Very informative two days that we spent in MAIN Angel Oasis Conference in Gouna. In my opinion, all the discussions opened more questions and this statement shared by Ziad Mokhtar, Algebra Ventures, on the valuation panel wrapped it up for me: The whole ecosystem is a startup!
No stability will be there any time soon ( or ever!); just dynamic waves that we need to understand and adopt! So for 2019 which waves are we on? what are the observations that were shared on the panels on day one?! The following are a few…
Local Angels are drying out because most are stuck with no exits or secondary market opportunities – this gap is being filled with more accelerators activities pumping in money at the pre-seed stage. Lots of Angels exploring raising micro VC funds to be able to keep up.
More international angels and more international VC money are coming in the Egyptian market
We are seeing new cycles of more mature entrepreneurs whether professionals from corporates turning entrepreneurs or executives from previous successful ventures deciding to do their own thing (a good example would be Careem).
There is a desperate need to be more realistic with valuations, especially with startups with revenue dependent only on Egyptian market.
The concept of the graduation cycle or stage that makes companies want a matching offer as peers who were in the same accelerator cycle or started the same year irrespective of industry, revenue, operation cost or maturity of the team – “this notion of Dof3a is making discussions less rational! ” says Khaled Bichara, Accelero Capital.
The need to recalibrate our thoughts on what is a reasonable exit – a big percentage of the exits in the US are early stages and we never hear of says Khaled Ismail, HIMAngel, through acquisition or consolidation while in our discussions we really shy of from these early exits or criticize them.
The need to kill zombies publicly was an interesting point stated by Heba Ali, Egypt Ventures; everybody agreed! Very few Egyptian companies are written off and they keep on pivoting and living and pivoting and bridging… while writing them off will open up several new opportunities as they suck energy, resources and even tons of bridge funding that, if consolidated, would make a difference with the ones that deserve to move faster. A clear write off will liberate the entrepreneurs who failed to start over with a new mindset and apply all the learnings without the luggage of their ever ending pivots and heavy cap table.
Secondary markets for stock grants of employees and for Angel shares need to open up….can we provoke or accelerate this market to cycle more cash in the system? Huge debate – everybody agrees we cannot place it as a mandated purchase early on; it needs to be an organic outcome of the system maturity. My conclusion is that there is space for the creative acceleration of the secondary market; personally, I decided to read more on the secondary market cycles in other mature ecosystems.
While I disagree on entitlement when it comes to secondary markets – I believe that the “no one is responsible for looking after anyone’s interest” attitude is common but it is not recommended because “While it is fair enough for the personal interests, it is not so much for the entrepreneurship space…cause a collaboration can certainly be fruitful” and massively rewarding in value.
So to conclude – more realistic valuations please and more collaboration, please! After all, we are all incubating this startup ecosystem to make ton$$$ of money from its progress;)
P.S. Btw I used the word companies a lot, instead of a startup, as a reminder of a big point that panelist stressed on…startups are companies which are supposed to make revenue and be profitable – at least on unit economic basis; buying growth at meaningless price is not in fashion anymore!
