end of radio silence.

This is not a hacked newsletter. Nor have we relocated our offices to another planet. In fact, we grew into a truly regional VC, having on-ground presence in 5 countries across the MENA. Plus, we did our first closing for Fund II in August and made a whopping 4 new investments. Did I mention we grew our team to 8 members? Okay, enough of the news shower.

Amman hosted us for a few days this week for some team-building fun. You can see sometimes we also cook other things than sizzling deals! We also organized Founders’ Coffee & Chat – a casual meetup with a number of startups in Amman to brainstorm ideas and expansion. Well-spent time indeed. We already miss the laughs.

Now—first things first: Arzan VC’s top 10 trends for 2020. Then we will show you what’s the magic formula of growing a sustainable business.

Let’s go!


The 10 for 2020

1 Cash burning is not so popular anymore and the doomsday of blitzscaling may be near. Immense growth by surprise doesn't always result in a victory.

2 Yes to bootstrapping. Businesses would be checking on their revenues and minimizing losses by focusing on growth in their most profitable areas.

3 Profitability before growth. Priorities reversed.

4 What's your unit economics? Time to do some math 🧮➕➗

5 Long-term sustainability is the new (or old?) kid on the block.

6 Less competition. Less cash burning would be a game changer (ender) for many.

7 B2B could pave the way. Because they are keener on organic growth and sustainability.

8 More market consolidation. Mergers, acquisitions and IPOs.

9 Are you environmentally sustainable? Jeff Bezos has $10B fund for climate-based projects 💵

10 In MENA, initiatives that address logistics issues will continue to dominate the deals. That is transport, delivery, payments and e-commerce.

Disclosure: We don’t necessarily agree with the above trends, but we would still like to share them with you.

 


 Any profits in 2020?

There’s a lot of recent whispering out there about sustainability and profitability. The world got alerted when in the second half of 2019 Japanese conglomerate SoftBank, a major investor in Uber, Slack and other stellar startups, got shaken by the weak performance of some of its major investments. Not to mention the dramatic failure of WeWork.

Uber, just like Amazon, is a global tech monopoly in its respective field (that’s why they call it “Amazon of transportation”), but do you know what else makes these two similar?

They wouldn’t have been the companies they are today without their growth tactic: blitzscaling. It is a shortcut to immense growth via cash burning, resulting in massive edge in technology and customer base. You’re simply pouring in the money even if the numbers don’t make sense. Sustainability may seem trivial and profitability got a red light. What if the traffic signs don’t work and the business will never see its profits? The argument is that the growth would eventually compensate for the financial losses sometime in the future. Note: eventually does not mean definitely and, at one point, each business has to take certain measures to ensure sound financial standing in the long-run.

It took Amazon over a decade to touch the profits. Uber is yet to be profitable and its CEO recently said it would finally happen by the end of 2020. The main question is: when Uber decides to take measures toward profitability, to what extent would their customers stop using the Uber app? We @ArzanVC don’t feel it’s going to be anything major! Uber improved our daily logistical life and most people would be willing to pay more. (Let’s hope that’s the case—we have invested in a number of mobility players.)

Ultimately, we all want our businesses to be sustainable and profitable. Blitzscaling is a valid growth approach, but it doesn’t fit all business models. Many investors are recently eyeing businesses that opted for a bootstrapping tactic. Those who deliberately focus on the most profitable areas and slow, paced growth. If Uber got bootstrapped, it wouldn’t have grown so fast and it would have most probably been already profitable for some time. Or maybe it would no longer exist, since other players would have grasped the opportunity and burnt cash to grow their market share at the expense of Uber!

We shouldn’t need to remind you that each starting business must know the right ingredients of success and you must take into account different factors when considering a certain growth strategy. Is there a way to find out and predict the feasibility of your business model? Call in unit economics. It is a tool that tells you how much money one unit of any solution or service will generate. Essential from day 1. How much does it cost you to generate $1 value? Unit economics basically measures how much the business gains (or loses) from each customer (or transaction). You can then know if you are on the right path to profits and what to focus on in order to make that hit.

calculate

 Many startups are losing with each new customer. Why? Because it costs them a certain amount to attract a customer who is not going to stay with them for long. If you spend $2 for $1 value and your customer base is expanding way too fast, you will only be able to go on at this pace until all your money runs out… 💸

In simple terms, you need to balance well your customer acquisition cost (CAC) and customer lifetime value (CLV). That balance can be either positive or negative. Positive unit economics brings cash in, negative robs you of it. If your CAC is bigger than your CLV, you’re basically paying your customers to use your service. You may gain a mighty market share in the early stages, but that alone would not make your business sustainable. In the early days of Uber, Lyft and WeWork, no one looked at profitability—they actually used to make fun of anyone who would do that! After all, VCs are not in the business of early profitability yet the value proposition of any business should always be sticky and impactful. Are your customers willing to spend more or can they “live without you” once you start playing with the pricing? If they feel like your services/solutions are “nice to have but not must-haves,” this means they will be sensitive to price changes, lowered quality etc.

The lesson for 2020 is simple—hold on to your fundamentals and focus on real value creation.

Being over-ambitious on your growth strategy may often turn out to be risky. Do your unit economics, set realistic targets and spend responsibly so that you are able to create and sustain your value. Do you want to have recurring revenues? Then persuade your customers to stay with you for a while. Get under their skin.

TL;DR (too long; didn’t read) 
Following the falls and losses of many flagship startups in 2019, businesses (and investors!) shift their attention towards unit economics. Measuring costs/gains per transaction can reveal a lot about the future sustainability of any business. Growth-at-any-cost is becoming a strategy of yesterday. Today cares about the value proposition, so that tomorrow could be about long-term sustainability.

 


Welcome to the Family 

👋👋👋 Repzo, Cartlow, FlexxPay and iKcon. The 4 latest investments we made. Welcome to our ever-growing ArzanVC family!

Repzo is an Amman-based mobile employee management and CRM platform that turns a device into a standalone field force management tool. It allows FMCG and pharmaceutical companies to track and monitor their field employees. Repzo is used in 7 countries by more than 2,500 representatives.

Cartlow is a Dubai-based money-saving e-commerce that offers its customers various famous-name products at lower prices. It recycles, tests and resells returned/excess goods from retailers. No wonder the app has more than 1 million active users!

Dubai-based FlexxPay aims to bring financial security, dignity and savings to those experiencing financial stress. How? By fixing pay frequency problem through an instant pay platform.

iKcon – Innovative Kitchens Concept from Dubai – is all about cloud kitchens in prime locations! Thanks to these modern kitchen spaces, iKcon brings amazing F&B brands to the market – from existing chains to new concepts.

kitchen art

👋👋👋 Repzo, Cartlow, FlexxPay and iKcon. The 4 latest investments we made. Welcome to our ever-growing ArzanVC family!

Repzo is an Amman-based mobile employee management and CRM platform that turns a device into a standalone field force management tool. It allows FMCG and pharmaceutical companies to track and monitor their field employees. Repzo is used in 7 countries by more than 2,500 representatives.

Cartlow is a Dubai-based money-saving e-commerce that offers its customers various famous-name products at lower prices. It recycles, tests and resells returned/excess goods from retailers. No wonder the app has more than 1 million active users!

Dubai-based FlexxPay aims to bring financial security, dignity and savings to those experiencing financial stress. How? By fixing pay frequency problem through an instant pay platform.

iKcon – Innovative Kitchens Concept from Dubai – is all about cloud kitchens in prime locations! Thanks to these modern kitchen spaces, iKcon brings amazing F&B brands to the market – from existing chains to new concepts.

 

Family Postcard

 

Where to begin? 😍 

Ka-3.5M-Ching!
Amman-based game publisher Tamatem raised $3.5 million Series A.
yay

POSRocket opened new offices in Kuwait and Alexandria, and they just made the first step to enter the Saudi market. Their integration with Talabat and FineDine is now live, and they also launched a new product called Kitchen Display System (KDS) that replaces printed or handwritten ticket orders in commercial kitchens by connecting to the restaurant’s point-of-sale!

Swvl, a premium alternative to public transport, launched new routes in Egypt between Cairo and other governorates. Trukker, the Uber for trucks, expanded in Egypt. And Cartlow, one of our latest investments, has recently entered Saudi Arabia.

+ 1 news full of love – CrowdAnalyzer looked at how MENA celebrated Valentine’s Day in 2020.

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Latest Jobs @ArzanVC Family
Please stay healthy!
stay healthy
Hasan