How to build a company that will last forever

Scale is important for startups to put them on the radar of strategic acquirers, which are a more likely route to an exit in MENA than listing on public markets.

But MENA is not a single market so regionalizing your business is a difficult and expensive achievement, although we’ve seen some notable names do it such as Careem, and Anghami.

To achieve scale, and attract those strategic acquirers, you need sustainable growth rather than quick wins.

These are the elements that I believe are necessary for a company to get there, and if you don’t end up exiting you’ll have built a solid enterprise that will last forever.

1. Use the right growth metrics
Growth in product use and adoption is key to a startup’s valuation. Regardless of the vertical you’re in, your key performance metrics should always capture that as valuations for technology startups are more correlated to revenue/usage growth than any other financial metric. To put this in perspective, at Talabat a modest week for transaction growth was 7 percent week-on-week, and acquired for a more than 20x revenue multiple, versus market comparables of 10x at that time.

2. Show your regional scale through product adoption
Showing strong evidence of widespread product use and adoption at scale is the only evidence of your position as a regional startup, but it’s much harder to show high growth rates when your revenue/usage are large (when you hit about $5 million per five million users). Product/market fit at scale is how strategic investors gauge a company’s growth prospects.

3. Pick the right investors
To achieve long-term sustainable growth, access to smart capital through multiple rounds of financing is critical. Instead of spending half of your time trying to fundraise, resilient financial backing lets you focus on the business. The best regional example I can think of is, whose institutional investors have supported the company’s growth through its different stages.

4. Understand unit economics
Understanding your costing structure and properly allocating your total costs on per transaction basis must be accurately captured in your unit economics. As you reach your Series A and B funding rounds, understanding your unit economics is important in order to have a sense of what your margins could look like when your business matures. Due to different business environments Talabat was operating in, we used separate unit economics for each country we operated in. Such reports gave a better understanding of how much incremental growth directly affected Talabat’s bottom line.

5. Have a large market
Strategic acquirers invest in companies that have a large market. A large market means that the company could reasonably become a large enterprise even without extremely high penetration of that market. At Talabat, the food ordering market size was at least 10 times our daily transactions, even after operating for 10 years when we were growing at over 7 percent week-on-week.

6. Know the competition
When you’re disrupting an industry, competing products should never be ignored. Understanding your market structure and how your startup fits into the broader market is key to building your ‘unfair advantage’ over direct and indirect competition.

7. One vision, multiple products
Strategic investors want companies that aren’t built around one product. It’s important for founders to look beyond the product they’re currently offering, to build a community of products. That’s why market-leading companies such as Facebook start with one core product and end with multiple products that ultimately serve the single core vision.

8. Be community leaders
Strategic investors want to invest in companies with leadership teams that are branded well in the ecosystem they operate in. Beyond the founders, your C-Suite executive team have to be known names in their field, to build the trust of strategic investors when they do reference checks.

9. Hire the right sales and marketing people
Strategic investors will want to see you’ve hired a proven head of product and marketing, and sales. That person/persons is important as you seek to address consumer needs as you scale, and help you develop new features and products in the long-run.

10. Doing good for the community
Make sure you give back to your community. Mentoring entrepreneurs, supporting coding schools and engineering departments at local universities, as well as startup initiatives and many other activities are important. Strategic investors understand the value of a community leader. It’s not a quantitative metric, but a brand value that the community appreciates.

11. Keep your accounts clean
Most startups are deeply involved around the product and often forget that finance is core to ensuring long-term sustainability. Maintaining healthy accounting books and producing financials in a timely manner will prepare you for the fiscal rigour required by strategic investors.

12. Provide the right work environment
It may seem more administration work to build a code of conduct, employee handbook and operational procedures, but is important to create the right environment in your workplace. Communicating the founders’ values and expectations to employees affects the startup’s ability to execute on its plans. During Talabat’s first five years, we always tried writing our playbooks ourselves, which tended to be brief. As we grew, proper policies and procedures were developed to ensure we had the same operational efficiency as when we were a six-member team, and provided new hires with the appropriate context for doing the job. We had a weekly breakfast where everyone from the business could attend which was a chance to embrace the company’s values and vision.

13. Don’t take legal shortcuts
Startups in our part of the world often take shortcuts in complying with the local laws, which is not attractive for strategic investors. An example we see regionally is that business licensing and jurisdiction regulations are often ignored: your startup can be registered in a free-zone that only allows you to do business in that jurisdiction, but your revenue actually comes from other jurisdictions. Taking legal short-cuts might save you some money in the short-run but as you achieve regional scale this will come at a cost to your company’s valuation at the time of acquisition.

14. Responsible governance
Assemble a board from your investors that challenges your vision and governs your practice, and attract experts who could technically and operationally help you improve the business. This strategy paid off well for Talabat at the time of exiting as a member of the board played an important role in negotiating with the acquirers.


Abdulaziz B. Al Loughani

twitter: @aballoughani

The Rise of “Community”

5 years ago, there were a number of entrepreneurial initiatives in Kuwait that large sums of money were allocated to but were operating independently of each other. A few governmental programs were servicing funding needs through both debt and equity instruments but nevertheless did not cover other building blocks of the entrepreneurial ecosystem, to name a few here is a list:

  • Kuwait Small Projects Development Company
  • Industrial Bank of Kuwait
  • AlRaeda Enterprises


Half (approximately) of the allocated funds for these programs were earning interest from deposits and the other half typically funded traditional businesses, with no focus on knowledge based economy. However, the SMEs scene in Kuwait was still quite active relative to the rest of the GCC and a majority of small businesses and startups were funded by private money (friends & family) through traditional funding terms.


On the consulting side, there were a lot of boutiques that offered relatively expensive consultations (to the size of businesses being established) and a few were more entrepreneurial friendly in pricing. Here is a list to name a few:

  • AlMubadir
  • Cubical Services
  • Traditional accounting/consulting firms
  • Manpower and Restructuring Program



Beyond the abovementioned services, entrepreneurs were very much self-dependent (hustlers) and have been struggling with the following key issues:

  • Excessive regulations: It is very challenging to start a business in Kuwait as the licensing requirements and procedures are quite complicated, they take a lot of the entrepreneur’s time to start and maintain rather than focusing on the business 100%.
  • Attracting and maintaining talent is hindered by the strong benefits that the government offers and by the generous labor law rules and regulations with very restrictive immigrant labor permits.
  • Being the largest procurer, Government business penetration is very challenging and is predominantly taken by large corporations and family offices.
  • Access to private finance is limited as most private financial institutions do not view the SME/Venture asset class strategically and the Central Bank’s interest spread cap of 400 basis points is prohibiting high risk taking.
  • Support programs are nascent whether its incubation services, grant schemes, mentoring, business development services, there are a handful of programs with limited capacity.
  • The mindset and culture stand against encouraging modern entrepreneurship. Entrepreneurs are directly encouraged to take a risk-averse mindset and no sense of community exists.


Territory marking

With that said, there were a few startups in different industries that were marking Kuwait on the regional map, to name a few in the technology sector: Talabat, Koutbo6, KuwaitNet and many others in different sectors.


Infrastructure & market

During those years, government has invested heavily in telecom and internet infrastructure enabling residents and offices to benefit from fiber optic cabling in most areas around Kuwait. As the price of technology access was also witnessing a significant decline, penetration of internet became much more affordable and the bandwidth was only getting better and cheaper. The Apples of the world were causing huge software and hardware disruptions, making the quality and ease of using technology more accessible/useable than ever. The connectivity and efficiency only drove the world to be more connected through brilliant platforms and hardware and everything around the world was only a click away from everyone. Smartphone penetration climbed up the charts and Telecoms focused more on VAS for their customers, as voice calls became a utility.


Changes in Local Landscape

Kuwait LandscapeIn the past 5 years, the Lean Startup school of thought became more global and standardized the startup’s lifecycle, early stage funding methods and tools were becoming more visible. As a result of funding gap challenges we had in, my partner and I started setting up a late stage VC practice in 2012 that evolved into a larger project on a national level (the National Fund for SMEs Development), and several institutions started exploring the rising asset class (Venture Capital) where international private funds started flowing into the ecosystem (i.e. and incubators/co-working spaces started blooming. Individuals (including myself and many others)/family offices/corporates continued to invest in the asset class and the funding gap is much smaller in size than it used to be. Startup competitions (local and international) were happening and developers/designers became more in demand. Despite not having a tax-break policy for non-profit initiatives in Kuwait, non-profit startup initiatives became very popular and the calendar year started filling up with many events in the startup world. Here is an overview of how the local landscape looks like today.



If we look at the above table, a super majority of these initiatives are led by entrepreneurs, not government and not corporates (I‘m sure there are more efforts which I missed in the list). These are striving entrepreneurs who are giving us a sense of a real community that is shaping the future of our country’s startup ecosystem. As Brad Feld repeatedly mentions in his “Startup Communities” book, “entrepreneurs always lead the community” and this is exactly what we’re witnessing in Kuwait. There is a new culture of openness and information exchange between entrepreneurs that none of the earlier generations ever witnessed. Mentoring has become more standard and the notion of protecting your idea is gradually becoming obsolete. With more than 60% of the population less than the age of 35, the landscape is only starting to shape right now with much more efforts being geared for the community. There is a very important role for corporates and government to play but ultimately, the community has to continue being led by entrepreneurs who should streamline other stakeholders’ efforts for their benefit.

20 years ago, our flagship startup was Sakhr and we had Talabat conquering the marketplace model for the GCC in the past 10 years… all of that without 10% of the resources currently available for the community. Can you imagine what the next 10 years can produce for the local startup community? IT CAN ONLY GET BETTER!



Abdulaziz B. Al Loughani


Branding Yourself

Many small things we do in life are often translated into theories to put them in the right scientific context for us to systematically learn. Looking back, I recall a short conversation with Prof. Henry Moon from my Organizational Behavior class at London Business School, on the topic of work ethics and commitment that he summed up in the importance of branding yourself at the beginning of your professional career. As we come closer to the end of The Proteges – Generation 5, I noticed how important Henry’s piece of mind is for anyone at the beginning of their professional career. I realized that there’s more to branding than work ethics and commitment. Here’s how Henry’s small branding comment looks in my head today.

The first 10 years of your professional career are the best 10 years for branding yourself. Many of us get consumed with the workload and the demanding long hours, which is fine as long as its directed to what you’re passionate about; “The only way to do great work is to love what you do.” When you find your passion, you will specialize and focus on a certain domain, which should always be associated with your BRAND. Here are 10 ways of improving your brand in your first 10 branding years:

  1. Maximize your learning curve: The best way to maximize your learning curve is by associating with the best in your industry. Work with the best institutions, best managers, best partners, and if they do not accept you, find a way to get accepted. If you are not offered a job or an opportunity, push yourself to work for free; Find a way to only work with the best. Improve your hard/technical skills by getting better schooling, degrees, certificates, and practice by building your track record. Get the widest exposure and take very deep dives in your domain, know all the secrets of your trade. Have a mentor that listens to you, provides you with the right guidance and more importantly makes you aware of how the industry works.
  2. Work ethic: Having integrity will make you foster relationships with your stakeholders and will insure trust is built in the long run. The commitment to your work coupled with discipline is important to shaping your attitude towards work; Work in an environment full of dedication, fun and a sense of military discipline. You have to feel responsible for every thing you do, you need to feel empowered and accountable otherwise will you not feel the heat. Your work ethic should reflect on your lifestyle, people should be able to tell your work ethic from your attitude towards life.
  3. Feedback: Seek feedback from your peers/partners continuously. Even if it’s not very constructive, take it as an opportunity to learn how to deal with non-sense. When it is constructive, it’s a great opportunity to further develop your skills, to motivate you and perform better. When you’re giving feedback, offer it only to those who are willing to listen, to those who value your input. Act wisely by knowing when to provide feedback, who to provide it to and what to communicate.
  4. Stay positive: Don’t get sucked into any negativity around you and focus on achieving your learning targets. If you complain about your work, go do something different because you’re clearly not enjoying it. Look at the brighter side of things. When others see weaknesses, turn them into opportunities to improve. Be realistic in your approach and act on your positivity. Choose your battles wisely and know your capabilities when deciding on your actions.
  5. Hang out with smarter people: “If you’re the smartest person in the room, you’re in the wrong room.” Always hang out with people who outsmart you, who are better than you in what you do, who broaden your thinking horizon beyond the narrow/focused mindset you’re in. Without consciously realizing it, you’ll find yourself in a competition to outperform yourself; they will push your limits and help you beat them at what you do.
  6. Be approachable: Your attitude matters very much in business and perception is reality. Helping others makes the working environment you’re in a better place, which ultimately benefits you in the long run. Even if you see this theory differently, Brad Feld’s “give before you get” attitude implies that giving back to the community you work/live in should be a normal behavior without any expectations in return. “Adopt a philosophy of helping others without an expectation of what you are going to get back. It’s not altruistic – you do expect to get things in return – but you don’t set up the relationship to be a transactional one.”
  7. Community involvement: Regardless of the industry you’re in, getting involved in your community helps you become aware of how you’re industry is evolving. It helps you gather intelligence, utilizes your idle skills, gives you a sense of belonging, and more importantly aggregates all the different skills of its members to better serve your industry. The community addresses industry challenges and provides solutions, and typically advocates policy/regulatory changes when need. An active community will have a significant role in shaping the industry you’re in.
  8. Publish content: Don’t publish content for the sake of publicity only, instead focus on creating original content within your domain that readers would want to practice and share. Content doesn’t necessarily need to come in the form of articles, but can also include delivering workshops, campaigns and competitions…etc. Do not dilute your brand by producing content in different domains, focus on what you know best and get creative.
  9. The best: You have to aim for being the best at what you do. Equip yourself with all the tools and resources you need to master what you do. Practice does make perfect. People in/out of your domain have to always reference you for a skill-set within your domain because one day, the best opportunity will come and you need to be the best fit and ready for it.
  10. Do not look for monetary reward: “Fortune favors the prepared.” If you spend your first 10 professional years branding yourself, fortune (monetary and non-monetary) will definitely follow. There is no arbitrage in life; earn every bit of success you plan to have because it will never happen by chance.

“It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest.” Everything you do should revolve around self-interest, even what I am writing now does.


Kuwait – Venture Friendly

In late 2010 just after we had completed the exit of, I took some time off to go back to school and pursue my MBA degree.  I wanted to expand my thinking horizon beyond my career objectives, I wanted to learn more about the fundamental gaps we had in our local entrepreneurial community and adopt the best venture capital practice to our part of the world.  There was a lot going on in the region and the startup scene was starting to take its shape.

We are all wise enough to know that change cannot happen over night and for such, I had to choose my battles wisely.  Post graduating in 2012, my partner and I started a project solving a late-stage venture capital gap, which later evolved into an even larger project, building an entrepreneurial ecosystem in Kuwait.  In April 2013 the parliament in Kuwait passed law 98/2013, the establishment of the Kuwait National Fund for SMEs Development “the Fund” which I am honored to be a part of.

In my previous post, we talked about law 97/2013, the new Companies Law, and the relevant importance of it in transforming Kuwait to a more venture-friendly community.  We will shed some more light today on the key objectives of the Fund and how it anticipates to build an entrepreneurial ecosystem.

As per law 98/2013, the Fund was established to develop and support the entrepreneurial ecosystem in Kuwait with the following objectives:

–       Developing the national economy by implementing policies for jobs creation and diversification of national income sources in order to alleviate the financial burdens off government budget

–       Raising awareness on the benefits of enterprise, and coordinating and promoting initiatives of SMEs

–       Providing national data and technical assistance to SMEs

–       Assisting in developing business models and financial feasibilities to SMEs

–       Developing training and development programs through support institutions

–       Developing and implementing funding programs for SMEs

–       Increasing enterprise competitiveness and providing maximum support with minimum interference in the SMEs business

–       Supporting local products and innovation by encouraging the development of local intellectual property

Beyond the macro guidelines provided in the Fund law, it was clear to many that key building blocks of the entrepreneurial ecosystem were missing and thinking beyond the available local resources was necessary if we wanted to build something sustainable.  During our research phase, we met with all relevant stakeholders and learned tremendously from their experiences which opted our thinking process to be in the following direction:

–       Build a fully integrated entrepreneurial ecosystem not just one part of it

–       Do not be reactive to current public needs and instead, have a more forward thinking mind-set

–       Leverage local academics and research centers which have accumulated a significant amount of data/information wealth

–       Adopt international standards which will be key for scaling up and attracting international investors in later stages

–       Allow the market and practitioners to provide direction when providing subsidies or other forms of support

–       Do not complicate the design of the initiative; over-engineering sometimes kills the project

–       Recognize the lead time required for these initiatives to prosper and manage expectations of parliament/public

–       Avoid programs that are too small to create impact and too big for the local market

–       Encourage interactions of local entrepreneurs with international investors to bridge gaps in standards of services/products

–       Stress on evaluation matrices of initiatives

–       Programs should have creativity and flexibility when evaluating them; have the courage to refine or kill some programs

–       Recognize agency problems; try minimizing self-benefit over public interest

–       Make education part of the initiative, involving overseas investors, local entrepreneurs and public sector

–       Evaluate local resources to provide subsidies for targeted technologies and their research and development needs

–       Award and recognize entrepreneurs who fail for the right reasons

–       Mark your presence on international monitoring agencies, i.e. Global Entrepreneurship Monitor survey; aim for better ranks and rewards

After meeting with almost all relevant stakeholders, we realized that our efforts needed to focus on four key building-blocks: Smart funding, legal, education and mind-set.  With some ambiguity in the Fund law as it stands and after careful evaluation of many ideas from the stakeholders we had met with, the Executive Regulations of the Fund were passed to the competent minister and the following were the key points addressed in it:

Smart Money:  Providing value-ad capital beyond just meeting your financing needs:

–       Provide different debt/equity instruments for financing needs

–       Allow for multiple rounds of financing for different stages

–       Ensure alignment of interest with entrepreneurs through different incentive schemes

–       Providing strategic/technical guidance through specialized professionals with different domains of expertise

–       Access to pool of talent

–       Business development and contribution to top-line

–       Low cost of funding

–       3 years work permit (exclusive to public sector)

–       Public tendering accessibility preference

–       Co-op outlets preference

–       Land access

–       Training & development

–       Capacity-building of local production and education

–       Supporting local research & development centers

Education: Prepare raw talent to be ready for changing the world

–       Awareness events on entrepreneurship

–       College and pre-college programs that help capacity building for the entrepreneurial mind-set

–       Supporting entrepreneurial competitions

–       Building incubation and acceleration programs

–       Building technology-transfer centers

–       Data bank and information centers

–       Promote local entrepreneurship in international events

Legal: Assist in improving the legal framework for startups to run their businesses and for entrepreneurs to transact with investors in the future

–       Liaise with public/private sector to enhance paperwork process of funded startups and ensure support aspects mentioned earlier are effective

–       Assist/lead efforts of entrepreneurial related public policy reform

–       Push for more venture/entrepreneur-friendly laws

Mind-set: Redefining what the modern definition of an entrepreneur is to the local community:

–       Solves a problem

–       Creates a new product

–       Identifies a new market

–       Builds a scalable model

–       Eyes a large market beyond the local one

–       High risk/reward

–       Creates thousands of jobs if successful

–       Attracts international talent/white-collar labor

–       Positive impact on society

We are in the final stages of the easier part, strategy-building, and are very excited to making this dream come true.  There’s plenty of local talent not being exploited to the fullest and despite the challenges they face, they have been very supportive to make this project happen.  I would like to thank all who have contributed to the project (public and private enterprises/individuals) so far and welcome any feedback on our thoughts.

New Companies Law – Venture Friendly


Building a startup ecosystem requires primarily 4 key building blocks: Smart capital, proper education platform, legal framework and setting the appropriate entrepreneurial mindset.  Despite the Kuwaiti culture being very entrepreneurial in nature ever since the founding of this nation, 2013 witnessed the birth/amendments of 2 important laws which are crucial to redefining the entrepreneurial ecosystem in Kuwait:  The new Companies Law No. 97 of 2013 and the Kuwait National Fund for SMEs Development law No. 98 of 2013.

My focus today will be on highlighting important articles of the new Companies Law that relate to building a more venture-friendly legal framework for entrepreneurs and investors to transact.  The amendments relating to startups include: 1) recognizing shareholders agreements; 2) the introduction of share classes for the first time in the Arab World for any investor and finally, 3) enabling the issuance of shares below a minimum nominal par value.

Once your startup is ready to be legally registered, you will have to choose one of the following legal forms to be registered: General partnership company, limited partnership company, partnership limited by shares, joint venture company, shareholding company, limited liability company and single person company.     To attract smart money, minority shareholders (venture capital) will require to have a front seat when you drive your startup.  With limited common shareholders rights, minority shareholders would typically require you to form a closed shareholding company to insure that share classes and shareholders agreements protect their equity position.  Shareholding companies in Kuwait require a minimum 51% Kuwaiti shareholding pattern and a minimum of five shareholders; they are regulated by the Ministry of Commerce and the Capital Markets Authority.


Shareholders Agreement

A Shareholders Agreement is an important document that gives minority shareholders (venture capital) specified rights to define how your company will be governed going forward.  When your company is formed, its shareholders may decide on a set of ground rules over above the basic articles of association laws that will govern their relationship with the founders.  Some examples may include how do you handle a shareholder who wants to sell their shares? Should it be possible to force out shareholders in the event of a buyout (tag-along/drag-along rights)? Here is a list of common terms that are highlighted in shareholders agreements:

–          How does your capital structure look like? Clearly define your pre-money and post-money capital table

–          Should the agreement involve all shareholders? Or is there a minimum percentage required?

–          Are there vesting provisions? On who and for how long?

–          Who will sit on the board? Are there any board advisors? How will they be compensated?

–          Key man clause

–          Are there any anti-dilution rights?

–          Drag-along and tag-along rights

–          How do you resolve shareholders disputes? Arbitration clarity

–          First right of refusal guidelines

–          Shareholders rights: IP, information, financial statements, reports…etc

–          What happens in the event of death/incapacity? And how do vested shares get treated in this case?

–          Financial and non-financial authority matrix that govern operations (budget approvals, banking spending limits, contractual limits…etc)

–          What decisions require unanimous board and/or unanimous shareholders approval?

–          Compensation: Incentive scheme and remuneration of teams, board members

–          Non-compete clause: Should there be any restrictions on shareholders with respect to competing interests?

–          Preferred shares: Types of shares and rights attached to them

–          What would trigger the dissolution of the business?

You can get as creative as you want in drafting your shareholders agreement as long as it does not conflict with any laws of your jurisdiction.  Unfortunately, unaccounted for conflicts still pop up along the way which might change the destiny of your company, so make sure you provide for all the scenarios you can think of.


Share Classes

There are a number of incidents in the Arab world where share classes were introduced for specific foreign investors but no legislation has yet been put forward for all investors to benefit from before law No. 97 2013; The introduction of share classes is the first of its kind not only in Kuwait but in the whole Arab world. 

As you start validating your idea and traction is seen with customers of your startup, it’s important to evaluate different equity funding options you may seek from Venture Capital firms which is why we need to highlight the difference between a common stock and preferred stock.  Preferred stock is a share class that has a specified yield on the assets and profits (dividend payout) and is senior to common stock in the event of a company’s liquidation or bankruptcy but is subordinate to ordinary debt and typically has no voting rights attached to it.   

At later stages of your startup’s cycle, it is quite common for your company to issue different share classes of common stock especially when your company goes public.  When issuing a new share class of common stock, more voting rights will be assigned to one class of stock over the other.  Beyond voting rights, different share classes are typically indifferent and are entitled to the same economical rights/benefits, i.e. to profits and company ownership.


Rights Issue Below Par Value

In an asset class where failure rate is high, having the flexibility of a rights issue to buy additional security below par value can be vital to the survival of a startup.  For example, if you’re a shareholding company in Kuwait and you are in the process of completing a capital increase at a price per share below par value, the previous law did not allow for this.  Rebalancing the shares allocation was previously a way around the law to reflect the discounted rights issue however with today’s amended law, the capital table is cleaner and changes are easier to reflect.

All in all, the fact remains that this is a law and without it being executed, it’s worthless.  The recent amendments to the Companies Law in Kuwait positions Kuwait to be legally a more venture-friendly environment. With more dynamic individuals participating in senior roles in Kuwait’s government, the recent changes reflect the country’s willingness to further align its business environment with international practices.  In the next StartupQ8 event, we’ll be shedding some more light on the new Companies Law so please join us if you have further queries or comments.




Founding Teams

We often read about the qualities for making a good CEO, a great founder, and more importantly how to successfully lead a team; but we often disregard the importance for startups to have a good founding team.

Early-stage investors always look for teams that have complimentary skill-sets and communicate well with each other. They invest in enthusiastic teams that have a blend of corporate and start-up experience which disciplines and challenges one another think outside the box at the same time. They look for passion, determination, curiosity, hunger, flexibility, efficiency and more importantly, mutual respect between the founders. We have all witnessed fallouts of founding teams that have cost startups millions of dollars due to conflicts that primarily arise from founders not getting along.

Especially at the start of the journey, you’ll find yourself spending 12-16 hours a day with the same group of people and will come across a lot of conflicts to make the next big thing happen. Here are a few thoughts that might be helpful for you when thinking of your next startup founding team.

As we come across ideas and start sounding them off to our small circle of friends in the community, idea founders almost by default assume their entitlement to become CEO of the startup. “Ideas are worthless, execution is everything” and without a team/company that can commercialize the idea, it will only fill in history books. When you share your idea with your circle, make sure you sound it off people that are better than you in what you do, a team that can better execute than you alone and have the will to step down off the driver’s seat if a team member can drive better. The founder of the idea doesn’t always need to be part of the founding team, and in some cases may not have an executive role in the startup itself.

It’s important to sound off your ideas to your circle of friends in the community and not just any individual with a specific skill you need. The reason behind that is to avoid falling in a dating trap on your big idea; you would want to have dated your co-founders prior to sleeping with them then realizing that chemistry between you and them doesn’t exist. Always remember that talent can be acquired, interests can be aligned, but team cohesiveness is priceless.

Startups can’t afford to have overlapping skill-sets in their founding teams. With that said, there’s no magic formula or number of minimum founding members required for your idea to fly; the number depends on the functions required for your business model to actually work. Two test questions to determine if an individual deserves to be in a founding team as Steve Jobs highlighted are “do we have a company without them?” and “can we find someone else just like them?”. If both answers are no then you found yourself a co-founder, otherwise you can always have this individual as an early employee at a later stage with the right incentive.

Having a unified vision is a very important principle all co-founders must share. Every member of any organization knows what he/she does, some will know how they actually differentiate themselves from others but only a few will actually know why they are doing their work. I love the example Simon Sinek gives in his famous TED speech about Apple; “people don’t buy what you do, they buy why you do it.”

The founding team is the corner stone of any startup, so make sure the 12-16 hours a day you spend in the next startup worthy enough!

What Do VCs Offer You?

As Venture Capitalists “VCs” screen through potential startups to invest in, sitting behind a financial model and a suit sometimes sends the wrong signal to entrepreneurs on how much value-add can be extracted from VCs.  I’m sure there are plenty of investors that tag-along with the lead investor in funding rounds with minimal contribution besides capital, tier one lead investors will always have direct positive impact on startups.   Unlike Private Equity transactions, primarily leverage buyouts, where leverage accounts to most of the value General Partners “GPs” create to their Limited Partners “LPs”, Venture Capital as an asset class that invests in high-growth/risky startups with the potential of typically making a 20x return on investment driven by equity instruments or the equivalent; As investors go up the value chain and de-risk their investments, returns start looking more modest relative to the 20x multiples.

In mature ecosystems, funding rounds take a huge slot of the entrepreneurs’ day as they compete for their best funding source however, VCs also compete on the best transactions too.  Term sheets typically reflect how much value-add your lead investor brings; the more value-add the better terms for the investor.   VC value-add standards are constantly being upgraded, setting the expectations from founders to anticipate more from their investors aside from their financial backing.  Funding rounds in venture are very structured as an asset class; Depending on the startup’s size and maturity, the required value-add varies.

So what should startup teams expect from VCs besides deep pockets and strategic/technical business insights?

VCs’ value-add typically comes in the form of services that vary around the following areas:

–       Partners/Clients: With experienced general partners and access to a great pool of companies in different parts of the value chain, the introduction to partners and clients is an important feature VCs bring to their startups.  Consider your VC backer as your strategic business development division; they will contribute directly to your startup’s top line and make the necessary introductions in building strategic/equity alliances.  This is quite common practice and usually comes across all VC fund sizes.

–       Marketing/PR: Despite marketing being an important block within the “build-measure-learn” cycle, some venture capitalists dedicate marketing professionals to assist backed companies that aren’t ready to hire a marketing team of their own yet.  An example of the same is currently available with Fly Bridge Capital Partners.

–       Recruitment/Talent: As investors engage with the startup community early on through startup competitions, events, incubators/accelerators, colleges, deal flow…etc, access to talent is naturally inherent.  Coupled with the first hand entrepreneurial experience the investors bring in, VCs attract a lot of industry talent to its portfolio companies.  Some examples of enriching funded companies with the right talent include Andreessen Horowitz, which has established a talent agency and college program that attracts developers to assist funded companies.  First Round Capital and Kleiner Perkins also both have platform teams to support entrepreneurs in funded companies.

Larger VC funds are standardizing these value-add services and are becoming a common feature to have.  Although large funds give great access to the above services, it’s very important to sense a level of comfort working with the deal leader.  The deal leader will be spending a lot of time with your startup and would formally have board meetings on monthly basis however, he/she will be dedicating a lot more time, experience, network and strategic/technical insights to your startup than just attending the board meetings. Make sure the chemistry is there.

Unfortunately, I didn’t get a chance to be a VC backed entrepreneur yet and I’m not too sure that the VC attempts in the region provide the above services in a structured format.   In early 2009, I was the Managing Partner of and I recall putting together a pitch book for a funding round that did not materialize.  However if I were to make a choice between 2 offers for the round, one from a large institutional VC and another smaller fund, I would focus more on the deal lead for my transaction regardless of the VC size; deal leaders can make or break the success of startups.



What Do VCs Look For?

Over the past couple of years or so, I’ve been coming across great ideas with bright minds that are certainly redefining the startup community in Kuwait and enriching the ecosystem we all work in.  As they learn, build and measure their startup’s progress, smart money becomes key to scaling up and regionalizing their business.  Despite their commitment and excitement, I realized that the lack of venture capital “VC” exposure to local startups leaves a fundamental gap in preparing local startups for venture money.  This post was prompted by a few conversations I had with local startups over the past month as they were shopping for an angel round. Here are key questions to think of while building your startup that will hopefully shape how you position your pitch to VCs once you’re ready for their money.


What do VCs look for?


  • Trust – How well does the VC fund trust the principals? Can VC work with them? How long have they known each other, worked together and why are they working with each other?


  • Team – Does the team have complimentary skill-sets? Do they communicate well with each other? Are they enthusiastic or is this a lifestyle business for them? Is there a blend of corporate and start-up experience in the team? Does the VC have references on the team from people the VC knows well and trusts?


  • Mentorship – Has the team gone through an incubator? List the team’s advisors/mentors and what side of the business did they impact most?


  • Returns – Possible VC return on investment “ROI” of 20 times in 5 years? Will the startup be cash positive in 18 months? Who’s leading the funding round? Follow-up funding required? When and what size?


  • Revenue and Market Share – Is the time required for significant revenue increase far away? Does market share come quickly or slowly? How will you grab market share?


  • Market – What market are you in and how big is it (history and projections)? How well do you know your market? What key suppliers/customers can you reference for a quick call? Who are your competitors? How do they compete with you? Market/product momentum


  • Product – What is your value proposition? Is the competitive advantage sustainable? Are there market barriers? How durable are they? How much has your product evolved and over how long of a period?


  • Customers – Describe your typical customer? Walk us through a transaction. Do you currently have a paying customer?


  • Barriers to Entry – How do you prevent someone with bigger pockets from offering the same product? How sustainable is your barrier to entry?


  • Cost – What is your costing structure? Does the startup have a cost structure significantly better than competition?


  • Profits – Does the plan focus on profit or on product development? (cash flows equal to returns, inventions fill history books)


  • Investment proposition – Funding round, size, equity offering, breakdown of investors by category, key terms, proceeds use


  • Skin in the Game – Does the management team have a personal financial commitment of their own net worth? What is there for you to lose if you close shop?


  • Geography – Is the start-up within 1-hour drive/flight from our money? How friendly are the logistics to taking a trip to your startup?


  • Exit Strategy – What is your exit strategy? Clearly spell it out


  • Risks –What risks your startup may encounter and how will you address them?


Although due-diligence on IP/technology validation is an important box to check, it usually comes post checking all the boxes highlighted above.  I certainly do not speak of all regional investors in MENA, but smart money for startups typically focuses on four key aspects when evaluating an opportunity: Team, product/market, momentum and returns. VCs more importantly invest in game-changing startups that can potentially deliver astronomical returns; if you’re not a game changer, don’t ask for VC money.

Validated Learning – By ABDULAZIZ AL LOUGHANI


As an entrepreneur with investors backing my acquisition, nothing worried me more than whether “Talabat” (previously known as was catching more eyeballs or not.  Before that, I was an associate in a Private Equity “PE” house in 2007 (Global Investment House), and was accustomed to measuring progress by earmarking certain milestones through management teams in companies we invested in that stretched through the life of specific funds (typically 7 years).  Despite spending significant time and efforts working with management teams in portfolio companies, pressure on execution was always delegated to the management team on the Company level as we enjoyed reporting the results and collectively planning new milestones for specific investments.  Towards the end of 2007, I found myself doing a personal leverage-buyout (LBO) when my co-investors and I acquired a significant majority stake of Talabat, where pressure and I became very close friends.

As a managing partner of Talabat, I started redefining quarterly/monthly and weekly progress reports with detailed MIS daily reports for each side of the business we operated in.  By the time my partners and I completed the acquisition process, I had already taken a deep dive in the business side of the startup to take strong grip on it.  I later started to question what if we found ourselves building new features that nobody wanted? What if the features were key to our User Interface “UI” but customer experience didn’t capture the best of it? And in that case it didn’t’ really matter if we delivered it on time and as per budget!  Working hard was really a commodity, it all boiled down to how much of hard work and money being spent resulted in positive outcome.  I only hoped that our team’s effort was taking us closer to catching more eyeballs (the goal) and in case we hit a fan, at least we learned something valuable.  This was my first real life engagement as an entrepreneur which was only the first step into the door.

In my previous life, I was used to building high-level corporate/business strategies and execution came in the form of consulting work and minimal executive roles but as an entrepreneur, domain expertise, functional strategies and swift turns “pivots” were key to validate the learnings in the journey.  I learned that as entrepreneurs under pressure to succeed, we were “wildly creative” when it came to delivering results.  “You can’t take learning to the bank; you can’t spend it or invest it”; pressure was on and results had key weights to the scorecard of my co-investors.

Amongst the features we wanted to introduce in Talabat was Gamification.  “Gamification is the use of game-thinking and game mechanics in a non-game context in order to engage users and solve problems.  It is used in applications and processes to improve user engagement, ROI, data quality, timeliness, and learning.”  We introduced a points/reward system for our users which enabled end-users to order food and earn points with specific restaurants that qualified users for winning prizes; it was later called the “Nag-Negg Fiesta” in 2009.  In the design process of gamification, Nag-Negg was very well designed with an interactive crowd-sourcing content page and dynamic users’ charts (private & public) linked to users’ social networks.   The beta version of the design was marvelous and after functionally testing it for over 60 times, the Nag-Negg Fiesta was up and running very smooth.

Despite the positive functionality of the gamification ad-on to the website, the pool of customers we tested the campaign on was very narrow and did not represent a general mass of our client base.  A majority of transactions in the first couple of hours of the campaign launch were not captured in the Nag-Negg Fiesta restaurants’ universe, FAQ’s content did not cover all questions, points system did not make sense for the average user, restaurants’ were not happy, Arabic content of the ad-on was poor… and the list goes on.  It was devastating! Did all of our hard go down the drain? How are we going to react? Is “Plan B” actually worth taking a stab at? So many questions were falling on us…Focus was on solving the problem, and no attention was given for responsibility…at least for now.  After monitoring users’ behavior (heat map) on our main page for a couple of hours (during a peak hour) and collecting of real live data with first hand customer questionnaires, we quickly realized that our biggest flaw was in the sophistication level of the ad-on.  Within hours, the whole gamification ad-on was redesigned and after an “all-nighter of testing”, we re-launched the game on the morning of the following day.  Result? 60% surge in eye-balls month-on-month and unprecedented engagement with end-users, employees and restaurants.

“I’ve come to believe that learning is the essential unit of progress for startups.  The effort that is not absolutely necessary for learning what customers want can be eliminated. I call this validated learning…”  Our biggest take home from the gamification experience was that validated learning is primarily backed by empirical data collected from real customers; no other form of validation is as competitive or effective. GET YOUR DATA RIGHT!

Funding Blocks

With more ideas brewing in college labs and more private/public incubators being set up, many of the common venture funding terms are not captured when investors and entrepreneurs transact in Kuwait.  In a country where approximately $750mn of government funding is allocated to start-up related projects, the bylaws of a company is the only legal binding document that highlights the relationship between investors and the entrepreneurs, and is very standardized with no room for any preferred treatments.  As a result, the transaction process for early stage funding in Kuwait is also very primitive relative to the rest of the region and the international scene; this is the main reason why modern local entrepreneurs and investors prefer transacting outside of Kuwait.

The following are a few thoughts that may be useful to take into consideration for future funding rounds.


Term Sheets

Typically in early stage funding, a term-sheet is an agreement that is entered between financiers and entrepreneurs which outlines the key financial and non-financial terms of a proposed investment.  In developed venture communities, financiers and entrepreneurs have established a more common template for funding rounds.  With the exception of exclusivity and confidentiality, provisions of a term sheet are usually not legally binding however should highlight certain milestones or conditions that are precedent to investment which both parties agree to meet.  Despite provisioning not being legally binding, terms may be rectified based on new findings that have direct impact on the transaction and is typically used in the negotiation rounds before reaching a final agreement.  Once due-diligence is performed (legal, commercial, technical, or financial depending on the level company’s maturity level), the revised terms are usually captured in a shares purchase agreement (SPA) and shareholders agreement (SHA), with the amended articles of association (AoA) reflecting the new legal changes.



The shares purchase agreement contains details of the funding round including the number shares subscribed, share class, and payment terms with representations and warranties about the condition of the Company.  These representations and warranties are qualified by a disclosure letter that specifically highlights all necessary factual information prior to the completion of the transaction.  The second agreement is called “shareholders’ agreement” and will usually contain investor protection rights, including consent rights, control measures, governing policies, board representation and non-compete restrictions.  The “articles of association” contract would include the company activities and engagement rights, the rights attached to the various share classes, the procedures for shares’ issuance and transfer, annual shareholders and board meetings’ procedures.  Commonly highlighted terms in early stage funding term sheet include:

Share classes, valuation and milestones attached, dividend rights, liquidation preference, shares redemption, conversion rights, automatic conversion of shares/series, anti-dilution, founders’ shares, pre-emptive rights on new shares issuance, first right of refusal, tag-along, drag-along, representations and warranties, voting rights, consent rights, board/governance, information rights, exit, registration, management non-compete agreements, intellectual property assignment, employee stock option plan, transaction/monitoring fees, exclusivity, enforceability and conditions precedent. 

Depending on the nature of the transaction and market conditions, term sheets are tailored to meet the specific needs of the transaction as appropriate.  They are also very dependent on the maturity of the overall venture ecosystem and  are fine-tuned to match the transaction needs in accordance with the domestic legal framework.


Lead Investor

 A funding round is usually led and managed by one venture capital firm or angel network that would put together a syndicate either before or after the term sheet is agreed on. The syndicate will usually comprise some or all of the existing investors and new strategic ones that demonstrate arms length value add capital. Once agreed by both parties (new financiers and existing shareholders inclusive of management), the term sheet is used by lawyers as a basis for drafting the investment documents; the more detailed the term sheet, the fewer issues you will have in the final stages of the drafting process.  The process can be complex, therefore working with lawyers familiar with venture capital transactions is highly recommended to reduce the margin of error/ambiguity, the time frame and associated costs.


Despite the complexity of how the transaction process may seem, the actual process and its time horizon is quite simple and short.  In early stage funding, the transaction process would typically take no more than 60 days depending on the level of the company’s maturity and the complexity of the product/services.  More importantly, early stage funding is a very intimate process that is centred around the working culture and the execution capability of the management team; a smart and hard working team is the main factor for a successful funding round.

Wishing you all a Happy New Year and hope to see you in the next StartupQ8 event (21/1/2013) !

Abdulaziz B. Al Loughani



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