A panel discussion on the two sides of Iraq’s biggest investment

On March 30th, 2022, Five One Invest hosted a Speaker Series session with Dr. Munqith Alazzawi (co-founder at Baly) and Ben Harburg (Managing Partner of MSA Novo). Do you want to know more about MSA’s incentive to invest in Iraq (why now and why Iraq) and Baly's startup and investment journey? Read on!

Launched in Q4 of 2021, Baly, a ride-hailing app based in Baghdad, claims to be Iraq’s first-ever super app. Making Iraqi investment history, Baly raised the most significant seed round in January 2022 to the tune of $10.5M. Backed by tech-enabler Rocket Internet, Baly’s investors include regional and international investors, including MSA Novo. MSA Novo, a global fund investing in emerging markets, is not a newbie to the MENA market. It has already invested in regional startups such as Tabby, Kitopi, and Swvl. 

Dr. Munqith, a co-founder at Baly, a Ph.D. researcher, and a former expat in China, explains that Baly’s ultimate goal is to be the leader in tech and innovation in the MENA region. He believes that what makes a great company is its people. Baly’s mission is to connect the local Iraqi team with global talent - Baly’s international team comprises talent from several countries, such as Italy, Germany, and Pakistan. As a one-time expat himself, Dr. Munqith aspires to “get brilliant Iraqis worldwide to come back to the country and start their entrepreneurial journey with Baly.” 

As a founding member of The Boston Consulting Group's Middle East system, MSA Novo’s Ben brings a wealth of experience in the region’s largest financial institutions, including Iraq. Ben describes MSA Novo’s approach to investing in emerging markets as identifying young populations with relatively high purchasing power, the potential for regional growth, and the market's savviness in dealing with crises and uncertainty.  

MOTIVATION TO INVEST IN IRAQ 

MSA Novo had been keenly eyeing the Iraqi ecosystem for a while. The discussion started with Rocket Internet while brainstorming various ideas for the region. Together, they decided to launch something in Iraq. Baly was a joint build between MSA Novo and Rocket Internet, where Rocket led the initiative and MSA was a silent supporter. 

MSA noted that the tech ecosystem is still nascent in Iraq, but that only means there is a massive potential for growth. It started mapping the ecosystem identifying players such as Miswag, Talabat, and Sandoog. While mapping out the tech ecosystem, MSA pinpointed market challenges and consumer pain points. MSA was looking for a company that would provide a broad spectrum of services, mirroring Chinese models. MSA was not only looking for an app that would offer ride-hailing and food delivery (like incumbents such as Careem). MSA was looking for an app to onboard consumers through high-frequency low-use services to ultimately provide products with high margins and lower frequency (such as events and financial services). 

Over time, MSA has developed a standard playbook outlining the evolution of companies in such markets. For example, ten years ago, Southeast Asia’s ecosystem kicked off in e-commerce, services, and the super app space. Startups such as the Singaporean Grab and Indonesian Gojek paved the way, and investors eventually valued them at $40B. MSA’s focus is on markets with similar potential. They saw that the nature of the Iraqi market was conducive for investment; it possessed the desirable ingredients for success. As Ben explains, “The playing field was still very wide open for a new entrant that would provide many services.”

Eventually, MSA had its strategy for investing in a company such as Baly: the landscape was mapped out; the playbook was clear, the market was ready for a super app, Rocket Internet was onboard, and most importantly, a seasoned investment team with experience and insight into emerging markets. 

Key Market Ingredients

The Iraqi market has all the essential ingredients that MSA looks for. Although the startup scene is still nascent, this is not an investment deterrent. Ben reaffirms that “Iraq is a compelling market…more compelling market than many of its neighbors, even those who are a bit more affluent or have long periods of stability.” Its attractiveness is its large population with relatively high purchasing power. The socio-political environment has taught entrepreneurs to think on their toes. Founders are resilient and are well equipped to handle crises and uncertainty, unlike other global markets. Their insight into the market gives them a competitive edge. International and regional players face challenges when entering the Iraqi market and have trouble navigating the nature of the Iraqi (business environment and cultural norms). This gives Iraqi startups a first-mover advantage. 

Ben muses, “Businesses from Iraq can scale regionally.” Entrepreneurs can move swiftly and efficiently within the local market and, once well established, can expand to other markets with similar environmental and cultural conditions. Another attractive ingredient is the low operational costs. This opportunity includes offering local Iraqis competitive salaries relative to the market versus having to bring in international (expensive) talent while having to train them on the market conditions. 

BALY’S INVESTMENT JOURNEY

Baly, which means “yes” In Iraqi Arabic, is the brainchild of Munqith and Matteo Mantovani, the current Group MD at Baly. The company started as a ride-hailing app and eventually expanded into the food delivery space two months later. The co-founders' confidence sold them to the investors. Munqith recalls, “We told investors the passion we have to come to Iraq, the change we can provide, the experience we can provide, and the experience we can find in Iraq. Sold them the idea that it will be the first unicorn story in Iraq.”

Additionally, being a Rocket Internet company was the cherry on top. Rocket Internet has a track record of graduating winner startups. Rocket has the network and the experience while providing access to their portfolio companies where knowledge sharing is encouraged. 

WORDS OF WISDOM

When it comes to setting up a startup, Munqith shared three pieces of advice. First, ensure that the startup has the right team. An aspiring entrepreneur should realize that soft skills are as critical as technical skills. Second, entrepreneurs should always keep their eyes open to new ideas and opportunities. Munqith encouraged founders to look for “ideas that haven’t been brought to the country for which you could be the pioneer.” His last words of wisdom were always to stay humble, acknowledge mistakes, learn from them, and improve.