Tuesday 21 May 2019

Amir Farha

Beco shares funding tips with entrepreneurs

DUBAI, April 5, 2016

Entrepreneurs should focus on ensuring that they have control of their companies and only give investors selective control terms such as a board seat, vesting and some limited reserved matters, an industry expert said.

“They must remember that this is a long-term venture and they will be relinquishing more control after each round of funding, so they need to be careful as to what precedent they set at the earlier stages and focus on keeping control over their ventures, added Amir Farha, co-founder and managing partner of Beco Capital, a regional venture capital firm focused on technology investments in the GCC.

Farha was speaking at STEP Conference in Dubai, UAE, addressing over 6,000 tech entrepreneurs and investors from all over the Middle East.

According to Amir, a good rule of thumb is that entrepreneurs should give away anywhere between 15 per cent and 33 per cent in each round of funding. “Anything less than that signals greediness and future funding difficulties. Anything more than that indicates that the entrepreneur is not fully committed to the venture and willing to get diluted significantly for the sake of growth”, he explained.

A lot of entrepreneurs tend to focus on valuation, rather than the more important terms that can affect the outcome of the venture and their control over its success over the long-term. The real VCs should care about the entrepreneur, and that will be reflected in the term sheets they negotiate.

“At Beco Capital we invest in innovative tech entrepreneurs who have found a local solution to a local problem that is scalable. We look for entrepreneurs who fight hard on the negotiating table as that is an indicator of how they will negotiate with the next set of investors,” he explained.

“We also admire those that share the wealth with their employees and include them in their success story as they grow.” Such entrepreneurs are perfect partners and Beco helps them, not just with funding, but also through operational support; developing new products, taking them to new markets and assisting them in every aspect of their operations.

“Treat others how you'd like to be treated”, added Amir Farha. “We do not take advantage of the entrepreneurs’ position when leading a transaction, and ensure that we support them by introducing them to potential co-investors that we think can provide value-add.”

Beco also encourages its portfolio companies to look at allocating shares to its teams through employee stock ownership plans (ESOP).

“Entrepreneurs should allocate 5 per cent to 15 per cent of ESOP at each round of funding to be distributed among their employees. This is not only good for the start-up tech venture, but also to the start-up ecosystem as a whole. We have seen the magnifying effect of ESOP in developed markets, when these talented employees monetize their shares on exit and reinvest them into a new tech start-up, to create a virtuous cycle.” Farha said.

Farha recommended young tech entrepreneurs to build their relationships at that early stage of their ventures, whether with early investors or employees, as long-term partnerships: “It’s all about smart leadership and smart money. Whoever you get in your team and in your cap table at this stage is with you for the life of your venture. Therefore you'd want them to be value-added in every stage of growth, so you need to choose wisely.”  - TradeArabia News Service

Tags: entrepreneurs | Beco Capital |

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