Sharikat Mubasher Expert Thoughts

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Jul 2, 2024

Why do you need an accountant for your business?

Noha Gad

 

 

Starting and managing a business is a multifarious endeavor that requires a clear vision, hard work, and expertise in various areas. Handling the financial intricacies of a business can be overwhelming and complex, this is where the expertise of an accountant becomes indispensable.

The role of professional accountants goes beyond tax filing; they analyze your finances, create a forecast for the coming year to ensure your business is healthy and prosperous, and help you navigate financial challenges, ensure compliance, and foster growth.

 

Why do you need an accountant for your business?

Poor financial management can have severe and far-reaching effects on a business, making a direct negative impact on the sustainability and growth of your business. Owners of businesses, notably the small-sized ones, must hire a professional accountant to help them:

  1. Improve cash flow. Effective cash management includes how a company manages its operations or business activities, financial investments, and financing activities to maintain positive cash flow. Inadequate financial management can lead to cash flow issues, making it difficult to cover day-to-day expenses, pay employees, and settle debts. A good accountant will help owners have credit control and cash management policies in place so that they have all the possible funds and information available.
  2. Reduce workload. Hiring a professional accountant will empower owners to manage operations by recommending process improvements, helping them take over financial and tax obligations, and introducing them to tools that can save them time and money.
  3. Get valuable business advice. Accountants own the right skills, expertise, and tools to serve as business advisers. Leveraging their wide expertise, professional accountants can provide an unbiased sounding board for your ideas, warn you of potential risks, and alert you to great opportunities. Their network can also add value to your decisions by helping you connect with key connections that can help you implement complicated strategies and solve complex problems.
  4. Manage growth sustainability. The expertise of a good accountant will be valuable when you seek funding and create incentivizing pay packages for employees. Additionally, accountants can help you react quickly and effectively to surprising growth and turn it into an advantage.
  5. Comply with regulations and keep pace with emerging technologies. A competitive accountant helps you visualize major issues the business faces due to economic uncertainties, trend changes, and new regulations. They help you use effective financial forecasts, smart solutions, growth management tools, and predictive performance reporting to tackle these challenges.
  6. Measure business performance. Performance measurement plays a crucial role in the growth and success of your business. Setting objectives and measuring them against results can be key to determining if a business will succeed or fail. Accountants can develop performance evaluations to get your business to understand its actual performance against the objectives it set for itself, using these evaluations to achieve long-term growth and sustainability.

Finally, accountants’ expertise in financial management, tax compliance, and strategic planning provides a solid foundation for making informed decisions and fostering growth.

Entrusting your financial affairs to a professional accountant offers you the chance to focus on expanding your business while ensuring that your financial health remains robust and resilient.

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Jun 27, 2024

Ten steps to attract investors to your startups

Shaimaa Ibrahim 


Securing necessary fund resources is pivotal for establishing a startup. This requires entrepreneurs to have a wide and deep knowledge of key factors to lure investors to invest in their startups.

Successful entrepreneurs must be able to define their projects' strengths and weaknesses and determine what differentiates them from others. All of this makes your startup more attractive to potential investors.

Obtaining the necessary funding is one of the key challenges facing entrepreneurs to start their projects or expand their businesses; they must comply with some stringent requirements to get loans from a bank or a financial institution. Hence, entrepreneurs search for investors to invest in their projects, and to do so, they must know how to attract investors to their startups.

 

Here are ten steps to attract investors to your startup:

  1. Come up with innovative and unique ideas for your project. This does not mean innovating a brand-new product or service; however, you have to differentiate your offerings from other competitors. 
  2. Provide necessary data that show your strengths to investors, i.e., gross profit margin, revenue growth, and plans to attract customers.  
  3. Having a strong business plan helps investors believe in your development plans and their effectiveness. 
  4. Market your product or service to investors actively and showcase its importance.
  5. Use data and numbers to persuade investors about the potentiality of your product or service.
  6. Prove that investing in your startup is a golden opportunity with high-growth potential.
  7. Discuss with the investor the reason why you need funding and how you will use it.
  8. Prove that your startup has a vigorous leadership team that includes smart leaders and strategists with strong financial acumen.
  9. Draw up a robust and comprehensive marketing plan that introduces your product or service to targeted customers and explains how to get them.
  10. Give deep insights about your startup’s growth as investors prefer investing in scalable and future-focused startups.

 

Translation: Noha Gad 

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May 26, 2024

Micro-VC Funds vs. Traditional Venture Capital: Differences

Kholoud Hussein 

 

As professionals in the venture capital (VC) and private equity (PE) industries, understanding the differences between different investment vehicles is crucial. In this article, we look into the key differences between micro-VC funds and traditional venture capital, shedding light on their unique characteristics and exploring whether micro-VC funds can outperform their traditional counterparts.

 

1. Investment Size

  • Micro-VC Funds: These small funds typically invest smaller amounts, ranging from a few thousand dollars to a few million dollars. Their agility allows them to support early-stage startups without overwhelming capital infusion.
  • Traditional Venture Capital: In contrast, traditional venture capital funds wield larger financial firepower. Their investments often fall within the range of several million to hundreds of millions of dollars. These substantial sums fuel growth and expansion for more established companies.

2. Stage of Investment

  • Micro-VC Funds: These funds primarily focus on seed-stage and early-stage companies. These startups are at the inception phase, often lacking a proven business model or significant revenues. Micro-VCs take calculated risks by backing these fledgling ventures.
  • Traditional Venture Capital: Traditional VCs tend to invest in later-stage companies. These firms have already demonstrated traction, possess a validated business model, and are ready to scale. Think of them as seasoned players in the entrepreneurial game.

3. Investment Strategy

  • Micro-VC Funds: Micro-VCs roll up their sleeves and get hands-on with their portfolio companies. They provide strategic guidance, mentorship, and operational support. Their collaborative approach aims to nurture startups through critical growth phases.
  • Traditional Venture Capital: Traditional VCs adopt a more passive stance. While they bring capital and expertise to the table, day-to-day operations remain in the hands of the company’s management team. Their involvement tends to be less intensive than that of micro-VCs.

4. Risk Tolerance

  • Micro-VC Funds: These funds embrace risk. They understand that early-stage ventures inherently carry a higher likelihood of failure. Their risk appetite allows them to explore uncharted territories and back disruptive innovations.
  • Traditional Venture Capital: Traditional VCs exhibit a more risk-averse attitude. They seek companies that have already achieved some level of success and market validation. Their risk tolerance aligns with their preference for proven track records.

5. Fund Size and Structure

  • Micro-VC Funds: These funds are typically smaller in size compared to their traditional counterparts. With fewer partners and a lower amount of capital under management, micro-VCs maintain agility. Their investment horizon spans around three to five years.
  • Traditional Venture Capital: Traditional VCs manage larger funds, often exceeding $100 million. Their investment period extends over a longer horizon. The depth of their pockets allows them to play the long game.
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May 23, 2024

What is meant by Micro-VCs?

Kholoud Hussein 

 

What are micro-VCs?  

 

Micro-VCs, or micro venture capital firms, are a type of venture capital firm that invests smaller sums of money into early-stage startups than traditional VCs. They typically invest between $25,000 and $500,000 per deal, and they have a shorter time horizon than traditional VCs (usually 3-5 years).

 

Micro-VCs have become increasingly popular in recent years, as they offer some advantages for both startups and investors. For startups, micro-VCs can provide the early-stage funding that they need to get off the ground. They can also offer valuable advice and mentorship, as many micro-VCs are staffed by experienced entrepreneurs and investors.

 

As for investors, micro-VCs offer the opportunity to get involved in early-stage startups with high growth potential. However, it is important to note that micro-VC investments are also riskier than traditional VC investments. This is because startups at this stage are more likely to fail.

 

The rise of Micro VCs is attributed to several key factors:

 

  1. The Lower Capital Threshold
  2. Fostering Innovation Through Risk Tolerance
  3. Agility and Responsiveness in a Dynamic Market
  4. Empowering Regional Development Through Localized Investment

The rise of Micro VCs also signifies a broader shift towards regional investment. With smaller funds, Micro VCs are more likely to invest locally, bolstering regional startup ecosystems and driving economic development. This localization of investments fosters community engagement, encourages local entrepreneurship, and facilitates the creation of specialized industry hubs across diverse geographical locations.

 

If you are considering investing in a micro-VC, there are a few things you should keep in mind. First, you need to make sure that the micro-VC has a good track record of investing in successful startups. Second, you need to be comfortable with the level of risk involved in these investments. Finally, you need to make sure that the micro-VC's investment philosophy aligns with your own investment goals.

 

How Can Startups Find and Approach Micro VC Funds?

 

The journey of finding micro-VCs and closing a deal includes: 

 

  1. Research: Startups must identify potential micro-VC firms based on factors such as their size, sector, focus, and location. Once identified, startups should create a list of micro-VCs that align with their needs. 
  2. Outreach: Startups can reach out to potential firms through email, social media, or in-person meetings. Leveraging one’s network to find potential leads also helps. 
  3. Pitch: Present your startup to interested micro-VC firms, showcasing its value and potential for investment.
  4. Negotiation: If a micro-VC firm expresses interest, negotiate the investment terms, including funding amount, equity, and deal specifics.
  5. Close: Finalize the deal by signing the investment agreement and receiving the funds.
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May 23, 2024

Yagoub: Kharja plans to secure $500,000 to expand footprint in Saudi Arabia

Exclusive – Sharikat Mubasher: The Saudi-based intuitive mobile application Kharja aspires to expand its footprint in Saudi Arabia to meet the burgeoning demands of the entertainment sector, in alignment with Vision 2030. To achieve this goal, Kharja plans to raise $500,000 to broaden its operations in the Kingdom.

 

Sharikat Mubasher interviewed Co-founder Khalid Yagoub to learn more about Kharja’s planned fundraising and discover the application’s advantages and offerings in the Kingdom.

 

What differentiates Kharja from other local and global social networking applications?

The Kharja application provides an exceptional and seamless experience for managing and simplifying hangout plans in the Kingdom. It allows users to use a shareable link with family members and friends to invite them to join the hangout.

It also suggests places that fit users’ styles based on their preferences, ensuring an excellent and more interactive experience.

 

What are the advantages of using Kharja in Saudi Arabia?

Kharja application plays a leading role in the Kingdom capitalizing on the increased focus on the entertainment sector within the ambitious Vision 2030. Unlike traditional social networking applications, Khaja specializes in managing and exploring entertainment activities, in addition to providing tailored suggestions and facilitating social gathering activities to enhance users’ experience. Our offerings underpin Kharja’s capabilities and leading role in Saudi Arabia as they strategically align with the national objectives. 

 

What are Kharja’s profit sources?

We earn profits from several sources, notably monthly and annual subscriptions for commercial businesses. These subscriptions enable businesses to manage their profiles on the application and benefit from the tailored promotional features.

Further, the application adopts a smart bidding system for targeted ads; it generates profits from active ads that reach the target audience at the right time.

 

What are the recent funding rounds that Kharka recently raised?

In April 2023, we raised $200,000 in a pre-seed round from Flat6Labs.

 

Do you plan to raise more funding rounds within the upcoming period?  

We plan to complete the pre-seed round to raise our capital. Also, we plan to secure investments of $500,000 to expand our operations, update the application, and broaden our user base by following advanced marketing strategies.

This funding will fuel Kharja’s strategic plans to grow rapidly in the Saudi market.

 

How does Kharja support tourism in the Kingdom?

Kharja provides tourists with an interactive platform to explore activities and discover different tourist hotspots in the Kingdom; it suggests cultural events, tourist attractions, and entertainment activities that match their interests, and provides recommendations based on users’ preferences to enhance their experience.

Moreover, Kharja contributes to promoting tourism in the Kingdom as it helps tourism agencies reach more customers through targeted ads.

 

Translation: Noha Gad

 

 

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May 13, 2024

Pre-seed funding Vs. Seed funding: What is the Difference?

Kholoud Hussein 

 

Timing, amount of money raised, valuation, and product or development stage are the four defining factors that determine the stage of funding you are in. 

During pre-seed rounds, your company won’t have a trail of financial records to showcase company success. Instead, you’ll need to show investors that you have planned out your company’s journey toward success with detailed steps and an MPV.

 

Companies are ready for seed funding after gaining traction and proving market needs. Additionally, you have a well-developed business strategy and a fully developed product with early customer adoption. Founders use funding through seed rounds to scale businesses and begin production.

 

Pre-Seed Funding

 

The earliest stage of funding a new company comes so early in the process that it is not generally included in the funding rounds. Known as "pre-seed" funding, this stage typically refers to when a company's founders get their operations off the ground. The most common "pre-seed" funders are the founders, close friends, supporters, and family.

 

Depending upon the nature of the company and the initial costs of developing the business idea, this funding stage can happen very quickly or take a long time. It's also likely that investors at this stage are not investing in exchange for equity in the company.

 

Seed Funding

 

Seed funding is the first official equity funding stage. It typically represents the first official money a business venture or enterprise raises. Some companies never extend beyond seed funding into Series A rounds or beyond.

 

Seed funding helps a company finance its first steps, including market research and product development. With seed funding, a company has assistance in determining what its final products will be and who its target demographic is. Seed funding is generally used to employ a founding team to complete these tasks.

 

 

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May 12, 2024

What is series A, B, and C funding?

Kholoud Hussein 

 

Series A, B, and C are funding rounds that generally follow "seed funding" and "angel investing," providing outside investors the opportunity to invest cash in a growing company in exchange for equity or partial ownership.

 

Series A, B, and C funding rounds are each separate fund-raising occurrences. The terms come from the series of stock being issued by the capital-seeking company.

 

How Does This Series Work? 

 

Before delving deeper into how a round of funding works, it's necessary to identify the different participants. First, the individuals are hoping to gain funding for a new business. Businesses tend to advance through funding rounds; it's common for a company to begin with a seed round and continue with A, B, and C funding rounds.

On the other side are potential investors. While investors wish for businesses to succeed because they support entrepreneurship and believe in the aims and causes of those businesses, they also hope to gain something back from their investment.

 

Thus, nearly all investments made during one or another stage of developmental funding is arranged such that the investor or investing company retains partial ownership of the company they are funding. If the company grows and earns a profit, the investor will be rewarded commensurate with the investment made.

 

What Is Series A Funding?

 

The term gets its name from the preferred stock sold to investors at this stage. In this round, it's important to have a plan for developing a business model that will generate long-term profit.  Typically, Series A rounds raise between $2 million and $15 million, but this number varies due to many circumstances.

 

In Series A funding, investors are not just looking for great ideas. Rather, they are looking for companies with great ideas and a strong strategy for turning that idea into a successful, money-making business. For this reason, it's common for firms going through Series A funding rounds to be valued at up to $50 million. 

 

What Is Series B Funding?

 

Series B rounds are about taking businesses to the next level, past the development stage. Investors help startups get there by expanding market reach. Companies that have gone through seed and Series A funding rounds have already developed substantial user bases and have proven to investors that they are prepared for success on a larger scale. Series B funding is used to grow the company so that it can meet these levels of demand.

 

What Is Series C Funding?

 

Businesses that raise Series C funding are already quite successful. These companies look for additional funding to help them develop new products, expand into new markets, or even acquire other companies. In Series C rounds, investors inject capital into successful businesses to receive more than double that amount back. Series C funding focuses on scaling the company, and growing as quickly and successfully as possible.

 

Most commonly, a company will end its external equity funding with Series C. For the most part, companies gaining up to hundreds of millions of dollars in funding through Series C rounds are prepared to continue developing globally.

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Mar 12, 2024

Al Hekail: Saudi Arabia magnets local, foreign fintech entrepreneurs

Shaimaa Ibrahim

 

One of Saudi Arabia’s ambitions is to become a global fintech hub. For this aim, the Kingdom enhanced the regulatory framework and developed competencies of the fintech sector, in addition to increasing the number of fintech companies in the Kingdom. 

BwaTech is one of the fintech companies licensed by the Saudi Central Bank (SAMA) to provide financial services, enabling corporates that deal with more than one bank to implement several banking processes through one platform.

In this regard, Sharikat Mubasher held an interview with Hashem Al Hekail, Co-Founder and CEO of BwaTech, to learn more about the role of the fintech sector in fostering small and medium-sized enterprises (SMEs) in alignment with the futuristic Vision 2030.

Al Hekail also showcased the products provided by BwaTech to enhance the entrepreneurship ecosystem in Saudi Arabia and highlighted the promising investment opportunities available in the Saudi fintech sector.

 

What are the services provided by BwaTech to foster the fintech sector in Saudi Arabia? and what are the products that BwaTech offers for SMEs?

Entities and corporates of different sizes usually have multiple banking relationships and we, at BwaTech, provide advanced tech products to enable them to conduct their transactions with different commercial banks safely and seamlessly online via one platform, instead of using the e-portal of each bank. We offer a full suite of products, notably:

Cash Management

This product enables corporates to consolidate their cash balances and transactions with different banks in one interface, in addition to processing various payments and transfers across all banks in a secure and efficient style.

Letters of Guarantees 

This product automates the full life cycle of the Letter of Guarantee (LG) and enables corporates and banks to exchange LG actions online. It offers quick delivery of LG from the issuing bank to the beneficiaries and allows beneficiaries to release or confiscate an LG issued in its favor online, in addition to identifying existing transactions and LGs between both parties. 

This product currently serves large corporates and entities that receive massive numbers of LGs, but it will serve SMEs that request issuing LGs once SAMA issues related legislation and standards.

It is worth noting that all services are provided via the Bwa Business platform either through the website and the applications or through the application programming interface (API) that links the corporate’s internal system to the platform. 

 

How does the Bwa Business platform enhance corporates’ financial digital transformation?

Earlier, customers had to visit the bank’s branch to finish their transactions, but later on, most banks enabled customers to complete their financial transactions through e-portals.

However, corporates having multiple banking relationships found it difficult to deal with several portals featuring different standards and requirements. Hence, BwaTech provided inclusive portals to tackle these challenges.

The inclusive portals are considered the second wave of the digital transformation following the emergence of digital portals for each separate bank.

In regards to the question, the unified portals are a kind of digital transformation for both banks and corporates as banks will focus mainly on attracting deposits and funding rather than investing in digital portals. Meanwhile, fintech companies will be responsible for developing digital portals and services that provide access to financial services. 

 

Can you please share more about the importance of integrating Saudi corporates with banks and how this enhances the business sector?

Each corporate has its own system to manage its resources. While implementing any financial transaction, the corporate finds it necessary to process the transaction through two procedures; its systems and banks, and both require a group of employees to prepare and approve the transaction. Additionally, errors may happen as the transactions are being recorded in the corporate’s systems separately from the bank.  

Through electronic integration, the transaction is recorded only once either in the corporate’s systems for payments or in the bank’s system for deposits. In both scenarios, systems electronically align with each other to record the transaction, saving too much effort and reducing errors. The electronic integration also enables the corporate to have all financial statements available immediately in its systems, raising the operational efficiency of its businesses.

On the other side, electronic integration is an expensive and complicated process that requires specific expertise and becomes more complicated when the company needs to integrate with several banks. Here appears BwaTech’s role in facilitating this process as the corporate only needs to connect with BwaTech to be integrated with all banks without any extra effort. 

 

How do you see the future of open banking in Saudi Arabia?

The Saudi banking sector is evolving and SAMA promotes open banking to explore potential opportunities to provide new products and services, increase competitiveness, and facilitate the entry of fintech companies

Open banking is the system of allowing access and control of customer banking and financial accounts through third-party applications. Looking at the services provided by the National Information Center (NIC) to individuals, it became easy for banks to have the customer’s permission online, thus, I believe these services will boom in the individual sector. 

In contrast, dealing remotely with corporates in general, except for one-person companies, is not as easy as individuals as corporates find some challenges in opening accounts and building banking relationships. Therefore, developing a centralized system is crucial to facilitate ascertaining the reliability and validity of required documents as well as the corporates’ representatives.

The efforts of the Ministry of Commerce and the Federation of Saudi Chambers to tackle such challenges are remarkable, however, more is needed in regard to the corporates’ representatives and their specialties. I urge the ministry to launch an initiative to fill this gap in collaboration with SAMA and the NIC.

 

Can you please share more details about BwaTech’s achievements in 2023 and its plans for 2024?

We primarily focused on building the systems infrastructure, developing some products, and obtaining necessary licenses, but in 2023 we started launching our services.

Our LG ecosystem yielded good results as it facilitated paperless communication between the bank and the beneficiary, which accordingly attracted most banks to join the LG ecosystem that BwaTech manages.

In 2024, BwaTech's plans include broadening clientele and launching some new products. 

 

What are the company’s future plans and investments in Saudi Arabia? and do you plan to expand businesses beyond the Kingdom?

We target expanding our products. For instance, the LG product is planned to cover the field of document accreditation locally and globally, in addition to other services related to accounting and payments.

We are currently working on launching a new product licensed by the Capital Market Authority (CMA), through our subsidiary, to distribute investment and real estate funds. We also plan to partner with other service providers to offer integrated services to our customers.

Expanding our footprint beyond the Kingdom is on the cards, but it is better now to focus on the Saudi market.

 

How do you evaluate the performance of the Saudi fintech sector in 2023 and what are the main challenges the sector faces?

The performance of the Saudi fintech sector is promising; it provides valuable products and services and strives for more. 

The Kingdom became a destination for local and foreign entrepreneurs as well as distinctive initiatives, backed by the endeavors of regulatory and supervisory entities to foster the sector. However, the sector faces a lot of challenges notably the high cost at the beginning with zero returns.  

 

In your opinion, what are the promising opportunities in the Saudi fintech sector?

There are several promising opportunities to develop innovative banking solutions through open banking, leveraging cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and blockchains. The cybersecurity and data protection fields also enjoy a lot of opportunities to develop new methods to detect fraud and prevent cyberattacks.

 

What do fintech startups in the Kingdom need to thrive? and how do entrepreneurs contribute to realizing Vision 2030’s objectives?

They need a set of elements: reliable cloud services, data security services, big data analytics, and AI, in addition to regulatory sandboxes and laws that stimulate their growth and attract investors.

Government entities and regulatory organizations are working together to provide a robust framework that stimulates innovation and bolsters the fintech sector.

Entrepreneurs can also contribute to realizing Vision 2030’s goals by providing groundbreaking ideas and solutions that enhance digital transformation, improve the user experience, and meet market needs. Similarly, startups participate in creating new jobs and developing human capabilities, in alignment with Vision 2030’s localization goal.

 

How do weigh the Kingdom’s efforts to bolster the fintech sector and boost digital transformation?

Fostering the fintech sector is one of the key goals of Vision 2030 and the concerned entities in the Kingdom spare no effort to achieve this goal and drive digital transformation. For instance, SAMA and CMA launched a sandbox to explore innovative technologies and provide the necessary support to nurture innovative entrepreneurs, in addition to introducing regulations that facilitate their businesses.

Nor can we forget the pivotal role of Fintech Saudi to provide entrepreneurs in this promising sector with the guidance, consultancies, and support they need.

Moreover, the Ministry of Communications and Information Technology is a key player in enhancing the growth of fintech startups.

 

Translation: Noha Gad

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Feb 21, 2024

Talhouni: 35% of Nuwa Capital portfolio is in Saudi Arabia

Kholoud Hussein  

 

Dubai and Riyadh-based venture capital firm Nuwa Capital is an investment platform aims to redefine the relationship between founders and capital by providing a progressive founder-centric approach to invest in emerging markets.

Sharikat Mubasher meets Khaled Talhouni, the Managing Partner of Nuwa Capital, to know more about Nuwa Capital’s main objectives in enhancing the entrepreneurship ecosystem in the MENA region, share insights on the targeted startups over the coming period, and discuss the company's future expansion plans in Saudi Arabia.

 

What are Nuwa Capital’s main objectives?

Nuwa Capital is an investment platform focused on investing in the innovation and entrepreneurship ecosystem MENA and Turkey. Primarily we invest in founders building companies that are reshaping their industries and solving for large and systemic problems in our economies. 

Through our $100 million fund (Nuwa Venture Fund I), we support early-stage startups to build successful businesses in the markets they operate in, while also exploring growth opportunities in regional markets. 

We are sector agnostic and have made investments across various sectors including foodtech, new age commerce, and fintech. 35% of our investments have been in Saudi headquartered companies. 

 

How does Nuwa Capital help grow startups across the Middle East?

The concept of building bridges is fundamental to how we operate. As investors, we want to see startups from the region, not limit themselves to just their home markets, but expand across the region and beyond.  The region’s startup ecosystem is at a stage where we need to scale beyond borders and we believe that we are on the cusp of seeing our founders go from the Middle East to the world. 

We don’t focus only on investments, but on building thriving businesses that can reshape the economies they operate in. Beyond capital, our portfolio companies benefit from our Value Creation offering where we provider founders with subject matter expertise through dedicated subject matter experts in technology, product, recruitment, marketing etc to unlock growth potential and streamlined operations

Lastly, we explore ways to create value for our Limited Partners (LPs) and startups by enabling opportunities for them to benefit from each other.

 

How about the company’s business in Saudi Arabia?

We not only have our roots in Saudi Arabia, but the majority of our portfolio is based there. We are anchored by a number of Saudi based institutions, corporates and high net-worths/family offices

In 2024 we have plans to aggressively deploy capital from our $100 million fund and Saudi startups are on the top of our list. We will also explore opportunities for follow-on investments in our existing portfolio as they continue to scale both regionally and locally in KSA

 

Who are Nuwa Capital’s top startups in Saudi Arabia? And who are the targeted startups over the coming period?

We’ve invested in a number of companies in Saudi Arabia including such companies as Eyewa, Calo, Raqamyah, Edfa Pay, Speero and others. Besides that a number of our startups are leveraging our local expertise to make their entry into Saudi Arabia, the region’s largest economy.

Founders at all stages recognise the significant growth opportunity in the Kingdom, aligned with its economic diversification agenda and the leadership’s vision to shape a digital economy. 

While we can’t disclose startups we plan to invest in over the coming period, we can tell you that we remain extremely bullish on the market. Beyond early stage investing, we have recognised significant gaps in capital availability for Series B and beyond companies. Growth stage funding remains a major challenge across the region and Saudi Arabia will attract bigger deals in 2024 as valuations moderate and investors seek new exit paths. 

 

What are the company’s plans for 2024? And what are the expected investments?

Since our launch in 2020, we’ve deliberately focused on early-stage companies and did not rush into making investments. This was due to rising valuations and unsustainable business models in the market. Today we have approximately 60% of our fund to be deployed and in 2024, you’ll see us being much more active in the market. 

We’ve also been analysing the gaps in the market with regards to capital flow. Across the region, data shows that the largest investments are made in early-stage companies. Growth stage businesses on the other hand have limited access to funding, given that there are few players who write bigger cheques. While we already make follow-on investments in existing portfolio companies, we will also explore later stage investment opportunities. 

Lastly, 2024 for Nuwa Capital will be about building bridges. How can we as a firm, take regional startups, into new markets. This includes helping innovative companies enter Saudi Arabia, while taking Saudi entrepreneurs to the region and the rest of the world. True growth can be achieved only by scaling in new markets and we are well positioned to unlock this for our portfolio. 

 

What are the challenges facing Nuwa Capital in the Saudi market? Is there a plan to have a branch in Saudi Arabia?

We do have a presence in KSA through our partners in Alfaisaliah Group and a team on the ground in the kingdom.

 

Does the Saudi startup ecosystem see a paradigm shift?

There’s never been a more exciting time to startup in Saudi Arabia. This is primarily because of the environment that the leadership has enabled. Today it’s much easier to set up a business, attract talent and build for large regional problems from Saudi Arabia. It’s no surprise that Saudi Arabia attracted the most startup capital in the last year. 

In terms of a paradigm shift, we believe that more founders will start to move to the Kingdom. We are also seeing the emergence of Saudi national talent, including women, whether they are fantastic coders or world-class operators who can build thriving businesses. 

Furthermore, thanks to partners such as SVC and Jada fund of funds, Saudi attracted the highest amount of venture capital in the MENA market for the first time since records have been created. This is a critical milestone in the development of both the Saudi and regional ecosystem

 

What are the Saudi sectors that might witness a growth in startups over the coming period?

Fintech is one sector where we expect to see a number of opportunities. The Central Bank has set up a world-class system to allow for fintech founders to build new products for the market. We are excited about the digitalisation of financial services in the Kingdom, whether it is for everyday transactions, investments or just regular savings. 

As technology seeks to transform large traditional industries, real estate and property is another one where we’ll see change. The Kingdom has a significant gap in housing and hotel availability to manage the influx of new residents, business visitors and tourists. This is where startups like Silkhaus are working to build the short-term rentals sector. 

We also expect to see growth in SaaS businesses as entrepreneurs build solutions for local challenges. Similarly next gen commerce businesses like Eyewa and Homzmart will thrive as consumer spending increases and the overall economy continues to grow. 

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Feb 15, 2024

Types of Startup Funding Rounds

Shaimaa Ibrahim

 

Startups often opt for funding rounds to raise more capital by selling some shares for investors to get off the ground and expand their businesses in the market. In turn, investors acquire part of the startup’s ownership and revenues.

Startups at different stages can raise funding rounds. There are five types of rounds depending on the startup’s maturity stage, types of investors, and the purpose of the round:

Pre-seed round

This stage typically refers to when a company's founders get their business off the ground after coming up with ideas and conducting a feasibility study. At this stage, the most common funders are the founders themselves or business incubators.

Pre-seed startups must have a clear vision and revenue forecasts. 

Seed round

The seed round is the first official equity funding stage. Investment funds and angel investors are the most likely to participate in this round as they provide funding in exchange for some of the company’s shares.

Series A 

Startups often raise Series A rounds to secure larger funding to accelerate their business growth and reach more customers; meanwhile, the investor targets injecting investments into innovative startups to gain more profits.

Participants in the Series A rounds usually include crowdfunding firms, investment funds, and business clubs.

Series B

By this stage, the company will probably have a higher valuation than before and aspires to expand its presence and tap into new markets. 

Companies usually dedicate the proceeds to carry out searches and analyses as well as marketing campaigns. 

Participants in the Series A rounds are likely venture capital (VC) firms. 

Series C

A Series C round is required when a company is ready to go for rapid growth with proven success in the market. Companies usually raise this type of round to seize larger market share, make acquisitions of competitors, or for major expansions.

Through Series C rounds, companies can secure massive capital from investment banks, equity firms, and investment funds.

 

Translation: Noha Gad

 

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Feb 12, 2024

How angel investors foster startups?

Shaimaa Ibrahim

 

Startups depend on various sources to secure the necessary funding for their businesses, notably the angel investors who play a crucial role in the startup ecosystem. 

An angel investor is an individual who provides funding for startups at a very early stage, once or in a consecutive manner, in exchange for equity or ownership in the company.

Along with the financial backing, angel investors often provide mentorship and support entrepreneurs to grow their startups.

What angel investors provide for startups?

Angel investors can support startups in different ways, including:

  • Securing funding to grow.
  • Providing necessary support, expertise, and consultancies about business management.
  • Helping entrepreneurs make decisions to enhance their competitiveness. 
  • Unlocking cooperation opportunities with potential partners and reaching new customers.
  • Enhancing the startup’s credibility to attract potential investors and partners.

Types of angel investors

There are several types of angel investors who foster entrepreneurs, notably:

  • Family and friends: Many entrepreneurs first turn to their family and friends when seeking funding for their business; however, this type does not provide entrepreneurs with the expertise they need to get off the ground.
  • The Domain Angel: investors in this category are usually operating executives who have spent their entire careers in a specific industry or sector.
  •  The Angel Investor Group: this category comprises individuals who provide support for small startups or entrepreneurs.
  • The Fellow-Entrepreneur Angel: this type includes entrepreneurs who provide funding for other junior entrepreneurs.
  • The True Believer Angel: this type includes investors who hear a startup’s story, instantly believe, and want to immediately invest in spite of the financial risks.

 

Translation: Noha Gad

 

 

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Feb 4, 2024

What Is a Simple Agreement for Future Equity (SAFE)?

Kholoud Hussein 

 

A simple agreement for future equity (SAFE) is defined as a financial instrument first offered in 2013 that has gained popularity in the startup ecosystem, particularly among early-stage companies.

SAFEs do not represent a current equity stake in a company. Instead, the SAFE terms must be met before you receive this stake. A SAFE is usually triggered when a specific amount of funding is met. 

How SAFEs Work?

Since being created in 2013 as a popular fundraising option, it has been used among early-stage startups, as a more straightforward and faster alternative to equity financing or convertible notes.

Startups use SAFEs to receive funding without determining a valuation or issuing equity immediately. Investors invest in the startup, but rather than getting shares right away, their investment converts into equity only once a predefined triggering event occurs.

Benefits of a SAFE

SAFEs have several benefits for both the startup and the investor. For both parties, the most significant advantage is their simplicity. Those benefits are: 

  1. SAFEs are typically shorter and less complex than traditional equity or debt financing documents.
  2. SAFEs often have customizable terms that can be tailored to fit the specific needs of the startup and its investors.

Benefits for Startups 

Startups often struggle with accurate and fair valuation in their early stages. SAFEs let them postpone this challenge until a later funding round, usually when more information is available to determine the company’s worth. This can prevent founders from undervaluing their company early on.

Further, early-stage funding rounds can lead to significant equity dilution for founders. SAFEs can be structured to lower this dilution compared with traditional equity financing, enabling founders to keep more control over the company.

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