No Fool’s day this year.

If you’re reading this on your phone, at least we took you away from your laptop cameras and back-to-back online meetings.

We decided to have a look at the endurance of businesses during these tough times. There are numerous businesses that are doing pretty well right now, to the point that they can’t meet the demand. (And we are not referring to the producers of toilet paper.)

We will also bring you some good news from ArzanVC’s Family. Because what the world needs right now is more good news.

 Black swan is a test of adaptability 

You heard it. We are living through the biggest global crisis since 1945. It will set the tone for the years to come. And maybe even decades. Some say that the crisis may lead to a new way of economic thinking. It most probably will. And to new (or enhanced) and more flexible business models.

 The word of this crisis (and any crisis in fact)—whether for us citizens who have to abide by the rules and restrictions of our governments or for the companies and businesses in our local and international environments—is adaptability.

 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.

 We are noticing uniquely innovative and collaborative actions, with many businesses shifting their modus operandi to adapt to the market demands. This black swan event definitely favors businesses that possess strong organizational agility and alignment. And above all, online players clearly have a top leverage right now.

 In the diagram below, we have included a few examples of local companies (MENA) next to their sectors.

 Disclosure: Some of the companies belonging to the high risk zone of the diagram might not really be affected negatively if they are able to adapt.

 We placed the restaurants delivery platforms into the low-to-medium risk zone. These companies would be expected to do great right now, but the curfew that is set by some governments puts a restriction on when the orders can be made. Customers may also think twice of the extra expenses (cooking at home may be cheaper), and the issue of hygiene during food preparation could also be of concern given the pandemic. 

 Why is ride-hailing at medium risk? Passenger rides are down (for example, they equal 0 in Kuwait). However, if the business model is flexible, the companies can wait things out. Plus, IntiGo (Tunis) is now providing grocery delivery and concierge services, and Lyft and Uber are also considering the same and medical supply. 

Essential e-commerce at medium risk while non-essential e-commerce is at high risk because the consumer choices have been primarily redirected to necessities like staple goods. Yet shopping for home gym equipment, books, toys and games may make a good impact.

We also think that social media may be little squeezed due to decline in advertising spending. Though the current user’s usage is massive.

On the contrary, communication & teleconferencing tools (vs. in-class teaching, office meetings etc.) are booming. WFH is safe and it reduces employers’ costs. Many Gulf countries lifted bans on Zoom, Skype for Business, Microsoft Teams and others. Slack shares jumped up by 26% this year, while Microsoft Teams’ DAUs reached 44 million (vs. 20 million in November). And despite the rising demand, Zoom’s call quality has not degraded!

As we are now embracing e-baskets over regular trolleys, online grocery delivery platforms face a doubled or tripled surge in online orders. Additional onboarding of thousands of shoppers and support staff is a new trend as well as safer and contactless delivery procedures. The increase in demand is unprecedented yet definitely a “good” problem to have right now!

And we cannot forget the crucial role of online streaming platforms – movies, series and podcasts alike – that are giving us and our kids a huge helping hand during these quarantine and self-isolation times. In fact, there is so much streaming that the providers had to reduce the quality to SD (primarily in Europe) and ask people to be more data-spending conscious. By the way, Disney+ launched in Europe in the best time possible!

Although this unprecedented growth of new customers and service users may cease once the crisis is behind us, we believe that it will ultimately change certain consumer habits. Just notice the growth of the online grocery stores: many of them gained the trust of their customers only thanks to COVID-19. And that trust won’t be temporary!

Is this the new normal? Will we see more online conferences, bigger online grocery orders and cloud kitchens rivaling the conventional cooking outlets? (Hopefully; we made a recent investment in one cloud kitchen start-up.)

The truth is, many of us desire to have 24/7 goods and services, and the crisis has only pointed out that our day-to-day actions and transactions do not necessarily require in-person, physical presence.

📣Call-out to founders: Share with us how you are adapting your business to the crisis. We would like to include your stories in our next newsletter.

TL;DR (too long; didn’t read) 
The word of the COVID-19 crisis is adaptability. Business areas such as groceries delivery, online ed-tech, streaming and online comm platforms are at low risk, while ride-hailing, essential e-commerce and logistics are at medium. High risk zone entails of travel e-commerce, booking apps and non-essential e-commerce. But we must not forget that the survival of each and every business depends on how flexible it is to adapt and withstand the crisis.

 Family Postcard

Flexxed up

 Cartlow has secured a six-digit USD figure in its first round of funding from Arzan VC, Vision Ventures and a group of angel investors.

And Lunch:on now provides free & contactless home delivery of its 25AED lunches from 200+ restaurants.

Latest Jobs @ArzanVC Family

• Business Development Manager (Corporates) at LUNCH:ON (KSA)
• Engineering Lead at Crowd Analyzer (Egypt)
• JAVA Engineers at PointCheckout
• Director of Operations at TruKKer (KSA)

 Corona Essentials

• If they can survive 1 year in the space… notes on self-isolation.
• Feeling anxious? Snapchat launched a Here for you tool.
• Once you’re done with Zooming and Slacking for today, throw a Netflix party!
  
  

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  Black swan, it’s about time you fly away!
  And the rest of us—let’s try to do WFH and social distancing for a little longer. 

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

Jordan Tech Startups

With a vast proportion of the Arabic content on the web originating from Jordan, a large number of startups we found are operating in the media and content category.  This includes information resources about the weather (Arabia Weather), food recipes (Atbaki), and everything in general (Mawdoo3).  Several content producers are focusing on video content (e.g. Istikana), audible content (e.g. Masmoo3, Sowt) and content for children (e.g. Shablol, Kharabeesh).

📌Untapped

These are the segments that have many startups in global markets but are not yet fully exploited in the Jordanian market. For example, for a small regional market, many players look to immediately scale outside of Jordan to grow.  The SaaS model of startups lends itself to this type of growth and is one of the main reasons why we’d love to see more come out from Jordan and the region in general. Another interesting untapped sector is travel technology, which potentially includes rewards management software, trip financing, corporate travel apps, flight claim and compensation services, and destination-specific content, to name a few.

Although there are companies that offer some of the functionalities listed in the Untapped box, we are still not seeing single players dominating these categories and it would be interesting to see how they evolve.

Know of other leaders in the Jordanian market? Think you could use one of those untapped services?

Welcome to the fam

Family Postcard

Hey folks,

To the kingdom

Family Postcard