The makings of a fintech unicorn: A masterclass in funding, fintech and falcon economy with Tabby

[Music] good morning everyone thanks for taking the time out of your busy week to join us we're here and I'm very honored to have a guest that's actually really hard to get he doesn't do these sessions so if you're here with us today you're lucky because you're getting a piece of hosam who is a really busy character and the reason I know this is unfair because well we've known each other since the start of tabby or before it was Tabby even right for some so thank you for joining us all here today and I just want to say congratulations $1.5 billion valuation first fintech unicorn out of the UAE at least yeah it's uh it's a it's a remarkable achievement and just touching on that because we're supposed to be doing a funding masterclass I want to try and give exposure on that Journey because Venture Capital Angel Investing is something that's quite new to the region it's not something that's been established for 30 years 50 years 60 years Silicon Valley so you're kind of leading the way for people to take an interest understand and perhaps template the approach to how do I raise money for a fintech in this ecosystem so starting with this round can you tell us the details about this round how big was it how was it structured what can you tell us about the funding aspects of the round you just did yeah so uh thanks for having me first of all um so this round was our series D um I think if you you've looked at the region and the funding history of this region um there's very few companies that get to that level of late stage funding and I think it's a it's a challenge that we've seen in this market historically so maybe just going going back in time um we were building Nami in 2011 and at that point in time Venture Capital as an industry was very very young uh and early stage investing was very difficult right so let alone let alone late stage early stage investing was a challenge just because of the lack of uh options for Founders to uh to secure funding from Venture Capital uh Venture capitalists in the region so what we had to do in 2011 is go outside the region to seek early stage Capital um fast forward to where we are today early stage Capital seems to have been soled for so you know seed series a and to a certain extent series B starts to be is starting to become a a a lot more uh in reach however growth stage and late stage is still very very much a challenge and for that you're going to have to go externally which is what we did right so I think we solved for early stage from within the region um so most of our early stage uh investors were uh Abu Dhabi uh Riyad Dubai based uh investors so the likes of mubadala um mubadala and Global Ventures and a couple of others from the region and then as we started to get later into the business and and towards larger ticket sizes we had to go externally so in this round when you went for a much later stage in funding probably the latest before you try and hit the next stage which is IPO or anything else in your journey naturally occurring Y how big was the Investment Group in pool from abroad so um this time around as well we we focused on looking for Global Investors that understood the space and were able to write large tickets the challenge was that we were in a time where late stage investing globally was challenged so let alone the region late stage starting in 20 late 2021 started to become a lot more difficult uh valuations were coming down late stage investors were holding back their capital capit and waiting for opportunities uh just driven by uh uh you know the uh the growth of or the oversaturation of uh Venture Capital over 2020 2021 um so you know I think I think just looking back what we focused on was building sustainability and profitability in the business to differentiate the story that we were coming with to the Global Investors right so growth was no longer um what investors were seeking they were seeking profitability and so in 2021 when uh the world changed it was very very important for us to start to uh tell a different story uh show a different uh narrative to the investors that we were speaking with um and so you know the the focus became let's look for investors that had Deep Pockets that understood fintech that that had a certain Comfort investing globally because many of many of the late stage investors as well are a lot more comfortable investing in more mature more developed markets like the US um and showing them why this region was different and why the company was different region being different for us at tabi um one of the one of the key points that we wanted to get across to a lot of these investors was just the fact that buy now pay later globally was challenged and there was a reason that was it was being challenged uh largely driven by the fact that it was a nice to have business model as opposed to in a market like this one where credit penetration was extremely low specifically when we talk about credit penetration we talk about Saudi where credit penetration sits around 15 to 20% compared to Global averages of 50 to 75% in more in some of the more mature markets so we came to these investors saying you know this this Market is different there is a real problem that we're solving for and because this Market is different we've been able to build a sustainable business that has shown profitability in a relatively short period of time now i' I've been privileged to be an investor in tabi as well as Clara and some other companies we've talked about and the modeling is different and how they all fundraise has been different you've been a pioneer of sorts in this region because we've talked about how young this ecosystem still is you had an exit from namshi you built that business was there a lot of advantages and learnings that you had in your early fundraising for tabi because you had exited from Nami or was it still such a young area that you had to do everything from scratch all over again so on the fundraising front I think just the fact that I was a second time founder honestly just made it a lot easier to at least get access to investors I think where many of the founders in the region struggle is early access to investors which you know once you're a second time founder third time founder it becomes that part becomes a lot easier right but that on its own I don't think is sufficient um the the fact that we had access uh opened up the doors and made made people you know want to talk to us and be available for us but uh there needed to be a business model that was uh attractive secondly what we also found was uh the level of competition in this market very quickly was quite high so when we launched tabi in 2020 uh within six months there were about five players in the space um and so being a second time founder I think some of the some of the challenges that we uh that you would typically face as a founder or or some of the unknowns I think we had a bit more clarity around uh time to Market was essential uh the go to market strategy was very very important you know things like ensuring that we had access to a number of anchor merchants in the early days ensuring that we had enough access the capital at the expense of dilution right so one of the things we did where a lot of Founders I think today or just inexperienced Founders I would say struggle with is they focus a bit too much on optimizing for dilution and uh you know working to ensure that they get the right valuation at a very early stage not take too much capital in because they're overly sensitive around dilution I think one of the learnings that we saw at at Nami is you want to optimize for survival rather than optimize for dilution I.E have enough Capital it's fine you're going to get diluted you're going to have less Equity at an earlier stage of the or less of a stake of the business at an earlier stage than you would like but you ensure that you're still around when the going gets tough thanks for that I think apart from just being a Pioneer in the space you know building a unicorn building out a business you've also been a Pioneer in fintech structures inadvertently perhaps to some degree and it's something that I think that a lot of Founders and companies and VCS are now taking for granted as as a template and what I'm referring to is equity financing and debt financing uh up until tabi in my knowledge in the region there weren't many Venture Capital back companies that had disassociated from their balance sheet to debt financing and we see it all over the place now so in essence you had created that what what caused you what was the turning point where Equity dilution with fundraising and balance sheet was it something that you decided very early on very quickly or was it something that matured from a a learning from Global businesses and how they had raised in this space especially you know when it comes to bnpl yeah I think for bnpl it was fairly clear that this is you know this is a balance sheet business and therefore we needed to secure balance sheets uh and balance sheet is essentially what uh either makes or breaks this business right the fact that we were able to grow at an early stage through Equity funding um at some point you hit a wall um you know prime example is uh what we did was we went out and secured relationships with some of the largest merchants in the market um and before we knew it we were starting to hit a wall um in terms of our ability to grow our business with these uh Merchants uh the way the business model works is we or we provide Capital to a merchant and then we get paid by the customer and so there's only so far that you can go with Equity financing on its own a business like award's balance sheet was essential and therefore I think it was it was a given that we would go and and try to secure debt having said that very few debt investors are willing to provide access to debt prior to seeing some sort of traction in terms of the growth of business but also Traction in terms of the ability to raise Equity they need to ensure that you have a sufficient Equity cushion with which uh they're able to lend so um you know where where we were is we we had to go out and lend through Equity initially which obviously for us as a business is extremely expensive because you're diluting every time you grow uh but working in parallel to secure debt at an early stage and again this is debt at an early stage that is likely more expensive and much more unaffordable than you would like but um the way we Justified it for us internally is we needed to unlock that first debt check before we were able to get more and more debt investors to come in so our first debt check was $20 million we actually uh just closed and and we'll announce it uh very shortly so this is uh this is for a closed but not very closed group uh We've uh we just secured a $700 million facility as well to allow us to really continue to fund this uh this business going forward oh wow congratulations 700 million is that the largest startup founding debt financing in the region that should be yes oh wow congratulations on that that's that's a great milestone yet again I think as a person that's been trying to set the templates benchmarks dynamically evolving from the business models that you have to keep reaching and continually getting funding from Regional and international sources what I wanted to touch upon was data and I think for outside investors or Regional investors to back Founders like yourselves who are trying to build disruptive businesses whether it's fintech whether it's AI there's a lack of data in the region or has that changed now that allows people to understand the actual unit economics of growth so for example where you were talking about card penetration you talking about transparency of having that knowledge so you can demonstr the opportunity or the size of the market has that changed since you first started or is it still opaque to some degree it's still not great to be honest I don't think we have that level of data that we need to a understand uh the market to the depth that we need to and but also be tell a story to uh to Global Investors right I mean one of the one of the biggest challenges we needed to overcome as we were telling our story and trying to sell to Global Investors is the size of the opportun right time and time again we had investors coming back and saying yeah listen it's it's great that you guys have grown uh but how much bigger is this Market uh how much bigger can you get um for us one one example I can share is uh PayPal Ventures looked at us at the series a and they were impressed with the numbers but said you know great how how much bigger can this get and then they looked at and they passed at the series a they looked at us again B and same story and then to C I think they realized you know there there was something really there uh but it's unfortunate that we need to keep telling that story that there is a sizable Market over here and there is a sizable opportunity that we we um are going after uh across multiple sectors I don't think this is specific to us in bopat or fintech uh but there is a real deep Market that Founders can go after um and I think I think there is a of data that tells that story or that allows them to tell that story I think it's very clear that the finex space is facing a bit more of a Resurgence and you've been helping with that by creating a beacon for people to have confidence in entrepreneurs that come from this region they can build International businesses so with that I'd like to close by saying thank you ham for being a Pioneer for taking time out for sharing your insights and stories with us today we wish you all the best going forward best of luck best of health and we'll see you soon thank you thank you all for your time