Are you following up on the latest tech stock resurrection on the block?

It’s been exactly 7 years since the company was established and 2 years since its debut on Nasdaq, which was followed by a valuation drop from the initial $1.5 billion to $16 million in December’22. Almost a year later we witnessed a long-awaited twist to the story.

The first $1.5 billion unicorn from the Middle East to list on Nasdaq seems to be standing again on its 4 legs. Healthier 4 legs.

The unfolding resurrection of Swvl

The first investment of our Fund II. The first $1.5 billion unicorn from the Middle East to list on Nasdaq stock exchange. I can still remember the excitement on March 31, 2022, ahead of Mostafa Kandil’s ringing of the opening bell. Red confetti flying all over, slowly descending towards the ground. Swvl’s stock price began mimicking the confetti, as if the gravitation force was also pulling it downwards…

Q2 2022, the first quarter since Nasdaq debut

Corp’s Class A ordinary shares and warrants commenced trading on Nasdaq on April 1, 2022 (ticker: SWVL), which was followed by a drop in the stock price due to January anomaly and post-IPO trends. The stock price recovered at the end of April’22 only to be followed by another drop as a result of the global economic downturn.

Swvl announced a portfolio optimization program to turn cash-flow positive in 2023. At that time, the company was already operational in countries like Germany or Argentina. And Swvl’s acquisition spree was in full force: Volt Lines (Turkey), Zeelo (UK) and Urbvan (Mexico). (Note: Zeelo was called off.)

By June’22, Swvl paused daily intra-city rides in Pakistan and Kenya in light of the global economic downturn. The management signaled a possible headcount reduction affecting mainly engineering, product and support. A not so rosy outlook…

But they managed to raise. In August’22, Swvl announced a $20 million private placement, which was supposed to take them to their breakeven point.

Trading below the $1 mark

The optimization program seemed successful: the company turned contribution margin breakeven (after everything except fixed OPEX/R&D), and Egypt, Turkey, Germany, Kenya and Jordan turned Adjusted EBITDA positive or breakeven… But come September’22 and Swvl’s stock price was trading below the $1 mark. The founders explained this was due to short investors and temporary unwillingness of institutional investors to invest. One could also blame Swvl’s rapid expansion policy, which cost the company hundreds of millions of dollars.

Shutting down Pakistan, reducing total headcount by 50%

The company introduced another optimization program to reduce costs by (i) focusing on the largest markets which contribute the majority of Swvl’s revenues (i.e. Egypt and Mexico), (ii) shutting down operations in Pakistan, (iii) reducing headcount by 50% and (iv) cutting operating expenses (incl. marketing).

Swvl’s market value continued to be below the required threshold ($50 million) throughout the last quarter of 2022 and a written notice of non-compliance from Nasdaq was on its way.

Reverse stock split, pending 2022 Annual report

In January’23, Swvl got an ultimatum from Nasdaq to ensure that its minimum market cap is worth $50 million for 10 consecutive days ahead of July 10, 2023.

To regain compliance with the Nasdaq $1.00 minimum bid price requirement, the company proceeded with a reverse stock split of Class A ordinary shares, at the ratio of one-for-25 such that every 25 issued Ordinary Shares would be combined into one Ordinary Share, with a par value of $0.0025 each. Swvl began trading on Nasdaq on a split-adjusted basis at the start of trade on January 26, 2023.

In the middle of all that, Swvl cancelled its acquisition of Volt Lines (Turkey). Not a shocking move.

Another notice from Nasdaq was on its way in May’23, this time for Swvl not doing its homework. Its annual report (fiscal year ended December 31, 2022) was not submitted on time. Nasdaq’s new deadline was the end of October’23.

Licensed in Egypt, moving to Nasdaq Capital Market

In June’23, Swvl became the first company to acquire a license for transporting people in Egypt using an app. This five-year license was granted to them by Egypt’s Land Transport Regulatory Authority (LTRA). The company was also looking into operating smart transport lines to link Greater Cairo with the New Administrative Capital.

Given the persisting market cap issues, Nasdaq approved Swvl’s request to transfer its listing from the Nasdaq Global Market to the Nasdaq Capital Market, an equity market for companies with the smallest levels of market capitalization within the Nasdaq Composite Index. The trading commenced on July 19, 2023.

In line with Swvl’s strategy to focus on higher priority markets, the company sold Urbvan Mobility to Kolors, a leading transport provider in Latin America, for aggregate gross proceeds of $12 million (all cash). Urbvan represented approx. 7% of Swvl’s IFRS revenues as of December 31, 2022.

First group gross profit

The last day of October’23 couldn’t come faster enough. Turns out Swvl’s 2022 revenues grew 101% yoy and the company posted its first group gross profit ($2.75 million), largely because its revenue grew faster than its basic cost of operating its fleet of buses (55% yoy). Booked rides jumped to almost 46 million and Swvl buses were full 96% of the time.

The market was expecting a jump in stock price following the H1’23 results announcement that was due at the end of December’23.

Graph: Swvl 6m stock price chart as of April 3, 2024.

First-ever net profit

On December 27, 2023 we all learned of Swvl’s first-ever net profit of $2 million in H1’23 (vs. -$161.6 million in H1’22).

Turns out that most revenues (73.7%) come from selling technology that clients use to plan their routes, operate fleet services or even manage riders. The rest is from operating buses. Also, the company’s largest market (Egypt) brought in 93% of its revenues, while KSA brought in 7%. (Nada from the UAE though it’s also one of their focus markets.)

How did they achieve profitability? Swvl had cut about one third of its workforce in 2022, which allowed them to reach profitability in 2023 instead of 2024 as originally planned. They sold off their subsidiaries in over a dozen countries (Argentina, Chile, Mexico, Germany & Pakistan) and narrowed the focus to three markets: Egypt, KSA and the UAE. They also reduced the compensation paid to senior management and company directors from $13.4 million in H1’22 to $344k in H1’23. And they sold Urbvan earlier in 2023.

Swvl aims to proceed with careful expansions in 2024, with a focus on Saudi and rehiring some of its employees, which will again increase their compensation packages.

And the stock price? Resurrected. Awake. 1,420.18% growth over the past 6 months.

2023 annual report should be announced soon. We’re all ears.

Swvl turned 7

Klaim + Emirates Development Bank

Carseer + Abu Khader Automotive Group

Taker + Saudi Food Bank

Zid’s new strategic partnerships

Whatever your business is… (an ad by Qoyod)

Shortlisted for the Positive Luxury Awards

• Manager/Director, Legal Affairs at Zid (Riyadh)
• Backend Tech Lead at Qoyod (Cairo)
• Merchant Acquisition Specialist at Money Fellows (Cairo)
• People & Culture Specialist at Gameball (Cairo)
• Senior Accountant at Lucky (Al Giza)
• Business Development Associate at Subsbase (Cairo)

Take care,

Hasan

I’m not sure how many of you know the story of Pentugram, the startup I had co-founded along with Miled Elias. Pentugram got acquired by KSA’s RasMal and we announced the transaction last week at LEAP.

Here’s the story of my latest personal exit.

The story of Pentugram, its 3 key challenges and lessons learned

Last week Saudi-based RasMal announced that it acquired Pentugram, a startup that I had founded in 2018. A 6-word bio: a dealflow and portfolio management tool.

6 years ago I had been continuously searching for tools that would help Arzan VC manage the increasing deal flow and our portfolio companies’ data. We were looking for software that would be reasonably priced and would combine both deal flow and portfolio management. We demoed many tools: Affinity, Zapflow, mydealflow, etc. We went ahead with Pipedrive and Asana, but I was already anticipating that with the amount of data we were receiving daily, those softwares won’t allow us to benefit from our own data… and this problem got me really excited 😉 You can easily imagine the amount of interesting startup pitches that had passed through my hands and ears since 2014. I always imagined what it would be like to be in the shoes of founders and pitching, because it appeared as much more fun than sitting on the comfortable (not so those days) VC seat. And it turned out to be more fun; more exciting yet more challenging, too.

A 4:45AM idea

One early morning I woke up at 4:45AM with an idea that could be developed and used internally at Arzan VC and licensed externally to other ecosystem investors. The idea was to create a platform on which founders could keep all their data/metrics and share it with investors who would also be on that platform. It would allow for all data to be in one place, easily shareable by founders, while in parallel allowing investors to accumulate all their notes, emails, tasks and news related to specific startups. All that in one place. I could not sleep anymore and right from the morning I began brainstorming the idea with my team at Arzan VC. By coincidence, on that very same day, I was meant to meet the CEO of the Kuwaiti National Fund for SMEs and I thought: It’s a perfect opportunity to pitch the platform to them and get their initial feedback. Obviously, the platform was non-existent and I had one hour to come up with a name. Pentugram. I liked how it sounded although its meaning had no relevance to the platform. I was sure that, with time, the platform would create its own brand value.

After some extensive research, I presented the idea to Arzan Financial Group (AFG) who liked my thesis and decided to support Pentugram with an investment. I hired the head of engineering Abdulhaleem Lagrid and we began to stage the project and set the development milestones. We started by recruiting a designer and back-end and front-end developers, all from Tunis. I was so excited that I had gotten this opportunity to build a tech startup although I was pretty busy managing Arzan VC.

Challenge no.1

The MVP was ready after 9 months of hard work. It was far from what was acceptable, but the team’s excitement kept me going. Being a venture capitalist, I used my connections to get other regional VCs to consider using Pentugram. Let me tell you, the talks with fellow VCs turned out to be not what I’d expect. None of them was comfortable with the idea that another VC would host their data (although important data is encrypted).

So, I immediately started to think about an alternative way to sell this product without being questioned about data confidentiality or even ownership. I decided to spin off the project as a standalone company, hire a COO and remove Arzan VC from the cap table. I was lucky enough to meet Miled Elias at one of ArabNet’s events and I knew he would be a great person to manage the sales and operations of the business.

Challenge no.2

Miled, Abdulhaleem and I worked closely with the team to develop the platform and bring it up to a standard that VCs would find acceptable. The team at Arzan VC played a key role in the process by providing continuous feedback, which helped us not only to improve the platform but also to make it as slick as it is today. Once ready, Miled began pitching the platform to VCs from the region and this was when we stumbled upon our second major challenge. Although the VCs liked our platform, they were worried that a regional platform like Pentugram might not exist in the short term since we had not raised any significant funding rounds and we might have a rather short runway. In addition, back in 2018, a SaaS from MENA was not as appreciated as it is today. Any international tool would be preferred.

Challenge no.3

To solve the challenges, we raised a second round from AFG to ensure a long runway and we also hired a digital marketing expert. Our aim was to onboard more VCs who could help us improve the platform further and give us feedback. This proved to work and Pentugram expanded from 1 client (Arzan VC) to 9 clients. We began receiving precious feedback. Miled was superb in providing a customized customer experience and clients loved his passion and willingness to help. However, we got face to face with our third challenge (which was, at the same time, a benefit for this business model). These CRM tools can be very sticky! If a potential client was already using different software, it would be very difficult to make them shift to Pentugram. Hence, we focused on pitching Pentugram to newly established regional VCs.

As Miled continued to sell, we all realized the difficulties he was facing in convincing VC partners to sign up and pay. We had a feeling that partners thought of Pentugram as a “nice to have” tool, but not a “must have”. Looking back, I don’t think we were able to clearly demonstrate the long-term value of Pentugram to potential clients and hence onboarding clients turned out to be a struggle. As I expressed earlier, the vision of Pentugram was to enable VCs to use their data and improve their decision-making. That was not clear to our clients. Moreover, it became clear that if we continued our focus on VC firms, our market size would be too small. Hence, we decided to use our core platform to build new products that would cater to other fund managers in different asset classes such as private equity, wealth management, real estate, etc. Although we had very little funding left, we were able to create a reporting platform for retail investors who are invested with Arzan Wealth (a firm focused on investing in yielding assets): they would log in and easily view the news about their investments and details about their income distributions.

A future with RasMal

I believe there are different ways in which Pentugram can be attractive as a software tool for asset managers, but we could not have developed that with the limited resources we had. For Pentugram to be successful and truly take off, it would require selling the product in much larger markets in order to receive consistent customer feedback. We realized that the traction would be much better if we integrated with existing deal flow management tools and focused on developing a technology that demonstrates AI. This is when RasMal came into the picture.

We passed the torch to team RasMal last week (along with Miled, who is now fully at RasMal) and I am convinced that RasMal’s acquisition will allow for the continuous development of Pentugram. RasMal will introduce Pentugram to a broader range of asset managers beyond just venture capitalists, ultimately leading to improved returns for all users.

Thank you, Miled, Abdulhaleem and team Pentugram, for the journey.

Hala, Zid and Lean Technologies on one stage

Delivering in 7 cities in Saudi

Luxury’s resilient price points

Feeding collection in 3,2,1…

Zid + Qoyod

Qoyod + Supi

Subsbase + KayanHR

• Bookkeeping Manager at Qoyod (Riyadh)
• Search Engine Optimization (SEO) Specialist at Money Fellows (Cairo)
• Business Development Manager at Subsbase (Cairo)
• Sales Executive at TruKKer (Amman)
• Sales Executive – SaaS specialist at Repzo
• Content Marketer at Gameball (remote)

Wishing you a peaceful Ramadan,

Hasan

If January was a trial month, would you cancel your annual subscription?

Back to reality. Those of you who didn’t intercept Clara releasing their updated Term Sheet for Series A investments – I got you covered.

Their Term Sheet provides a balanced and fair draft of key terms and conditions, endorsed by various venture capital firms, investors and law firms in the Middle East, including Arzan VC, 500 Startups, Wamda, MEVCA and TaylorWessing.

Scroll down for the download link.

Term Sheet template for Series A rounds in MENA ecosystem (by Clara)

Founders, you’re all well-aware that a term sheet is one of the most important documents that you will negotiate and sign, and so it’s super important that we are all aligned with the latest legal standards in our market.

Do you know what a good Series A Term Sheet looks like? And do you know what provisions are worth fighting for? (Short answer: Not just the valuation…)

Clara team took it on their shoulders to update their Term Sheet for Series A with the help of leading VCs and law firms in the region – and we thank Clara for spearheading this initiative.

Clara’s Term Sheet is what a Series A term sheet should look like with standard, clean and balanced terms. Remember that this is a template and it’s been developed for use in common law jurisdictions, such as ADGM, DIFC, the Cayman Islands and BVI.

Download your copy here.

You’ll notice that it comprises 37 sections, including Price (+ Valuation), Liquidation Preference, Anti-Dilution, Voting Rights, Conversion Rights and, equally crucial, Information Rights. Also, your Board composition will hint on your power dynamics and how much control the investor wants to exercise when it comes to operational decisions. (Note that Clara’s Term Sheet is non-legally binding, intended for discussion purposes only, with the exception of the last six of the 37 sections, which are binding.)

Schedule 1 presents Pre- and Post-Closing Cap tables, Schedule 2 outlines a sample list of Board Reserved Matters and Schedule 3 outlines a sample list of Shareholder Reserved Matters.

A serious last note:
I’d say Clara’s term sheet is very straightforward and it’s a solid foundation to build on. Ping me if you got questions.

Nearpay at Seamless Singapore

Lucky One was lucky in 2023

Merit recognized as leader of Saudi growth

Carseer became closer to Islamic International Arab Bank customers

Citron offers free replacement parts until Feb 11

Retailo + Starlinks

Subsbase + Wadi Degla

• Community Sales Executive at Money Fellows (Cairo)
• Senior Product Manager – Payments at Money Fellows (Cairo)
• Product Innovation Manager at Qoyod (Riyadh)
• Full Stack Engineer (Lead) at Khazenly (Cairo)
• Product Owner at Khazenly (Cairo)
• Partnership Executive at Merit Incentives (Singapore)

See you around,

Hasan

HAPPY NEW YEAR. (It’s only the second week of Jan, so it’s still ok to say it.)

We don’t like to release our Wrapped before the year ends because who knows what the last few days may bring…? And it turns out that the end of our December was just that busy – ahead of Beban’s airing of its first episode of Season 3, in which I took part. (Did you miss it? You can watch it over and over here for free).

What we at Arzan VC treasure most about our 2023 is the old and new faces we got to meet at events … and there were so many of them – you can tell by the amount of photos below! Our wish for 2024 is to continue doing so – while having a chance to witness the comeback of events in Palestine️

Let’s unwrap.

2023 Wrapped… by Arzan VC

This is how the ride began.

Hope 2024 is treating you well so far… see you on the ride!

$14 million for Nearpay

Merit Incentives delivered over 1 million rewards & gifts in Saudi

Money Fellow’s Ahmed Wadi featured on Bankawy’s 2023 Influencers list

Klaim is Future 100

4th Tajerthon event by Zid

What are 2024’s big marketing trends? And edtech trends?

• CRM Specialist (User life cycle management) at Money Fellows (Cairo)
• Software Back-end Engineer (.Net) at Money Fellows (Cairo)
• Account Manager at Khazenly (Cairo)
• Account Manager at Cartlow (Dubai)
• Operations Lead at Retailo (Riyadh)

I’ll be in Dubai on Jan 17. Coffee?

Hasan

The tone of our issue #70 is different from the previous sixty-nine.

I’m sharing some thoughts on how we should communicate in these times and how each of us can ensure that the concept of free speech in the workplace survives the ongoing war on Palestine.

How do we communicate when striving for entrepreneurship suddenly becomes striving for mere survival?

Gaza’s startup ecosystem has been blown up and its founders are being killed. Gaza Sky Geeks, the largest tech hub in the Strip run by Mercy Corps, had their offices demolished and some staff lost their life. The startup community in West Bank remains operational albeit with a very uncertain future. (I wrote about the Palestinian startup ecosystem here in June 2021 – amid another aggression.)

Over the last two months, several individuals in the West lost their jobs or had their events cancelled because of what they said or what they did not say, students lost their job offers and were publicly shamed… and often times they ended up being offered better jobs in more supportive environments, they found new audiences and support groups. These excessive firings and cancellations showed that such actions are indeed extreme measures and can spark more outrage in response.

Not sure how about you, but I’ve seen my LinkedIn feed turn acutely political or should I say acutely humanitarian?

How do we communicate in these times and how can we ensure that the concept of free speech in the workplace survives the ongoing war on Palestine?

In MENA, many VC partners, founders, teams are choosing not to stay silent. Some are actively posting, others are fighting the battles in the comment sections, some startups adapted their logo to reflect colours and symbols associated with Palestine and some founders even rejected investments after finding out the money was in some way affiliated with the occupying party. It’s their right. We should only do what our conscience tells us to do – and that certainly includes fundraising for your startup.

Earlier in November Fortune, Forbes, Inc and others began to dwell on the correct approach to talking about the ongoing conflict in the workplace. Geopolitics has become the no.1 challenge for CEOs. Google, the hub for employee activism, has been retaliating against Muslim employees. Communication advisors have full hands advising management teams around the world on how to respond while not offending the other group… and who are the groups? Should we label them by religious affiliation, or should we label them by their political beliefs, because the two do not seem to be interchangeable? A tricky quandary.

Free speech comes with responsibilities. Free speech means that not only bosses get to have a real freedom of speech. Free speech in the workplace means not retaliating against employees. Free speech means we sometimes have to stick up for people who have said things that we don’t like (unless what they said is pure hatred and source of threat to others and hence a good subject for cancel culture).

As a founder, ensuring the well-being of your team, safeguarding the culture you’ve created inside your startup and protecting the relations with your investors and clients is a must, but so is addressing sensitive issues that may disrupt that well-being, culture and relations. Whenever we’re talking about contentious topics, let’s not forget:

1. 1. Our emotional intelligence & compassion
2. 2. Our workplace policies and to what extent we can express our solidarity
3. 3. Our company’s social media policies and how to make sure our opinions are voiced as our own
4. 4. The language and tone we speak with
5. 5. The sources of information we share
6. 6. To keep documenting our conversations as a form of protection (evidence)
7. 7. To stay calm and professional
   

These are difficult times to be a leader. However, it is possible to address issues involving human suffering in a diplomatic and compassionate way, starting by referring to our own values and principles. In an ideal world, leaders should bring people together, not divide them, and they should nurture healthy conversations – even when politics is involved. I believe that no matter what our opinions are, if we ready ourselves for listening to one’s opinion without immediately arguing back, if we don’t resort to aggression (although yes, emotions are high right now), if we work harder to create that safe zone, that neutral gathering space, where arguments can be voiced, heard and acknowledged, only then we will be able to progress – as companies, as communities, as countries, as humanity. I’m not daydreaming; if we don’t realize this now, we can as well forget about any lasting progress. 

I wish for a future where our communities’ culture will be robust enough for all of us to have open discussions – even if they frustrate us. Frustration is better than silence and denial. 

I trust that Palestinian entrepreneurs will be able to rebound and rebuild, except that this time they will do so without fearing that someone will come again and shatter everything they have built. 

#FreePalestine 

© Symbol of Hope by Sliman Mansour (1985)

$15 million for Retailo

Khazenly becomes Content partner for Tech Her Program

Lucky Talabat

Merit + Alshaya Group KSA

Klaim + Huawei Cloud

Zid discussed how to grow business with modern financing

• National Operations Manager at Retailo (Riyadh / hybrid)
• Partnership Executive at Merit Incentives (Singapore)
• Scrum Master at Money Fellows (Cairo)
• BD Representative at Swvl (Cairo)
• Digital Marketing Specialist at Qoyod (Cairo)
• Cash On Delivery Coordinator at Khazenly (Zamalek)

Stay well & warm,

Hasan