When it comes to VCs on the Lebanese scene, Phoenician Funds is the new kid on the block.
One year old now, it was cofounded by Jad Salame (managing partner), and a consortium of 12 local banks.
Using Circular 331 money, the fund focuses on investing in fintech, digital health, and government startups, with a 10-20 percent share allocated to ventures belonging to other industries.
The fund has already invested in four seed stage companies: Risk+ Solutions, Bsynchro, Seez, and Blink My Car.
Following their first year of operation, here are four lessons they learned.
Look for the right mindset
“You obviously have your standard checklist, such as the vision, the team, the problem statement and solution, etcetera,” said Salame. “But there is an additional yet very important aspect we like to see: Are they in the right mindset when they approach us?”
He adds that they focus on the entrepreneur’s foresight, and the importance he or she places on creating value with an institutional investor.
Remember, you are ‘co-shaping’ an ecosystem
With their large networks and policy levies, venture capitals are agents of change in nascent ecosystems. According to Phoenician Funds, VCs should embrace that role and cultivate the right mindsets among all stakeholders and not just entrepreneurs. For instance, establishing the right legal infrastructures has not been achieved yet. However it has come a long way in the last five years, mostly due to initiatives made by similar entities. Salame said it is their responsibility as a venture capital to contribute to the development of the ecosystem. “Evidently, we’ve been doing that since we’ve launched in 2016.”
Place priority on the stage
Prior to the issuance of Circular 331, early stage startups did not have the proper support infrastructure, and venture capitals were not clearly differentiated by stage. Most of them shied away from the rather riskier seed stage rounds.
Today, the environment is different. A number of support institutions (accelerators, incubators, coworking spaces, etcetera) have emerged, which has helped shaping the seed and early stage landscape. “Given the rise of this support structure, we found an obvious gap at the seed stage, when startups need institutional support the most. This is where our investment strategy is currently focused, he said. He added: “We engage our partners early on, with the hope of creating value together down the road,” said Salame
Tarek Kabrit, cofounder of the recently funded Seez, said: “We’re a company that’s not going to monetize anytime soon. We needed an institutional partner that would help us set and reach ambitious milestones.” Seez is is a peer to peer automotive marketplace that allows users to discover, buy, and sell cars.
Start in Lebanon, look beyond
Lebanon possesses a number of characteristics that are attractive to investors. Its population is highly educated, hardworking, and tech-savvy, in addition to being fluent in two languages or more. Add to that, the funding facilities made possible by the central bank, and you’ve got yourself the perfect startup ‘kitchen’.
“We were surprised to see that many startups that are not very relevant in the West, are solving exciting region-specific problems, like financial inclusion to the unbanked. Lebanon is a great starting grounds for these initiatives, but it is important that they expand to the larger region”, said Saeb Nahas, manager at the fund.
While several countries have been emulating the circular 331 model, Lebanon remains attractive for its relatively lower labor costs, and cultural exposure. However, for VCs willing to invest, scaling beyond the Lebanese market is important.
Chadi El Nawar, cofounder of Risk+ Solutions, has similar plans in mind: “At this stage, we’re tailoring our solutions to the Lebanese banking system, as we’ve all worked in it extensively. But we will be expanding to the GCC soon. Lebanon is a great testing grounds for us.”
Risk+ Solutions is a fintech company specialized in developing and implementing financial intelligence and risk management IT solutions for banks and financial institutions.
Feature image via Pixabay.