Claudine Emeott (Salesforce Ventures): We invest with the same core strategy as other Salesforce Ventures funds, meaning that we’re looking for enterprise software companies that can integrate their technologies with our platform
01 Mar, 2021
Basil Moftah is a general partner at Global Ventures. He was the President of the Intellectual Property & Science (IP&S) division at Thomson Reuters. He repositioned IP&S as a platform business by integrating its content and technology into a single micro-services architecture. He then prepared the business for sale to Onex PE in Canada. Prior to this position, Basil managed emerging markets for Reuters. He successfully grew the business organically, through strategic acquisitions, including the purchase of Zawya in the Middle East. He was a founding advisor for Reach Mentoring.
It’s an interesting story. When I first started my career in 1997, I joined the company that
I guess I didn’t know very much then, called Reuters, which was a news agency and seemed to be very interesting to me, global, etc. I was on the business side, and my first assignment was to be a part of their VC arm. Reuters set up a corporate venture arm, that was pretty much built to protect Reuters from the internet, as they have a lot of information, a lot of data, and the corporation was really worried about this new way of disseminating content and information online. It was a very exciting journey. I spent 6 years in that CVC. I was based in London for the first part for 2-2.5 years, and then for the rest of it I was based in San Francisco. We invested in companies like Netscape, Yahoo, Verizon, etc. it was a very-very successful fund that had a return of about 40% IRR, if I remember correctly.
It’s interesting that, when I came back to the venture world today and have been investing for the last 3 years as a part of Global Ventures, I found how much of the same ideas and same themes back in 1997 and all the way up to 2002 are still around. One of the companies we invested in at the time was a company called Adero, I think, and it was a company that was creating a new way for people to trade online. The idea was how can you trade intellectual property, how can you trade tokenized assets, and so on. Obviously, in 1997 there wasn’t anything called Blockchain or anything like that, but people were still trying to solve in this online digital world, how will non-physical assets get traded.
I believe that scouting is a really important part of the VC job. I believe some of the best entrepreneurs are not the ones who are out promoting their companies on a daily basis, but ones that are focused on their business, and by building relationships while meeting them you get to understand how are they thinking, what they’re doing and discuss with them what some additional capital would do for their business. We spend a lot of time speaking with accelerators and incubators, attending their programs (we contribute a lot of content to them), we do training on how to fundraise, how to manage startups, how to grow your clients, how to grow your business, different types of business models – we speak on different topics. And through those activities, we meet some of the most amazing entrepreneurs developing some of the most amazing ideas. Another very successful way for us to receive ideas and startups for funding is through our LP-base. Global Ventures is really well-positioned in the Middle East and Africa region because we have some amazing LPs in our fund, so we have investments from some of the largest sovereign wealth funds in the region, some of the biggest family offices, and so on. They are always sending us companies that they have in their networks, people that they know, or entrepreneurs that they’ve met and recommend us to them.
I think, “we need both” is, probably, the best answer here. And I think it really relates to two things. On the one side, you want some kind of presentation to see how the entrepreneurs are passionate, how they speak about their ideas, how they communicate with the outside world, how they’re able to explain their ideas. That’s an important part of a founder’s job – to be able to attract customers, to be able to attract employees, and to be able to attract investors. So, we like a show, as you call it. But I don’t believe pitches are ever complete without understanding the business model and the financials, and how the company plans to make money at different stages of its development.
Global Ventures is focused on two things. One is to look at globally minded entrepreneurs. By “globally-minded” we mean that we invest in the Middle East and Africa region, but we’re looking for those founders that are thinking about how to grow their businesses regionally and maybe even globally. We have soft criteria that the ideas have to be something that is not single country centric, but regional or global. On the hard side we’re looking for Series A and B companies that have product-market fit, with their product having proven customers and some early results that we can rely on to understand the business, companies that are going out of the seed stage and into the growth stage and looking to raise that initial institutional money, that is outside of friends and family or seed investors.
Formally we do anywhere between 1200 and 1400 that we see each year for the last 3 years. We, obviously, received more than that through our website, LinkedIn, and other ways. But we only have not so many hours in the day, so over the last few years, we’ve only been able to look at 1400/year.
We probably have only been able to spend time after the first filter with about 100-150 companies. Our first filters include being at the right stage, fitting our thesis and industries where we like to invest, having the right team. We can proceed from there.
In the last 12 months, we’ve made about 10 investments. Over the life of the fund, we have 23 investments. Not all of them are public because not everything has been announced – deals that we just completed recently haven’t been published yet on our website.
We look at companies in the Middle East and Africa, but we do have a small portion of allocation to look at companies that are growing into the Middle East and Africa. Sometimes we look at the US, South and Southeast Asian, and European companies expanding into the region.
We are very interested in enterprise software, meaning B2B SaaS type of businesses. FinTech has been an area we’re interested in, we look at Food Tech companies. In the last few months, with the pandemic and the COVID-19 situation, we became especially interested in Digital Health as it is going through an acceleration based on the needs of customers. We see a lot of similarities to FinTech which has accelerated as well after the 2008-9 crisis. We think Digital Health will be accelerating in the next period.
We prefer to enter the Series A and Series B stages, we’re looking for companies that have a proven customer base and a product-market fit, so they’re already generating revenue. We are conscious that in some sectors that can take a bit longer and in other sectors that can happen earlier, so we look at the companies all way through the seed to Growth stage as long as they have a proven product-market fit and generate revenue.
Our diligence process takes anywhere between 6 and 12 weeks, the average is about 8 weeks from the first meeting to the check. That can be quite variable: we have done some deals in 3 weeks and some deals took us 4-5 months to complete. We believe that if you’re investing in a Series A, you have a responsibility to conduct thorough due diligence, so we do customer due diligence, we do technical due diligence, and we also do legal due diligence.
We invest anywhere between $1M and $3M as the first check and then up to $5M as the total investment with the following investments.
That’s a difficult question to answer in a very general way. Like every investor at Series A, we’re looking for money multiples that are probably anywhere from 8x to 12x of our initial investment. But given our own timeline, which is 7 to 10 years, and recognizing that certain industries have different life-span, those multiples can start with 5X and, obviously, be anything above.
I don’t know if there’s a word “fair” here. With any investment that you’re making, you’re looking to get a steak that will allow you to make that return, we discussed, on exit. So, depending on the business and the industry, depending on how much money the company will need over the course of its life and how much dilution we, therefore, could expect in the future, after we’ve invested our $5M, the typical ranges of ownership that we have seen in our business is between as low as 5% and as high as 20%.
Globally minded founders are one of the most important parts of our definition of teams at global ventures. It means entrepreneurs who likely have experience in the sector that they’re working in, who have worked and operated, or have knowledge of how does industry operates in multiple countries across the region and across the Middle East and Africa and in some cases across the globe. They need to know what’s happening in the world. Competition can come at you from anywhere, and we like people who can think from a global perspective. The other thing is the compatibility of the team. By Series A the team needs to be getting along well, and we focus carefully on has any of the team members or previous employees left, why did they leave, have there been any particular issues, and so on. And the last thing we try to evaluate is how well do they understand their customers, how do they focus on building the right product, evolving the right product, how well they listen to the customers, and make sure that the feedback they get is incorporated. This is a kind of coachability element of entrepreneurs.
I’m very fortunate that my business partner at Global Ventures is Noor Sweid, she is one of the leading VC executives across the region. Noor has a track record of having been an investor, having a CIO for one of the funds here, and she is a founder of Global Ventures. I’ve got to witness the incredible capability that women can bring into the VC world with their perspective, knowledge, and the way they approach investments which is unique and which is complimentary. Together Noor and I can see both sides of different entrepreneurs, we have an ability to connect with female founders, we have an ability to connect with female executives and bring them into the world of entrepreneurship. I’m fortunate that I was one of the early founding advisors of Reach Mentoring. It was established on the idea that female executives across the Middle East and Africa – not just in startups but also in large corporations – can benefit from additional mentorship opportunities from other people in the corporate world. That’s a matching program that works on finding some of the top talented female executives and entrepreneurs in the Middle East and connecting them with other successful executives – both female and male – and giving them that mentoring support that helps them build their leadership skills.
I don’t know the answer to that question! I guess I will say this. At the end of the day, Steve Wozniak was an incredible technologist and an incredible innovator and he definitely provided a big part of the value that was created in the early days of Apple. Steve Jobs was an amazing business leader and amazing visionary who was able to take it to the next level. So, I don’t know. Can I have both?
We’re very sensitive in any discussions with entrepreneurs about several things. We look for consistency of message and thought. We like entrepreneurs who are determined, but coachable, and stubbornness can be a red flag. To manage a startup in a very uncertain environment demands coachability from an entrepreneur, it is an important factor. We have red flags around businesses that have unsustainable business models: we look very closely at the financials, look closely at gross profitability, ultimate profitability. We are very sensitive to businesses that require a ton of cash to build over time. There are other investors that are better suited to make those investments, but we are very careful with businesses that spend a lot of money on marketing, on customer acquisition, and not enough on product or service. Needless to say that anything that makes us feel that the entrepreneurs have not been straightforward is an immediate red flag and will immediately end our discussion.
This year I started looking at a company, before COVID-19 started, called Open, which became one of the fastest-growing companies in the world (in Europe, in specific) and recently raised the mass round of $25M with $2+B valuation. They provide remote events management, remote conferences, and so on. That’s one that I wish I had pursued harder and spent a bit more time getting into. There is another company here, in the region, that has been very successful – shedul.com. It is a scheduling platform for beauty salons, hairdressers, SPA, etc to manage their bookings online and offline and schedule all their staff. They’re doing really well and, again, I wish I had pursued that one a little bit harder.
Ironically, BlockChain and Cryptocurrency is an industry that I feel has tremendous-tremendous-tremendous potential, the technology itself makes a lot of sense and is very appealing to me as to somebody who loves innovation and has a good understanding of technology. But I find it very difficult to invest in Crypto ideas and even Blockchain-based companies and Blockchain-based ideas at this stage.
There’s been a few changes. We invest across the Middle East and Africa and we cannot travel to all the countries. We’re meeting a lot of entrepreneurs online, spending with them a lot of time online – that’s one big change. It’s not a very comforting thing – there’s a lot of benefits from just sitting down face-to-face with entrepreneurs, seeing their environment, how they work, how they behave. In terms of our investment focus, we’ve launched our new second fund that is predominantly focused on post-COVID-19 opportunities. We put a lot of effort into Digital Health, which includes remote diagnostics, e-pharma, telemedicine, electronic medical records – that’s one of our big areas of focus. In addition, we’re looking at EduTech, at how people – students, kids, and adults – are going to be learning online in the future. We’re looking at AgriTech, we’re looking at the Future of Work. COVID-19 has had a significant impact on our thinking and our appetite on which Industries we believe will accelerate in the next 5-10 years.
COVID-19 is an opportunity for VCs, because at the end of the day VCs are looking at a timeline and a horizon that is longer than 1 or 2 years. This pandemic is definitely not a small event by any means. In the grand scheme of things, now, with the vaccine being announced, with all the medical procedures and medications that people are starting to produce, maybe I’m optimistic, but I think that within the next year or two we will see this virus contained and managed and we will all go back up about our lives. As VC investors we look at 5-7-10-year horizon, and we think that COVID creates opportunities. We will all live and work in different ways. My son doesn’t go to school anymore: he studies online and does school from home. We’ve all found out that doing business as we do right now – over the phone or over Zoom – is very easy and equally good. There are changes in the way we do things, for sure, but there are new opportunities emerging because of COVID. The pandemic has opened our eyes to many of the fragile points in our society. Clearly, hospitals, medicines, doctors, and the way the health care system operates need to take advantage of technology, need to be complemented with technology in order to improve access, quality, and cost. When you have a pandemic that affects 50 million people today and I don’t know what the numbers will be the next year, so, surely, technology has a role to play in providing the access to a quality healthcare system. It is an opportunity, and some companies, some technologies would benefit a lot from it, and we hope to be the investors to support it.
Let’s start with the obvious one. I still believe that Google remains one of the most tremendous companies of our generation. There’s no doubt in my mind that what they have done to the world today would be very different. Organizing content and information, making it accessible to the planet, to everybody is an incredible achievement and it would prove immensely valuable in the future. The whole world’s knowledge is improved by that access to information. Nobody can imagine living without Google today. I think Airbnb is another one, in spite of the challenges they are facing with the pandemics. Uber and Airbnb, we could talk about both, but I’m going to talk about Airbnb. When I grew up, as a teenager or as a child, my parents told me, “No, you don’t take cars with strangers, you don’t go stay at strangers’ houses, etc.” Even though Airbnb is at the beginning of its journey in the world with many hotels, there are so many homes and houses that can now become available for other people to use, that it improves the efficiency of capital investment beyond anything. It’s a very early stage, but this is a revolutionary idea – it has changed humanity. My daughter is 19, and when she is going on vacation with her friends to, say, Greece, she doesn’t stay at hotels she can stay at a house she can find something that suits her budget. The last one is WhatsApp, which is now owned by Facebook, but I don’t need to tell you about the importance of peer-to-peer communication and the ability to send messages quickly to each other. The phone is useful, but I find WhatsApp even more useful because it’s asynchronous and that is a huge thing.
My son and I enjoy playing together the Rise of Kingdoms – it’s a game about strategy, making alliances and partnerships, resource management. When I first started playing it, I just thought it is just another game to play with your child. We’ve got really good at it, I think, we have 64 million of Power (whatever it’s called). But what is more important is that I really see him flourish as an individual – he is 10 years old – in his ability to think about strategy, how to make alliances and gather resources, how to build up his power and forces, when to attack and when not to attack, when to protect his assets. You learn a lot from that game that you don’t learn from school.
Listening is a very important trait in VC. I’m always amazed by the ideas and entrepreneurs, the people that I speak to every day. And you need to listen to the details and be able to understand nuances. Every idea can seem like a good one, especially if it’s pitched by somebody who has more experience and more knowledge than you. A good VC needs to be able to understand the details and be able to make informed decisions on the nuances of every business. You have to be optimistic and believe in the future, you have to understand what are the trends that are driving the future. When my kids first started using Snapchat, I looked at it and thought, “What a very silly social network! You already have Facebook and so many others.“ I don’t think I would have been an investor in Snapchat, even if it was a very successful company because I didn’t understand it. A good VC should understand what the word looks like and what the world should look like, instead of what the world is like today. And you have to be very trustworthy. When you’re dealing with other people’s money (we have a lot of LPs that trust us with their capital), you need to be trustworthy not just in terms of how you handle it, but how you communicate good and bad news.
I’m extremely happy with being a venture capitalist. I started my career in VC and I’m going to end my career in VC. I spent 16 years or so of my life operating businesses I built in emerging markets, in Europe, and in the US. There a lot of work with a larger organization: at some point, I managed a 4,500 person organization around the world. What I really enjoy about VC is the incubation stage: taking something that is very small and young and watching it grow, develop, and become successful. As a VC, it is a very rewarding and thrilling job.
My first advice: Focus on the business and focus on what you’re doing. Fundraising is challenging, and we, VCs, can take a lot of time because we want to think about things, to evaluate and analyze things. The entrepreneurs that get easily distracted or get taken away from their job and not focusing on the business can be making a big mistake as well. I have a lot of respect for efficient entrepreneurs who provide the right information at the fundraising time but continue to keep their eye on the business and on what they’re trying to build. My second advice: Even if you think you have product-market fit, you have to remember that the world is always changing, and what might seem like working today could easily change the next day. You need to adapt yourself, need to be able to pivot, and to be able to handle the competition. Agility would be my second advice. Always think about what’s happening, whether what you’re doing still works or it needs to be enhanced or improved. The last one: Never forget that any product in the world is a service, meaning your customers, what your customers think of you and the feedback they give you is incredibly important. Listen to it. You should spend twice as much time with the clients that you lose than with the clients that you gain to understand what you got wrong and what you can do better the next time, even if you’re never going to win them back. Especially in B2B SaaS businesses, understanding why customers didn’t continue with you is an important part.