When analyst, venture capitalist and entrepreneur Amir Farha found out that his cousin Dany was planning to set up a corporate venture capital fund and hadn’t called him, he didn’t take it personally—instead, he took matters into his own hands and picked up the phone.
That was eight years ago. Today the pair—along with newest partner Yousef Hammad—are heading up one of the region’s most active VCs, with a current portfolio of 14 startups, including household names such as Careem, Propertyfinder, Bayzat and Fetchr, as well as newer ventures such as Shedul and Wrappup.
Currently raising their second fund, the company recently exited from JadoPado, an online marketplace reportedly acquired in May this year by a tech fund led by Emaar Properties founder Mohamed Alabbar. The BECO team is hoping for a few more exits before they increase their portfolio. “It’s a patient game, venture capital,” Amir smiles.
The aim of the game for BECO is multi-dimensional. Of course, they need to make wise investments, and a profit, but ultimately their passion lies not just in growing money, but in growing the technology and people capable of transforming the Middle East. The current team is largely made up of former startup founders, and they believe that if they do their job properly, every successful company they help to nurture could create 100 new entrepreneurs.
This is already true of one of their early investments. Jon Richards joined Propertyfinder in 2011, and as a member of senior management was directly involved in the due diligence when the BECO team invested in 2013. In 2014, he left to concentrate on his own venture—finance comparison site, yallacompare (formerly compareit4me).
He credits his experience with preparing him for the journey. “I was front row basically. When you get to see a business up close like that, you see warts and all,” Richards remembers. “When I raised money for yallacompare it wasn’t a shock, I knew what was going to come because I’d already been through it. The more people that come out of these businesses the better it is for all of us.”
Despite their desire to facilitate these moves, Amir and Dany are necessarily fussy about where to place their bets. Having looked at around 120 startups in their first year, 2016 saw them meeting with 1,000; this year they’re on track to double that.
However, they invest in less than 1% of what they see, hunting out the companies that are most likely to build “extraordinary outcomes”—which Amir says they value as anywhere north of $100 million, but ideally closer to $500 million. By the end of its funding cycle, BECO aims to end up with anywhere between 10-30% of a company.
Startups must be Middle East-based, with Lebanon, Jordan and Egypt proving to be key markets— “It’s really where our relationships are strongest,” Amir admits. The team focuses on seed rounds, or Series A or B, investing in the earliest stages to help bridge a gap in funding at a time when startups are often still struggling to gain traction.
“Early-stage venture capital is one of the best performing, if not the best performing, asset class in private equity essentially, especially if you’re the best performing VC in that asset class,” says Amir. BECO invests around $300,000 at seed round, anywhere between $1-2 million at A-round, and at B-round between $3-5 million.
Once invested, BECO follows a “concentrated” approach. Where they invest early they then continuously measure the success of a company by looking at how well they execute against their business model. The team offer advice and mentoring, and if the startup hits certain milestones BECO continues to “double-down”, i.e. increase their investment.
Early investment means the risk is high. “It’s driven by a concept called the ‘power-law’, where you make a bunch of investments and generally two of them are going to outperform by a long way and then the rest are going to be zero to one or two times your money if you’re lucky,” Amir explains. The two high-performers generate most of the returns.
In their first two years Amir and Dany made five investments—in Duplays, Roundmenu, PropertyFinder, TravellerVIP and Laimoon.
In 2014, they invested in Careem, which went on to become the Arab world’s second unicorn with a valuation of $1.2 billion. Mudassir Sheikha, CEO and co-founder of Careem says BECO was fundamental to opening local and global doors with potential investors and partners.
“BECO is one of the core pillars in our region’s tech ecosystem,” he explains. “They have consistently backed leading startups and worked tirelessly to promote the sector.”
Michael Lahyani, CEO and Founder of Propertyfinder Group, remembers meeting Dany in 2012. He credits his investment and support as being vital at the time. “They not only led the round, they priced the round, which wasn’t a given in this part of the world,” he says. “It was very hard to communicate to people what this business was worth.
Having BECO leading the round gave a huge vote of confidence from a locally recognized entrepreneur, giving a ton of credibility to Propertyfinder.” Today his startup is one of the jewels of BECO’s portfolio and was valued last year at $200 million.
Their gambles have not always paid off. One of their other early investments—travel e-commerce site, TravellerVIP—failed to hit the targets they were hoping for. Although the overall opportunity was promising, the timing was off, with the region seemingly not ready at the time to embrace technology in the travel market. The BECO team simply puts this down to a lesson learned.
2015 saw a further four investments, this time in Bayzat, SellAnyCar, JadoPado and Myki. Talal Bayaa, CEO of Bayzat, was introduced to Amir before BECO existed and was later able to use the connection to get his idea off the ground. “Their importance cannot be overstated,” he enthuses. “In addition to achieving validation from the market as a company, we were able to raise additional capital from other investors who took comfort in knowing that the leading VC was an active shareholder.”
Last year BECO made investments in Wrappup, Vezeeta, Ajar and Syarah, followed this year by Fetchr and Shedul. And with that, their first fund, worth over $50 million at the outset, is now fully deployed. What’s left is being held back for follow-up support for the early-stage startups in their current portfolio.
When assessing any startup, the BECO team follow a formula. They look for complete teams with ideas that are transformational, defensible and scalable. This approach is born of experience, with both co-founders having startup backgrounds themselves.
The cousins come from entrepreneurial stock. “For us it’s been the norm,” Dany muses. Hailing from Lebanon, their uncle, Ghassan Farha, acquired Belgian interiors and fit-out company, Cloisall, in 1966. Dany’s father, Ghaleb Farha, moved his family from Beirut to Dubai three years later to set the company up in the emirates, shortly followed by Amir’s father, Majed W Farha. All three businessmen still serve on Cloisall’s board of directors.
Amir got his first taste of VC life in 2005, after attaining his Master’s in management at Bath University. Having finished his Bachelor’s in computer science and completed a year with Mars as an engineer, he had decided that programming wasn’t for him.
After his studies, he joined a UK-based corporate venture capitalist as an analyst, at a time when social media was just starting to pick up steam and technology was still an up and coming sector. Spending over three years meeting young, excited startups keen to change the world was all the inspiration he needed. Having grown up in Dubai, he returned home in 2008, and started work with Dubai Holding’s Arab Business Angel Network.
While there he noticed a knowledge gap and found himself often stepping outside of his core role to help startups and small businesses with their strategy and finance planning. So, in 2009, he set up a business with a friend specifically designed to offer this support: Tandem Partners. “I call it the boutique Mckinsey for the startup world,” Dany laughs. Over the following couple of years Amir went on to be a founding investor in other companies including Toolman and Purple PR.
Meanwhile Dany had already made his own waves. Having also studied in London, he returned home to Dubai in 1995 to partner with his brother in catering company, Intercat. Serving Dubai Police and the growing hotel industry, they set out to compete with large incumbent companies by offering a better service at a lower cost by infusing the business with technology, embracing ERP and just-in-time inventory before the competition could catch up.
In 1997, they also set up Butlers commercial laundry, again using cutting-edge technology and automation to service the hospitality sector.
Then came a change of direction. Dany stepped out of his management roles in Intercat and Butlers in 2000 to set up an online recruitment service with a friend—they’d both struggled to hire good talent and decided there was a need for a local solution to mirror the U.S.’s Monster model. Bayt.com ended up becoming one of the region’s earliest big tech-startup success stories.
Over ten years with the company Dany set up ten sales offices around the region, from Morocco to Pakistan and everything inbetween, and hired nearly 300 staff.
In 2008 an idea struck. With such a vast network and lucrative contacts, Dany decided to try setting up a corporate venture capitalist fund through Bayt.com, sending out a press release calling on the brightest entrepreneurs to get in touch. When the global financial crisis hit, those plans were put on hold; but fate had something else in store. The release and website had been spotted by Amir. In 2009, he picked up the phone to connect with his cousin, and the rest is history.
They waited out the crisis before building their business plan and setting wheels in motion, but by mid-2011 both had exited their previous companies and were putting all their energies into building BECO, launching themselves in 2012.
They started out investing in a deal-by-deal capacity, using their own personal capital and that of family and friends. After a year and a half, they decided it was time to set up their first fund. They approached high-net worth individuals and leveraged their networks to raise over $50 million by 2014. They also brought two new partners on board, Alvaro Abella as a partner for Fund 1 and later Yousef Hammad, who is now a partner in raising Fund 2.
Hammad believes in surrounding yourself with people that inspire you and have fun, which is why BECO appealed. Having started his career as an entrepreneur and then shifted to investing, the team was a perfect fit. He explains that they support each other and their portfolio without limits. “We are very candid with each other and base our relationships on trust and honesty—internally and externally,” he says.
BECO stands for “Booster Engine Cut Off.” It’s a NASA term referring to the moment a rocket detaches from its engine and exits the earth’s atmosphere on its own. It’s an apt metaphor for the role BECO plays in the journey of its portfolio startups, giving them the support and power to launch, then exiting when the company is established enough to survive on its own momentum.
The BECO team believe its their ability to genuinely empathize with entrepreneurs that differentiates them from other VCs. They are able to offer mentorship and advice based on personal experience. “It’s a tough existence being an entrepreneur,” says Dany. “When I look back on my life I think every single time there was always those one or two breaks—everyone needs a break. And it’s our responsibility to help these entrepreneurs find them.”
Having felt the benefit of this, Bayaa agrees, “We can unequivocally say that their support is unwavering.”
The mentorship on offer comes from both angles. Six months ago, BECO launched their community network, bringing their portfolio companies together through social events to communicate, build their own relationships and discuss challenges and ideas.
Creating these bonds is part of a wider mission, with making money simply a “byproduct”. Looking ahead and the BECO team are focused on further transformation and growth, with hopes for more unicorns and a tech-startup IPO in the not-too-distant future. “Execution is key,” says Amir.
And never be afraid to pick up the phone.