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Funding in different contexts: Landing international & local investors

 In a bid to explore different funding contexts, we had a chat with an investor operating in North Africa who shared abo...

Interview: Tamer Azer, Partner at Shorooq Partners

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Tamer Azer: Partner @Shorooq Partners  

Tamer is an entrepreneur and business builder. He has served in the investment field under different capacities and was also Principal @Sawari Ventures. He has co-founded startups and worked closely with entrepreneurs in several countries across 8 industries.

Shorooq partners is a seed-stage venture capital fund based in Abu Dhabi that invests in tech startups in the Middle East, North Africa and Turkey. It also funds ventures as early as pre-seed stage. 
  • Earlier this year Shorooq Partners set up an office Egypt. I wanted to know why Egypt and how does it distinguish itself from other countries in the region.

 

TA: There's two parts to this. The first is that the Egyptian market is becoming increasingly more dynamic. The opportunities are increasing, there's immense potential because of the market size, the talent, the opportunities and proximity to other markets. There's also the thesis that Shorooq Partners are founders' partners. We really believe in being close to our portfolio. So there are offices in our three core countries that is Egypt, Abu Dhabi in the UAE and in Riyadh in Saudi Arabia. So we are trying to stay true to our thesis as investors of being founders' partners, and because there's immense opportunity in the Egyptian market.

  • Does this also mean that you would be open to other hubs on the continent?

TA: We most definitely are open. We are exploring these markets. We're always looking into them. We're always having conversations with founders in these markets and learning more from what the market looks like. It's definitely something we're keen on exploring.

  • Egypt did really well last year in terms of investment. Investments into Egyptian startups went up 31% and this was during the pandemic where investments were expected to drop significantly. In your opinion, what would you attribute this growth to in 2020?

TA: I think even though COVID sort slowed down some types of businesses, it actually accelerated the digitization of the Egyptian market. It increased technology, it created an enormous amount of opportunity and facilitated the transition to a more digital economy. That actually created a positive impact for Egypt's tech entrepreneurship ecosystem.

  • How were investment decisions affected, with most process going digital and eliminating the face to face side of negotiations?  

TA: There's two things here. For some investors during COVID, depending on how much dry powder they had, they had a very different equation for opportunity cost. Some of them looked to support some of their portfolio companies more, some of them have enough dry powder to do that and to explore different opportunities.

Some of the dynamics in the market changed depending on where each investor was in the fund life cycle. The other component around that is that venture capital is a business of relationships. It's a business where you partner with a founder for say six, seven years. It's not a quick relationship. It's not a stock trade. It's something that really requires you to build an important relationship with someone and building an important relationship with someone has a fundamental tenet that is body language and being able to build that rapport with someone.

Investing digitally is happening and relationship building digitally is happening, but there's always a certain component that's missing, which comes back to our thesis about being founders' partners and being present in the markets in which we want to invest to allow for that to happen and to allow for that rapport to be built and to allow for those relationships to flourish.

  • Apart from Egypt, what other North African countries do you feel have the same potential in regards to their startup ecosystems?

TA: I wouldn't say same, I would say there's potential, but there are different kinds of potential. There's the corridor of Egypt, Tunisia and Morocco where Tunisia and Morocco have some fantastic talent. There are some really incredible companies and being able to provide some of the companies access to the Egyptian market in terms of size and in terms of opportunity creates a multiplier effect for some of these companies.

  • Are you looking into these other countries as Shorooq?

TA: Absolutely. We're exploring companies in Tunisia and Morocco. We think there's great opportunity there. We think some of the founders are absolutely exceptional and some of the talent is absolutely exceptional and we're looking for ways to work with companies in Tunisia, Morocco, and help them expand.

  • You've mentioned the immense talent there. What else do you look at when considering investing in startups apart from what's usually mentioned in your investment thesis?

TA: We like to see people who work with intention. These are people who are intentional about their decision-making or intentional about everything that they do. They are absolutely ruthless at execution and they execute completely efficiently for growth. We want to see that the quality of the entrepreneurs matches the opportunity and because the opportunity is immense, we need to see entrepreneurs that see the opportunity as large as we see it. 

  • And how do you source for entrepreneurs that match this criteria? Do they come to you most of the time or do you go to them? 

TA: We have two ways in which we source. Even though the ecosystem is growing fantastically quickly across the region, we try as best as we can to see as many opportunities as we can through inbound and outbound. So there are some ways which we will look for companies that we think are interesting and reach out to them. We also speak at events, we're present, we're approachable, we are genuine and people come to us. 

There's always two ways. There's coverage and thesis driven sourcing where, for example, we would look at different FinTech products that are targeting the unbanked or targeting different socioeconomic groups and the 1% who will have different priorities. So when we believe in a certain thesis, we will go out and look for companies that are delivering on that thesis and trying to find companies that work and the way that we would like. Sometimes companies come to us and sometimes we go to them.

  • Have you had any challenges with deal flow?

TA: Not at all. There are a lot of opportunities out there. We're looking at an enormous number of opportunities every day and across all of our markets from Pakistan all the way to Morocco.

  • And what about matching platforms in the market? 

TA: It depends, because investors will have their own networks, they'll have their own presence, be it on social media or an event, an actual physical events. S there's tremendous opportunity and tremendous value add from partners at a certain firm to identify good opportunities, but there's also room for matching and also room for everybody to collaborate. 

So there isn't a single silver bullet that will sort of deliver the glory and the magic of the unicorn. There's the idea that there's opportunity out there and the best investors are the ones who can find it whether that comes from a platform or it comes from a network, or it comes from warm referrals through having good, honest, genuine relationships with other investors who share these opportunities. What matters at the end is that you find the right opportunities.

I would take interest if I know the team that's doing the matching, if I know and trust their ability to source the right companies and that it's not just volume game. I would have to be able to trust those who are executing on that. 

  • What's in store for African founders from Shorooq Partners this year?

TA: This year we'll be primarily focused on Egypt and looking a little bit more towards Tunisia and Morocco. We've been having some conversations with Nigerian, Kenyan and South African entrepreneurs as well. We're trying to pull a bit more about these markets and the type of founders that are there and the type of businesses that are there. We've made one or two investments here and there and we're still exploring the markets and I think in the near future we'll start seeing more and more of these transactions.

  • FinTech and platforms are your industries of focus, but you also mentioned tech-enabled businesses which is broad. Are there other specific niches that you're focusing on?

TA: A good business is a good business. We're willing to talk to people who are solving complex problems and solving them at scale. People who are building scalable solutions that can really have a deep impact on improving the lives of people who are dealing with this complex problem.

  • You were at one point a startup founder. Now as an investor, what do you feel are areas where startup founders should tweak in their entrepreneurial journey?

TA: This is not very specific to anybody. It's important that founders really know why they're doing what they're doing and there's reasoning and intention behind how they're tackling the challenge that they're trying to solve. I think culturally, a lot of us take things a little lightly when it comes to being structured and organized or when it comes to achieving operational excellence. Achieving operational excellence is something that's really important for building a large, scalable business. It's not just about marketing, it's not just about growth. It's about building the operational excellence and muscle that can deliver on that growth. 

  • What do you feel founders are getting right?

TA: Overall the quality of founders, the quality of running a business and the quality of pitch decks and positioning and presentations has improved massively in the last three to five years. It's really improved, right. We've come a long way as a continent and as a region and that's something that is highly commendable.

I think we don't really do our homework when it comes to approaching the right investor and how we approach the investor. There's still a lot of room there, but I think everybody's learning together. The ecosystem and the investors and the startups, we're all growing together and we're all learning together because we started at the same time though in different cohorts in different sides of the business. Investors also go out and fundraise and also deploy the money, just like a startup does. We also have to go and find people to give us money and sign agreements with them and then execute these agreements. Both of us started at the same time. There's a component of learning. There's a component of growing together and that's okay.

  • Would you attribute this massive improvement to maybe the growing number of accelerators and incubators on the continent?

TA: I think that's a part of it but I don't think it's the whole story. I think we're starting to look from the success of some companies that are raising money. People sharing their stories and people helping each other out. So it's not just a function of organizations going through accelerators and incubators that covers a percentage of the market, but not all of it.

I think a big part is in that some founders are growing and exiting and sharing and giving back. Some investors are also being more supportive and collaborative. There's an opportunity now to learn more from the experience of previous cohorts that have gone through the full investment cycle. It's starting to happen that some companies are going through the full cycle. It will still take some time but we're starting to see some companies near a full cycle which is huge because these companies will produce new entrepreneurs that have learned within the company.

So it's all about experience and opportunity and people being a part of that, that creates newer more sophisticated generations of founders like in Egypt the Uber and Careem experience created an entirely new generation of entrepreneurs that are fundamentally of higher quality and just understood what it means to really scale a business.

  • Do you have a target number of investments to make per year at Shorooq?

TA: Nothing is set in stone in that way. We look at opportunities as and when they come or we find them as an opportunity, we assess both from the perspective of it as a business and both from a portfolio construction perspective. Sometimes we will have geographic target based on one of our LPs, but the rest is about strategy and portfolio construction. So it's less about targets and more about what makes sense. 



Click the link below to find a related whitepaper dubbed "Why it's time to invest in digital Africa." The whitepaper addresses the challenges faced in the digital Africa space and offers actionable development perspectives. 
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