Power players: VentureSouq
They invest. They run companies. And they rule the region’s VC space. Who are they? What do they have in store for the future of finance? A stellar interview that you shouldn’t miss.
Tell us about VentureSouq. What is its mission and how did the idea come about?
Sonia Weymuller: VentureSouq (VSQ) is an early stage equity funding platform. The premise behind the platform is to democratise access to quality deal flow. People associate the Middle East with deep pockets – family offices, sovereign wealth funds and the like – but we believe there is a large, untapped pool of regional capital sitting with young professionals interested in the angel investing space. From what started as an informal investor club amongst friends, we have grown organically to a current reach of over 800 angel investors across the GCC and invest in both regional and international tech-enabled businesses. We have so far successfully executed 29 funding rounds into 19 companies hailing from India, Africa, the UK, the US, Hong Kong and our home MENA region. We listen and cater to our investors’ diverse geographic interests and risk appetites and, subsequently, have invested at the seed stage as well as series A and B along with several follow-ons. We review 50 to 70 deals a quarter and select the top opportunities to present to our community of VentureSouq investors.
For a start-up ecosystem to flourish the investor base needs to mature and evolve in lockstep with the entrepreneur base. Subsequently, we developed our own investor education curriculum to support investors who want to explore the angel investing space but are not quite sure how to go about it. We bring in regional case studies and accompany our investors on their journey, teaching them about term sheets, valuations, due diligence and investment strategies in an interactive and engaging manner. This VSQ Investor Accelerator vertical has grown from strength to strength over the years and is a testament to the emerging regional appetite for angel investing.
Why did you decide to come together as partners? What kind of rapport do you share with one another?
Sonia Weymuller: Tammer and I went to university together so we’ve known each other the longest. We met Sonia G and Suneel in 2011 and became friends. Maan came on as our KSA partner in 2017 as we started to focus on growing our regional reach, specifically in Saudi. We started angel investing ourselves and noticed the interest from our group of friends who also wanted to invest alongside us. VSQ grew in an organic manner, bottom-up, out of a need in the market that was evidently not being addressed. We are fortunate to have a very transparent and respectful relationship with each other; we are aware of each other’s strengths and weaknesses and therefore have developed an honest, efficient collaborative and supportive approach in all that we do. The fact that we remain, close friends, is a testament to the strength of our relationships.
Suneel Gokhale: Our team rapport is great. Each of us is interested in certain things without our overall mandate so the team is great at recognising that and letting people run with initiatives that are clearly in their respective wheelhouse based on previous experience.
Sonia Gokhale: Our team started as friends and continues to value this relationship, in fact, Sonia W and Tammer are godparents to our child. We love and respect our business partners and hope that they will pass down their amazing qualities to the next generation through our son.
Tammer Qaddumi: The four of us kind of sought each other out – it was self-selective. We each had a different vantage point professionally, and we each were strong on the network side meaning, everyone had broad networks that they could also bring into investments with them. So, we just assumed our role as the workforce behind an organically growing network of budding investors.
Maan Eshgi: For me, it all started when I came back from Switzerland and decided to invest some of my own savings in start-ups in the GCC, which I saw as a golden opportunity. As a result, I was approached by my friends (angel investors) to help them source good quality companies and co-invest alongside myself. The network started growing and through mutual friends/clients, I was introduced to the VentureSouq team, which complemented what I do in Saudi and from there on we joined forces by integrating Saudi angel investors in addition to institutional and governmental entities, which shortly qualified us to be the largest angel network in the region. Our rapport is amazing given that most of us worked in big financial institutions or multinational companies which gives us an understanding of what teamwork is and that’s a recipe for success.
Do you think having five partners on board adds value to the businesses you work with because you all bring something unique to the table?
Sonia Weymuller: The key to VSQ’s success has been the complementary skill sets and the diverse perspectives and experiences we each bring to the table given our respective professional trajectories across multiple sectors, namely: PE, corporate law, strategy and data analytics. Conversely, when entrepreneurs approach us there is bound to be at least one of us with some level of experience in the sector who can provide added value to the assessment of the opportunity with his or her own lens.
Suneel Gokhale: Organisations always talk about diversity and it being key to how they do things but we live and breathe it every day. We have two female founding partners, which is not the norm when you look at venture capital firms globally and all 5 of us are members of visible minority groups, which also is not commonplace. For us, diversity is not just about “doing the right thing,” it’s a strategic advantage to us because we focus so much on emerging markets such as MENA, India and Africa, where having that diversity to draw on helps us in assessing investment opportunities and risk.
Sonia Gokhale: I love working with individuals that I can learn from and I am constantly learning from my partners at VentureSouq. I am an actuary and thus have a mathematical mind, I see the world in numbers and formulas, whereas my partners are very different. Suneel is a lawyer with a very commercial mind, he can identify a great investment opportunity yet is very practical in his approach. Tammer is a big picture thinker and he is constantly looking for companies with a similar approach and pushes VSQ to think big and outside the box. Maan is a master business developer and can see and identify the needs of our investors, which helps us provide a better service offering. Finally, Sonia Weymuller is looking for efficient ways to better the world we live in – whether it be her efforts to educate angels to become better investors, scouting the world for scalable investment opportunities that have a lasting impact, making powerful connections between people across a variety of sectors, mentoring young budding entrepreneurs, she is always looking for ways for VSQ to contribute to the ecosystem in meaningful ways. The combination of our various strengths as a team helps to propel us forward.
Tammer Qaddumi: Yes. The five of us keep each other honest. We all have the way we ourselves would want to do things, but because of each other, we are forced to adopt practices that apply to everyone. Which makes us better. We’ve figured out a way to leverage five people in terms of both capabilities and networks, so we’re five times stronger than any one of us.
What was the biggest challenge of setting up VentureSouq?
Suneel Gokhale: One of our challenges was about figuring out who we were and what our USP was. When we started this in 2013 there were several resources dedicated to entrepreneurs and start-ups and after some research we identified a huge gap in the tech start-up ecosystem – no one was paying attention to angel investors and ensuring that Dubai and the region had a strong angel investment ecosystem to drive investment and growth within the start-up community. Once we figured that out, it was about how to best provide value to angel investors and we came up with a platform focused primarily on providing access to global investment opportunities to our network and education and development initiatives to people looking to develop the skills required to make angel investments.
Tammer Qaddumi: Another was making sure we as a team are aligned with priorities. With the five of us working in unison, achievement of any goal is basically certain. The challenge is in making sure we are all prioritising the same things at the same time.
Looking back to 2017, what were some defining moments for VentureSouq – both positive and negative?
Sonia Weymuller: We are grateful to have had a successful 2017 closing 12 rounds of funding into companies from the US, the UK, Africa and MENA, the highest for us historically. These included globally recognised companies including Andela, reddit, what3words and Dubai-based Fetchr. We hosted our third annual Angel Rising investor education conference with startAD at NYU Abu Dhabi, which attracted over 250 investors; again, this a testament to the growing regional appetite for angel investing. The numbers have grown year on year. Our fourth one took place on March 24, 2018, and we encourage you to join the movement. We expanded our reach to KSA by bringing Maan on board as our Saudi partner and we took a proactive approach by hosting Investor Round-Ups and investor education sessions in Jeddah.
Tammer Qaddumi: I think milestones for most businesses revolve around personnel. The four Dubai-based partners were together from the beginning. So, the major milestone was bringing on board Maan, a partner based in KSA. This opened a whole new market for us, which happens to be 10x larger than our existing market, and which brought a whole new set of priorities. And given how dynamic the Saudi market is right now, and how focused the government is in technology right now, Saudi is really more and more of a focus for us. With Maan there, we’re starting to see ourselves almost as much of a Saudi company as we are a Dubai company. Really, we consider ourselves a GCC company.
More than one-third of the money invested across the MENA region last year went into technology-based start-ups. Do you think investments are too slanted towards technology?
Tammer Qaddumi: No. The term “technology” is broad now. Most new businesses popping up are leveraging technology in ways that are more efficient than the incumbent players. It doesn’t make sense not to. I am of the view that basically, all new investment should go into businesses that are technology-driven. We’re in the middle of a fundamental change in the way people consume everything, the way government is accountable to citizens and residents, the way power is generated and distributed, absolutely everything. KSA is the most jarring example of this transition happening in real-time. Traditional companies in this region do not adapt quickly to change, so the fact that more and more investment dollars are going into new tech-enabled businesses is both expected and sensible.
Maan Eshgi: No, I don’t think it is too slanted as this is where most of the money is being made. Technology plays an important role in a wide range of sectors; such as products, processes and organisation. We use technology to extend and simplify our abilities.
What is VentureSouq’s overarching investment focus? Do you look at certain industries with more interest than others?
Suneel Gokhale: Our focus is really split between early-stage opportunities in technology and technology-enabled companies in growing emerging markets such as the MENA region, Africa and India and then opportunistically in the US. From an industry standpoint, we are agnostic and really look at companies that provide services or products that people “need to have” rather than just “like to have”. This is different depending on the market and geographic location(s) that a company operates in. In looking back, our portfolio has a lot of tech-enabled companies, which are essentially trying to solve a real on-the-ground problem using technology.
Maan Eshgi: We have developed our own internal rating system and one of the criteria we look closely at is the company’s ability to disrupt a certain industry. We look for companies that can change the way traditional services are provided to consumers.
What kind of companies are on your radar for 2018?
Sonia Weymuller: I am keeping an eye out for companies in the environmental tech vertical, in line with my personal investment thesis and interest in this space. We recently invested in BioCarbon Engineering, which uses emerging technologies to deliver precision planting and mapping to increase forest development, essentially combating industrial-scale deforestation with industrial scale reforestation. These are the types of companies that get me going: financially sustainable and geographically scalable endeavours led by a stellar team that harness the power of technology to tackle some of our planet’s most pressing challenges.
What are some factors or considerations that influence where you invest?
Suneel Gokhale: For VSQ, three primary considerations drive investment decisions: the strength of the founding team, scalability of the company and upside potential and finally whether the company is providing something that people need. At VSQ, we are looking at companies that have the potential to be unicorns and we focus on ‘diligencing’ the upside. Part of this is really trying to find companies that are providing or making something that people need and are in line with customer demands in their market. However, probably the most important consideration is the founding team; all the companies in our portfolio that have outperformed our expectations and really done well have founders that are extremely intelligent, highly commercial, recognise their weaknesses and have boundless energy.
Sonia Gokhale: We find Emerging Markets such as Africa and India extremely interesting due to their growth potential. These markets are distinct from one another and have their own idiosyncrasies thus it is important to be on-the-ground with intimate knowledge of the markets. We travel to each of the geographies in which we invest from India to the US and have strong trusted partners in each market that help us navigate the various quirks. We feel this gives us an edge when investing abroad.
Sonia Weymuller: It’s important to note here that we are not a fund; we have a wide and varied investor base of over 800 individuals – each investor comes with his or her investment preferences (sector, geography) and varied risk appetites (seed, Series A), which will ultimately dictate his or her investment decisions. Our job is to keep a pulse for the market demand (our investors) and ensure we continuously provide them with quality deal flow that resonates with those preferences and that appetite. We’ve taken a patient approach over the years to better understand the psychology and rationale behind each of our investors’ decisions.
Tammer Qaddumi: The industry of private equity and venture capital investing has very clearly fundamentally changed in that investors have both the information and the access to invest directly into opportunities that they like. They don’t need to go through blind PE or VC funds anymore, and a lot of them really prefer not to. Their problem now is a filtration problem: sure, they can get access, but how do they assess what’s good and what’s bad? That’s where we come in; understanding what direct VC deals our investors have an appetite for, then sourcing, screening and executing. While investor preferences vary wildly, we see some clear patterns on characteristics that investors like: Solid demonstrable traction, with a strong preference for revenue traction; Backed or being backed by recognisable investors, and Hook to this part of the world.
What are some characteristics of companies, entrepreneurs or ideas that catch your attention?
Sonia Gokhale: We look for businesses that have commercial viability. We are looking for companies with strong margins and potential for exponential growth. We are swinging for the fences and are looking for that home run.
Tammer Qaddumi: I really like to see concrete examples of how bigger companies or huge consumer demand bases fundamentally need their products or services. This allows me to conceptualise better how big the company can get.
Suneel Gokhale: The companies in our portfolio that have done the best have driven founders that are all over their businesses, always pushing for excellence and continuously thinking about the next growth opportunity for their companies.
Sonia Weymuller: For entrepreneurs, a sense of purpose, humility and integrity are essential to me as they reflect conscious leadership traits. A founder who is a strategic thinker, commercially-oriented and has a clear understanding of why he or she has decided to embark on this journey. One that is willing to put ego aside and is self-aware enough to understand that the strength of a company lies in its team and therefore can put together a stellar set of individuals with complementary skill sets. Ideas are plentiful but it’s the execution that matters and will be a key determinant of a company’s success.
Maan Eshgi: It is often said that a start-up is only as good as its people and their ability to adapt to unexpected market changes; so a strong team is extremely important other than any smart technology that could possibly change the way we live. This is what would surely attract my attention.
On the flip side, what’s the ultimate deal breaker?
Sonia Weymuller: Immediate red flags we’ve seen include part-time founders, evident team misalignment on commercial strategy and an absence or limited understanding of the competitive landscape in their sector.
How important is it for all partners to come to a consensus on an investment decision?
Suneel Gokhale: Consensus is a big part of VSQ’s ethos and culture. We think of each other as smart and experienced and value each partner’s opinion, so in most cases we all agree on a way forward when decision points come up, usually by trying to make a case for taking a specific course of action. With that said, each of the partners have specific mandates or parts of the business where they are the primary lead so we also make sure that we defer to each partner on certain matters which is just about recognising each partner’s strengths.
Sonia Weymuller: Consensus is key when it comes to moving forward with an investment opportunity. Each deal is typically championed internally by one partner who takes the lead and pushes it through.
Tell me a little about your investment portfolio. What’s worked and what hasn’t?
Suneel Gokhale: In general, our portfolio has performed well. It’s still early days given that we tend to come in at the seed or series A stage of a company’s financing life-cycle but we are optimistic. We have had significant uplifts from our initial investments in portfolio companies such as Zoomcar, Knot Standard, Andela and Fetchr. What3words just announced a large investment from Daimler, which is great. We are really excited about investments we made in 2017 in Piggy and Helium Health, which are both YCombinator companies. We are close to closing on a couple of exciting deals in the drone and automotive spaces that will be announced to the market soon. At this early part of our portfolio’s lifecycle, it seems that some of our best performing companies are focused on solving real, everyday problems in emerging markets. We love these types of opportunities because as an investor you don’t have to spend too much time figuring out whether there is an addressable market for what the company is trying to do – you know there is already a pain point or a problem to be solved, it’s just about developing technology that make delivery of an existing service or product faster, more cost effective and more scalable. Given the early stage nature of our portfolio, there is a relatively high degree of risk there and some companies take a bit longer to hit their stride and start to really figure out what their customers want. We have a few of those as well in our portfolio like any venture capital investor but we remain hopeful that things will continue to move in the right direction.
With fluctuating markets and a lot of noise within the technology space, how do you stay confident with your investment decisions?
Suneel Gokhale: Time will ultimately tell but in this business and as an investor you must ultimately trust your founders. If you do the work when assessing the company, the founder and the opportunity at the time of making the investment, the rest is then up to the founders. We are always there to provide advice and guidance and with many of our portfolio companies we are regularly dialoguing with the founders – we have over 20 portfolio companies now and can draw on experiences from each of them to assist companies in navigating through their growth lifecycle.
Tammer Qaddumi: You must put a lot of trust that the team that’s running the company that’s receiving the investment can keep up with the dynamic market. That’s why we’re investing into these guys rather than a traditional operator in x, y or z sector. We trust them more than we trust ourselves to stay on top of how their respective market moves. We would never put our money into a deal that we perceived to have a fixed business plan with limited ability to move with a fluctuating market
Start-ups often struggle to find a sustainable business model and there’s the debate between value and valuation. We’ve seen several heavily invested companies that end up burning cash. What’s your take on this?
Sonia Gokhale: One of the first questions we ask a company that is looking for funding is: if we invest in your company what will you do with the money, how will the company grow and how long will this money last? We are looking to avoid companies that will burn through the cash before noticeable growth is experienced. “Burning cash” is necessary to see exponential growth, but there is a difference between spending for the sake of spending and spending smartly for the sake of growth. We invest in the latter.
Tammer Qaddumi: The bet that you’re making with any of these investments is that they will be able to reach scale. A well-trodden strategy to achieve scale is effectively to buy market share, i.e. burning cash to grow at the top-line. We can buy into this strategy if it’s well thought through, and that the company knows exactly how long it wants to play this came and where the money to play it will be coming from. In terms of valuation, you really must dig deep to validate that the performance and growth parameters the company is sharing with you are accurate, and then cut those metrics in several different ways to make sure that the valuation is at market. Ultimately that’s what you want to be sure of: that the price you’re paying is fair relative to the broader market.
We always hear that there isn’t sufficient access to capital within this region. Do you agree? Or, is it simply the case that the ecosystem hasn’t fully developed?
Suneel Gokhale: I disagree – there is enough capital in the region from a quantitative perspective. However, it’s about finding the right capital for each part of the ecosystem, which at all ends is relatively young. We can’t look at the regional start-up ecosystem the same way we look at what’s going on in Silicon Valley. With that said, as the ecosystem continues to develop, we as investors need to keep pushing ahead and bringing others who have been less active into the fold. For example, sovereign wealth funds and other large financial institutions on the buy-side have largely remained on the side-lines when it comes to investing in early-stage technology companies. However, I worked at a large sovereign wealth fund for almost five years and know that internally these organisations are beginning to understand that they need to be investing in early-stage technology companies because these companies will ultimately be disrupting their existing portfolio companies. I think it’s headed in the right direction but we as one of many participants in the ecosystem must keep the momentum going.
Tammer Qaddumi: I completely disagree. There is a ton of capital in this region. It just sits in different “pools” than people are accustomed to, and it can be hard to manoeuvre around to find it. It doesn’t sit neatly in pension funds or endowments with big welcome signs on their doors. It sits with individuals or family offices, which you need to hustle to find, and then work hard to earn their trust. Or it sits with big government related entities, which have their own decision-making processes and strategic priorities.
Finally, what’s next for Venture Souq? What’s in the pipeline for 2018?
Suneel Gokhale: For VSQ, 2018 is all about scaling and expanding. Investing more capital in regional and global investment opportunities and continuing to push on investor education. We will continue to look at high-growth emerging markets outside of the MENA region very closely, particularly India and Africa, where we plan on being very active this year.
Sonia Gokhale: We are also working more with family office and corporates that are looking to diversify from their current investments and increase their exposure into private tech companies globally.
Sonia Weymuller: We will continue to grow our investor education pillar by further developing our content and taking a multiplatform approach. This feeds into the virtuous cycle we are creating – we strive to empower individuals by providing them with the tools they need to make informed investment decisions. This, in turn, will help sustain and grow the investor base in the region. You’ll also be seeing more of us in KSA as we look to support the investor ecosystem in line with Vision 2030.
Tammer Qaddumi: Strengthening our own technology backbone is also a major focus. It will allow us to scale what we’re doing already, and opportunistically run after big initiatives with strategic partners.
Maan Eshgi: Enhance and leverage our relationship with regional and international startups to create more synergies in addition to the work we do with institutional investors and government entities in the region to help close the gap in the ecosystems and that can be done by using our technical know-how and investment track record and capabilities.