Unlocking immediate growth: Exclusive details and insights into Foundation Ventures debut fund
Following the announcement, MAGNiTT caught up with Omar Barakat, Managing Partner at FV to discover further details about the new fund, including why it will be focused on the early stage, what startups and industries it will be investing in, the support the VC will provide to its portfolio companies, their top tips for fundraising startups, what makes FV different from others, and much more.
Why is your investment focus on early-stage startups?
Our main fund strategy is built around being a true value-added investor that is able to unlock immediate growth and distribution channels to our portfolio companies, We invest in early-stage companies so that we ensure that we can provide impactful support to the teams we back. In early-stage companies, this is when we can be the most engaged and provide them with the right partnerships at a stage that is critical and maybe the differentiating factor in building an enduring and impactful company.
What type of startups/industries will the new fund be investing in?
The ecosystem in the region is still not at a place where any fund can be dedicated to a single sector in our view. We are sector agnostic and we map out markets and themes and try to identify high potential opportunities. And while we try to monitor these trends and shifts in consumer and market behaviour, we believe more in founder-led insights. Learning from entrepreneurs about their solutions to particular problems is what excites us the most.
Our pre-seed strategy is fueled by the belief that a high caliber and experienced entrepreneur that possesses quality insights about a particular market is someone that we would be willing to back prior to going to market or gaining traction. That being said we are keen on backing startups that are solving massive problems in the region in a scalable and cost-effective manner.
What qualities do you look for in a fundraising startup/founder?
1. Strong and capable team that is dedicated full time to the venture:
- Articulate in discussing the company & the vision
- Strong technical team complemented by a strong visionary and operationally competent CEO.
- Strong understanding of their target market
- Experienced in their roles
- Focused on building an enduring company (non-exit focused)
2. Functional product or prototype:
- Solves a challenging high-value problem (provides a solution to an actual pain point not finding a pain point for the solution the founders chose)
- Long term defensibility
- Big improvement over incumbent solutions
3. Measurable traction and user engagement and evidence of market acceptance
4. Identifiable target customer and monetisation strategy
5. Scalable business
6. Capital efficient business with favourable unit economics
What makes up a good/successful pitch deck?
Pitch decks are important because it gives a glimpse of what a team is working on solving. The most effective decks show clarity of thinking and leave you thinking, “I never thought about it that way” or gives you an insight that you never knew about before. It is also very important to clearly outline the problem that you are solving and how you are solving that problem. The ability to present the problem clearly shows that the team has thought about what they are solving thoroughly and that they have come up with a solution that effectively tackles it. It also must:
- Be concise and to the point
- Have a good understanding of the market dynamics and where they fit as well as how they are solving a pain point in the market
- Include interesting insights on the market that may not be known to someone who is not familiar of the market
- Share a product demonstration/how it works with use-cases and why it is helpful to its intended users
- Include Metrics/KPIs - a lot of startups nowadays do not put metrics in their deck, so you are unable to gage the size of their operation
- Have a product/business roadmap - founders must be vision-oriented, so being able to map out their roadmap (realistically) shows how much the founder is in tune with the market and his/her business
- Outline their biggest challenges or shortfalls as it portrays an honest founder that knows his/her strengths and weaknesses
What support do you provide to your portfolio companies?
We are very focused on adding value to our portfolio, we have a 3 pronged approach to adding value:
- We help the founders we invest in to hit the ground running with a sizable roster of partnerships and potential customers to unlock immediate growth for them. Securing distribution channels for them allows them to scale and grow their product offering faster which gives them an unfair advantage in the market.
- The GP members have very good relationships with various regulators, so we're able to support our startups in navigating the regulatory landscape and their dealings with the relevant regulators in the respective fields
2. Business Building:
- We support our portfolio companies on their strategy and provide them with the needed resources in order to make informed strategic decisions and provide them access to industry experts.
- We provide corporate governance support to our portfolio, helping them build an institutionalized foundation.
- Funding in the region dries up post-Series B and a lot of startups struggle to raise large rounds from western VCs. Given that our GP Partners (HOF Capital) have built out relationships with all the tier 1 VCs in the states, we're able to tap into their network for our portfolio.
What are your top tips for a startup fundraising for the first time?
1. When pitching, speak confidently and truthfully and if you do not know the answer to a question don't try and BS your way through it. Stating that you don’t know something shows clarity of thinking and gives comfort that you are comfortable with what you don’t know and that gives you a reason to search for the answer.
2. Have a clear answer as to how much you are raising and what the milestone that this capital will help you achieve. Fundraising should be a means to achieving a milestone and not an end in itself.
3. Choose your investors wisely, Capital has become abundant but smart capital and strategic capital is a lot harder to obtain. A founder must align their medium/long term goals with the investors they bring onboard, every investor must have a purpose of being on the cap table beyond the capital they provide
4. Do not focus on the exit during your pitch. Founders should be focused on building a great company that provides true benefits to its users. It's a massive effort to start a company and scale and so we like founders that are passionate about the problem they are solving and have a long term view on creating impact and are not exit focused
What makes Foundation Ventures different?
- Foundation ventures is a true value-added venture capital firm. Our fund construction strategy is built around the idea of playing a supporting role to the startups and de-risking through adding value. FV has a very wide network of enterprise partners that our portfolio companies can tap into, allowing them to unlock immediate growth and access to wide distribution channels.
- Through FV’s large network, both locally and regionally, we have access to the most competitive and highly sought after dealflow in Egypt. FV’s network also extends through our LPs ownership stakes in a broad range of industries and geographies. These companies serve as potential clients and potential strategic investors for our portfolio companies. This large network can help our portfolio companies expand their geographical and market reach, product offering, and business development activities.
- FV relies on curating a very selective portfolio of companies that have a very high conviction on following our rigorous process. Once invested we ensure that we dedicate enough time and resources to supporting the founders. We essentially become employees in the companies we invest in and try to help the team we invest in, in any way that we can.
Will you be expanding beyond investing in Egypt-based startups to other countries in MENA?
Yes, We are Egypt-focused given it is our home court, but we are looking at some opportunities at the moment in Saudi Arabia and the UAE.
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