As we break into summer, a lot is concentrating our minds at GBN.
Startups: How not to be a “Silent Investor”
Khaled Ismail, the founder and Chairman of Himangel, has launched a USD five million angel fund. Its core activity is to provide investment and mentorship to young startups in Egypt.
The founder of Himangel provided GBN with an interview during the 2019 Seedstars Summit, where he explained how he transformed from a serial entrepreneur into an angel investor by choosing the “non-silent investor” strategy.
Khaled Ismail, who holds a Ph.D. in engineering from MIT, has a long history of entrepreneurship. “I had seven companies over 20 years, making successes and failures and learning through experience reasons for those successes and failures.”
He built an innovation-based business called SySDSoft which he managed to sell “with a very good exit” in 2011. Afterward, Ismail started structured angel funding activities with two Cairo-based angel funds – KI Angel and Himangel.
Khaled Ismail is amazingly inventive and resourceful in searching for new forms of revenue, willing to participate in the local and regional economies in Egypt, and constantly looks for new ways to make an impact with his funds.
“I decided after that to help young startups and invest in them but also to pass my experience to them instead of starting one company at a time, I can help 10 to 15 companies at the same time, that’s the reason why I switched from being an entrepreneur to being an investor.”
A man who turns an idea into practice
The reason why Himangel focuses its work on promoting Egyptian startups is a simple case of geography. Supporting early-stage startups can be expensive and especially tough, which are all reasons to be close.
“I have to mentor them; help them, have face to face meetings with them, invest my time in networking with them; go with them to partners, go with them to sale meetings…do everything with those companies and if they were not in Egypt, it would have been very difficult for me to offer this kind of service that I am offering today to my startups.
“I do believe that a local investor with a local company gives the best marriage
“If you invest in a remote company, you will need somebody local to help you with the investment otherwise you become sort of a ‘silent investor,’ which I am not. Investing is not just putting in money, otherwise, it is easy. Investing is also about giving time, putting effort and providing expertise.”
A successful strategy
While devoting himself to the mission of supporting Egyptian startups Ismail shared with us the unbelievable number of companies that went through his business model. “I mentored over 100 startups but only invested in 22 investments. Two have failed, we sold 2 of them with a successful exit and we still have 18. So far the success rate is decent.”
Silicon Valley: a wrong model for Africa
The well-known center of the “Startups universe”, Silicon Valley should not be considered as a unique business model suitable for all countries. The African continent should avoid replicating the same eco-system developed in California and rather focus on a model that will work best for it, taking into account the local environment and customers.
“In general”, he says, “I think that the Silicon Valley model in the US does not hold very well in places like Egypt or Africa by extension, we need to develop our own models and our models at least, as an investor, are to help most of the companies succeed and prevent failures as much as we can . Of course, there will be failures but, we hope that we can get success rate which is relatively high.
“It is different from the US model where Americans focus on a very small percentage to become unique ones and make big money. I focus on the average, I focus on the majority of the companies and I want the success rate to be 60-70 percent. The difference in the US is that they only care about 20 percent because they bring big returns.
“I’ve got several companies that have raised money 10 times the initial evaluation already after 2 years, 2 in healthcare, and I have one in waste management that grows 20 times over the last three years.” Knowing that a Startup needs at least huge growth in five years to be a good investment, Khaled adds, “I’m proud of most of the investments that we’ve done, there are of course all 18 different portfolios and I can see that there are 5 or 6 good winners, who will still make reasonable returns and maybe 4 or 5 will not make it.”
Key ingredients for investment
In order to get a chance to be invested in by Himangel, the following features are required:
- A good entrepreneur surrounded by a good team,
- A strong relationship should exist between the team members,
- A viable product,
- Good knowledge of the markets, social segment, age group, the competition, understand your customer and their needs,
- A good relationship with the customer is crucial.
Without all these above, Khaled said, “I will probably not invest…” However, a small window of opportunity might be opened to extend his investment outside of Egypt. He showed great interest in African agriculture, a field he is well acquainted with.
This world-class expert and innovator is a good example for the young Egyptians and elsewhere in the world. His chosen type of investment approach is much more like “a sustainable business economy model” promoting entrepreneurship with a new strategy, investing in startups that will be successful and later on able to invest more and more in other companies, generating new jobs and opportunities for the country.