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Identifying the right venture capitalist for investment: The do’s and dont’s

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Kevin Mutiso (Source: Kevin Mutiso)

I wrote an article recently on the key lessons I have learnt so far in the tech business and some people reached out to me to provide some advice when negotiating with a venture capitalist (VC) or an investor. This is from my own personal experience and observations and thus critical feedback and debate are welcome, particularly from investors themselves.

Sun Tzu, one of the greatest strategists in human history and author of one of my favorite books, The Art of War, has a quote that I live by: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Before I go into what to look for in a VC, it is good to understand WHO YOU ARE. In the world of ideas, the probability that you have a unique idea is next to zero. In the big scheme of things generally, you as an entrepreneur are nothing but another person roaming this earth just trying to figure out life. This video is a scaled representation of our solar system: https://www.youtube.com/watch?v=Kj4524AAZdE 

When you realize how far the Moon is from Earth, or that it takes 5hrs for the suns rays to reach Pluto, it hits you how small you are in this infinite universe.

Secondly, a conversation with a VC is about an exchange of value. The entrepreneur has a vision and an idea that he believes will have commercial success. A VC has cash and wants to take a risk with this cash and get above-average returns. Usually, in an early stage start-up, the VC is buying into your ability to execute your vision and deliver these above-average returns. So you both have something of value to exchange. You are equals.

With those two points in mind; let go of your ego the moment you meet with an investor and instead start observing and looking for their ability to understand your vision and idea.

What should you be looking for?

1. Does the VC insist that you get your own lawyer – The reality of life is that by the time someone has enough cash to invest in people’s ideas, they have learned that a good lawyer is a must-have. If they downplay the need for you to have a good lawyer, then be wary. This is a clear sign that they want to take advantage of your ignorance. “Lawyers -” as my mentor from CreditInfo once told me -” plan the funeral,” the entrepreneur and the investor usually plan the wedding – they only see the happily ever after. The lawyers usually see what could potentially go wrong in a transaction and thus depending on whom they are being paid by, provide the protections to this party.

Yes, you are a start-up and you may not have money, but by the time you are engaging lawyers you have agreed to begin a relationship with the investor, and they should be willing to add the cost of your lawyers to the investment they are making. If they are not willing to do this, be aware of potential malice.

2. Does the VC understand the risks your business’ faces – An entrepreneur should always know what are the key risks to the success of their business and should strive to de-risk them. The VC too should have an idea of the risks of the business they want to invest in. If they do not, then other than the money they might not be of much use. If you are not aligned on how to de-risk the business then you will have conflicting objectives and this will start affecting the business. A good example of this is usually observable when it comes to allocating resources of the company.

3. Do you want to be in the trenches with this investor – The legendary John Doerr usually asks himself when evaluating entrepreneurs the following question, “If s*** hits the fan, do I want to fight the fight with this person?” I think that question also applies to the entrepreneur. Problems are part of your existence and things will not always be rosy, so when you have a major fraud in your business or the technology crashes, does a blame game start, or is a brainstorm held?

You can see this early on, observe how the investor negotiates their must-haves in a contract or if a junior member of their team accompanies them to meetings. Do they naturally teach or do they instruct them on what to do? Do they apologize if they misunderstood something? These little things give you an indication of the kind of person you are about to spend considerable time with — so can you live with this for the next 5 years?

4. Zero-sum game vs. Positive sum game – The key lesson I learned when I did the master negotiator program at Strathmore Business School (If you can, please do this course – it changed my life) is that negotiation doesn’t have to be a winner and loser experience, it should be a win-win for both parties. If you are raising a sum of money and the VC wants to take anything over 50% of your business, I’d be wary. If an exchange of value is the point of the transaction then a fair price must be met.

Both parties must be striving to solve for each other’s needs when negotiating and the must-haves of both sides must be very clear. If you reach an understanding with the positive-sum game strategy, you have found a partner you can work with through even the most difficult of problems. Mark Zuckerberg is going through one of his most tumultuous times with all the data privacy issues, but when I looked at his board and saw he has the likes Peter Thiel and Reid Hoffman on his board, I was a little envious because the problem-solving abilities he has at his disposal are at genius level.

What I would do to be a fly on the wall during their brainstorming sessions. Both Peter and Reid were early investors in Facebook and have been with Mark from the beginning, and if I was to bet money, I’d bet that they will solve this too, not without some bruising. Entrepreneurship is lonely, and more so during tough times.

Also Read: Meet The Resilient Black Brothers Saving The Planet One Car At A Time

Finally, I’d like to add the final tidbit that another mentor constantly reminds me of. He says, “Good ideas do not chase money, money chases good ideas!”As an entrepreneur, it is always better to give a true and honest picture of your business to your potential investor and demonstrate that you have the ability to execute the idea and vision that will achieve commercial success.

Author: Kevin Mutiso, CEO Alternative Cricle

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Investment

Platform Capital invests in USA-based innovative peer-to-peer financing platform SoLo Funds

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Platform Capital Chairman, Dr. Akintoye Akindele and Rodney Williams, Co-Founder of SoLo Funds Inc. (Image & Press Release: Platform Capital)

Platform Capital (“Platform”), a leading growth markets investor, is pleased to announce its investment in and partnership with SoLo Funds Inc. (“SoLo”), an innovative and proprietary peer-to-peer financing platform based in USA that has revolutionised the access to and supply of short-term funds for individuals, entrepreneurs, and businesses.

Twenty-five percent of Americans are unbanked or underbanked, whilst 80% of American workers live paycheck to paycheck, and don’t have adequate savings to cover unforeseen expenses. In addition, implicit and explicit biases mean that women and people of colour are three times more likely to see their credit applications rejected. As a result, they are left with no other options, and fall prey to payday lenders, where a small loan can accrue over 400% APR, trapping them in a cycle of debt.

SoLo replaces payday lenders with a community-based, market-driven model for access to short-term funds for individuals. Through its community, individuals are able to access funds ranging from $50 to $1,000 for up to 2 weeks, that are delivered within hours through a simple and non-approval sign-up process powered by artificial intelligence and machine learning. The platform connects users directly and determines a SoLo score based on ability to repay, spending habits, payment frequency, behavioural data, and location-based data. There are no fees or compounding interest paid to SoLo or the member of the community providing the funds, avoiding the debt trap that is common in traditional short-term lending.

Since launch in 2018, the SoLo community has grown to over 300,000 users. The company has seen significant adoption of its model in states with large populations and high cost of living. Over the past 12 months, SoLo’s community has experienced more than 2,000% growth, introduced a new product feature “lender protection service” that safeguards the financed amount in case of a default, and has partnered with Kiva to enable access to funds for entrepreneurs and business owners ranging from $1,000 to $15,000.

SoLo Funds mission is to replace payday lenders with a community-based, market-driven model for individuals, entrepreneurs, and businesses to access financing. The company has raised $10 million lead by international investors including ACME Capital, Impact America Fund, Techstars, Endeavor Catalyst, and CEAS Investments to further develop its technology, scale its team, and expand across the USA.

Dr. Akintoye Akindele, Chairman of Platform Capital, joins the Board as an observer & adviser.

Rodney Williams, Co-Founder of SoLo Funds Inc., said “We’re excited about our partnership with Platform Capital, we look forward to expanding our services into Africa. This partnership enables us to achieve our vision of being the number one access to funds provider for people and businesses in need. We believe that our platform will certainly impact and change conversation in Africa around how businesses and individuals can access funds.”

Dr. Akintoye Akindele, Chairman of Platform Capital, said: “We are proud to partner with SoLo Funds. Access to funds is a problem that affects millions of people globally. We believe that SoLo’s alternative approach to laccessing funds will impact millions of lives and position them as an innovative disruptor in the funding space. We look forward to working with SoLo Funds to scale their innovative solutions to positively impact people’s lives.”

 

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Paymob completes Series A funding of $18.5 million to fuel regional expansion

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Paymob Press Release/Founders Photo (Source: Paymob)

Paymob, Egypt’s market-leading digital payments provider, announces the largest ever Series A fund raise by an Egyptian company and one of the largest fintech equity rounds in North Africa. The Company has raised US$15 million of new capital from existing investors in a second tranche of its Series A fundraising activity. It follows a first tranche of US$3.5 million, raised in July 2020.

The capital raise was led by Global Ventures, the UAE-based venture capital firm. It also included A15, a leading tech investment fund and FMO, the Dutch entrepreneurial development bank. Paymob will use proceeds to: Continue expanding its merchant network, Meet the increasing demand, Enhance its suite of products further and Fuel its regional expansion efforts.

Paymob empowers underserved SMEs with improved and more accessible digital payments offerings as part of the Central Bank of Egypt’s efforts and initiatives towards nationwide digital financial inclusion. The Company will accelerate its expansion in Saudi Arabia and other markets across the region, in 2021.

Paymob’s mobile wallets infrastructure processes over 85% market share of transactions throughput in the Egyptian market and serves merchants across five different markets including Kenya, Pakistan, and Palestine. Paymob is the largest payment facilitator in Egypt and is the only Egyptian FinTech to expand beyond its local market.

In payment acceptance, Paymob’s monthly revenue grew over 5x in 2020 and its technology is used across economic sectors by over 35,000 local Egyptian and global merchants, such as Swvl, ElGouna, Tradeline, LG, Samsonite, Aeropostale, Befit, Breadfast, Gourmet, and the American University of Cairo. Paymob’s annual Total Payment Volume processed is now over $5 billion.

“We couldn’t be more excited for Paymob’s next phase of growth; the market opportunity in the region is unprecedented. The large digital payments gap still exists and we are delighted to be working with progressive-thinking regulators to address this. This latest capital raise will accelerate our progress to reducing the digital payments bottleneck. All our existing investors have increased their holdings, and we thank them both for their support and the confidence they have in our business model and track record of execution.” – said Paymob’s CEO and co-founder, Islam Shawky.

“We are delighted to lead this momentous FinTech fund raise in the region. Paymob has a perfect combination of a high-quality technology, a product customers increasingly cannot do without and an outstanding management team. Their market opportunity is also huge; Egypt’s transformation to a cashless society is being enabled by the unique products Paymob has built. We look forward to continue supporting their expansion.” – said Basil Moftah, Global Ventures’ General Partner.

“As one of Paymob’s earliest backers, we are always proud to support a young and passionate team revolutionizing the development and advancement of financial systems in Egypt, our region and beyond. Paymob’s team has shown great returns with very limited resources. Witnessing the impact of facilitating financial services to millions of end-consumers and tens of thousands of merchants coupled with hypergrowth has been a very fulfilling experience for A15.” – said Karim Beshara, A15’s Chairman.

“Paymob is an excellent fit with FMO’s Ventures Program based on its exceptional team, innovative payment solutions and proven capability to include thousands of underserved Egyptian merchants into financial services offered by the company and its partners. We are proud to be part of the journey of Paymob in Egypt and excited to support the team throughout their next phase. The FMO Ventures Program is a EUR 200mln investment program funded by FMO, the Ministry of Foreign Affairs and the European Commission targeting early-stage technology-enabled innovative business models in emerging markets.” – said: Jaap Reinking, Director Private Equity at FMO.

 

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Sawari Ventures closes $71 million fund to invest in Egyptian-led startups

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Press Release/Image Source: Sawari Ventures

Sawari Ventures announced the closing of the Egypt-based fund with total commitments of USD 30 Million from Misr Insurance Group, Ekuity, National Bank of Egypt, Banque Misr, Banque du Caire, and Suez Canal Bank. The fund previously closed USD 41 million of raised investments from European Investment Bank, CDC , Proparco, DGGF which is managed by the South African fund Sango Capital, increasing the total fund size to over USD 71 Million to invest in Egyptian technology and knowledge driven companies.

Founder and Chairman of Sawari Ventures, Ahmed El Alfi said in a statement, “The Egypt based fund is a privately-held fund regulated by the Financial Regulatory Authority of Egypt (FRA), which allowed us to attract capital from top tier local financial institutions to co-invest with foreign capital from international development financial institutions, doubling our allocation to invest in Egyptian high growth companies to sixty-eight million U.S. Dollars. Our aim is to create exceptional returns through investing in knowledge driven companies, which have the potential of bringing transformational changes to the Egyptian economy.  The fund will support local companies with dedicated capital,  in addition to quality expertise from our seasoned and specialized team, and the value add of our investors.”

Sawari Ventures is the leading venture capital firm based in Egypt that is driven by passion for fostering innovation and entrepreneurship.  Led by Ahmed Al-Alfi, Hany Al-Sonbay and Wael Amin, Sawari Ventures has invested in more than 30 companies, backing multiple successful technology companies such as SWVL , Instabug, and Si-Ware.

During the announcement, Basil Heni, Chairman and Managing Director of Misr Insurance Holding Company said, “Misr Insurance Holding Group, as the largest non-bank financial group in Egypt, was keen on this strategic partnership with Sawari Ventures, the leading company in managing capital funds.  The partnership is directed towards emerging small and medium-sized enterprises, which is in accordance with the group’s role in supporting this vital sector in the economy. This is evident in the fact that we own the largest share in the fund.”

“Banque Misr was the first to commit to Sawari Ventures and this move is part of our strategy to support financial inclusion and digitize our banking operations, and is in keeping with our roots as an entrepreneurial bank,” said Akef El Maghraby, Vice Chairman of Banque Misr.

“The National Bank of Egypt has always believed that Egyptian Small and Medium Enterprises are the growth engine of the Egyptian economy. We are very aligned with Sawari Ventures in our vision which is why we are the largest banking investor in the fund” said Ahmed ElSaeed, CEO of Investments at the National Bank of Egypt.

“Our alliance with Sawari Ventures further strengthens the resurgence of the Kuwaiti investments in Egypt, partnering with a selective group of Egyptian institutions and investment funds, with the aim of contributing to the creation of scalable businesses as well as achieving the targeted investment returns,” said Adnan Al Sager, the CEO at Ekuity Holding, the Investment arm in Egypt of the Kuwait Investment Authority (“The Kuwait sovereign wealth fund”).

“Our partnership with Sawari Ventures is aligned with our strategy to expand our investment portfolio especially in the digital economy and SME segments.”, said Mohamed Regai, Chief Innovation Officer at Banque du Caire, “We are committed to further increase our exposure given the attractiveness and impact of these sectors.”

El-Haythem ElKobrosly, Head of Commercial, at Suez Canal Bank closed with  “We obtained our  approval in record time based upon the track record and experience of the Sawari Ventures team. We believe it is the beginning of a partnership that will allow our bank to further engage in the digital economy through additional co-investments and lending.”

 

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