By Dany Farha
Quite often, when meeting with prospective investors and industry stakeholders for the first time, BECO is compared to Rocket Internet (the German internet holding group) given our holding company (holdco) structure.
The main reason here is that we are not a fund, we are a company. Whilst we understand why at the face of it people would make this assumption, we could not be more different than Rocket. Let me explain.
Rocket operates as a hybrid investor and operating company (opco). They have their HQ in Berlin that provides operational support to its global companies. It funnels cash from its main balance sheet and then attracts later stage investment from other funds and investors at much higher valuations. At least that’s the plan on a very high level format.
Herein lays the main distinction. Rocket, for the most part, incubates these businesses. The greatest benefit in this model, if it works, is that Rocket accrues “founder economics”. To do this, they install hired guns, mercenaries, to go start and run these businesses, giving them the title of “co-founder” and circa 0.5-2% of equity that still needs to vest over a number of years.
However the minute ‘the going gets tough, the tough get going’. In our experience, hired consultants with no real founder economics and no mission to drive them, will eventually leave, when things get hairy; and as we all know, and as ex-entrepreneurs ourselves, things will get very hairy many times over and especially so in the first few years of the founding of a start-up.
Building a technology start-up is very different to building a traditional business that has fixed assets. Tech companies don’t have much in the way of fixed assets; their greatest fixed assets leave the office every evening and return every morning; they are its people. Retaining people requires having a mission and aligning interests and incentives.
At BECO, we invest in mission-driven entrepreneurs. Passionate, goal-oriented people who have seen and experienced a problem first-hand, so much so that they are obstinately passionate in building a better solution for a large audience and one that is directly applicable to the local market. These people never give up. They are on a mission. They are also extremely incentivized to do so. They are the founders, owning the vast majority of the company and allowing us to invest for a minority stake (typically ranging from 10 to 25%), in order to help them create value, in most cases in the earlier stage investments, to create more value than they are giving up in equity for the cash raised. These entrepreneurs are the captains and sailors – they don’t parachute in – and we provide some of the wind in their sails. It is their show; they are driving this revolution, and we are merely companions in their quest, hopefully important and long-term companions in their journey.
At BECO, our mission is to elevate the level of technology entrepreneurship to the levels of the developed world by investing in innovation by MENA-based entrepreneurs who have an intimate knowledge of their markets. In doing so, we will create role models, jobs and wealth in our region.
As Peter Thiel mused about why Mark Zuckerberg wasn’t funded when he was still based in Boston between February and August 2004: “Older (aged) investors couldn’t bring themselves to invest in Facebook and watch someone so young become so much wealthier than them”. We sincerely wish and hope that all the founders, young and old, that we invest in become significantly much wealthier than we are or ever become.
That, in a nutshell, is why the BECO ethos will win over mercenary-led and driven investors.