How to navigate fintech funding in the great VC reset?

[Music] hello everyone so it's a great pleasure to be back today and to have the opening uh panel this morning so I would like first to of course have our panelists introduce them themselves tell us where they are coming from where they are going and also um what's um what your companies are doing sure uh hi my name is Adam fesi I'm the co-founder of Portage uh before Portage I had my own business starting one of the first Exchange Trade fund businesses in Canada back in 2005 uh but for the last eight years I've been building our platform which is a early stage seed all the way to sirc uh fintech Focus Venture uh investor we invest primarily in North America and Europe we have about 90 companies now in the portfolio and then more recently we've just added a growth envelope so we can go all the way to pre-ipo thank you Adam what about you safe um first thanks for having me L um we Thunder um we allow our users to invest in stocks and mutual funds in Egypt as well as stocks in the US uh we've been around for three years now and so far we've managed to capture 25% of the transactions that happen on the exchange and we've contributed to 86% of all the investors entering into the space in Egypt um our general vision is to provide uh Economic Opportunity across the Mina region and we're actually working with the adgm regulator to hopefully have the U as our first expansion market so we've been talking in the last days you know about this topic like reset in the in the funding in the investment Market changing word or is it only a correction so I have the the same question for both of you and maybe we can start with Adam you know what is your vision and on on this how do you think severities when do you think we'll get out of it what are the opportunities especially for our region in the Middle East for that crisis so look we're actually relatively optimistic um the US seems to have bottomed in in Q2 in Q3 we actually started seeing valuations in seed and series a actually increasing um it's been more challenging and more difficult in later stage and it's purely for the fact that there hasn't been any deals done per se a few but the N is probably in 2023 less than 40 so having a really good idea of where the later stage Market is a little more challenging in Europe we're also seeing the early stage starting to recover but didn't it didn't go up as high either so Europe's always kind of funny caught in the middle uh in EM obviously it really is regional whether it's Latin America whether it's Asia whether it's here I think in general we've seen early stage valuations be relatively robust and I think that's partly because a lot of capital was raised at the Heights and a lot of that capital's come down market and which has allowed those valuations to be maintained although I think it's going to be a challenge to see which of those earlier stage companies can live up to those valuations and I think we're already starting to see in this call it series B C Market in North America and Europe that you know a really good financing is achieving your previous post money um and so if you think about multiples of compress depending on stage somewhere between 60 and 40% you have to have grown about 50% per year to get to your previous post money and so I think people should celebrate if they get their their their last uh valuation and and of course there's always that that top desile that will will exceed those expectations and what opportunities do you see specifically for Abu Dhabi and for the Middle East so look I think what's exciting about this region is there's a really robust Angel and and Seed activities so there's for the size of the market what's impressed us is the amount of uh flow and and companies I think the question for us is you know when would we enter the market when and where would we make an investment I think for us the opportuni is probably series A and B where we can be more of a facilitator and not compete with the local market and so that's what we're trying to assess right now so maybe you have your next investment by your side so say what about yourself it would be very interesting you know to have the opinion of um of an entrepreneur on that so it's tough like I we can say that it's tough like from the conversations that we're having I think there is money I think there's some dry powder and there is appetite to to put this dry powder somewhere I think what's making it a little bit tough is that it happened when this region was actually starting to grow and there was still a lot of investors still exploring this region and now you're competing with um with other regions that are already developed in terms of the startup ecosystem Capital markets that have similar irrs to what VCS would expect with this level of uh risk but also to be honest uh we're seeing the opportunity in this um opportunity in terms of less competition entering into the market everyone is focused on their own specific area but also opportunity in terms of data point so obviously Adam would know much more but from our conversations with BCS we feel that the more data points that they have on you the more likely they are to have the appetite to venture into you and being able to survive or even grow within uh the foundations and within the elements that are happening now this is an additional data point that proves res I that proves that there is a very big push and I think those that come out of this are actually in a better po position versus those that are entering for the first time after after things start to go back up again can you be a little bit more precise and also share with the audience you know what was your fundraising journey within funder and how did you manage you know to grow from Egypt go to the US come back to the Middle East and now Abu Dhabi yeah so um we did three three rounds in total I honestly think our first round was the toughest round uh we did it back in 2019 um so was the poker game now yes so back in 2019 both hamuda and myself we both come from Uber so we both come from the ride hailing industry the first two questions were what are you guys doing in fintech and uh why would the why why would you start in Egypt and at that point it's more of the vision the dream and like what we wanted to do versus any data points that can really support the and coming from this region you know like how low data points are in general so you might imagine how startups would be I think first round was 800,000 uh dollars and like we barely scraped through and it took four months of like lobbying all across the world and if you look at the cap table it's just a very weird cap table where you have VCS from all across the world second one we started to have some sort of traction with the license um as you know in in the fintech world licenses play a very big role regulations play very big role so I wouldn't say it's it was easy but it was definitely easier third round this was the series a of last year we had tiger we had beo we had process uh from from as new entrance um and I think the one thing that differentiated us at that round was the traction that we had for the first time we can we actually had traction to show and the point that they focused on heavily was unit economics uh and I think this was a very big difference to the language that we used to receive back then uh in the first two rounds it was mostly on like growth uh how's Revenue doing how's the user base doing with the different VC arms that we were talking to different stage it was okay show us the unit economics let just make sure that the money we deploy now is something that will actually have a multiplier effect on the growth of this uh business rather than just fueling growth for the for the next uh round thank you Adam you've been going coming several times to the region and to Abu Dhabi and this time you were bringing with you you know delegation of a dozen of fintech um companies from your portfolio can can you give us more detail about that and why do you think it's the right time now for you to bring these companies to the region I mean I think you always look for Market signals and as an investor we're looking for those signals Paul and I have been coming here for the last four years fairly consistently uh we for many people benefit did a strategic partnership with adq this past July so that's been a further impetus to be in the region but was also interesting of our 90 companies we started seeing commercial activity in this region and that they were starting to put people in the region but in a more informal way and so we started double clicking on that and we really found that we had about 15 companies that were doing real business in the region two of which had opened offices and three of which were exploring to open offices so for us that that was a pretty good signal that we should invest time and support in terms of what we know about the region and certainly introducing them to our Partners here so they've been here for three days most of the time spent in commercial conversations not fundraising conversations and you know we'll explore and see what those opportunities uh result in but I I'm super optimistic particularly just how healthy the pipeline uh was even before they got here thank you I think it's uh I would like to double click on that you know uh being with now adio and before with h71 we are seeing a lot of company is coming our way you know who doesn't know the region and just think that it will take them a couple of flights you know to be able to come here and to fundraise so that's part of the guidance we are giving them you know like you need to be committed to building this economic ecosystem with us you need to be committed to first get traction and make business in the UA and Abu Dhabi and that's where you would see after you know the support of the of the investment ecosystem that we have in the country when we were discussing yesterday Adam we were discussing you know about the maturity of the different stage in the UAE that we started especially you know around the series a with now a very strong you know investment ecosystem and and also network of companies to invest in in that that level of maturity that the business Angel and and preed Seed side is growing uh slowly but growing but we are still working on building you know the gross and the exit Vision which is of course critical for investors because if you don't have like an idea idea of what will be your exit from the beginning it makes the investment more difficult so what is your vision on that and you've been here sever time as we were saying and what do you think should should be done or how can you support also that that Trend so it's just going to take time is the is the honest answer because the ecosystem has to mature grow up see successes and recycle and and that that recycling part means Founders that were successful get refunded and it's a reinforcing Circle if you will uh but certainly at ic's for any North American European investor they're going to be asking that question is what is the exit path so um from our perspective we believe the most obvious exit path are probably International companies looking to increase their total addressable Market in a similar business so your business could be potentially acquired by a North North American platform or a European platform doing something similar and there's great synergies in doing that so that that's a potential path I think you know incumbents whether they see uh the fintech community as a way to accelerate whatever Innovation they're doing I don't think we've seen a whole lot of signs of that thus far but we're looking to see that type of activity and then lastly of course uh the final signal that you've got a really strong ecosystem is if you've got a liquid Public Market um we're just closing investment in Turkey as an example which is an outliner for us uh but the health of that IPO Market in Turkey actually gives you uh a lot of confidence despite the multiples maybe being uh lower than you would see in a developed Market if you're investing quite early so long as the growth uh is there you can you can deal with multiple compression but it's a really liquid market so I think that's really important in the evolution of this Market is we see the development of IPOs Etc I think this is a very critical point in the liquidity of the market and I just wanted to mention that that of course edx you know is working on it and also as part of adio abudhabi investment office we have the IPO fund so it's been launched to be able on one side you know to support the companies which are pre IPO to three years from becoming IPO in Abu Dhabi and also an advisory arm who are helping you know and prepping the companies that wish think we are ready to to do the last mile so safe what about yourself what is the exit strategy of Thunder do you have already won and and how do you see it happening in Abu Dhabi yeah so um so I'll Circle back on what Adam said here so the three things that we see as well are similar to how Adam sees it either someone acquiring us from outside either an incumbent actually expanding to their digital Forte through us or through the public markets um let me start with the public markets um I think Thunder is very um intertwined with public markets so like the the ideal story would be that we IPO one day um two things there one um I don't think an IPO is an exit uh for for Founders at least and I think it's even more hustle and it's even more work um I think it's an opportunity to allow for exits of those who back you up earlier as well as to provide the the options for users to actually uh be part of your story and this brings me to a point where I see that the right IPO structure needs to be a local or Regional IPO structure and I I don't think if we decide like if you look at all the liquid markets globally I think uh the US is top of the chain but I don't think it really works for for companies like us uh I don't have any brand presence in the US I don't really have a user base in the US I don't think I can get this premium of being in the US market especially that a lot of uh US based um firms would prefer to invest in US based opportunities and it is with their mandate um for this to happen we need to do a very strong push on the liquidity of of local markets and the sophistication of investors participating in the local markets uh which is something that is very close to Thunder's Mission as well um on the other two points um I think in terms of someone from outside coming to um acquire you or to invest in you it's not really within your hands on when they would see this opportunity but I think it's within your hands on the structure that you have that would allow for such a thing to happen in the future uh think of corporate governance think of the numbers think of the Strategic Sense on why you would appeal to to someone like that um on the incumbent part I actually see a lot of potential activity and I see it actually being focused heavily in the UE I think when I look at the UI I think there's more appetite of incumbents to actually participate in in in these growth stories you just saw and uh and the Karim story um and I think it pushes a very positive and it comes comes from from from the places that you wouldn't expect it you know and historically was not in in this sector at all and you see them actually making a very big push there so it doesn't necessarily have to be traditional Banks or traditional brokerages you actually have a lot of opportunities and appetite here and I think the leadership whether it's coming from the government or from these corporates are in a good stage where they're thinking of these things and they're making a big push on understanding these ecosystems and being part of that I I think that's a very important point you know when we look and we've been like you know trying to crack that at to be able to build the ecosystem it's like when you look at the other mature ecosystem you know they've been growing organically the point is that in the UA we started our journey six years ago with a vision from the leadership and what is quite very exciting now is that we can see you know that this kind of mayones is coming where we see as you were saying you know people who were part of the Senior Management as yourself you know of successory exiting being able to launch their own Ventures and bringing that experience with them and on the other side you know not only Sovereign we funds but also big corporates who are moving toward their their digital transformation journey and instead of trying to rent everything and to rebuild everything are trying to leverage you know some smaller player and see how they can benefit from there with a potential exit at the end so I think we are coming toward the end of this panel so I will have this very you know like general question for both of you what are your two sents of advice you know for a fit Tech fer who wants to launch his Venture in uh in 2024 what will be your your recommendation and then so I think safe talked about unit economics and just being really tight on all of your metrics and you know effectively have a living data room because you're in this type of environment should always be fundraising and those conversations shouldn't be a distraction so everything should be ready at the end of every month every metric that any investor ever asked you is updated automatically so your narrative is very crisp and you can tell a story in 5 10 minutes that's very compelling uh you no longer have the time to engage in a conversation over 30 45 days to really seduce them there's just too scarce of capital and people are very busy looking a lot of things the quicker you can get them on the hook the better and that comes with being really really prepared so that's uh coming back to measure sure what matters right what about yourself um I I'll give a few if I if I may um so first one um at least from our story when we were in the early stages and we were talking to International investors we found it very difficult to to talk about and like it's a new region for them they don't know a lot of these uh things that really have the cultural sense of things here and what we found easier is to bring well-known very reputable BCS from this region like beu like Global Benes they have a very good reach and they help you uh n narrate your story with with their partner VCS abroad and it makes it easier for the partner VCS abroad to actually come into something with someone that they trust but I'd say this is number one number two when talking to International VCS I think You' find that a lot of them are actually focused on specific sectors like I know Portage is very strong on the pin Tech piece and these conversations are much faster if they're overlapping with what you're doing uh you'll find them asking the right questions they'll find them understanding what you're doing and you'll find that even if it comes to rejection they actually tell you the reasons why they rejected you and what you need to do as a as a Next Step um and then the third one I want to say is from the numbers perspective I'll actually give you the numbers that I like to look at personally uh on the unit economics front so one Revenue growth is important a big charm of the startups is that you can do a lot in in very short time so Revenue growth I think will will always be relevant I I also like to look at cak Payback period anything below six months I I think is really good I like to look at a retention uh scheme in in Thunder we look at net deposits so if let's say the cumulative ecosystem put a million Egyptian pounds in our platform in month one how does month 12 look like is it growing is it the same is it going down um and then the last last thing I like to look at is basically your burn burn uh multiple if a VC comes and puts money in you today are you having this multiplier effect on revenue or not and I think having a good sound of these numbers makes it easier to have the conversations with with vs thank you so coming back to your first advice you know I will do a little bit of self-promotion here around up 71 you know that's exactly what we've been trying to build is to build that Community you know where people are able to support you and to make sure that you know the point of fundraising is not uh doesn't take a 24 hours at a demo day that's not how it works in our especially in our region so to be able to have the future investors being your adviser from the beginning you know will be able to Fast Track that journey and be able to do the right matchmaking one last point I think super important for a younger region is failure is really important and it's fine and it's absolutely fine and you should celebrate the entrepreneurs that fail get up and start the next company and I think too often in many countries including my own Canada failure isn't looked as as a successful uh you know effort of of energy like it is in the United States that entrepreneur celebr ated for trying and failing and getting back up and starting again I think in a new region like this we got to make sure we're attuned to that because there will be some failures there'll be some spectacular failures in Canada the 01 crisis we lost Nell which is a multi-billion Dollar business then we lost Blackberry all of those engineers and entrepreneurs went on to build some of the best companies in our country so uh I just keep that in mind as thank you so much for that last Point well I really enjoyed the conversation thank you for coming today and I hope you will enjoy the flowing conversation later today thank you thank