Ms Ajlouny is an e-commerce industry professional. She is the co-founder of Fetchr, a Silicon-Valley backed technology company based in Dubai aimed at solving the “no-address” problem hindering growth in emerging markets. Fetchr uses patented technology allowing people to use their mobile phone’s GPS location as their address. Fetchr is the first start-up in the Middle East to be funded by the largest and most successful venture capital firm in Silicon Valley, NEA. Ms Aljouny, on behalf of Fetchr, was on the cover of Forbes Magazine in the Middle East, which named Fetchr the #1 startup in the region. Prior to Fetchr, she founded Bonfaire, an e-commerce discovery platform for luxury footwear and accessories. Bonfaire was acquired in 2013 by fashion e-commerce giant Moda Operandi, owned by LVMH and Condé Nast.
She shares her insight into the region’s investment ecosystem in an exclusive interview with Naseba.
How has the start-up scenario changed with regard to business cases in the technology vertical?
I think there’s been a rise in what we in Silicon Valley would call “FOMO” – fear of missing out. I think that as more companies have an exit and more people pass on investing in them, the more this FOMO (which is very traditional in Silicon Valley) will penetrate this market. This, in turn, will make people take these start-ups a bit more seriously since they are seeing exits. As more and more companies exit and people hear about it, the more this energy will infiltrate and people will think “Hey, wait a minute… there are a lot of people here with good ideas. They need some backing with venture money, and we need to listen to them.”
With the exits from last year, do you think the market is becoming more mature right now?
No, not really mature – but more interesting. There are start-ups being built here that are turning into billion-dollar companies and exiting. For example, the recognition of a company like Amazon entering this region was huge, and all of a sudden it was like “Wait a minute.” Souq.com started here and exited, and what I mean by exited is that someone acquired them in an M&A deal. That makes people take notice that there are start-ups here that are exiting with Silicon Valley investors.
How are start-ups going to move forward when it comes to investors?
There’s an ecosystem that’s slowly growing here. Dubai is a very stable place with a lot of existing infrastructure built, so it is a natural place for start-ups to come. We’re showing that there’s no other region where Amazon has stepped in and put a stake in the ground. The infrastructure for startups here is growing, and we’re at the very beginning of this growth and the recognition of companies turning into billion-dollar enterprises. We’ve only seen the very tip of the iceberg. Companies like Fetchr and Souq.com are putting a stake in the ground and saying “Hey, look – we just got investment money from Silicon Valley investors, we just raised another round of funding, and we’ve got Al-Futtaim investing in us.”
As more exits come out of this region, it will attract more focus and attention. This is just the beginning.
You said this is just the beginning, and you have been in this region for quite some time. How do you think the funding scenario has changed over time? If I’m not wrong, you got your first round of funding from the US.
Lead investors set the terms for the deal, they set the valuation of the company. The lead investor is very important, because they take a look at what you have and say how much your company is worth, and then they see who else is willing to put their money on the table. The more substantial the lead is, the better the reputation of the lead. For example, our lead investor was New Enterprise Associates. What made people pay attention to Fetchr was not that we got funding from Silicon Valley, but that our lead investor is the number one venture fund in Silicon Valley, with the most IPOs and M&A deals in the history of not only Silicon Valley but the world, and the largest fund. So I believe this caught the attention of local investors, who thought “Wait a minute, you know the guys are investing in somebody in our own backyard, and these guys have the highest track record. Maybe we should take a good look.” So your lead investor is very important, as is their reputation. They set the terms of the deal and they get other people to notice if they have that reputation. I think local investors understand that, and they follow the lead. And by the way, when you’re raising money in Silicon Valley that is the number one question asked: “Do you have a lead?” Everybody always asks that question, and most people still by saying “No, not yet.” And a lot of investors will tell you “Well, come back to me when you have a lead.” Because nobody wants to put the first dollar down, so they’re always looking for someone else to validate the deal and then they follow suit. It’s definitely a herd mentality, and there’s a herd mentality here in Dubai as well.
What are the challenges that a company has to face when it deals with Middle Eastern investors – other than the fact that the regional investment ecosystem is quite new?
Oh, bureaucracy. Without a doubt, bureaucracy is the number one obstacle and I say that all the time. You know, startups have no money, they’re constantly begging for money. I use the word “begging” although the technical term is pitching – because you’re talking to anybody and everybody, trying to get them to listen to your idea, and you’re basically begging for money. You’re poor beforehand, and you watch every single dollar. Usually, start-ups in the United States start in a garage using their family’s Wi-Fi, and you can get your license online for $200. Here, the cost of infrastructure is the same for every company, whether it’s IBM or for Apple or another multi-billion dollar company, there’s no difference. So here, if you’re running a tech start-up as a young kid with a great idea – let’s say you’re 25 years old, you’ve got no money, you’re begging for money – then you’re asked to follow the same guidelines and standards as a publicly traded company coming into this region with a billion dollars. I think that is the biggest obstacle for start-ups in this region, and I think this is what we need to focus on. Bureaucracy is the number one killer of start-ups, and there needs to be some infrastructure set up that helps these start-ups grow and thrive because they just don’t have the same resources as an established company.
Do you think that the investors now recognise this challenge and try to help start-ups overcome these obstacles?
They can’t because the law is the law and we all need to abide by it. Investors can help with making introductions and opening doors – whether it’s using their black book or their database. And these introductions help to expand your business; you definitely need local investors. People ask me all the time, “Why did you get Silicon Valley money?” Silicon Valley gives you credibility, but you definitely need local money, because local investors are the ones that are here on the ground. They know the infrastructure, they know the people, they’re the ones who are going to help you grow your business and open the right doors. So you absolutely need them, without a question. You need a mix of investors that give you credibility and ones that give you the contacts to help you grow your business.
I just want to touch on your partnership with Majid Al-Futtaim.
They are proper investors in the fund, providing local venture capital. But they’re also one of our clients, so it’s two different things. They were our clients before they were investors.
How much do you think these CVCs are going to affect our ecosystem?
They have funds and they can invest in start-ups. So they’re acting as venture capitalists, and the family funds have money set aside for start-ups. I think they’re slowly doing that, but at the end of the day, if you have a business model that could possibly help them and it’s in their best interest to invest in you, they will. Take us as an example – where a delivery company, and Majid Al-Futtaim is in the business of retail, whether it’s Carrefour or Geant, so of course investing in a shipping company makes sense because there’s an alignment.
So it’s more about the synergy rather than financial return?
It’s about both – actually I don’t think you can have one without the other. I think it’s about both synergy and financial return.
For companies that are not based in the Middle East – what are the advantages and challenges you think they might face when they approach a Middle Eastern investor?
People have asked me all the time: “Why did Silicon Valley invest in the Middle East? They don’t ever invest in the Middle East.” And they don’t. It’s because they have enough talent where they are. Everyone comes to them because they’re in Silicon Valley. I think there’s so much talent coming into Silicon Valley that they don’t need to hunt for deals outside the region, so I think for people outside the region to come in here, you really have to have a value proposition that makes sense for them, not only in terms of alignment but also in terms of profitability. In the long term I think you need to find a solution that’s not just local, not just a regional solution, but a global solution. Everybody puts together PowerPoint presentations, but I think at the end of the day you need to show that you have a business model that can scale because these investors are giving you money to make money. So my advice to a lot of young startups is: “Yes, you have a great idea but where’s your exit? How are going to exit? Where is the potential for the investors to make money on their money?” I think the ecosystem right now is still a little too young for outside companies to come here looking for funding unless you’re looking for funding for a fund.
I have seen and we’ve been dealing with a lot of companies who come into the region to look for money for their fund, and to look for partners. I think because of what’s happening now with Souq.com, people are realizing that there are investors here. So start-ups from neighbouring Arab countries think that there is some funding here because they’re hearing all these stories now in the news and Dubai is such a hub now for start-ups.
On October 31, 2017, Naseba will be hosting the 3rd MENA Private Equity and Venture Capital Summit in Dubai, United Arab Emirates. The primary focus of the summit is to offer a deal flow platform that will introduce representatives of sovereign wealth funds, traditional PE and VC firms, regional conglomerates and family-owned businesses to innovative business cases from around the world.
The summit will combine insightful panels led by key regional and international tech investors and experts and pre-scheduled introductory meetings between up to 30 healthcare, life science and ICT investment opportunities and key regional investors and strategic partners, to raise capital and form strategic and commercial partnerships, in an informed and exclusive environment.
To access the Middle Eastern investors and strategic partners submit your business case here,
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