can’t access your file

can’t access your file

by | Mar 15, 2018 | Newsletter

Happy new year to all of you! We came back in January refreshed and ready to roll ⛷️ . Before I jump into the newsletter, I would like to start by wishing Anurag Agarwal – who is family before he becomes a colleague – all the best in his future endeavors. Anurag has decided to join Oman Tech Fund (OTF).  Anurag was a star at ArzanVC and his departure is a loss to the team and to me personally. He will continue to be one of ArzanVC’s family members and a reason why ArzanVC is what it is today. OTF, you’re lucky! Back to our scheduled programming… This month we kicked off construction on Blender, our coworking space. We’re renting out licensed office spaces as well as individual desk passes. Our founders get extra perks as well, which we’ll be sharing soon 💃 💃.   If you are looking for a space in Kuwait or know someone interested, hit us up here for more details.

We’ve also been looking at a couple of interesting companies and follow-on investments, and expect deals to pick up this quarter. In 2018, we are specifically interested in Saudi based startups! This is in line with our strategy to launch our KSA office in the next few months. In light of that, this month, we’re sharing our piece for founders on organizing documents.
Get your “house” in order

We’re beginning a new year and I’ve asked AVC Venture Partner Anurag to share his tips for founders on organizing documents ahead of a due diligence round…

📢 PSA for Founders: Time kills deals.  If there’s one surefire way to slow a deal down, it’s not having your data ready for investors when you approach them. Get yours in order asap, at least before Ramadan when slowness kicks in. I have seen startups with well-structured data rooms close their deals faster and more efficiently.  In general, a data room can mean a physical room with your data, virtual data rooms or data centers. What I’m referring to here is a due diligence data room. A shareable folder where your company aggregates its legal, commercial and financial documents for review by a potential investor. Let’s take a look… First, this may sound straightforward, but make sure to put your company’s name on your folder. Otherwise, things get messy with your investors receiving 20 folders titled “Due Diligence.” What goes in there? Good question. Here’s what we consider our DD checklist at ArzanVC. You can keep it as a reference to help you structure your data room. We organize our checklist into 5 parts: 1. Corporate, Shareholders’ Information, & Legal Matters This is all your incorporation related documents, copies of licenses, CAP table, previously signed term sheets and shareholding agreements.  If you’ve had several financing rounds, create a folder for each one, and make sure to include the term sheet and signed agreements. 2. Management & Personnel Your organization chart, summary bios of founders or LinkedIn accounts. Got an ESOP already? This where you keep it. 3. Material Contracts for the Company Which contracts are important will depend on your business. This doesn’t need to be all your confidential contracts and agreements. Use your judgment on what can be shared and what you consider ultra-confidential.  You can share contracts for leases, housekeeping services etc. 4. Product / Services / Competition & Intellectual Property I can’t stress enough the importance of this folder – this is where the juice is.  Things we look for are: –    Product roadmap; –    market research information & market sizing; –    list and analysis of competitors; –    metrics and KPIs that you use to track performance. 5. Financial Information Yes, for an early stage company, there might be minimal financial history and information. Still, this information should at least be included in an orderly manner. Build a proper business plan and forecast for at least 2 years ahead.

TL;DR (too long; didn’t read) A data room is a reflection of your existing file structure. If you’re organized and on top of your record keeping, setting up a data room is a quick and simple exercise. Don’t leave it until the end, or you’ll be scrambling to put something together and it won’t look good in front of your potential investors.
🌟 BONUS: Tools of the trade
Continuing with the organization theme, here are tools we use every day: Pipedrive: For our deal flow management. Very convenient to take the deal from receiving it to the final decision stage. We can integrate all email communication with the startup, have all our notes in one place, and upload all information and documents. Slack: Streamlines communication between the team, with separate discussion rooms and topics. Asana: Our tool of choice for task management, but there are many others you might prefer. Our startups ❤️: Tableau:    Measuring KPIs Chartio:     Interface to your database and get data analytics MixPanel:  Business analytics for mobile and web Intercom:   Customer messaging apps & live chat New Relic: Server monitoring and DevOps tools Segment:   API integrations, especially analytics Crazy Egg: Heatmaps, usability testing, and optimization Sketch:       Design and prototyping Invision:      Design and prototyping
Family Postcard
On the list Artificial Intelligence startup Cognitev, was selected on the SAAS 1000 list, an index of the world’s fastest-growing SaaS companies.
Bring on the drivers Careem is expanding to Iraq, reopening in two Palestinian cities, and hiring female drivers in Saudi Arabia.
It’s true: hardcover to your door Online bookstore, Jamalon,  launched Jamalon Express, a service to deliver books to your doorstep within 48 hours.
Till next month, keep it real…
Hasan Zainal
Reap the seeds you sow

Reap the seeds you sow

by | Jul 9, 2017 | Newsletter

Hey folks,

Eid Mubarak! Every year we hear about Ramadan being a slow month with barely any activity. This Ramadan was surprisingly busy in the region and for AVC as well, and it was refreshing to see the ecosystem bustling un-caffeinated 🙂 On the AVC end, we’re so excited to tell you about a new offering we have in the works, and our latest investment, POS Rocket. Hope you all have a great Eid break and start to the summer holidays!

MENA EDTech Startups

This month, we looked at the EDTech sector in MENA. EDtech companies focus on designing effective academic instruction using technology, media and learning theory.  Our map illustrates a variety of categories in the market where we are seeing an increase in number of and growth in regional startups.  We found a large number of startups focused on creating educational content and software for young learners in Arabic, as can be seen below. In addition, companies offering platforms for tutoring and providing supplemental courses linked to public curriculums are increasing, indicating the dire need for quality educational content and delivery. Overall, with the increase in internet penetration and new forms of media in the region, there appears to be huge potential for further innovation and growth in this sector. Where are the gaps in MENA edtech? Can it scale across the region?

Join the discussion at #arzanVCchats

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.

5 things you’ll want to check out

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 [email protected]

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.

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

Keep it real, Hasan Zainal
Understand your CAP table (our two fils)

Understand your CAP table (our two fils)

by | Jul 6, 2017 | Newsletter

Hey folks,

We’re back with this month’s newsletter and have some fresh scoop. We’ve been talking to a variety of interesting startups this month while continuing with our fundraising discussions for Arzan VC II.

Earlier this month we were invited to participate in Mix N’ Mentor in Kuwait and it was awesome to meet so many talented entrepreneurs. Although there were primarily non-tech startups, we are starting to see an emergence of some in Kuwait.

 

Anurag with the energetic group he joined

 

With multiple tabs open and endless distractions, if you don’t make it to the end of the letter, we’d like to wish you a happy Ramadan from the Arzan VC family 🌙

MENA Delivery Startups

 

The food delivery space is massive in MENA. There’s a lot of overlap ranging from food portals to one-store delivery services. We’ve focused on multi-vendor delivery companies.

Who do you think should be on here?
How can they differentiate?

Join the discussion at #arzanVCchats

 

Understanding your cap tables: our two fils

 

We see tons of startups at ArzanVC, and we tend to see common pitfalls amongst them.  One of those is in the CAP tables of startups.  Since AVC Venture Partner Anurag works closely with these startups on legal documents before we do invest, I asked him to share his experience and this is what he had to say…
Based on the deals we looked at so far in 2017, we can tell you that one in every three startups in the MENA region had shortcomings with its shareholding structure. Founders in the region seem to underestimate the importance of having a prudent shareholding structure to an alarming extent. Here are 3 common mistakes we have found in many startups’ CAP tables:
  1. Founders give up too much equity to early stage investors
  2. Founders’ shares do not vest
  3. No or limited employee stock option plan for key members

Let’s take a closer look…

 

1. Founders give up too much equity to early stage investors

In all the shareholding structures that we saw, the founder already owned too little equity at an early seed stage. Having this structure as it currently exists is a complete non-starter. While you don’t necessarily need to have 100% of the equity, you as a founder need to have at least 75-90% as you head into the first round of institutional funding.  For example, here’s an illustration of what the CAP table looked like for one company we evaluated in Jan’17:

In the above instance (Actual CAP Table), the founder owns almost nothing at the time of exit due to the dilution in multiple rounds. Think about it: what would motivate the founder(s) to continue working for this startup? How would future investors look at such a situation? What impact would it have on future funding rounds?

On the other hand, in the revised cap table, the founders along with the key employees (through ESOP) own 70% of the company after the angel round of funding. Starting with this ownership structure guarantees that the founders along with those key employees own a substantial minority at the time of exit, motivating them towards that goal.

Why do we see a lot of the first kind of cap table? First, a lot of founders are desperate to raise money from any investors. Second, investors -mostly angels- are partly to blame for this as they demand high equity percentages (“I need 40% for $100k”) in a company rather than giving money to founders at fair valuations (“I would invest $100k for a post money valuation of $500k”).

To remedy this issue, founders need to always raise money based on fair valuations, keeping in mind the dilution effect.  If an investor asks for a high equity stake, DON’T TAKE THE MONEY.

 

2. No vesting of founder’s shares

Any startup that wants to build a successful enterprise should vest its equity over time, particularly for founders and key employees. A carefully thought out and deliberate vesting schedule can prevent difficult conversations with investors or, worse, lost equity in the hands of departing team members.

Very few companies we evaluated had founders’ shares vesting. It is a very important aspect for a startup as it addresses 3 main issues – 1) keeping the founders enthusiastic and motivated, 2) whenever a founder decides to leave, you can fill his position with a new founder and give him the unvested stake of the leaving founder and 3) investors and other stakeholders see it as a sign of commitment; the founders want to get their due share only after achieving something.

Note: The legal aspect of vesting varies significantly from country to country. Consulting a lawyer is generally a good idea.​

 

3. No employee stock option plan (ESOP) for key members
Stock option plans are as important as vesting because in every startup, a founder will have to hire key, high caliber team members.  At an early stage company, founders seldom can match or pay more than industry standard salary to these members. Realistically, the only way a startup can keep these key employees motivated is through stock options (also vested over time).

Ideally, a startup should have a minimum of a 10% stock option plan (going up to 30% in some cases) in their CAP table before the first round of funding and the ESOPs can be distributed over any period of time.

Lastly, we believe the progression in case of most startups would be something like this. The infographic is a general example and in no way represents 100% of the actual scenario a startup would go through. It gives you a good idea on how a founder should distribute equity in his company over the period of time.

(too long; didn’t read)

Managing your cap table and equity options is not easy, but it is not something impossible with the right research and planning. Seek advice from investors, lawyers, and other founders. A clean Cap Table and solid stock option plan can be worth more than a million-dollar investment alone.

What challenges have you encountered while constructing your Cap Table?Tweet us at @arzanvc

4 things you’ll want to check out

Smart founders learn what didn’t work for others (also here & here)
Build the strangely familiar
Stop obsessing over the elevator pitch
An excellent piece on the rare hockey-stick growth model

Family Postcard


Storage just got even better

In addition to its tech-enhanced blue boxes, Boxit now also stores customers’ own boxes, suitcases and large items like fridges, TVs, beds & sofas.  Time to declutter!

They be killin’ it

Tamatem released its new car drifting game and hit number 1 on the Saudi app store in less than 24 hours. Yaaaaas.

Only on your phones guys, please

 

The big reveal
MenaCommerce has rebranded to Cognitev and you have to see their fantastic website 💯 Cognitev uses artificial intelligence to understand the meaning of content across the web and enhance user experiences. Think high-quality traffic, targeted ads, and more.
Everything in moderation, friends. You know what I’m talking about.

Happy Ramadan!

Keep it real,

Hasan Zainal

It’s been a while

It’s been a while

by | Jul 2, 2017 | Newsletter

 

Hey folks,

It’s been a loooong time since we sent an email to this list, but we thought it was time for something fresh.  If you never want to hear from us again, you can unsubscribe at the bottom. We won’t be offended.

Spring at AVC has been full of action. We were at the STEP Conference earlier this month, and saw cool startups, talks and speakers.  It’s always great to see familiar faces and feel the jolt of energy at the event.  We’ve also been hopping around the GCC presenting our upcoming fund which we’re excited about.

MENA Payment Solution Providers

Who is going to survive?
How can they differentiate?
Join the discussion at #arzanVCchats

On the radar

While I was doing my MBA, I worked with an intellectual group (Marco Di Mare, Alex Pham, Guillaume Pigot, Huang Yaping) on an extensive research project titled “Blockchain and it’s effect on the Financial Sector.” Of course, I won’t try to fit all that in this newsletter, but I’d like to share some interesting bits as well as our analysis at ArzanVC.

BlockchainBlockchain is a technology to run distributed ledgers that can reduce counterparty risk while boosting transparency and consistency.  Using an analogy:

(Sideways Dictionary)
The first application of Blockchain was Bitcoins. Innovations in the technology enabled potential applications in the financial sector that bear promises of disruptive potential.
 Long story short
Based on a World Economic Forum survey, many bankers believe that by 2025 Blockchain can reshape finance and banking. According to experts in Santander, banks will have $15bn to $20bn in annual savings in bank infrastructure costs from distributed ledgers. Hence, retail banks have started to experiment through VC investments and pilot projects.

Foreign Retail banks are dipping their feet

The impact is gonna be YUUUGE
These are the four major areas in which the technology has been used and is impacting financial services, firms and institutions. The most relevant applications and the players pioneering them are highlighted:
 

 

And what about MENA?
A few banks based out of Dubai, such as Emirates NBD, are partnering with other larger banks to launch the first pilot Blockchain network.  Small MENA banks should consider testing and partially implementing Blockchain applications in their operations. This will create a competitive edge and will give small banks the first mover advantage by allowing them to engage with large international banks via the Blockchain network. We’re keeping an eye out to see how things evolve.

4 things you’ll want to read

If you haven’t read Jeff Bezos’ Annual letter yet
Venture capital did not start in Silicon Valley
Who rallies your team?
Entrepreneurs: 3 tips for getting a sale unstuck

Family postcard

Is it lunch time yet?
Lunchon is solving the ordeal of ordering lunch at work with options from 100s of restaurants in Dubai, and they are killin it! Where do you think they should operate next Tweet @lunchon_UAE

If you’re thinking of supercharging your voice calls…
Bellgram launched its integrated app to the public in February, after successfully beta testing with 5 customers. Our productive friends at Onfleet and Lyft have joined too.


And speaking of productivity…
Forget deciphering through your meeting scribbles notes, Wrappup, the meeting based productivity app, had its big reveal in March

Welcome to the fam

We’d like to introduce you to Armada, our latest investment and member of the AVC family.  Led by CEO & Founder, Ahmed Al Obaid, Armada is is a marketplace for last mile delivery services that utilizes a crowd-sourced fleet of private cars and freelance drivers.

Say hi to Ahmed

 

Yes, we realize that the delivery industry is really crowded. However, it’s crowded with many delivery companies who own their fleets.  Furthermore, from about 250 granted licenses in Kuwait, only around 50 companies are active. This is due to their inability to scale and the high capex requirements involved.  Here is where we see untapped value.  Armada’s marketplace offers a solution to the delivery companies’ problem, since idle fleets will be optimized and new “business/income” is granted within Armada’s marketplace.

But it doesn’t stop there…

Armada’s marketplace will not only be focused on food, but also can cater to pharmacies, groceries, retail stores and more.

Here’s Laith and I after a long day of fundraising meetings in Saudi this week. Good times!

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