Facing the Fundraising Challenge: Investor Readiness
As financing remains a scarce resource in Jordan, where should entrepreneurs begin their quest for capital? BeyondCapital’s Investor Readiness Program aims to outline this process for entrepreneurs. We teamed up with ShamalStart to provide a two-day training course to 12 Jordanian and Palestinian startups. The program sought to introduce seed-stage founders to the financing ecosystem, guiding them on how to think about fundraising before the process begins.
In Jordan, there are serious gaps in the normal fundraising sequence. At the seed stage, a few key players exist including Oasis500 and ShamalStart. However, Jordan lacks angel capital and early stage financing to support startups onto the scale-up phase when organizations like Endeavor Jordan and Silicon Badia may enter the picture. With this in-cohesive system, it has become more important for founders to understand how to navigate the entrepreneurial ecosystem from entry to exit. The Investment Readiness Program connects the dots of this journey by introducing startups to topics such as the art of storytelling, perfecting the pitch, necessary legal steps, and lessons learned from local entrepreneurs. In this article, we will sum up some of the topics and takeaways from the event’s expert speakers:
To begin the segment on storytelling, Investment Principal at Silicon Badia, Jenny Ahlzen, shared a surprising statistic; telling an effective story is 55% body language, 38% tone of voice, and 7% content. Ahlzen stressed the fact that storytelling for entertainment and storytelling for business are one and the same. Since investors see hundreds of startups, connecting the dots of your story and being able to relate to others will make investors care more about your company. According to Ahlzen,“How you tell the story is much more important than what you actually say. We remember stories that stick out, that create a reaction, something that speaks to the heart versus the mind.” One tip Ahlzen suggests is to include anecdotes in your presentations. “Let your audience see in their mind and feel. Let’s say you are talking about your achievements. Paint the picture of the achievements as an image.”
Perfect Your Pitch:
A compelling story will translate into a compelling pitch. Dina Shawar, former Investment Associate at Silicon Badia, outlined the steps for successful fundraising. She first noted that startups don’t necessarily need venture backing. “You can build a valuable business without venture money. If you are able to bootstrap, you save your own equity. If you can sustain yourself from the start, by all means, you do not need the money,” she said. “If you don’t have traction, focus on your company or a VC firm will take a larger part of your business.” With that in mind, entrepreneurs should always focus on improving the value of their businesses from within. Shawar added that, “fundraising is extremely time consuming. It’s time taken away from building your business, so make sure to sustain revenue to prove your business’s value.”
Drawing from Ahlzen’s advice on storytelling, Shawar noted that the most important story to tell is your team’s story. “Your deck is your team,” she said. “Your team is the most important part of your pitch deck, so your pitch must tell your team’s story.” As for creating your presentation, investors will pay attention to the small things. These might include too many slides, irrelevant info, poor formatting, or excessive jargon. “What can make a deck poor,” she said, “is the design, all the little details matter.”
Prepare for Financing:
Preparing your financials can be intimidating, but Rasheed Rafidi, CEO of accounting firm, Precise Business Consulting, elucidated the process. Rafidi explained the necessary financial statements and the relationships between them, as well as the main financial ratios investors use to evaluate startups. Rafidi noted that many startups he sees do not keep proper records and begin to see problems once they grow. Failing to document your financials, for example, may limit your ability to receive credit from banks in the future. On that note, Bashar Maayeh of Societe Generale Bank (SGBJ) discussed the various banking products available to startups, and outlined how banks evaluate companies and their financial statements.
Following the SGBJ, General Manager of The Innovative Startups and SMEs Fund (“ISSF”), Mohab Murrar, discussed the process of receiving ISSF support, and how they seek to increase private, early stage equity finance for innovative small and medium enterprises (SMEs). In doing so, they aim to develop an ecosystem of entrepreneurship around them.
The boot camp provided recourse to another daunting subject: the law. Experts from Zalloum & Laswi Law Firm provided a technical breakdown of the important legal steps entrepreneurs must consider. Among the topics covered were the limitations and advantages of different types of registrations, SME tax incentives to take advantage of, legal requirements of due diligences, and more.
Offering a legal perspective from the investor angle, Silicon Badia’s corporate and legal affairs manager, Lina Al-Araj, provided various insights into the deal process. She first explained the basic timeline for the due diligence phase;
“We engage an independent law firm, and an independent accounting firm to diligence you…We will introduce you to these independent firms and give you a checklist of what we’d like you to put together. It takes about three weeks or so while we go through all your documents and speak to advisors. At the end of that, we get a report from each one and look at areas that need improvement or problems that need fixing.”
Al-Araj also pointed out that investors may be able to help with more than just capital. They can also provide legal knowledge among other forms of assistance. “A great investor will offer more than just money. They may also offer resources, expertise, etc,” Al-Araj stated. When arranging a deal with investors, the terms will vary based on many factors, but Al-Araj offered a few tips, “Watch out for harsh economic terms: anything above 15% interest, for example, is unreasonable. And always think long term. When you raise money, you will go through the deal processes again at some point. Giving preferential deals to certain investors early on may cause issues seeking investors at later stages.”
Fireside Chat with Omar Akel:
After the topic-based sections, attendees also had the opportunity to sit down with Omar Akel, co-founder of ifood, which he successfully exited in 2016. Akel has started four companies in total, the first of which was a food delivery service he began after graduating university in Canada. That venture failed, and at age 22, Akel had over $60,000 in debt. This failure, however, did not detract from his optimism. “The positivity always has to come from within,” he says. “Don’t let the small negative things that happen affect your larger vision. Greatness happens in incremental steps…My first business in Canada failed, but you shouldn’t be afraid of failure. Always have the energy and optimism that if this one fails, the next one will succeed. Make the conscious effort to be positive.”
Akel also offered insightful tips on how to be resourceful when money is tight. He warned, for example, that entrepreneurs should avoid getting second jobs to support their ventures financially. Rather, they should invent different ways to make money through their company. “Be creative,” he advised, “because as soon as you put your energy into doing something else, your company won’t succeed.” He drew this advice from personal experience. When ifood did not, at first, generate enough revenue, Akel recalled, “we created a call center through the company. It was not part of our model but it helped us generate about 50% of our revenue during the early days.” This resourcefulness helped his fledgling company sustain itself into maturity.
With Akel’s final word of advice, the program came full circle: to the importance of storytelling. “Storytelling is not just for investors,” he said. “What I do subconsciously while working is I’m always building good stories, gathering the good news, and radiating it to everyone. Always remind investors of your presence. Don’t be afraid to ask investors what a good story would look like from their perspective in order to invest in you.”