Patience is key for venture capitalists in hunt for entrepreneurs with unicorns

Jessica Hill November 16, 2015 No Comments

Patience is key for venture capitalists in hunt for entrepreneurs with unicorns

GoogleKayvan Shoaye RadkayvanshrHi-Tech Development Group LLCPatience is key for venture capitalists in hunt for entrepreneurs with unicorns2015-11-16 11:00:04Author Google+ Page

Finding the right company to invest in is like “looking for Nirvana”, according to the venture capitalist Dany Farha.

His Dubai-based venture capital firm, Beco Capital, considers up to 500 technology opportunities every year, with only a handful actually selected for investment.

Companies that made the grade include the job search website bayt.com, internet taxi firm Careem and real estate website propertyfinder.ae.

So what makes Mr Farha sit up and take notice of an entrepreneur?

The first tip is not to approach him with an “idea”.

“I have a real problem with the word idea, because so many people have so many ideas,” says the German-Lebanese investor. “I don’t know what idea means. What I look for is when a founder experiences a problem first-hand and says: ‘this sucks, there must be a better way of doing this. You know what? I’m going to go solve this problem’. Then you get the passion and conviction that you are willing to continuously bet the ranch on.”

Mr Farha says he hunts for tech start-ups that he can groom to become “unicorns”, a term for companies valued at US$1 billion or more. So for him, scalability is a must.

“If the business, or the prospective business, are trying to solve a problem which is local or small and doesn’t scale, then we won’t touch it,” he says.

“It could be regional aspirations rather than global, although entrepreneurs in our part of the world are becoming much more emboldened by thinking ‘I can actually build a global business.’ I look for people who have that tenacity of saying ‘nothing’s gonna stop me.’”

Mr Farha’s advice for entrepreneurs seeking funding came at the TieCon Entrepreneurship Convention in Dubai last month, which also featured the Indian billionaire Ronnie Screwvala, founder of the cable company UTV.

Since stepping down as managing director of Disney-UTV last year, he has been investing his capital into sectors including e-commerce, agriculture and artificial intelligence.

For Mr Screwvala, 53, knowing the company’s founder is in it for the long term is vital.

“There is this perception these days that everyone is building a business for five years, and then they plan to exit,” he says. “I’m curious to understand how that’s going to happen. I think exits cannot ever be timed. What legacy are you making for yourself? Are you building it with a rear-view mirror in your mind that says: ‘I know who my beholder is five years from now and therefore here’s what I think they want to see?’ This concept of planning doesn’t work.”

Also on stage at the event was the souq.com founder Ronaldo Mouchawar, from Syria, whose company has invested in five businesses he deems “synergistic to Souq” in the past six months.

“We are always hungry to get new technology,” he says. “In today’s world where mobile has become so centric, I almost don’t want to look at something that can’t fully be incubated on a mobile phone because I think the days when you connect to your laptop to do something are over.”

Like Mr Farha, Mr Mouchawar also places a high value on tenacity. “People can’t give up, they have to be motivated to continue the journey,” he says. “Even if their idea doesn’t work, you can always keep changing a bit until you get something. I don’t think Facebook today is what Facebook was inceptionised to do. Initially it was about meeting a friend and today it has become this massive content platform, where people express and meet and share information. You evolve over time, there is no end game in technology.”

Jon Richards, a 31-year-old Briton, is chief executive of the UAE-based finance comparison site, compareit4me. In August, he attracted $3 million in funding which the company is now investing in new technology, marketing and expansion plans. He says securing the initial meeting with potential investors was easier than he had expected.

“We knew within a couple of months who we wanted to work with and who was potentially going to invest, but the whole process from start to funds in the bank took a little longer,” he says. “Getting them over the line can take significantly longer than you would imagine.”

The entrepreneur says the process of agreeing a valuation can be tricky for a start-up.

“The bigger the valuation, the less equity you give away so it’s your interest to be bullish and ‘sell the dream’ on how you see the future,” he advises. “Our approach thereafter was simple. We talked to each investor about our wins, failures, shortcomings and upsides – we were humble about our successes but bullish about the potential. But most of all, we were just ourselves. Investors need to know they can work with you as well as believe the model has a chance of success.”

Compareit4me ended its funding round with five offers and chose three to work with – STC Ventures, DSO Ventures and Wamda Capital – “based on personal fit, shared vision and general alignment”, Mr Richards adds. “All extremely important if you’re going to work together.”


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