What’s holding up investment in the Arab region? Is it the lack of investors ready to take risks or the lack of good startups? “Because we don’t have enough investors, entrepreneurs are forced to deal with investors they don’t get along with,” says angel investor Ranwa Halsa, Deputy CEO and Head of Business Development at ICCCC, a leading provider of turnkey telecom services for mobile operators and system providers in the MENA. Jordanian Ranwa Halasa, just 29 years old, moved to Beirut a few years ago to study finance at the American University of Beirut before returning back to Jordan. There, she invested in online bookstore Jamalon and became a board member at Madfoo3atCom, an online payment service. On a daily basis at her principal job, Halasa mentors entrepreneurs, helping them get funding and make good business decisions. Aside from the lack of investors who embrace risk, Halasa also thinks there’s an education problem. Familiarity with, for instance, the term sheet and legal terminology is very important, and is something that many entrepreneurs lack, she says, which leads to disappointed investors. Prior to receiving investment, there are at least two things to keep in mind: Adopt realistic initial round valuations: The cash you pocket has a certain runway, during which if you fail to meet your goals, you will be looking at a down round. Nobody wants to give away too much equity especially early on, so entrepreneurs should try to find the sweet spot in the middle. Take the time to understand legal terminologies: Receiving a term sheet is great, but it is just the first step. You need to understand the basic implications of these terms if you want to negotiate effectively. There are plenty of great free resources for this. I find Brad Feld’s blog Ask the VC and Fred Wilson’s blog particularly useful. Also, the book Venture Deals does a great job simplifying investment terms. After receiving investment, entrepreneurs should keep the following in mind when spending the money: Bring in a co-founder who complements your skillset: One of the biggest limitations you will be faced with while running a startup is your own mental energy. Having the right co-founder means you juggle fewer roles and have someone to share the anxiety that comes with entrepreneurship. Don’t take the ‘lean startup’ model too seriously: It’s one thing to have an initial launch and perfect things as you go along. But launching when your website is practically illegible and customer experience is just an afterthought is lazy rather than lean. Keep open lines of communication with your board and investors. Nobody wants to spend precious time writing investor reports, so establish a template with all your key metrics and work to push it forward on monthly basis. Investors are a lot more likely to understand your challenges and back you when times get tough if they are part of the progress. Know your unit economics; be data driven. Although this seems obvious, very few entrepreneurs place enough emphasis on knowing their metrics. If your answers to fundamental questions like burn rate/runway/customer acquisition cost etc. are “let me get back to you on this one” investors are likely to run in the opposite direction. Halasa stresses the importance of investments in order to create more job opportunities. “One in four young people in the MENA labor market are without jobs,” she says. “According to the Center for Venture Research at the University of New Hampshire, private investors in the U.S. created 274,800 jobs, or 4.1 jobs per investment, in 2012.” She also called on the richest countries in the region to contribute to job creation. “Qatar and the UAE are among the top ten richest countries in the world with a staggering per capita gross domestic product of $100,000 USD and $65,000 USD respectively. Both have massive oil and natural gas wealth and disproportionality small populations. Basically, the capital is there but it needs to be mobilized.”
