A Conversation with Nadia Moukaddem on Bridging the Gap between MENA and Global Startups

On September 22nd 2021, Five One Invest hosted a Speaker Series session with Nadia Moukaddem to discuss how BY Venture Partners (BY) is bridging the gap between MENA and global startups. Read on to learn about BY’s investment thesis, what makes for a successful founding team, and the components of a thriving ecosystem. 

Nadia Moukaddem, Principal at BY Venture Partners (BY), has experience in nascent startup ecosystems tracing back over ten years. She started her career at an investment fund supporting small businesses across Sub-Saharan Africa in markets such as Nigeria, Ivory Coast, and Kenya. Around five years ago, Nadia joined BY, a venture capital fund for early-stage technology startups. Since Nadia joined the firm, BY has raised two funds totaling $100M and invested in over 80 companies. 

BY raised part of its first fund with money through Lebanon’s Circular 331, which was a $400M initiative of the Central Bank of Lebanon to support entrepreneurship. BY deployed 50% of the money from its first fund into Lebanese startups and the other half went into regional and international startups. BY is currently finalizing its second fund at $50M, and will continue to invest in both MENA and global markets. 

FUND DIFFERENTIATORS

BY’s ultimate goal is to invest in great entrepreneurs and provide them with value beyond financing. BY believes that founding teams are a critical factor in a startup’s success, and views itself as a founder’s first VC. Nadia discussed what she believes is the truly unique element of BY’s strategy  for adding value to its portfolio companies - the “bridging” element.

The Bridge Factor

BY drives a global approach to investing where it “bridges” the Middle Eastern ecosystem to more mature and developed international markets. BY creates such bridges through three main elements: international exposure, community building with its Founders’ Program, and “soft landings” designed to help with follow-on funding. 

International exposure: BY’s fund is split 50-50 between regional and international investments. So, its portfolio will always have a mix of both. This is one way in which BY supports its startups by creating connections and networking opportunities across and within new ecosystems. It focuses on granting Middle Eastern startups access to its global network of ecosystem support, whether it is other entrepreneurs or investors. Moreover, BY presents its Western startups with expansion opportunities into the MENA region. As a side benefit, splitting the funding between regional and international startups helps mitigate risk by spreading investments across markets.  

Founders’ Program and Community Building: BY formalizes its support system by creating a Founders’ Program. It leverages the lessons learned from its portfolio companies through knowledge sharing. The program will also have a “founder shadowing” component, where early-stage founders access more experienced founders, a twist to traditional mentorship programs.

Soft Landings - Access to Funding: It is in BY’s interest to facilitate further funding. Whenever a startup raises a new round, BY connects the founders to VCs that might be interested. Additionally, BY organizes pitch meetings with its LPs, creating co-investment opportunities for its investors. 

TEAM CHARACTERISTICS 

BY believes the foundation of a successful startup is the team. The three ingredients that BY looks for are technical skills and experience, the complementarity of the team’s skills, and a growth mindset. The foundation of these ingredients is passion. The founding team needs to display a passion for their business and solution. BY is looking for answers to questions: Are the founders creating something dear to their hearts? Does their passion come across in the pitch presentation? 

Technical Skills and Background

When it comes to technical skills, BY evaluates the team’s background and professional experience. When it comes to very young founders, BY expects to see a co-founder or an advisor who is an expert in the relevant industry. 

Complementing Team Members

BY is attracted to a founding team that has a wide range of skills. BY appraises the quality of a team based on its diversity of backgrounds and breadth of expertise across relevant operational areas in the company. According to Nadia, this tends to be more crucial to get right when evaluating early-stage companies.  

Growth Mindset

The willingness to test and reiterate a product, solution, or strategy is essential. BY looks for founders with resourcefulness and a growth mindset who acknowledge feedback and are open to change. A diverse, knowledgeable team is the number one ingredient, but BY appreciates founders who can execute their plans and are willing to try again if the solution is not working.  

SUCCESSFUL ECOSYSTEM COMPONENTS

According to Nadia, based on her experience in Sub-Saharan Africa and the Middle East, establishing a flourishing ecosystem hinges on three main components: ease of doing business, community support, and access to capital. Business registration, cost of registration, clarity of policies, opening bank accounts, and choosing the appropriate jurisdiction are barriers that many startups face. Business policies and legislation need to be straightforward, efficient, and cost-effective to ensure a thriving ecosystem. The second component is creating a community network by connecting ecosystem enablers, such as universities, partners, accelerators, incubators, and government agencies. Finally, no ecosystem can exist without access to capital. Government support through funding initiatives and incentive schemes is essential to unlocking capital. In developed markets, the state has played a role in stimulating the entrepreneurial scene by funding accelerators, academia, and R&D programs, for example. Nadia posits the need to put the Iraq startup scene on the map by creating awareness, showcasing startups, attending and networking at regional events, and hosting ecosystem conferences to highlight what is going on in Iraq and what yet needs to be done.