartlow (Riyadh)
• Business Development Executive at SubsBase (Cairo)
• Customer Success Executive at Gameball (remote)
• Senior Quality Assurance Engineer at FlexxPay (Beirut)
• Quality Assurance Engineer at Classcard (India – remote)

KSA : Mexico is on tonight. That should be interesting.

Hasan

Do you still believe that offline commerce and e-commerce are 2 different worlds? (Not accepting No as an answer.)

Today I’ll talk about modernizing retail and I’ll be zooming on a regional Shopify in the making… guess who.

Becoming a regional Shopify… and modernizing retailers along the way

We’ve been with this startup from a very early stage; 3 tickets in total, the latest went into their recently announced Series B.

They began in 2017 with a traditional SaaS model and later shifted to SaaS+/Marketplace. Being in B2B Saas for SMBs enabled them to reap the rewards from the network effect and aggregate the demand. The growing demand then led them to build their own set of products – ZidShip, ZidPay and ZidApp Market – through which they were able to offer their merchants better prices and offerings, while providing their partners with continuous demand…

Now you know who I’m talking about. Zid.

Bricks and clicks

In the past, there was a misleading assumption that e-commerce shut down the real stores. “People used to believe that you open your online store to close your offline shop,” told me recently Mazen AlDarrab, the founder of Zid.

Well, the pandemic did turn online retail into the bread and butter of many offline retailers. In most cases, online was the only way to reach out to their customers. But online was more than that; it helped retailers analyze what their customers actually want and require. And then people returned to the physical stores, and the boundaries of e-commerce and offline commerce became forever blurred.

Enabling modern retail

“I started to disbelieve in e-commerce – unfortunately… or fortunately,” Mazen told me. Zid strongly believes there isn’t just “e-commerce” or “traditional commerce”. It’s modern retail, where all channels can be managed and optimized from one place with one partner. At the centre of modern retail is the customer and the merchant. And their experience.

The company’s Series B round signals a very important expansion in Zid’s vision, which is moving from being “an e-commerce enabler” to “a sector enabler”. That means Zid’s role has been extended beyond just offering and unlocking online/digital channels.

Factors of modern retail

Factor A: Active use of data in aiding and making business decisions
Factor B: System integration and/or synchronization within the retail cycle
Factor C: Improved marketing performance through data
Factor D: Omnichannel sales with synergies
Note: These factors are not independent and usually two of them are at force.

Examples?

Factor A: Active use of data

A famous discount shop Riyal Al Barakah (KSA) – a similar concept to Poundland in the UK – was initially strictly offline (11 branches). They launched their online store 2 years ago to serve cities and regions where they didn’t have offline presence. The online sales data they collected ever since has guided them in selecting the right locations for their future branches. In other words, the data enabled them to make their business decisions with more accuracy and confidence.

Factor B & C: System integration & Improved marketing

A store for bathroom supplies Reefi (KSA) started with Zid 4 years ago. Back then they were just an Instagram account with no offline footprint. Zid helped them reduce their marketing spending by analyzing the customer data and utilizing API conversion integration between Zid and Snapchat. Reefi got a better ROI on their marketing activities and today they’re planning on opening 15 offline stores.

Factor A & D: Active use of data & Omnichannel sales

A leading poultry producer Entaj (KSA) started their D2C during covid. Prior to that, they used to have one business model: selling indirectly to grocery stores. Today they’re not only selling directly to the end-customers through their online store, but they have also acquired insights into their new products (launched exclusively on their online store). Based on that data, they scaled the products on their other channels. What began as a pilot project turned into one of Entaj’s main directions going forward.

Here’s to many more such stories. We wish Sultan AlAsmi, Mazen & the Zid team the best of luck! (Although I think you may not need it anymore :P)

+2

We’ve made first two investments through our upcoming AVC Fund III: Nearpay and MoneyFellows. Welcome to the family! 🖤.

Modernizing NGOs

Zid partnered with Unifonic to enable more than 2,000 NGOs to start and scale up their online stores.

Enterprise tech of the Year

FlexxPay won Enterprise Tech Startup of the Year at Gulf Business’ GB Tech Awards 2022. Mabrouk!

British fashion

The Luxury Closet joined forces with the British Fashion Council as a new patron to support circular fashion.

310% of minimum goal raised

GoPillar’s crowdfunding campaign on Republic is still on. Support them here.

• Backend & Frontend Engineers at Classcard
• Account Manager (Saudi National) at Merit Incentives (Riyadh)
• BD Specialist at TruKKer (Jubail – KSA)
• Partnerships Specialist at Qoyod (Riyadh)
• Project Manager at Carseer (Amman)
• General Accountant at FlexxPay (Beirut)
• (multiple positions) at Lucky (Egypt)
• Pricing Analyst Manager at Cartlow (Cairo)
• Legal Associate at Retailo (Riyadh)

Anyone attending /MONEYtech @Grand Hyatt Kuwait on November 14? See you there…

Hasan