Doing your homework is as important as polishing your business plan when pitching to potential investors, according to a Dubai-based venture capitalist.
Kamal Hassan, general partner at Turn8, spoke to Accelerate SME about the importance of understanding the investor and how their expertise can help your business unlock its potential, before you even approach them.
“Be ready when you’re pitching to investors. You don’t want to waste your time [or theirs]. Understand who they are and what they are looking for,” he said.
Founded in 2013 and with its headquarters in Dubai, Turn8 has provided pre-seed funding to more than 60 companies across the Middle East and North Africa, Europe, Asia, Africa and the Americas since its inception, according to its official website.
In 2016, the company launched a USD 60-million (AED 220.5-million) venture capital fund that not only provides seed funding, but also Series A follow-on financing to growth-stage start-ups. The initiative hopes to bridge the SME funding gap prevalent in the region and the rest of the world, which have stifled many entrepreneurs from taking their ventures to the next level.
Turn8, however, goes beyond financial assistance by also offering acceleration, incubation and mentoring programs that nurture budding start-ups and help them maximize the potential of their innovative business ideas.
“Turn8 invests in many different sectors,” Hassan explains. “But we're mainly focused on technology-driven start-ups that disrupt these [various] sectors.”
Among the areas of focus for the company are financial technology, Internet of Things, renewable energy, robotics, 3D printing, nano technology, big data analytics, transport technology, artificial intelligence, and storage solutions.
When searching for investors, Hassan advises start-ups to explore various channels, which may be in the form of networking, referrals, or even cold emails. But whatever avenue you prefer to take, he underscored the importance of positioning yourself and finding the right venture capital that matches your start-up’s needs.
Once you have pinpointed the investor that best suits your business, prepare to answer three major questions: 1) Why is it important to launch your start-up now? 2) How big is the pain point you are trying to solve? 3) How are you going to create value for your shareholders, the ecosystem and the society in general?
“What we look out for in a pitch deck is passion. Beyond the typical stuff, such as market, team, experience, technology and business model, we look for hints that suggest how passionate the team is about what they are doing, how experienced they are, [and] how they are trying to solve big challenges,” he added.
Heads up: Mistakes to avoid
It may be a given that to win investors to your side, you have to impress them. However, Hassan cautions about the dangers of being blindsided by such kind of mentality.
“[One of] the most common mistakes entrepreneurs make when pitching to investors [is] thinking that complexity sells. It's actually the other way around – simplicity sells better,” he said.
Some start-up owners may also think that by using a lot of buzzwords or highfalutin technobabble, they could convince venture capitalists about their capabilities as young CEOs. Hassan said entrepreneurs must bear in mind that investors are savvy people. They know the market inside-out, the trends affecting their respective industries, as well as the latest and emerging technologies.
In addition, some entrepreneurs have a tendency to “exaggerate their potential” by claiming that their company can become a “unicorn” (or a start-up with a market valuation exceeding USD 1 billion) within a short period of time.
“[Because] we understand the market, we’re also aware how many start-ups would fail and how many will succeed. So my recommendation is for entrepreneurs to be real [when they do their pitch],” Hassan pointed out.
Hassan’s recommendations come as the MENA region enters a period of “start-up boom”, according to the World Economic Forum (WEF).
Investment in the sector has seen an uptick in recent years, with investment data platform Magnitt putting the annual investment at close to USD 1 billion, majority of which flowed into technology-related sectors.
While challenges still remain in the sector – in particular a concentration of investment towards well-established start-ups, thus sidelining seed-stage companies – WEF said there is “plenty of room for growth”.
The organization noted that digital presence in the MENA region stands at just 8%, compared with 80% in the United States, while online accounts for only 1.5% of total retail sales.