Do you already see the sun rays that pierce through clouds after every storm?

They are always there, waiting for us 🌤️

And with that in mind, we reached out to a couple of founders to check on how they’re sailing through the rough corona seas. Last month we analyzed the overall endurance of business sectors, and today we will dive deeper to see how startup founders think, how their businesses adapted and what they can teach us.

More good news from ArzanVC’s Family will follow. Hold on tight to your boat’s helm! 

Copy the way I cope

Crises are part of life. They force us to think, rethink and make things better. It’s a rule that crises always give rise to something good. Even John F. Kennedy said: “When written in Chinese, the word crisis is composed of two characters—one represents danger, and the other represents opportunity.” And that’s what we @ArzanVC really believe in.

But what do founders believe in? We asked them. We were in touch with founders from multiple sectors—Algodriven (automotive tech), Almentor (edutech), Teela (essential e-commerce), The Luxury Closet (non-essential e-commerce), Tons (groceries e-commerce) and ViaVii (travel e-commerce)—and these are their insights and words of advice:

Adapt. Act quickly. Innovate. Whenever possible, all teams opted for working remotely, as the rest of the world did. Some of the founders experienced unprecedented demand, while others had to find alternatives to delivering their offering. Algodriven had to fast track new features to enhance their products and offered extended payment terms. Similarly, Almentor had to customize new products to manage the very high demand for the e-learning services. Teela saw it as an opportunity to expand and grow the market share. Tons chose to control the number of orders and slowly grow the capacity while onboarding new stores. The Luxury Closet made sure to implement a healthy supply and demand and stress-test financials. ViaVii was the first to launch online authentic cultural and artistic experiences, which gave them a leverage over international competitors. “We translated going into self-quarantine to a fun, entertaining and educational experience,” said ViaVii.

What are the most important attributes of a startup right now? Speed. Some founders believe that this is a unique opportunity for startups as many governments and corporations realized that it’s startups who can help solve nation-wide problems. Or world-wide. Empathy and communication are also crucial. “We’ve tried to engage all our stakeholders, from employees, to customers and investors so that we can work through the situation together,” explained Algodriven. “Establishing clear communication will help businesses win people’s confidence,” added The Luxury Closet. Teela thinks that having a vision is the key: how do you envision your business after the crisis? If implementation is slowing you down, an alternative route, according to ViaVii, can be a beta.

And the founder’s personal advice? We all have to keep our heads above the water level and stay positive, but don’t forget to always plan for the worst. Countries around the world have started lifting their restrictions. According to Tons, “companies who endure this situation will be more resilient and valuable going forward.” But “don’t jump on any opportunity and lose your original path. Maybe you’re benefiting now because you built the infrastructure to serve the right model, so stick to your model and don’t lose focus with the temporary, and maybe distracting, market needs,” warns Almentor. Teela has another view: “Maybe it’s the time to start a new venture, launch a product or a brand. And while people are staying home, they’re willing to try any product that is delivered to them.”

Who knows; maybe now is the right time to make your big move! Plan well and execute by day.

TL;DR (too long; didn’t read) 
We were in touch with the founders of Algodriven, Almentor, Teela, The Luxury Closet, Tons and ViaVii. According to them, the current times are favoring those who act quickly, innovate, customize and stress-test. What matters is speed, empathy, communication and vision. And don’t just jump on any opportunity out there. Plan well and execute by day.

 Family Postcard

ArzanVC’s family post office was very busy the past month and we couldn’t be any prouder!

Our Eyad AlBayouk participated in an online discussion by Qoyod (April 16^th), giving advice on how to invest during corona times.

LUNCH:ON has partnered up with Gulf For Good to allow all the app user to donate to children in Nepal, Tanzania, Uganda, Peru and Lebanon and keep them fed, hydrated and educated.

Swvl has collaborated with Egyptian Food Bank (EFB) to support day laborers during the holy month of Ramadan.

Meanwhile, Repzo is offering Jordan’s supermarket, cafe and restaurant owners their very own application where customers can order their fav food, drinks and meals safely and securely from their homes.

UAE’s iKcon introduced various additional safety measures, including an additional layer of protective plastic packaging for all deliveries. Also, all bike riders are no longer allowed to enter iKcon premises to keep them separated from the in-house staff.

And finally, with all the teaching/learning happening online, Reportcard’s student CRM with an integrated online collaborative classroom becomes definitely handy! Reportcard also hosted a webinar on “Teaching Online with Zoom”.

 Latest Jobs @ArzanVC Family

 Those of you who recently had to downsize your company workforce, don’t hesitate to contact us and we will help your former employees to find a new job in other startups.

 Rehydrate during the night and stay positive. Better times are just around the corner.

Hasan

End of radio silence.

This is not a hacked newsletter. Nor have we relocated our offices to another planet. In fact, we grew into a truly regional VC, having on-ground presence in 5 countries across the MENA. Plus, we did our first closing for Fund II in August and made a whopping 4 new investments. Did I mention we grew our team to 8 members? Okay, enough of the news shower.

Amman hosted us for a few days this week for some team-building fun. You can see sometimes we also cook other things than sizzling deals! We also organized Founders’ Coffee & Chat – a casual meetup with a number of startups in Amman to brainstorm ideas and expansion. Well-spent time indeed. We already miss the laughs.

Now—first things first: Arzan VC’s top 10 trends for 2020. Then we will show you what’s the magic formula of growing a sustainable business.

Let’s go!

The 10 for 2020

 Any profits in 2020?

Welcome to the Family 

I don’t know what it is, maybe it’s the energy of spring but this month has been full with positivity and great progress. That’s why we have a bunch of great news for you this month! But before we jump in, we are excited to announce that partnered with the Saudi Arabian General Investment Authority (SAGIA) in another step towards taking our portfolio companies regional!

That being said, we also have potential pre-seeds in mind. We know that the cost of starting a business is expensive, bureaucratic, and difficult to raise funds or find the right talent or mentors for it. That’s why this month’s piece will be talking about common mistakes pre-seeds do and our advice to avoid them.

Let’s dig in!

The Bread Starter

They met with you, they heard your pitch, they are on the verge of funding your company, only they backout at the last minute. Bummer right? If you’re wondering what might’ve changed potential investors’ minds (or our minds), it could be one of these reasons, 

Your cap table is all over the place
As an Investor, we want to understand who is already on your cap table. My team and I might steer away from investing in a startup if we find that there’s, 

a). An inactive co-founder on board. It looks bad to us knowing there’s someone already onboard who’s not fully invested in their capital, so why should we?

b). Family members. Raising capital from family around you is great but problematic, especially living in a collective society where the line of differentiating between family and business is thin.

c). Founder shares. Even though common shares are usually associated with founders of the startup, sometimes they try to sell common stocks to potential investors as well. And while some investors accept taking common stocks, we generally insist on preferred shares simply to protect our investment.

Our advice? Diversify your cap table with people who can help you grow and buy out your inactive cofounder(s), don’t take family members onboard unless you’re 100% sure business won’t turn into a family matter and make sure that any cash invested into your company is converted to preferred shares. And who can adapt best? The businesses that are flexible. We have entered a work-at-home economy, which favors companies that can come up with solutions no matter if the life moved out from offices to our dining tables and living rooms.

Let’s talk mentors & advisors
For pre-seed startups, advisors can be particularly useful for tasks such as building out a company’s network of fundraising options, yet we’ve noticed that pre-seeds tend to, 

a). Compensate advisors with common shares with a range of 3% to 15% per advisor vested over 3 years. Yikes! This high cost can be avoided by paying advisors with an equity stake that ranges from 0.15% to 1% of the outstanding common stock of the company (on a fully-diluted basis). 

b). Have too many advisors onboard without having a clear role for each advisor. So you got rid of inactive founders, why are you keeping the burden of having to pay someone who isn’t adding anything beneficial to your business? Each advisor should fill a specific gap in your experience. Set clear commitments and expectations.

c). Get advisors who do not invest in them. Advisors shouldn’t just give consultation but must also have skin in the game. They should invest some money, something to reflect their belief in the business, no matter how small. 

Our advice? Pay attention to how much you’re putting into your advisors and don’t go overboard, only hire advisors that can give clear consultations and fill your current gaps, and look for advisors who don’t only look at you as a client but actually believe enough in your business through investing in it.

Well, overall poor fundraising decisions
Some minor slips that founders don’t put in mind can cost them a lot and eventually not getting the funding they need, some examples include, 

a). Not building traction after pre-seed. Founders of startups assume that maintaining the same market size that got them their pre-seed funding is enough to raise another round. Wrong. As a VC, we don’t just want to see consistent traction but an increase in attracting a bigger consumer pool before we invest hundreds of thousands of cash into a startup. Look into marketing your product or service or do a revalidation before meeting with VCs for your seed round. 

b). Taking too long to raise by talking to juniors/associates. Go with investors who show that they understand what you’re doing. Try to talk to a partner first. Don’t talk to every VC on the planet.

c). Lack of research. Before approaching the VC you want, make sure you know everything about it. When we invest in a company, we look into every nook and cranny before we invest and put our money into it and we expect you to do the same. We do this because once we invest, we are staying with you for a long period of time and will have an affect on every future round. 

Our advice? In order to continue raising funds for your startup make sure to continue building your traction, don’t take the shortcut, instead, try talking directly with the partners of the VC, and choose your VC wisely through extensive research.  

Family Postcard

Bling bling! ✨✨
Amazing news from direct-to-consumer jewelry startup Mejuri, raising $23 million in Series B. Congratulations!!

Do you see us now? 🔍
The World Economic Forum and the Bahrain Economic Development Board (EDB) have partnered and selected some of our portfolio companies shaping the Fourth Industrial Revolution. Can you identify them?

Touched by royalty 👑
In a pleasant surprise, Queen Rania paid a visit to POSRocket to give her support.

Till next time, stay hydrated and Ramadan Kareem!

Hasan

Hey folks,

Reap the Seeds you Sow 🌱

Close your eyes and imagine this….

A passionate individual has a hunch for a product that could potentially solve a big problem that people face in the MENA region. It’s been occupying his mind for some time. He can visualize the world with his product and what it could become.  It’s brilliant and he’s fired up. He puts in his time and money to work on bringing this rocking idea to reality. He diligently researches the market and convinces others to join him in achieving his vision. Together as a team, they work day and night for 8 months to produce an MVP.  After much trial and error, their MVP works and they high-five each other ✋, but sadly, they realize they’ve run out of money.They decide to raisea small amount of funds to enable them to test and build some traction. With great enthusiasm, he knocks the doors of family and friends but realizes that some turn out to be too expensive. He’s stunned. Some have asked for 40%+ of the company! Why? Because the company has a tiny capital base, no assets, and is not a “profit generating company!” The disappointed founder, clinging on to his dream, decides to explore his investor options. He has meetings with corporates & large institutions, but ironically, they send him job offers instead of checks! Thanks, but no thanks. Unwilling to give up on his vision, he pursues regional VCs, but they (including Arzan VC) worry about the risks and ask the founder to come back once sufficient traction is reached.That said, the founder is left with three difficult alternatives: accept an unfair deal and regret it for the rest of his life, become a career person, or bury the idea once and for all.  Buzzkill.  The sad thing is this idea could have been Souq, Careem, Carriage, Talabat …etc, but the difference is that it did not get it’s real chance to get off the ground.Sound familiar…? We’re sure it is.

Moral of the story

If we do not plant seeds, we won’t see trees! Hence, if no Pre-Seed (MVP is available but no traction) investments are made, no sufficient Seed and Post Seed deals will be available. This also means the $100mn+ VC funds that are currently being raised won’t see adequate deal flow.

This has been on our mind at AVC & here’s what we are going to do about it…

We are taking the initiative to invest in the seeds of the ecosystem. This fall, we are launching a dedicated Pre-Seed platform to turn this story around.

How it works Startup founder(s) will log onto our Pre-Seed platform, tick simple criteria boxes, upload a pitch deck, hit submit and track our investment process. Within two weeks the founder will receive a decision. If approved, s/he will receive $25,000 and all legal/admin documents required.  The founder will then need to raise at least another $25,000 (from angels) based on our standard terms.  Wait – that’s not it!  Once you’re in, you’re in! We will continue funding up to Series A and the ticket size will vary per stage. Sweet. There’s more, but we’ll keep the other perks as a surprise for you once we launch! Our investment criteria We are looking for the basics: 🌱 Minimum round of $50,000 🌱 A technical co-founder (available or joining) 🌱 Focusing on a Large market 🌱 Operating in a legal entity We will invite other angels/VC’s to co-invest, provide feedback and interact via our platform.

too long; didn’t read We are launching our in-house Pre-Seed Platform to invest in companies at MVP stage in September 2017.  Companies that meet the investment criteria will receive a decision (within two weeks!), followed with $25k in funding + required documentation.We would love to hear your thoughts.  What would you like to see on the platform? What capabilities/functionality would make the process for you smoother as a founder? Investor?  Hit reply and let us know.

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5 things you’ll want to check out

• How to call BS on big data – because you’re smarter
• What is and isn’t founder friendly
• Don’t fear the incumbent
• You don’t have to please everyone, really
• 3 views on growth vs profitability

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Family Postcard

Ramadan Careem Careem raised $150m to close out its $500M Series E round. Also, Careem launched operations in Palestine and is working towards improving mobility and economic growth in the country.

He’s got game Tamatem Games CEO, Hussam Hammo has been selected as an Endeavor Entrepreneur. Tamatem also got covered in Inc Arabia 👏👏👏

When nobody wants to be notetaker Use AI to summarize your meetings with the Wrappup Slackbot and get the meeting notes in Slack! It even got featured on Product Hunt with 200+ votes!

Here comes the jam

Jamalon, the largest online bookstore in the Middle East, has been featured in Forbes. They’re also expanding their tech team and are looking for an android mobile developer (senior), front-end developer (senior), UI/UX designer (senior), and 4 PHP back-end developers.  Applicants can send their CVs to jobs@jamalon.com

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Welcome to the fam We’d like to introduce you to POSRocket,  our latest investment, and member of the AVC family.  Led by CEO, Zeid Husban,  POSRocket is a cloud-based point-of-sale platform in the MENA region that improves customer discovery and intelligently increases sales. Their target audience is small to medium sized businesses that struggle with growth as well as retailers not currently using a POS or inventory management system. POSRocket supplies merchants with a cloud-based POS platform that consists of a software and a hardware component (iPad, cash drawer, and receipt printer). Say 👋 to Zeid Zeid is a second time founder; his first startup, ifood.jo was sold to Yemeksepeti (later acquired by Rocket Internet). For POSRocket, Zeid brings relevant industry experience in the food industry. But not just the food industry… POSRocket is also working with other types of businesses such as retail outlets, services and entertainment industry.  The opportunities for growth are endless.  We are happy to announce also that Arzan VC is leading this investment round.

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On this festive occasion, I’d like to wish you happy eid to you and your loved ones!

Keep it real, Hasan Zainal