When it comes to understanding the MENA region’s Seed stage venture capital and startup ecosystem, you’d be hard pressed to find someone with a wider breadth of experience than Hasan Haider. Formerly the Managing Partner of 500 Startups’ MENA Fund, Hasan and his partner Sharif Elbadawi launched Plus.VC in the fall of 2020 to continue the work they started at 500 Startups in 2017, backing the region and its diaspora’s most exciting Seed stage founders.
Like any good entrepreneur, Hasan’s foray into this world started with a pain point he experienced as a consumer. Namely, he couldn’t get access to the DVDs he wanted to watch in Bahrain. To solve this, he founded his first startup. As I heard the rest of his journey, I realized that this “see something, do something” attitude has really guided Hasan’s career all the way up until the founding of Plus.VC. He identified the missing components in his own experience as founder, which led him to set up Bahrain’s first angel investing network. That exposed him to the region’s funding gap for Seed stage startups, which propelled him to 500 Startups. While there, he was involved in nearly ¼ of the regions’ Seed deals, a track record that sets Plus.VC up nicely to invest “early and often in the non-obvious emerging market entrepreneurs, taking an early leadership role with founders to set them up for success.”
Read on to learn more about why Hasan’s so fired up about the region’s potential, what it’s like raising for a VC fund in MENA, what Hasan looks for in a founder, and so much more.
Can you start by introducing yourself and Plus.VC?
My name is Hasan Haider. I’m a founder at Plus.VC. I’ve been investing in the Middle East and North Africa in startups for the past ten years. Early in my career, I had my own startup which failed miserably, and I worked in investment banking before that.
Plus.VC is an early stage venture capital firm focused on the MENA region and the MENA diaspora. We’re looking forward to playing a significant role in the development of the ecosystem here.
I love a good startup story, especially when it ends in miserable failure. Could you tell me more about your own startup, and any other “entrepreneurial” experiences of your own?
The startup was called “Film2Go.” The idea came to me around 2007 from a pain point that I personally experienced as a consumer. I love to watch movies, but in Bahrain at the time it was pretty difficult for me to rent the movies I wanted to watch. At the time, Netflix was still sending physical DVDs in the U.S.. I thought it seemed like a pretty good model and decided to replicate it here. I launched it with one of my friends from school. We found a couple of investors, mostly friends and family, and ended up with a room full of around 10,000 DVDs. We had fun, but no guidance or mentorship. I had no previous experience and I made a bunch of mistakes. If I thought something was the right thing to do, I just did it. Obviously, if I had a mentor guiding me, I probably would have done many things differently. That was my initial foray into being a founder and entrepreneur.
The second time that I started something new was Tenmou, the angel investing group in Bahrain, which evolved from the issues that we saw at Film2Go. There wasn’t enough funding for startups in the MENA region at that point, and we got a group together in Bahrain that ended up investing in early idea stage business in the local ecosystem. It was essentially a way for investors to give back to the next generation of founders. We had to build all that from scratch, which was fun.
Now Plus.VC is my third startup (laughs). It’s entirely like a startup. I have to manage cash flows, figure out where I’m going to fundraise from, and hire the right team. It’s just a startup that invests in other startups, and won’t scale as fast as the rest of them.
What was it that inspired you to take that first step into entrepreneurship with Film2Go?
To be honest with you, I didn’t even know the word “entrepreneurship.” Before Film2Go, I was working in investment banking. I was doing well financially and progressing in my career, but I felt a bit unfulfilled. I wanted to do something that I’m passionate about. Like I mentioned, I love movies and TV, so I started to think that I could work in that space and that my idea could grow into something big. I didn’t say to myself “I want to be an entrepreneur,” it was more so, “let me create something that I’d want to use” I was the first client, I would watch whatever movie came in first, before we put it on the website.
Was it that experience as a founder that’s propelled you to continue working with startups?
The experience with Film2Go left me thinking about the ecosystem’s missing elements. I felt that if I had the right guidance and support, along with “smart” funding, then I would have been in a very different position. I felt that I could at least start addressing the funding gap, which led to Tenmou. This was ten years ago. There wasn’t really an ecosystem at that point. I think the Maktoob acquisition had just happened, but that was it. Jordan was the most active market. There wasn’t really any activity out of the UAE or Egypt or anything at point. It was super early and super interesting. I realized that I would prefer to invest and let other people do the hard work, rather than personally building a startup again. I was going to say I don’t have it in me, but I’m starting Plus.vc now (laughs). I don’t think I could run a startup similar to the founders that I’m investing in. I’m looking for teams that are better than I am at executing and building what they need to build.
What’s Plus.VC’s origin story?
In the past three years, while I was a Managing Partner, MENA 500 Startups deployed our entire fund, and it was time to think about what we’d do with Fund II. We’d invested in 180 startups, were involved in 20-25% of all Seed stage deals in all the MENA region at this point, and we as a team wanted to continue doing that type of investing. There was a slight change in management and strategy at 500 Startups, and they saw things a bit differently when it came to the region. It made sense for us to go out and build something that we want to build for the region to make sure that we can support founders as much as possible. That’s what Plus.VC really is.
You launched the fund towards the end of 2020 and are currently fundraising. Where do you look for LPs?
When people look at the region, they think there’s so much money here and that fundraising should be a breeze. In reality, venture capital is a very risky asset class and, more importantly, it’s still “new” to the region. There aren’t tons of LPs interested in investing locally in tech startups. The concept is still unproven in their eyes. Fundraising is the biggest challenge for a new fund focused on the Middle East. If I was raising a fund in a more developed market, there’s an existing set of LPs that invest in fund managers in emerging markets.
In China, Southeast Asia, or India, part of that story has already played out. They have an established tech ecosystem. In Sub-Saharan Africa, they have more “development” financing institutions and impact investors. MENA is a weird, in-between market though. Everyone thinks there’s so much money in places like the UAE, Saudi, and Kuwait. Honestly though, tech startups are starved of funding. The total amount of funding available in the MENA region for startups last year was around $800m USD. That’s the equivalent of a tiny real estate project in one of those countries.
That said, even if It’s not an asset class that many people care about, it’s the future of our region. Oil is going to run out, the governments can no longer employ everyone that wants a job, and the private sector employment is reaching capacity. We need new companies, and where are they going to come from? Technology. They have the ability to solve the unemployment issue that we have in the region. We need a new engine of growth and it’s tech and startups. That’s how we’ll build new businesses that can harness and hire the young, talented and highly tech-connected population that we have in the region.
Do you end up looking outside the region to raise?
We’re open to anyone who’s interested in the region. In the U.S., it’s just not people’s radar in terms of an ecosystem. You’ll find people who just started to invest outside the U.S. and they’re in China, or Southeast Asia, or Europe. We’re trying to talk about the opportunity by explaining that the MENA region is a market almost as big as the U.S., that speaks the same language, and has a similar culture. The region is currently underserved in terms of almost everything. Some of the industries have been stuck in the 80s. Things are done in a way that’s forty years old!
The region is ripe for disruption, which means a huge opportunity for startups to emerge and solve problems for a very highly connected population. Saudi and Egypt are in the top 10 in terms of usage of social media applications like Facebook, Twitter, Snapchat. The population is consumers of content, they’re digitally native, and they’re savvy. It’s just a matter of building local startups that serve the needs of the region. I think that the story still needs to be told a bit more in markets like the U.S. to convince LPs to invest here. Many will ask about exits, and the thing is, there have been quite a few exits in the region. I’m not just talking about Careem being acquired by Uber. There’s been quite a few. At the same time, who was asking about the exits before investing in China in the early 2000s? The guys who invested in China in the early 2000s made a killing on those funds because they invested early and the exits came. That’s where we’re at in MENA. You invest early in an ecosystem in order to generate higher returns. That’s where we can improve how we tell the region’s story.
What differentiates Plus.VC? Why should LPs trust their money with you, and why should companies take your investment?
We’re trying to fill a gap at the Seed stage. Like I said, with our previous fund, we were involved in 20-25% of the Seed deals in the region, and we led 60% of those deals. I think there is still a gap for someone to lead, set terms, and invest at Seed, and we really are positioned to do that pretty well as a team, given everything that we’ve done before.
In terms of the value we’re providing to startups, I think we’re taking our past efforts to the next level. It’s all about providing a platform of services to our portfolio companies that helps get them to the Series A. We’ve got a team in-house for portfolio support that can help with PR, recruiting, fundraising, or growth marketing. You name it. We have a broad network of mentors willing to help companies in various different areas. We’re also building out some digital learning services.. When COVID goes away, we’ll do regular community events for startups to collaborate. This is all part of the broader effort to create a community. That’s what we’re trying to be. We’re there to support our companies as much as they want, or as little as they want. We’re going to offer them everything and if they want it, they take it. If not, that’s up to them.
As an investor, I don’t see myself as a stock picker. The whole concept of active management has been proven wrong in almost every other asset class. I think that’s going to come to venture capital as well. Venture capital right now is made up of very concentrated funds that either will be amazing or zero. I don’t think that constitutes a sustainable asset class. Eventually, I believe everything is going to revert to a mean, and funds will start to generate closer to the mean returns. This means a change in the way we approach VC. Our thesis is to invest broadly and to invest early to diversify out the risk that’s inherent in these early stages. We’re targeting to do about 100-120 investments over the next three years. That is significant diversification. It allows us to take risks on an individual company basis. We can back outlier, non-obvious companies that other VCs may not be able to because of the way that their portfolios are constructed. We can find founders that might be overlooked by the rest of the market.
The Plus.VC website includes “MENA diaspora” as part of your investment mandate. Why did you include this, and how do you envision that playing out?
I think the diaspora from the MENA region needs support as much as founders in the region. If there’s a founder that leaves the region to study in the U.S. and starts a startup there, we still want to be able to take advantage of that potential upside. We still want to be part of that story, even if the company isn’t based in the region. It helps us diversify a little bit as well, by investing a little bit in more developed markets.
That said, it’s never going to be a huge amount. A maximum of 10% of the portfolio will be companies from the diaspora, probably a bit less. Historically, that’s worked well for us. Diaspora founders operate in a different ecosystem, which brings a little different flavor to the portfolio. Those founders have something different to add to the other founders in the portfolio, and vice versa, which is an added bonus. Why should a founder have to suffer just because they decided to start in Silicon Valley instead of Egypt? Although they’re not going to suffer (laughs), but you know what I mean.
You’ve reviewed so many early stage deals in the region. Are their unique characteristics to successful founders in the MENA region?
The thing that I’m looking for now in the founders that we invest in, more than anything else, is a bias towards execution. Getting shit done. That’s really it. We’ve invested in some founders with a phenomenal background, but they just talk. They never actually get anything done. I’ll leave them, check in six months later, and nothing has happened. Show me that you can get shit done and I will invest in you. That’s the most important thing. I think there are plenty of areas where our founders can learn from more developed markets. The mentality, tools, and metrics for things like growth hacking and customer acquisition don’t really exist in the region. We’re trying to build that bridge, but at the end of the day, those are just tools. If you’re not at the level where you’re getting things done, then I don’t think that those tools will help in any way, shape, or form. We find founders ready to put those tools to work. We find that across the region, in every country, every market. There are people who just say, “I’m going to get this done” whether you invest and support me or not. That’s the attitude that works.
Are there any industries that you think are particularly exciting in MENA right now?
Honestly, there’s no specific industry, or sector where I say “this is the place I want to be investing in.”
The sector, or even the idea, doesn’t matter as much as whether or not it’s the right team to be building something. At the end of the day, it’s a hard question to answer without more data and without more time. Eventually you’ll get more data, but early on, it’s a hard thing to judge because there’s no numbers attached to it. I try to shy away from any top down sector analysis because who am I to really judge what’s going to work or not? I don’t know. I’m an individual. I’m one person. There have been startups that have succeeded and I didn’t see the market, and there’ve been startups that I thought were really promising, and it turned out I was one of maybe three people in the region who felt that way. It’s not up to me to decide whether an idea is good or bad. It’s up to the market and the startup to prove that this is something that’s going to work.
The worst founder in fintech is a bad founder, no matter what industry he’s in. I’m not going to invest in him just because he’s in fintech. The best founder, even if he’s doing something weird that no one is really interested in, is a good founder that you should back.
How would you summarize the opportunities you see in the MENA ecosystem today?
Like I mentioned earlier, it’s a massive region in terms of population, with the same language and culture. Southeast Asia has a ton of investment, but every market there has a different language, a different culture, etc. It’s not really one bloc. The MENA region is closer to one bloc. We all speak Arabic – different dialects, but still it’s Arabic. We have similar cultures and influences, not exactly the same, but we understand each other. Did I mention we’re 400 million people? That’s pretty significant.
The demographics are pretty positive. The whole MENA region is very young. The majority of the population is under the age of 30 – that demographic could be an issue, but we’ve seen in other regions that a young population leads to increased consumption. These all combine to make a really high growth, high potential, large market, with a heavily connected and digitally native population. We are digital users. Most of the region didn’t have a PC or internet at home, but now everyone has a smartphone and internet access. That’s a massive opportunity.
The region is still mostly a green space with so much potential. Things just have not been done here. We still don’t have a dominant e-commerce player. Amazon plays here, but they’re only in the UAE and now started in Saudi, Kuwait, and Bahrain. There’s a much bigger market out there that’s still untapped. If I’m investing in the U.S. and I have to search and search for these small, untouched niches. I don’t have to do that here. It’s just obvious, “in your face” what you should pick. It’s a much easier job here than competing in Silicon Valley. Identifying pain points to build startups around here is not complicated. There are simple things to fix here that have already been fixed in the rest of the world.
Valuations here are also so much less than Silicon Valley. You can’t invest in a Seed stage company in Silicon Valley, that already has a product launched and customer usage, at a $3m pre-money valuation. That’s unheard of in most of the U.S., but that’s the average here in the region. That money gets these startups so far. Much further than their peers in Silicon Valley. I would not be doing anything in any other market except for MENA because I just see the opportunity here, as the next emerging market after Southeast Asia, after India. This region is ripe for a tech startups explosion.
Are you especially excited about any markets within the region?
Our fund targets majority Arabic-speaking countries and their diaspora. Inside that remit, I will invest in good founders anywhere. I do not have a country-specific bias. As long as they can show me that they’re a founder worth backing, I will invest in them. We have invested more than most other funds in smaller markets like Kuwait, Bahrain, and Tunis. Most other VC funds wouldn’t take the time to really understand those markets. We are pretty agnostic about the places we’re investing in.
Having said that, about 30% of our first fund was invested in Egypt. There’s just so much opportunity there and the market has some amazing founders. Another 20% approximately, was invested in the UAE. Saudi is emerging quite quickly as an ecosystem, but that’s coming with an overinflation of valuations. The bottom line is that we’ll back good founders wherever they are.
I saw on Linkedin that you speak 4 languages! Do you end up using all of them in your work?
In some markets it’s difficult to get things done without having at least a semblance of understanding of Arabic. Saudi, Kuwait, and Egypt come to mind as places where Arabic is absolutely essential. In the Maghreb, it’s a different form of Arabic, so you have to speak Fusha to communicate. French can be helpful there too, but Arabic tends to be the common language.
Personally, I just like understanding what people are saying. Since I was young, I was speaking four languages normally. I started adding on to those when I was in school, where I studied French and German. I haven’t used them in years, but If someone speaks French or German slowly, I think I could understand what they’re saying. Responding may be more difficult. I tried to do Mandarin at university too … that was a failed experiment. It was so different from anything I knew. I was lost. Just pronunciation was hard. I spent some time on a Japanese youth program, so I picked up some basic words and phrases in Japanese. I like to collect languages, I guess. If I could speak every language in the world, I would! Why not? Communication is the most important thing that humans can do with each other, if you can communicate with someone in their own language, it’s even better. Workwise though, it’s just Arabic and English.
When you look at the health of a regional funding ecosystem, does anything jump out to you as particularly concerning?
The main area of concern for me is that some of the LPs in the region have started to geographically limit where those dollars can be spent. I think that’s a dangerous game to be playing. We’ve seen it a bit already in Lebanon, where it leads to an unnatural, unsustainable ecosystem. Startups that shouldn’t be getting funding, get funded. Startups that should get funded, get more money than they need, and they end up burning that at much higher valuations. When there’s an ecosystem that has too much funding and not enough high quality startups, valuations go up and round sizes go up, without any real underlying reasons. We’re seeing that in some of the other markets as well, especially in the Gulf where we have these country specific-mandates related to LP dollars. I think we’re already seeing some signs of overvaluation, which breeds competition where there shouldn’t really be any competition.
At the end of the day, if it’s going to blow up, it’s going to blow up. It’s not really in my hands. I’ll still be investing in some of these markets, but I am very concerned that valuations are 2-3 times higher than they should be. When valuations increase in Silicon Valley, it’s because the upper end increases, the Series B, C, D, and exits are happening at higher numbers, which trickles down to the Series A and Seed valuations. It’s happening the other way around in some of the markets here – you haven’t seen the increase in later stage funding, or exits, but you’re seeing the Seed and Series A valuations going up in anticipation of those exits happening. It’s the wrong way around, and I think that is something to be conscious of.
Having gone on that rant, we still don’t have enough funding in the region. We are a criminally underfunded ecosystem. We had less than a billion dollars in total funding in an entire year in our ecosystem. With a population of such size, so many markets, and so much opportunity, that’s a crazy small number. It doesn’t make any sense to me. We advocate for replacing these geographic mandates, with a broad MENA mandate, because the region needs 10x the number of funds and 10x the value of funding.
What keeps you motivated to do all the hard work required to launch a fund?
I feel what I’m doing has a real impact. I can see the achievements of the startups we’ve funded right in front of my eyes. I want to continue doing that. I feel this is my purpose in life, and I’m adding value to the world through this. I know it’s a very “VC-speaky” thing to say, but honestly, it’s really what drives me.
So many of these startups that we backed at Seed, no one was paying attention to them. The moment we decided to lead the round and set terms, then others started paying attention. Having that first person to believe in you enough to give you money, that’s such a huge boost to a founder. It’s the same as a fund manager too – when that first LP says “yeah, I’m in,” it’s a big thing. I want to continue to provide that.
It would be so easy for me to choose to be a Series A and beyond investor. I’d do 10-20 deals, and spend most of the time on the golf course. Investing in 100-120 deals is a lot of work, but it’s work I want to put it in because that’s where the impact is.