Posts Tagged ‘venture capital’

Disruptive Innovation – How VCs View Startups

by Lana Al-Kazimi

Bilal Zuberi is a principal at General Catalyst Partners, a Venture Capital and Private Equity firm with offices in Boston, New York City, and San Francisco. He moved to the United States from Pakistan and brought with him a wealth of clean-tech focused knowledge. He holds a PhD in Physical Chemistry from MIT and had a short stint in management consulting before starting a company in 2004 that commercializes advanced materials [advanced ceramic technology] for automotives and other applications. GEO2 Technologies commercializes the automotives’ emissions control technology in partnership with Corning, Inc. That then led to a spinoff biomedical device company called BIO2 Technologies. Once launched, he joined General Catalyst Partners [about four and a half years ago] as an investor. Bilal’s side interests include ENTER, a program he co-founded to help college-level entrepreneurship, active membership in the TIE Entrepreneurship Taskforce, and engaging in intellectual conversations, to name a few.

Needless to say, I was fascinated by Bilal’s accomplishments. Even better? He’s approachable! If you have any questions that I didn’t cover below, please do reach out to him, that’s how interested he is in helping people!

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Entrepreneur’s guide to VC in MENA region

Entrepreneurs,

Looking to fund your idea, or to find out more about venture capital in the MENA region?

Our friends at MENA Private Equity Association put together a guide for new Arab entrepreneurs titled The VEECEEPRENEUR. It details the basic concepts of venture capital as well as the perspectives of major VC firms in the region.

The link to the full PDF:

The VC answers; Raising Venture Capital: Advice for MENA Entrepreneurs

This is part of an ongoing series of expert articles about entrepreneurship. It answers the questions you have asked on YallaStartup answers. If you would like to contribute to this series, contact us at exec@yallastartup.org with your proposal.


Hello YallaStartup members,

Thank you for your questions! The answers below are just starting points and I hope we can follow up on these subjects on an ongoing basis on YallaStartup’s Q&A platform.

Let me start with a few basic but important points about what are the objectives of a venture capital investor, from their own perspective:

  • Venture capital investors manage other people’s money. Often, the funds come from very large institutions such as pension funds, who need to diversify their risk over different asset classes, one of which is the venture capital asset class
  • VCs are accountable to their own investors, called Limited Partners. Their performance is clearly measurable and determined by how much money they return to their limited partners
  • Typically, there are only two ways to return money to investors: either a portfolio company “goes public”, or it gets acquired by another company. These “liquidity events” are the end goal towards which VC investors need to work from the very beginning, including your first pitch!

So the overall principle is not too complex: entrepreneurs pitch an investment opportunity which, if all goes according to plan, should lead to an IPO or an acquisition in a few years, allowing the VC to provide their limited partners with good returns on their investment in the VC fund.

Therefore, the general answer to most questions about VC pitches is the following: anything that helps an entrepreneur build a more convincing case is good. This means that, all else equal, it is better to have a detailed plan, a strong team, a working prototype, early customers and a good cash flow! Not only does it increase the likelihood of investment, but also the valuation you can get at the time of an investment. At the seed stage, and early angel stages, the expectations to provide all of the above will of course be lower.

So having said that, the answer to Khaled’s question regarding what to present to a VC is “it depends”, but I would definitely try to have a demo if possible. A demo avoids the need to provide an abstract explanation of what you intend to do. If a picture is worth a thousand words, a demo is worth a thousand PowerPoint slides. A demo also shows that you have the technical ability to build something, and enough commitment to your business idea to have devoted some resources (time, effort, money) to it.

Regarding having a detailed business plan prepared, just keep in mind that you are asking for funds, and therefore you need to show that they will be used efficiently. What will the operating costs be? Who will you hire? What can you achieve if we give you $xx, and how will that help you raise the next $yy in one or two years? The more clarity you can provide around these points the better. But we all know you will not have all the answers at first, so no need to go into excessive details. We just need to know you have thought the issues and are proposing the best solution, given the information you have today.

This brings me to Bana’s question regarding the most common mistakes I see as a VC. I wrote a blog post a while back entitled “Comparing first-time and serial entrepreneurs” (http://ziadsultan.com/?p=36) that covers this question. The five main things I had identified were the need for new entrepreneurs to: define the problem better, assess the cost of customer acquisition better, understand the customer’s budget, be more realistic about partnerships, and get feedback early and continuously.

Finally, I would like to address the questions regarding the MENA region. I have personal ties with MENA, but my work so far has focused on the US. Given this disclaimer, here is my take on some of the challenges:

  • The MENA is still an emerging market for tech ventures, which means there is a small market for tech IPOs and M&As. This makes it a little harder to have a lot of VC money flowing into the region. Yahoo’s acquisition of Maktoob was a good start, but we have a long way to go. http://www.techcrunch.com/2009/08/25/confirmed-yahoo-acquires-arab-internet-portal-maktoob/
  • While there is a lot of tech talent available in the region, and a culture of entrepreneurship in general, there still isn’t a robust ecosystem of tech entrepreneurship. Very few places have such ecosystems, Silicon Valley and Boston being two of the rare examples. This video does a good job of describing the components of such an environment:http://vimeo.com/7537191

Having said that, I firmly believe that the MENA region has all it needs to produce successful technology companies in the coming years. A few ways to do so would be to:

  • Find local solutions to create the next winners on the Arab web. No one knows this market better than local entrepreneurs, so you have a strong advantage that you can exploit. Innovate better and faster on your home turf. The MENA market is bigger than you think and getting bigger!
  • Don’t be afraid to go after global markets. In today’s world, a virtual, agile team based anywhere has a fighting chance! So if you come up with a solution that could be global, don’t be afraid to give it your best shot
  • Create a well connected entrepreneurial ecosystem. They say it takes a village to raise a child. Well, it takes a sophisticated entrepreneurial environment to create successful tech companies. Developers, designers, investors, mentors, lawyers, and many more functions should collaborate and constantly exchange ideas and share the lessons learned.

This last point is particularly important and I am glad to see initiatives like YallaStartup gaining momentum because they can serve as a great catalyst for new companies. Participate in the Q&A forum, organize and attend events or webinars, discuss your ideas with the entrepreneurial community, etc.

I will try to do my part by answering questions on YallaStartup. So if you have more questions for me, please post them on YallaStartup and ping me on twitter at @zsultan. I’ll do my best to help out!

About the Author:

Ziad focuses on investments in business applications and consumer media. His responsibilities span all aspects of Longworth’s investment process from deal sourcing and due diligence, to deal execution and ongoing support of portfolio companies.

He earned his undergraduate and master’s degrees in electrical engineering and computer science from the Massachusetts Institute of Technology, where his graduate studies focused on artificial intelligence and digital signal processing.