Traction and good communication are the two pillars on which Hasan Haider of +VC measures the quality of a founding team. The venture capitalist formerly from 500 startups has been tracking the MENA region for more than a decade now and has made more than 180 startup investments over the last decade. We spoke to Hasan about the evolution of the region’s ecosystem over the previous ten years, the sectors and investment stages he’s most excited about and how he goes about evaluating startups to invest in.
Q. Walk us through the progression of investing in the MENA region. How has it grown over the years?
Hasan: A little over ten years ago, in 2007-2008, almost no funding was available in the MENA region. There were maybe one or two funds that were doing a couple of deals in Jordan and the UAE.
The first trigger for the regional ecosystem was when Yahoo bought Maktoob in around 2010. That was the largest exit that the region had witnessed. It was in the $100 million range, and it showed people that this is a real asset class. From there, things started to pick up slowly.
We started to see a couple more funds being formed around that point in time, a couple of angel groups and a few things that started to build that ecosystem. But it was still a very niche thing. Over the last three-four years is when the region has come into its own. We started to see a lot more funding, a lot more funds being established, and the governments started to focus on entrepreneurship and startups as drivers of economic growth in the region.
Growth has been on a significant upward trend since then. We saw Talabat’s exit, and the big milestone that happened recently was Careem being acquired by Uber for about $3 billion. We’ve been seeing this progression of the ecosystem over the past few years. And with government programs and fund of funds that are starting to establish more VC funds, angel groups and accelerator programs. There’s never been a better time to be a founder or to be investing in tech and startups in the region than today.
Q. Do you see any challenges with seed-stage investments in the region right now?
Hasan: No, one of the biggest opportunities is investing in seed in the MENA region. There are very few institutional VC funds that are focusing on the seed stage. It gives us an opportunity to find the best deals and invest in them as +VC. The quality and quantity of seed deals across the region have significantly improved over the past two to three years. We’re seeing founders at startups that grew to Series B or C in the past, starting their own companies, and the positive virtuous cycle of building an ecosystem is beginning to kick in right now.
Honestly, I wouldn’t be investing in any other stage except seed. Maybe Series B because there’s a gap there as well. But the seed stage is the most fun to help and have a tangible impact on founders and startups.
Q. What are some of the things that stand out for you when you look at an entrepreneur’s pitch?
Hasan: For me, it’s the founders and nothing else. It’s the founders and their ability to execute and show us not what they’re going to build but show us what they’ve already built, what they’ve already done and what they’ll continue doing with or without us that’s the best founder.
They say, ‘look, we’re going to build this thing. This is what we’ve already done. This is already what we’ve achieved. This is how we’re acquiring customers and users, and revenues. It would be great for you to be on board and help us scale to the next level and get things done’.
The most important thing in the founding team is a bias towards the execution. Founders that are getting things done, not sitting around talking and not doing anything.
Q. What are some of the ways in which founders can signal that they have this bias for execution?
Hasan: It’s difficult to quantify a qualitative aspect like the quality of a founding team. To quantify it best, we have to rely on traction. Are they able to acquire customers and users? Do they know how to grow? These things reflect the founder’s ability to understand their market and their ability to build something. We typically wouldn’t invest in pre-traction companies unless the founders did something in the past.
The second way is by keeping us informed, up to date and letting us know how things are progressing. You’d be surprised how many founders, even after we invest, probably don’t report as much. Good communication, good reporting and good rapport are pretty valuable.
Q. How long does it take for you to decide to fund a startup?
Hasan: We’ve been building out a lot of technology on the back end to process deals at scale quite quickly to get from a startup applying through our site to a decision to invest or not invest within two weeks. That’s the ideal period. As a VC in less than a month, you already know whether you’re in or out.
Q. What’s a deal-breaker for you when you listen to a founder or working on a deal?
Hasan: Founder ethics is a big one, making sure that at the end of the day, we’re getting into a long term relationship with these founders. Founders not being completely forthright with us is an immediate deal-breaker. Other than that I generally don’t like arrogance. If it’s validated, maybe it’s okay, but generally, it’s not validated.
Q. You’ve done deals across FinTech, FoodTech and HealthTech. What are your personal favourites in the region? And what are you most bullish about in the market?
Hasan: We are sector agnostic because it honestly doesn’t matter what sector we’re investing in, as long as we invest in the right founders. My bias is towards finding founders that have found problems that I would never really know about.
I can’t predict what sectors are going to be hot or not because I don’t know. Having said that, there are definitely gaps in the region. Like in FinTech, there’s a gap with access to finance and banking across the region. There’s a lot of issues in logistics and e-commerce. We are nowhere near where we need to be as a region there. There’s also a lot of areas within content that might be interesting to review.
Q. When evaluating a founder, is market size a big deal for you?
Hasan: We do take that into account sometimes. Some founders get a little too narrowly focused on what they’re trying to build. They’re building for a niche within a niche within a niche and there’s no way that that product can ever become something more significant.
But in general, if founders are focusing on a niche now, but they know what is going to be the next step and how they’re going to continue to expand and grow, that’s fine for us. Things that look small might end up being big markets. When Uber was getting started, everyone was looking at it as a percentage of the taxi market, whereas it actually became a much bigger business than what was existing as a market at that point in time.
In the MENA region, we have a lot of big problems to solve that are obvious. Founders should be going after those problems rather than tiny niche problems. In more developed markets like the U.S., you’re seeing more of that niche small market size stuff happening.
Q. If our listeners want to reach out to you, what’s the best way to do that?
Hasan: I’m pretty accessible on most social media channels. If you’re a MENA startup looking for funding you can go on our website and apply. We look at every single deal, and we’ll respond.