Oasis500 is the leading seed stage investment and business accelerator in the MENA region, which is designed to create a sustainable entrepreneurship ecosystem by developing and funding startup companies. Oasis500 was one of the valuable partners of ThePitcher 2016 event!
In a special interview for ThePitcher, Faisal Al Bitar, Assistant Investment Manager within Oasis500, gives to all entrepreneurs and young startups valuable advice on pitching and fundraising and interesting insights on entrepreneurship.
Can you tell us a bit about the work you do as part of Oasis500 team?
I’m the first point of contact when entrepreneurs reach out for funding. I evaluate the investment and sit on the negotiating table to finalize the terms of the deal. In addition, I work with the startups on business development, sales and raising funds from angel and institutional investors.
Pitching investors is one of the most exciting, yet challenging and stressful moments that entrepreneurs encounter. What is the main advice you give the entrepreneurs when you help them prepare their pitches? And according to you what are the main components of successful investor pitch?
Pitching is a form of art, you should be able to grab the attention of the crowd from the very first second and be able to keep their attention throughout the story line. You should practice on explaining your idea under a minute in the simplest terms in order to engage with the investor on specific details of the business. Manage your pitch efficiently by not spending too much time on things unnecessarily like introductions or multiple stories about the main point. Remember your pitch deck and how it represents you, so invest in designing an attractive deck in addition to practice, practice and practice.
The most important thing is that you need to convince the investors; why you are the most qualified person and why they should give you their money now. You should be able to articulate a detailed understanding of what your customer problem is, and the value you are offering them. Investors are not looking for an entrepreneur who is just passionate about the company, yet they are looking for a founder who truly understands how to create a business. The founder should be the one who can tell me everything about their competitors, market and legal environment.
You are mentoring entrepreneurs in areas related with fundraising and business development. What do you think are the biggest mistakes entrepreneurs make when it comes to securing funding?
The first and most common mistake I have seen in the region is that entrepreneurs underestimate the process of raising funds. Fundraising is very distracting, so a startup should either be in fundraising mode or not. It drains so much energy that entrepreneurs tend to lose focus from the day to day business. My advice would be, if you are single founder, when you are raising funds, focus your whole attention on it so you can get it done quickly and get back to work.
Another common mistake is raising funds when you have no more money in the bank. A rule of thumb: never raise money on an empty stomach. You should start raising funds when you have sufficient cash runaway of at least 4-6 months. That way you have the flexibility on the negotiations table.
Do not try to over sell your valuation. The most important thing to understand about valuations is that they are not that important. Setting a high valuation could just end up hurting the company in the long run. Setting high expectations and not meeting them could hurt your current relationship with your existing investors and potential new investors in future rounds. In some circumstances a company may have to result to a flat or down round; flat meaning raising at the same valuation of the prior round, and down meaning raising at a lower round than the previous round. Down rounds could seem awful, yet they are much better than closing down the company. However, every cost has its price, which would result in a situation where the founder is compensating previous investors’ value lost with equity.
Fundraising could seem intimidating, however the entrepreneurs should not rush in signing the agreement before fully understanding the terms of the deal. The structure of the deal should start out straight forward and should get more complex as you raise bigger rounds.
What general advice will you give to first-time entrepreneurs and young startups?
Raising funds is a marathon, not a sprint. When you are fundraising, think about constructing the round in a way that will make you strongly positioned in the future. This means raise enough to put the company in a strong position to achieve the necessary operational and financial milestone, in order to maximize the probability of raising a future round. Equity is the most important thing, so try to give up around 10% – 20% whenever you raise money. 10% and less is great! However, if you have to give up more, try to keep it under 20% each round. You should aim to have a minimum of 35% by series A, and that’s after you have issued Employee stock option to lure in investors. Finally, choosing the right investor is very important, it’s like a marriage. You should do your research beforehand, by reaching out to other portfolio startups or asking for references.
Do not take rejection too personally. Just because an investor decided not to invest does not mean your business sucks. There could be so many other reasons for their rejection. Do not give up yet, take the opportunity to ask for feedback in order to build on it. Finally, always remember that the customer validates if your business sucks or not.
Thank you for the great interview, Faisal!