The Middle East is a region of great opportunity. We have a large and young population with more than its fair share of problems, and as every entrepreneur knows, every problem is an opportunity; the bigger the problem, the bigger the opportunity. As a region, we are also one of the largest exporters of capital to the world. Investors from the region own the priciest global real estates and are shareholders in the largest companies of the world. The big question facing local entrepreneurs is how to attract big regional capital into opportunities from the region, for the region. Having successfully raised multiple rounds of funding from the region, we believe the Careem’s journey has teachings that can help us solve this puzzle.
I believe external capital follows traction in a big opportunity. In the beginning, the only capital that will bet on you is your own money or that of people who trust you. As an example, we started Careem with $100,000 of our own money. In about 6-9 months when that was running out, we managed to convince our friends and family to invest. That ‘friends, family, and fools’ round comprised of old friends, ex-colleagues, and against all advice, my mother-in-law. Beyond that round, we had to earn the right to take people’s money. It boiled down to convincing investors of the bigness of the opportunity, showing solid traction week after week, building an awesome team, and just not giving up.
If you want to raise institutional money, then you must be solving a big problem. Small problems and opportunities can make great lifestyle businesses that you can fund with your own capital or that of friends, but they will not get you institutional interest. Investors know that many of their investments will not succeed, so the ones that make it need to be home-runs, and the only way to have home-runs is to only bet on big opportunities. In pre-Careem 2012, when we were thinking of ideas, one of the first things we did with any idea that came up was to calculate its market size. The initial market size for Careem was $5bn, which was the amount spent on taxis in the GCC. Our current view of Careem’s market size is significantly higher since we have expanded beyond GCC and the platform is filling the mass transit void in the region. If your idea has a market size of less than a few billion dollars, you will most likely have a tough time raising external capital. Big capital is attracted to big opportunities.
What may seem like an obvious opportunity to you will not be so obvious to others. To the others, you need to show proof of the opportunity in the form of traction. This is your ability to grow your business week-on-week. And growth does not just happen. It is a function of deeply understanding the needs of your customers, building products that address those needs, and making sure you do whatever it takes to make customers happy. Happy customers come back and bring many others with them, and this starts showing in your growth numbers. At Careem, we have been obsessed about our customers and growth. In the early days, we would track each and every trip to make sure it went well. Every failure (of which there were many in the beginning) was an opportunity for us to understand what went wrong and to change our systems/processes to prevent the same from happening again. And we monitored our growth like a hawk! Every week, every day, every 15 minutes. As I write this post, Dubai is up 7.8% from the same time last week. For an investor, growth is the truth, it is validation, it is proof.
You can’t do it alone, and investors know it. You will need a team, and the better the team and the more passionate it is about the opportunity, the better are your chances of success. As an entrepreneur, it is one of your foremost responsibilities to excite people to join the mission. Inability to build a great team is a leading indicator of challenges down the road. At Careem, we did not know many things about the business we were starting, but the one thing we did know was that investing in talent and culture would take us places. And we did many things on this front. We allocated a large pool of Careem equity for our colleagues, we hired companies to get talent on board, we chased amazing people to join us even after they had turned us down, and we invested time in designing a culture based on a set of core values. Team strength is a key criterion for investment decisions. No team, no chance of success, no funding.
Not giving up
You are not going to get it right the first time, maybe not even the second time; and you will be rejected by many. They key is to not give up, keep learning, and keep improving. This is an essential trait for an entrepreneur and it is needed more in the fundraising process than in any other part of the business. In our first round, we were rejected by all venture capital funds in the region except for one (thank you STC Ventures!). Today, alhamdulillah, we have most of them on board. We kept knocking on their doors, kept showing them our growth numbers, and kept at them until we convinced them to invest. Every time you feel like giving up, know that we have all gone through it and that better times wait on the other side of perseverance.
We are blessed to be in a region with so much opportunity and significant local capital. Our regional investors have had their reasons to invest outside the region, whether it is diversification away from the region, the lack of exits, or the shortage of professional teams to back. Times are changing though. The purchase of Souq by Amazon is a landmark transaction that will make regional investors pay attention to local opportunities. When they look, let’s make sure that they find us going after big opportunities with solid traction and with awesome teams. If they decide not to invest at first, let’s not give up. It is worth our time to get them onboard, because once they start investing in local startups, the region will change forever.