ask the money guy | vc viewpoint | your money | ECON
Kareem Elsirafy, founder and Managing Partner, Modus Capital
talent that is a cultural fit for the company, presents a very challenging obstacle.” Either way, he notes that startups struggle to find the right talent at an affordable rate, or hire an agency to plug the gap. From the VC’s perspective, Elsirafy and his partners felt that in addition to providing the right type of value add support for portfolio companies, they needed to offer a better investment product to their LPs. “VCs historically engage in a framed discourse:
positioning their competitive advantage as a sector specialist, or access to specific dealflow. In the end, and to overly simplify, the game is making educated bets hoping for one or two home runs that will carry the fund to profitability. While this risk is inherent to venture capital, we felt there is a way to provide a better de-risked investment opportunity to LPs.” Considering both these perspectives, they took on the challenge to formulate a “new model of
“companies compete with ever increasing salaries supported by the high valuation startup environment which, when combined with the general challenges of finding the right type of credible talent that is a cultural fit for the company, presents a very challenging obstacle.”
venture capital engagement, where you can provide not just more but the right type of value added to entrepreneurs, while giving LPs a safer derisked investment product.” For startups wondering if their enterprise should consider working with Modus Capital, Elsirafy assures that with his company’s operational framework, which can provide value for early-stage startups and SMEs alike, it is quite industry agnostic, although the team do have a preference for concepts in fintech, regulatory tech, blockchain applications, SaaS, direct-to-consumer services, and medtech. The founder and Managing Partner admits Modus also tends to focus on businesses that have the potential for significant social impact: “We’re looking for companies that can have a positive social impact en masse, more so than as a simple by-product of a new successful venture.” And with an office in Egypt, Modus has also launched an initiative to expand its model across the region. Elsirafy remarks on how the ecosystem is still quite nascent, and has a few major gaps that the Modus model can help fix. When asked if his entrepreneurial background has affected the way he sources deals, Elsirafy explains that Modus’ methodology is centered on doing due diligence, and having its operational teams work with the entrepreneurs, prior to being considered for investment. From his personal experience, Elsirafy has learnt that even if you’ve met the founding team countless times and have conducted due diligence, you’re still only getting a partial perspective to the business. “We all know that execution is key, and that when challenges arise, and stakes are high, this provides an opportunity for
money
teams to either break through successfully or let it get the best of them.” The Modus process thus allows Elsirafy and his team to really see how the startup handles hurdles, and get a true insight to their operational flow and in-depth process. As someone who assesses startups seeking funding, Elsirafy evaluates a startup’s pitch based on a few particular aspects. One, is what the startup is trying to solve and the solution they’re offering, plus if the demand is apparent and warrants the value proposition of their product or service. He looks at their approach to the solution: from the concept of their product-market fit, to their product’s traction as early validation, and its USP of what makes their product or service better than what the market offers, and whether they address the problem distinctive. Two, he focuses on its opportunity and current and probable future market value. “Some companies may be addressing today’s market, but knowing where that market is heading, and the underlying drivers contributing to its future development is crucial to understanding the long-term opportunity of the sector.” Third, he factors in the startup’s ability to explain their problem, solution and timeline with as few slides as possible, as it indicates that the startup has honed on their focus. “There must be a balance between staying within certain parameters and not being too opportunistic outside of your core focus, while being pliable enough to pivot and get on the best path to success.” Fourth, he considers whether the founding team compliments each other’s skillset, and Elsirafy notes how each founder contributes to an overall pitch, >>>
February 2018 / E N T R E P R E N E U R . C O M / 63