#466 What Founders Miss Most: Moataz Mukhaimer on Strategy, Pricing, and Funding Readiness

Episode 466

[00:00:00] 

Mehmet: Hello and welcome back to a new opposite of the CTO show with Mehmet today. I'm very pleased joining me from Jordan Moataz Mukhaimer. Thank you very much for being here with me today, Moataz. I was, you know, explaining to you previous [00:01:00] discussions. The way I love to do it is I keep it to my guests to introduce themselves.

I have a theory, yes, no one can tell someone else about someone else other than the original person. So it makes sense, but like, kind of hints for, for, uh, you know, the audience, what we are gonna talk about today. So today I think it's an important topic and I'm very glad like, uh, Moataz is here with me Today.

We're gonna talk about, you know, all things which founders we think they struggle from financial perspective, like modeling strategies, and, you know, funding readiness. So we're gonna discuss these topics with matters today. And as usual, the floor is your matters. 

Moataz: Thank you. Thank you so much, Mehmet. Uh, it's an absolute pleasure to, uh, be here.

Thank you for the invite. Um, I'm a fan of your show. I listen to a lot of episodes and, uh, it's always interesting when you talk to different people how, how much perspective you can learn from them. Um, so let me start by talking about, uh, introducing myself. I'm Moataz [00:02:00] Mukhaimer, like you said. Uh, how I describe myself.

I'm the person who leaders, uh, come to me when they have either a challenge to overcome or an opportunity that they're thinking of, um, pursuing. I'm a strategy and finance advisor. I've, um, I work with SMEs and startups, uh, in the Middle East, but I've worked in Boston, um, Montreal, Toronto, Kuwait, uh, Bahrain.

And then I moved, uh, 10 years ago to Jordan to work as an independent consultant. I. 

Mehmet: Great. And thank you again, Marta, for giving, uh, me the time today for this, um, you know, episode now. Absolutely. Uh, you mentioned something which is close to my heart. You know, startups and small medium businesses, right? Yes.

So like, especially for people who might be doing business the first time, right? Um, what kind of, I like to [00:03:00] call them blind spots, right? That usually they have both from, you know, strategy perspective, because I think strategy is core, right? So we need the strategy is like the roadmap. Of course, I would leave that to you, but, you know, what are like the main things you see them missing?

What are like the challenges they face where they come to you and say, Hey, like, you know what, like we feel like we are hitting a wall or reaching it. That, and. So tell us a little bit more about these challenges that you see commonly. 

Moataz: Um, that's a fantastic question. Uh, I think if I want to think about top three things that are blind spots for, um, startups and surprisingly for some, um, companies that have been doing this for a while.

The first one and sort of the very critical one for me is research. Uh, I find, uh, I find it, uh, surprising every time I work with startups, especially and founders. Um, the, the [00:04:00] lack of understanding of the importance of research and research includes everything. Um, for some bizarre reason. A lot of business education and a lot of, uh, maybe programs that founders go through, concentrate on the inner issues of the company, product team, and all of these things, which is very important and you need to research this, but I don't think they pay enough attention to the external factors.

So, uh, not enough attention is paid to the industry. You're going into an understanding its nature, uh, competition. Uh, they do very superficial comp, competitive analysis. Um, founders usually don't do enough research even about the client. Uh, so they make a lot of assumptions and these assumptions end up costing them a lot of money.

So research is the one blind spot where people, uh, founders don't pay enough attention to, and they should. I always tell them, research, research, research, you know, how they say in real estate, location, location, location. [00:05:00] For me it's research, research, research. The second one, I think, uh, if I want to talk about blind spots, this is critical for founders and leaders and business owners.

They do not understand their influence on the team. Uh, I find this a lot. Even with, uh, medium to large size companies, leaders do not understand the impact they have, whether positive or negative on their team. You as a leader, um, it's not only a privilege, it's a responsibility. So you need to understand as a leader how the every word you say.

The impact of that word, the energy that you give, the responsibility that you have to lead the co The team is a lot more. So the same word that comes out of me has no, no effect as much as the one that you would if you were our leader. And I think I spend a lot of time with leaders trying to get them to understand that you unfortunately don't have the privilege of being super frustrated.

Uh, [00:06:00] you actually need to pick up the pieces when things are bad and, and bring the team together and actually try to find the positive way to solve the solution, the, the problem. And the third one is my favorite, uh, the blind spot, which I find is financials. Uh, there's a lot. Um, a lot of, a lot of the startups that we work with these days are tech companies and startups, and usually these people are programmers or engineers and, and very inventive, very smart.

And they know a little bit about numbers and they, for them, the priority is to have your MVP launch, sell, sell, sell, scale, scale, scale. Fantastic. Yet there is an issue with you and a very big problem that will appear if you don't pay attention to your numbers. These are the three, 

Mehmet: yeah. The first one, you know, um, you're, you're so right on it, and me included, you know, like at some stages in, in, [00:07:00] in my life and in my career.

And by the way, I, I think we do it not only when we launch businesses, even in our normal careers. Absolutely. Where we don't, where we don't do enough researches and then we go out and say, Hey, like it's gonna work. You know, like, uh, uh, and this is, I think, little bit, of course it's nice to be optimistic, right?

And say, yeah, let's do it. But I think, you know, this is the way we, and again, I related to the last point, which we gonna jump to it next, which related to the financials, right? So we assume always the best case scenario and we forget to. Talk about the worst case scenario. So, so, so the three blind spots Indeed.

But I think, you know, the first and the last one you mentioned, I think this, I think this is what we see more come of course. And of course the second one also, now talking about financial smart,

I come [00:08:00] also from engineering background, right? And I had this assumption always, oh no man, like the last thing I want to deal with is just, you know, Excel sheets and absolutely working with numbers, like let someone who understand accounting and so on, but why it's important to have this, let's call it financial literacy for running a business.

And again, of course we focus more in tech companies and to your point, the founders will be coming from technical backgrounds. Do they find it complex? Do they do, do, do you feel that they are getting scared of just approach because financial modeling? Mm-hmm. You know, like it's, it's like, you know, that word, mysterious word, is it like, kind of like illiteracy?

Is it kind of fear of discovering something else? So it's something to me also, by the way, it looked, it looked back in the day something big. But of course when I started to understand, oh, like this is totally [00:09:00] makes sense. So how we can simplify and how you help actually, you know, people who approach you and the people who you work with to simplify financial modeling and why it's important.

Moataz: Sure. Um, uh, it's a very good question. Um, founders usually fall into maybe a couple of categories. The first one is, um, they, they, I. Are so occupied with proving their concept, understandably so, and they don't have time to think about these things. I just wanna sell, sell, sell. And if I'm selling enough and I'm, and, and, and my sales are growing, then I'm fine.

The second category is always thinking, um, it's too complicated. I don't want to think about it. Uh, at some point I will, but it's one of those things where you, it's on your to-do list, but it keeps going down and down and down 'cause you don't like it. And I think the third part, um, uh, is people usually, some founders think, oh, at the beginning, I don't really need it.

It's just, you know, we'll, we'll get through it. We got our first round of [00:10:00] funding and then once we're at a certain stage, I'll just hire, uh, accountants or finance people, and then they will take care of it. The problem is, um, what I, what I tell found founders is a, I'm not expecting you to be a financial expert or an accountant or a finance person.

This is not your job. But it is critical for you to be able to ask the correct questions, look at the correct KPIs and numbers and ratios when even when you have a finance person, and, and be able to think about it and base your decisions on it. The reality is, every, especially startups, you need to, even if you get funding, you need to be bootstrapping.

You cannot just spend money and burn, burn, burn. So you actually need to know, where's this money going for? How much are you spending on what, and what is the return on all of these things? 'cause you have so many things to think about and each founder has to think about. [00:11:00] Their industry. Again, that's why external factors matter because certain industries, certain sectors, there are certain numbers that matter in addition to sales, uh, more than other sectors.

So you need to pay attention to these sectors. 

Mehmet: So just, I want to add one thing, Marez, which is you said like sell, sell, sell, scale, scale, scale. I think, um, one of the things that I see usually, um, also is build, build, build. So in a sense, um, yeah, let's, let's keep, you know, shipping features. Let's keep shipping, you know, uh, extra thing that we think the customer might like, right?

Sure, 

Moataz: sure. 

Mehmet: But the, but the only thing, and correct me if I'm wrong, maths, and there's something, I don't know how you, you, you factor it in the, in the model itself, which is time, right? So time, time. I was [00:12:00] just reading something today in a book where they say time is scarce for founders, but usually investors, they have the plenty of time because this is actually their game.

It's a time game. So how much is this related also to have, you know, this mentality of balancing between, you know, what the customers want, what's the market is telling us from research perspective, back to your point. Research, research, research. And. Factoring that into the financial modeling itself. So for example, if you can, you know, tell us, or like shed some light, for example, on like, uh, the, the burn rate and you know, like, uh, the runway and these things that I believe, yeah, of course we see them in the literature nowadays and people share about startups, but I think we, if you can, you know, shed some light on this, it'll be very beneficial for, um, for the, for the community.

Moataz: Sure. Um, again, [00:13:00] each sector has its specifications, but let's talk about things that applicable across the board. You need to understand that it's not your business model. Uh, when we talk about business model and talk about, oh, the solution and the problem that you're trying to solve, and who is the customer part of that business model, it needs to translate into a revenue model, a financial model that makes sense unless you're opening an a not-for-profit organization.

The point of you doing all of this is to make money so that you are, you can self sustain and that you can grow. So you need to make sure from the beginning you totally understand, very fully understand how is it that you're gonna make money. The problem is, or the challenge is a lot of, um, and I see this with tech startups, they have fantastic solutions.

There's multi-layered, um, multi-layers of users and end users versus customers versus, you know, suppliers and or maybe two-sided partners in like in marketplaces. And they present these solutions and I'm like, okay, [00:14:00] so how are you gonna make money? So that's the basic thing. You need to understand how is it that you're going to make money?

And then we move on to a couple of things that need to be. Always on your radar. As a founder, I need to understand how is it, how am I making revenue? So how much am I gonna sell and what's the price I need to think about The other side, the cost. It doesn't matter how much I sell, that's a great thing.

And, and startups usually concentrate on the, on the top line, which is revenue. But on the long run, I believe if you're not looking at your cost, how much it costs you to produce, to build it, it you're, you're going to, uh, eventually either waste a lot of revenue, uh, profit that you could have actually gained, or you're actually going to go into loss.

So you need to understand how much does it cost to produce something to make it, um, and the burn rate. When we talk about burn rate, we need to [00:15:00] understand, especially as a startup, how much are you spending on a monthly basis? You need to understand how much are you burning? How much money are you putting in?

Do you have developers? How much are you spending on marketing? Marketing is a big one where people, founders usually underestimate how much marketing they need to put in. And all of this relates to how much money you need. It's all connected. You're selling how much it's gonna cost you, how much funding do you need, and then include that, the challenge of actually growth.

I need to grow. I need to grow. So all of these things are all connected. Remember, uh, for any founder, if there's something that you need to really, really pay attention to is your cash flow. At the end of the day, forget everything else you think about. When you're creating a company, you're creating value.

Value means that you actually need to make cash. You need to have free cash. This is based on, even when we talk about valuation of companies and all these [00:16:00] things, it's free cash. You need to make cash, so you need to pay attention. You don't, it doesn't need to be fancy. You just need to know how much money you're, how much cash is coming in, and how much cash are you paying so that you know when is it that you're gonna need extra funding?

What? What months are you gonna be in stress? What months you're okay? All of these things connect to cash flow. This is the most important thing to pay attention to. 

Mehmet: That's great matters. Now, some of the questions that usually I hear it from people from time to time, and again, you kept mentioning, depends on the sector you are in, right?

It depends. Yeah. So where to start, like, and everything starts because you mentioned something very crucial, understanding our costs first. Then we need to put a price tag on the service or the product that we are trying to sell. And here where, you know, I, I think a lot of people probably, they [00:17:00] skip this important part of putting the price, the right pricing.

Absolutely. And you know, I've heard a lot of people, you know, and when I was much, much younger, I was having the same thought. Which is wrong of course, but you learn with time. Oh, how much is the best competitor selling this? Okay, I'm gonna break it. Half of what he's selling. And then you, you know what?

After couple of months, oops. We are losing money. So yeah, like what are like some of the best, I mean like you, you kept mentioning research. I want to come back to the research where to start the research. Like what are like some of the available resources available, I don't know, tools, maybe they come to someone like you Mar who you saw a lot of different, you know, businesses also as well.

So founders if they really want to put the right pricing strategy so they can consider this into their financial model. Where to start. 

Moataz: Where to start is, and I always tell this to founders [00:18:00] these days, there is um, an abundance of information. So there's a lot of great podcasts just as yours where you learn, and I think in general, founders need to find the time to read.

To listen to podcasts and to speak to their industry mentors in their industry, try to learn from other people from other different sectors. That's why community is extremely critical. Uh, these are the resources that you can think of and, and, and you can research business, uh, pricing strategy in all of these things.

But I like the fact that you went to pricing because to me, this is one of the most critical points financially for startups, how to price. Um, and I cannot tell you, I think nine out of 10 companies that come and talk to me about pricing, usually they're talking what you said. Um, we're not selling enough.

So we want decrease the price and usually the solution, if it's related to pricing, um, most, uh, scenarios than [00:19:00] none, the solution is not to decrease the price. It's actually to increase the price. So. Because, um, when you're a founder, sometimes when you're a company going through stress, you get insecure about the value of what you're providing, or the economy is going through stress, like now we're predicting recessions and all of these things.

So you start panicking, you think, let's decrease prices. Every research has shown that pricing is the most critical point where the, uh, 5% increase. I think this was, uh, research done by KPMG, where they looked at all of the factors, price, cost, and all of these things, and they saw that price. The same difference if like, if you increase price by the same percentage versus decreased cost by the same percentage or play with other factors, price has the most direct effect on your net profits.

So actually you need to concentrate a lot on your pricing. You were talking about, uh, in terms of slashing prices and all of this, it doesn't work this way. You need to think about where your [00:20:00] positioning is in the market. What kind of position do you want to be? Where do you want to play in this market that you're playing?

You need to think about that strategy versus model. Sometimes you, the solution is, or how to be competitive is by offering a subscription versus a one-time payment. Uh, all of these things can be actually strategic tools. What I, I advise your, uh, listeners to research when we talk about pricing is value based pricing.

That's the strategy that eventually you wanna get to, except certain very few industries where economy pricing meaning the lowest price, at the lowest cost. Most companies need to move towards value-based pricing. 

Mehmet: That's very important Moataz. And uh, if you allow me to add my, my 2 cents as they say. So based on what you said, now I tell people when you go to a business, right, [00:21:00] so you choose between two path.

So you choose between going with what is called the red ocean. Yes. So you have a lot of competition and usually you know, your d what, what kind of differentiation you can offer there. Right? Okay. You can do things maybe a little bit better but little bit faster. But the price will be actually your, yeah.

It will make it your or or break it. And then you need to play the volume and then you need to play on the marketing. And then you have the blue ocean kind or what some people in the tech startup, what they call it, the zero to one company, right? As Peter thi. Sure. Now there. And I'm trying to demystify some more things.

And again, feel free matters to, to stop me or like, you know, uh, add of what I'm saying, um, regarding the pricing strategy and all this. I think it comes back to understanding your ideal customer profile. Uh, I struggled myself, you know, I used to yell sometimes at some [00:22:00] companies why they are so expensive.

You know, why they don't understand. And then I figured out later, Hey listen, like these guys, they sell to enterprise companies and they're not Exactly, you're not, you're not 

Moataz: their client. Exactly. 

Mehmet: So, and you know, always the good example is like, yeah, Ferrari, they don't sell to everyone, right? So they sell to.

Part of the market. 

Moataz: A, a slice of the market. And they honestly don't care about what the other p you know, what other consumers think about them because they're not their target market. And you also need to be, do the same thing. Don't pay attention to other people who are now your target market. Um, to, you're too expensive for me.

Okay? You're not my target market anyhow, so I don't care. 

Mehmet: Yeah. So I want to relate to something. I like it. You know what you said? Research, research, research. I want to back this. This is what you do in the research. Uh. Yeah, you know, my, my, you know, dream is one day I would be able to bring him on the [00:23:00] podcast.

Let's see, so Steve Blank is, is a very well known figure, of course, a professor at Stanford University and he keeps talking about going out of the building. So actually when I was dragged to this entrepreneurship startup thing, I kept watching his videos and he kept repeating this word at the beginning.

I didn't get it go out of the building actually, he was saying about doing research. So go and, you know, like, go find out. Like, you know, you, you can't just, you know, me and Mataz. Now let's say, you know, maybe I'm coming from technical background and Mataz, he has the strategy financial, you know, so he'll be the CEO, I'm the CT O.

We will go now and write down many theories. These are like hypotheses. We don't know. Like if we believe that this is the only truth in the universe, 

Moataz: absolutely 

Mehmet: a chance one in million maybe will succeed, but a big chance that we, both of us, we are wrong. So what man telling you guys, go out of the building, go do your research, you know, understand your market.

And now I want to understand more because maths, this is something people, they think strategy. Yeah. Strategy is only for the [00:24:00] big guys. Right? But let's open this a little bit more. So when, because you work with a lot of clients and you know, you, you work as like, talks about itself also as well. But when you, we say strategy, so let's explore this more, you know, what is a strategy for, you know, business owners, for startup founders?

What does it mean? Like, what areas it covers, if I might ask? Sure. 

Moataz: Um, strategy is one of those words that's, um, I think very overused. Um, and one of the most. Uh, misunderstood concepts in on business. Um, I sit down in many meetings and I find that people are, it's just, I, I don't, don't know why they think it's fancier if I put the word strategy behind or before any other word I put.

So it is a very strategic goal. It's a very strategic decision. It's, uh, you know, so everybody, everything when you put strategy in front or after, I don't know. Does it give you any [00:25:00] fancy? Exactly. Um, and, and there's, and there's, and there is good reason why this is, um, there's plenty of schools that talk about strategy.

There isn't one unified, um, answer for strategy. But this is why I like strategy. Um. I work with finance and strategy, so finance is numbers and ratios and it's much more precise in my brain. Strategy is the area where it allows me to be creative and allows you as a founder to think outside the box, inside the box, destroy the box, rebuild the box.

For me, strategy answers simply answers the question, how are you going to win? You need to understand how is it that you're going to win? You need to identify, diagnose, what is the challenge or what is the opportunity that's in front of us that we need to take advantage of? Or most companies, it's usually what is the challenge that's standing [00:26:00] between us and achieving our vision?

You need to answer that question. The problem with strategy or the challenge with strategy is people usually confuse it with, um, sure we're going to have, uh, monthly meetings or we're gonna do, uh, operational stuff. We're gonna, strategy is a big picture. It's not the little detailed operational, uh, things you do every day.

And the, the challenge with strategy is that it's not just related to decisions you're going to make or you're gonna say yes to. It's more related to the decisions you're gonna say no to. That's very difficult because you're usually, as a human being, as a leader, you carry on a responsibility and, and, and you're scared.

If we say no to this opportunity, are we going to lose out? And that's, I've seen this over and over when I work with CEOs and leaders. They want to do everything. I keep [00:27:00] telling them, you don't have the resources, you don't have the manpower, and you cannot, this humans cannot handle, um, five, 10 strategies.

You need to actually think about what's the best option moving forward and say no to the other option that I find very difficult or most leaders find very difficult. So they bring me so we can fight over it and then decide, okay, this is what we're gonna say yes to, this is what we're gonna say no to.

And again, it goes back to really answering how are you going to win. If you're not able to answer that precisely, um, then you need to sort of stand back and get out of the daily operations and the daily challenges and the customer complaints and think about it. It's a very great opportunity for you to sit with your team and discuss bigger picture.

Strategy is a fantastic area where you can be creative, innovative. Um, build your team around what is it that you guys want to [00:28:00] do? It allows for that space, and I think that's why it's scary because it's not one plus one. 

Mehmet: Right? So now here's the thing, Mata, and we are passing, as you mentioned, in a tough times, like there are some sure uncertainties and, you know, all the trade wars happening.

Now I, I, I'm founder, friendly guy, you know, but it was brought in, in, you know, the, the, the show multiple times and yeah, like there is a kind of psychological aspect and kind of as you've said, fear of missing out aspect. And there is also this, what I call it, the ego aspect, right? Sure. So. So now, and again guys, like I've been in your place in different positions, like not as a CEO, but I mean, because people think that this applies only to founders or like business owners, but actually we, we see it in our [00:29:00] careers.

So where, for example, I gotta just give you simple example guys and what, like, I need you opinion here also. So let's say forget I'm, I'm a business owner, so. I am working on a project and my manager comes and tells me which, which is he's my customer. Hey, like, uh, you know, there's this also requirement from Yeah, sure.

Bring it on. And then, you know, like someone else comes, hey, like, uh, you know, the other team they are trying to come up with kind of a competitive thing. Oh no. Like we gonna add this. And then, you know, I keep saying yes, yes, yes, yes, yes. And then I found out like, oh, there is a deadline and I'm not able to to.

Right. Absolutely. But from business perspective, Moataz, and you know, here it's kind of out of as well, how do you manage, you know, the psychology of, of the leaders you work with? Because look like we, we are all human beings, so all of us, we have our egos, we have like, and how do you, like how you can [00:30:00] differentiate between a founder that really you think, you say, you know what, like, but I know like it's little bit tough, but this guy, he gonna do it.

Or, you know what, like. This lady, like, really, she's like looking overwhelming, but she gonna pass it. Versus the people who you say, you know what, like no way. They cannot do it. So like this psychological aspect, like how, how also it's important in your work maas, especially when you come with the strategy, right?

And then you need to tailor it based on their personality. 

Moataz: Absolutely. It's super critical because, uh, with all honesty, there's a lot of, uh, you know, your listeners can now actually start researching this. Um, there's a lot of writing about, um, that, that consultants are, you know, or even they talk these days about investors that they're the, they, they actually hurt, uh, founders, um, learning and, and they don't, there's no use for having consultants and all of these things.

And there's a lot of talk about this [00:31:00] and, and I always say. It. The idea of a consultant is to come and work with you, not just to tell you what to do, and it's a two-way learning process. That's why character of a founder, especially, or any CEO or leader for me, makes a huge difference. That's why when I first meet with them, we need to see, and I tell them, you need to see.

If there's chemistry between us, if our brains, uh, click, if you find that there is something I can add and I need to evaluate and be honest enough to tell you whether I think I can add to your character. I've had the situations before where I had to tell founders or even CEOs, um, I really don't think I can help you.

We're not seeing eye to eye. So why waste your money? And this brings me to when you were talking to me about strategy and then, you know, founders thinking about, uh, no, I wanna do it all and I wanna do it all. And how do I convince them? First of all, I, I, my, my thing is about building, uh, long-term trust relationships.

[00:32:00] So I have clients that I've known for, worked with for three to four years. So by, by the time you establish this, they, they, they, they really take you. They seek you out. Um, and I usually, it goes back to what I tell them. It's about allocation of resource. Especially, um, human capital, brain capital. So I always sit with leaders and I tell them, you cannot process, you cannot take on all of these challenges.

This is not possible for a human being. You can do more than maybe me, but at the end of the day, there are some things you need to say no to, or at least not now. And that's when we talk about scarcity of resources, that's when they start understanding, okay, you're right. I don't have all the money to do all of these things.

I don't have all the staff I need. I don't have the capital, the brain capital to be able to handle all of these things. And that's when [00:33:00] the conversation moves to something more interesting, which is, and this is where you need finance, what is the one with the most return on investment? The most beneficial?

And that's the one we're gonna go with. I. 

Mehmet: Right. I think there's a silver line and, you know, there's a, um, workshop that I was, uh, you know, honored to be able to be part of it where we talk about, you know, the traits of the entrepreneurs and one of them is, you know, being resilient. One of them is being flexible.

Right? Absolutely. And, you know, people used to ask me, okay, so you're telling us you need to be resilient? Like kind of show, you know, uh, skin in the game and you know, not giving up. But at the same time, you need sometimes, you know, this flexibility and the ability to say like, okay, things are not moving in the right direction.

Yeah. And they ask me like, how do we know? I said, it's lander, right? So. I think the biggest thing, and you know, for the sake of [00:34:00] transparency, we are recording this on the 22nd of April. Probably you are watching or listening beginning of May. So just today, you know, based on some discussions and something I saw here and there.

So I said like, I think also the culture matters. It's important because I'm not saying it's only in, in the MENA region, but I, it's a global thing. But I think here in the MENA region we have this fear of failing. We have this fear, oh, like, you know what, if this guy opened a business, like everyone gonna start to show, you know, by finger, oh, like this is the guy who opened the business and failed.

Or like, this is the lady that she tried to start a business and fail and you know, we have this fear of depression and, you know, being blamed out or no one gonna employ us after this. Absolutely. Absolutely. So I, I think this is, this is, you know, culture. I said, so we need culture. Of course we need everything else.

We need culture also as well. So if in order really to have this healthy ecosystem, we need [00:35:00] this. And this brings me to, you know, one of the main things that, um, I like to discuss with everyone, which is about being ready to go and take it to the next level and get funding. Absolutely. So being the guy working hand in hand with the leaders and the founders matters what really they need to do to have a proper, I would say, situation where they say, you know what?

We are now fundable. Sure. You mentioned a little bit about bootstrapping the business. Mm-hmm. I like it. But what else, what do they need to do to be able to go and stand in front of an investor? 

Moataz: Fantastic question, and I always get this question. Um, I always get, uh, con contacted through LinkedIn and all of this, uh, and people are always asking me, how do, how do I get ready?

Or how do I actually, the question is more how do I know I'm [00:36:00] ready to seek investment now from my work? 'cause I work a lot with, uh, startups or even SMEs, and we start with the first step, which is valuation of the company or financial analysis. And I work with them all throughout the due diligence and the discussions with investors.

So I've seen this over and over and I wanna enter this conversation commenting on what you said before about failure. And I'm telling you this from 20 plus experience to everyone who's listening. If there's a chance an investor has two people in front of them, one that has tried to be an entrepreneur and tried project, and I don't wanna say failed, but it didn't work out once, twice, three times, whatever it is, and now they're coming with a new idea versus somebody who I, who has never quote unquote failed.

I would say 9.5 out of 10 an investor would prefer the first [00:37:00] one. I would prefer if you have tried, if you have not succeeded, because theoretically speaking, and this is what I see, you probably have learned a lot, a lot, a lot more from that failure than you have if you had by chance, done one, uh, startup and it actually succeeded.

Um, and, and, and the learning was you've learned, but it's not as much as you would've learned if you had gone through other experiences. Now let's answer the question of how do you, um, get yourself or how do you know you're ready for funding? The most fundamental thing for, uh, founders to understand, the point is not funding.

The point is not to raise money. The point is to build a successful company. Funding is just the tool you need to actually grow. So if you're just creating a startup just to get funding, that's not the point. Don't be over. [00:38:00] And I know it's easier said than done, but don't be over occupied with the idea.

How do we raise, how do we raise, how do we raise the question you should be asking yourself every day, how do we make a successful business? How do we build this successful business? And when we plan, uh, uh, correct growth, and we know where we're heading, then we decide what is the point that we actually need, um, funding.

And that's when we seek it. Very critical thing for every founder, and I hope if they take anything away from this episode, excuse me, and they think about it when they're looking for investment. I see this a lot with founders, one of two. They either go in and talk to investors with this attitude that, um, I'm begging for money, or they're scared of the investor or the exact opposite.

They come in with huge egos and they talk like they've made it and they're still at the MVP stage. [00:39:00] It's very critical for you guys to understand you are going to be knocking on a thousand doors. Maybe 999 are gonna say no, that's fine, and they're probably not the right investors for you anyhow. But the one that says yes is basically a relationship where both ways the investor needs to understand, and this is why I always say there's a difference between an investor and a smart investor.

The smart investor understands that this is your baby, this is your, your project that you've worked on. I respect it. I don't need to be dismissive if it's not a good opportunity for me. With all respect, I say no. Also, you enter not too egotistical and not too uncertain, and thinking that you're, you know, uh, begging for money, you are coming in with a, with an opportunity.

It might be useful for a mam as an investment. Uh, it might not be useful or suitable for me, so it [00:40:00] doesn't matter. So a mutual respect between the founders and the investors is very critical. That's the first and most important thing, is you enter with that mindset. Mm-hmm. And be okay with listening to a lot of nodes.

How do you know you're looking for, or how do you prepare yourself for to go into investment? You need to get your numbers correct. You need to tell a very good story, but you need to show me numbers. I need to see how much you've sold, uh, certain sectors. I need to see what's your churn rate, uh, and other sectors.

I need to see month on month growth. Uh, so you need to understand in your sector what are the critical KPIs, what are the critical measurements that you will be asked about your cost of acquisition for a customer. Uh, I need to understand. You tell me, oh, I sold half a million. For whom? Which one is repetitive of your clients?

Which one is a one-time client? I need you to give me numbers that tell me that [00:41:00] you're building a sustainable long-term project. So great story, great product, great team, but also great numbers that make sense if you don't have good numbers. And I don't mean that they need to be positive, but they need to show a story and they need to be calculated.

And you cannot go to an investor and tell them, oh, I really don't know. I just know that I sell this much. I don't know how much it costs. I don't know what's my cost of acquisition. I don't know what's my churn rate. All of these things you need to prepare before and be ready for, uh, because that's what a smart investor would be asking me.

Mehmet: Right? So it's, you know, if, if just I want to summarize a little bit and add like, just to the point. Yeah. I use the wrong word. 'cause I don't have it in my, um, dictionary. I don't call it failure, I call it learning. Absolutely. So thank you for Thank you for reminding me. Yeah. And yes, so if, if you don't try, [00:42:00] you know.

You. If you're not failing, that means you're not trying enough. Right? So Exactly. This is, yeah, so, so this learning, this is why I call it learning. I don't call it failure. Now, back to, to the point, Moataz, as you just mentioned. Now, I think also what's important is don't outsmart. If I want to, I'm kind of summarize what you said, like don't outsmart, you know, people because probably they are also smart as well.

I'm not saying like, you're not smart as, as as founder, you are smart. Of course you're smart. But I mean, the other side, they are smart also as well. So probably just for you guys, just, and Moataz, I gonna ask a few questions later about that. So people who invest, so usually people are, you know, they are within your sector, so probably they have seen, you know, not the same pitch deck, I would say.

But you know, they, they know, they know what you're talking about. They know your vertical, they know the business models and in addition to what matters just mentioned. So of course they're gonna see, you know, the, the, the problem you're [00:43:00] solving and you know, the. You know, what kind of solution. So they want to see how the product market fit is absolutely there.

And they want to see also is it a repeatable business? Right? So can you repeat? So, okay, congratulations. You've by, by the way, and I know this because I read in multiple books, so people think, oh, like I have sold this to this fortune thousand company. Great. Can you repeat it again? Like what, what's your absolutely.

Your plan to, to to have a repeatable business? 'cause nowadays we are, we are into, you know, like, uh, guaranteed revenue kind of. So you need the money to keep flowing. So how are we gonna do it? So we need to make, have, uh, you need to have like kind of this, uh, playbook or framework. How you gonna repeat this?

So this is, you know, Marta, thank you for, for mentioning this and of course, having your finances ready. And this is why there's something called data rooms, right? Yeah, yeah. So data room, people think, oh, what's the data room guys? It's just as simple as a Dropbox folder or maybe a Google [00:44:00] drive, a room for data.

Yeah. So, yeah, I, it's a fancy, you know, the first time I know I, I encountered it like years ago. I said, well, like data room, is it a room when I open see data? Absolutely. Yeah. So it's just, it's just like a virtual space where you put all your financials there. You need to be ready to show that because, and, but I don't know if you want to shed some light on the aspects of the due diligence also as well, especially fi from financials perspective.

So any hints you want to share about the financial due diligence? 

Moataz: I'm glad you asked because I wanted to tell you that, to tell your listeners, look, um, the process for you to understand, um, in a nutshell, it could be long, it could be short, but once you present to an investor, and let's assume that they're interested in you, that's the first step.

The second step is they, you actually need to sit with them and discuss a lot of stuff. Uh, go deep into the numbers. And there is two type [00:45:00] of due diligence that has to be done, depends on the deal and who is investing, whether it's an angel investor or a vc or a private equity. There's two things that need to be done.

First one is, and they're both equally important, legal due diligence. So that means there's need, there needs to be lawyers and discuss all the potential contracts and all of these things. And there's financial due diligence to simplify it. They need to go deep into your numbers and understand them and, and question every single number that's critical for them.

So back to your point about outsmarting people, this is why I was laughing as you were saying this. I wanted to say this to your listeners. Uh, let's assume that you put a very fancy, uh, sheet, uh, a PowerPoint with a fancy page of numbers. You need to realize if, if the investor is interested, they're gonna bring somebody like me who's gonna have to look at these numbers in detail.

So eventually, if your numbers are not actually tying up or they don't make sense, trust me, we will find that out. It's not easy. I can, [00:46:00] I can, I've sat on so many pitches where immediately, once you have enough experience in finance, immediately I look at the number, I'm like, ah, I'm sure it doesn't make sense.

So, so just to tell your listeners, do your homework on your numbers and don't over exaggerate because if that person is interested, they're probably gonna bring somebody who really understands finance and they're gonna go through financial due diligence, really goes deep into your, uh, invoices, your client list, your suppliers, your costing, your salaries, um, how much commission are you giving to your employee.

All of these things needs to be dealt with to make sure that you're building a company that's financially sound. 

Mehmet: Yeah. Actually this is for their benefit also, Moataz. Absolutely, 

Moataz: absolutely. It's both ways. 

Mehmet: Yeah, because you mentioned, you, you mentioned about the valuation and I think, you know, one, one of the biggest mistakes, let's, and I can, by the way, I can't blame again.

It's not for blaming people because I think, um, we, people, humans, [00:47:00] we, we are kind of lazy and we always aim for shortcuts, right? Sure. So. Oh yeah. Like usually companies like mine are, if I'm raising a seed round, so pre money is $12 million, 12.5, so this is the magic number. So 12.5 or 8 million, or 7 million.

So I gotta put this, you know, in, in, in my, uh, pitch. So it's like pre-money, 7 million or 12.5 million, safe note, 20% discount, blah, blah, blah, blah, blah. And then, you know, but the investors look at it in a different perspective because, you know, they want to understand, okay, based on what you have built this valuation.

Absolutely. Yeah. So there's a lot of ways, if they have revenue, I think it becomes a little bit easier. Right? Correct me if I'm wrong. 

Moataz: A, a, a, absolutely. I tell, uh, founders, especially at the first stages, please try to self-finance bootstrap as much as you can going into an investor. Once you've sold, you've [00:48:00] actually gotten enough clientele, you've had some sort of consistent revenue.

Your sales pitch or your your investment pitch is, would be so much easier for you to get an investor versus talking about, uh, theories and projections. You will be in a much stronger negotiating position if you have proven consistent, somewhat consistent sales. Again, it depends on your situation.

Sometimes you cannot, um, self-finance, you cannot base it on, uh, maybe donations or, uh, crowdfunding or whatever it is, or, uh, you know, you can't get financing from some programs. If you really need to look for an investor, you need to, but my advice, try to delay that until you've sold enough or if you've created some sort of consistency to prove that your company is worth investing in.

Mehmet: Like minimum have a prototype, guys like minimum. Sure. At least. Yeah, minimum prototype. I understand, you know, in some sectors, like especially [00:49:00] let's say, uh, biotech and Sure, I understand. I understand. But by the way, guess what, like such under rules, they have their own, uh, I would say funding routes. So usually you go to university, they have endowments there, there's like r and d budget for this, you go and work in this, right?

Absolutely, 

Moataz: absolutely. Look for, look for grants as well. Look for grants. Many, uh, MENA countries, uh, government agencies. Some are government agencies, some are for example, uh, supporting, uh, women founders. Some support, you know, certain countries look for grants. Get as much free money as you can before you give away your equity.

Mehmet: Yeah. So Mata, I know you work with a lot of incubators and accelerators across the region. I 

Moataz: do. 

Mehmet: So. Yeah, so, so the first thing, like, do we have enough, do you think, do we need more? Are we doing, you know, well in that aspect, I'm not here to criticize my all due respects to every single [00:50:00] accelerator and incubate.

I think, you know, I appreciate actually some of them, they were like kinds of early, uh, in the market to believe in the talents here. But do you think we have enough, uh, of these platforms in, in our region? I'm talking about MENA region in, in general, of course. 

Moataz: Sure. Um, look, let's look at the positive. We, uh, the, the region, especially the GCC has recently, in the past 10 to 15 years has been a fantastic, very healthy.

Uh, environment for entrepreneurship and startups and all of these things, and a lot of incubators and accelerators and a lot of the other parts of the, uh, entrepreneurship ecosystem are popping up and they're there. Um, I think we're moving in the right direction, uh, um, in in demeanor region. Some places were faster than others.

Um, I think if I have one sort of [00:51:00] wish, I'm not gonna say criticism, I wish there would be a lot better collaboration across the countries so that we can move up as a market, as an entire region versus separate ones. There is power in numbers, especially when we talk about markets, when, when outside international companies look at the, the meaner region.

The, the number as a total population might look big, but it's actually, they always say this. They're like, the problem with this area is that it's so separated, separate countries that every market has its own regulations, has its own rules, has its own subcultural things. And that makes it a tiny bit less attractive.

So I wish more of that can happen on the ecosystem of entrepreneurship. And I think, I think if there's one area where I wish there would be more attention to, but I understand why there isn't because it's higher risk is much earlier stage startups, they find it harder to, uh, get support spec, especially financially.

Um, and again, and I always tell this to [00:52:00] founders. Research, it's not just apply for every, uh, incubator, uh, apply, but also read about them and ask people who have tried them. Some programs are better than others. Some programs fit you better. Some programs, for example, concentrate on tech. Others concentrate on non-tech.

So look for what's suitable for you. And, uh, I always say do the work. It's not just get into the program because really you get the, the more you get out of this, these kind of programs and the more the network that you can build is based on how much effort you put in as well. So I think we, we are moving in the right direction, right direction.

Mehmet: Yeah, of course. Like, especially I, I'm, I'm like you, uh, Moataz, I'm, I like to think in a positive way always. Um, I, I, I even mentioned, you know, a couple of episodes back. I think it was 2010 or 2011 when I used to talk to people here about, you know, startups and you [00:53:00] know, what happens in, let's say Silicon Valley and I telling them guys, I think one day we're gonna have this.

They used to laugh at me. And then the big. Thing that happened was, you know, we start to see couple of vus I used to people they didn't know what startups are like, you know? Absolutely. So, so the first thing that happened, souk.com, actually before souk.com, it was tu which was later acquired by Yahoo.

Yeah. And then we had, um, you know, souk.com acquired by Amazon, and then we had the Kreb, and I think these three maybe, and excuse me guys, if I missed some important ones, but these are the ones who always pop up in my head when I, whenever I talk to people, especially from, you know, other, um. You know, ecosystems.

And I say, yes, it, it's right. It took us time to, to get this, you know, startup ecosystem. But these pioneers, like mainly Yahoo, so acquiring TU and Amazon acquiring. So, and then, uh, Uber acquiring Careem opened. I, and there's plenty also, there's [00:54:00] like another company, uh, it's called Insta Deep in Egypt, which was like one way a big company.

So, so this one brought life. And yeah, now we have like, listen, like there was nothing called, for example, you know, this incubator program. And I think these guys, they struggled a lot at that time because I think no one believed them. Funny enough, I spoke to some. Of the, you know, first VCs in the region and ask them guys like, how did you manage to get, actually build your fund?

And they said, don't ask. We don't want to remember. It was like, it, it was a nightmare because even people, they don't know what a VC is. And now we are lucky because people understand what's what. Absolutely. Absolutely. Venture capital is to, I just want to say Moataz to your point, my wish to have more angels.

Right, 

Moataz: absolutely. 

Mehmet: And, and to have more funds. Of course. Uh, and I'm saying more angels because back to your point about bootstrapping. So one of the things we saw a lot in. In the established [00:55:00] markets, I would say engines played a big role also as well. Um, if, if you look like even the story of Google, the story of Microsoft, absolutely.

So, so, so they were backed by friends and family, as we call them, which is like the engine round. And then you, you bring them to the vc, which really gives you this huge, uh, I call it the turbo engine, you know, that that will push you forward. But, but it's, it's good, you know, like, uh, to, to, to see, uh, what our region have done.

And I wish that we can do more. 

Moataz: I, I, I think, and, and I love the idea that you, the, the concept that you brought about angel investors, because I was reading an article how, um, certain countries like, uh, UAE and Case A and Kuwait even, and even Jordan and Egypt, they have a lot of, uh. Now we call them angel investors, but they're investors who come from families with big money and all of this, but they're used to investing in traditional businesses, [00:56:00] assets such as assets, real estate and all of these things.

And there are, there's this article that was talking about, there is this mind shift now on these, these initiatives that are trying to introduce these traditional investors into entrepreneurship and try to make them understand the reward and risk and how it's different than traditional investments.

And hopefully that, to your point, will bring in more angel investors. And, and if there's anything that I really want, uh, would love for your, uh, your listeners to concentrate on as well is please, when you're looking for an investor, look for strategic investors. It's not just money that you're getting. It could be a great connection.

It could be a great, uh, access to a certain market. It could be something. So look for somebody who's not just giving you money. Somebody who's adding value. Obviously sometimes you take the investor because they're just giving you money, but ideally if you find a strategic investor that's an expert in your, in your sector, uh, somebody who has [00:57:00] access to a market that you're trying to get into, that would be very useful.

Mehmet: Right. And uh, back to your point when you mentioned about the people who looks like they are like desperate, so do your homework guys, like Uh, absolutely. And I think as you mentioned, there's abundance of data today. It's easy to guess, you know, let's say if you are in e-commerce, I'm just, you know, giving up.

Like don't go to someone who invests in, uh, I don't know, only in, um, in deep tech because probably they will tell you guys like, we don't have this in our portfolio. So just do a little bit of homework ly. Believe me, guys, with the age of ai. It doesn't take much time from you to get this information. Like you can, if it's a vc, you can go to their website.

They would usually put their, what we call it, thesis, so you would see what they invest in. And like, don't waste both sides times I actually, your time, but of course [00:58:00] I understand frustration sometimes push them to do so. So, but thank you for, for mentioning this Mathas because it's very important. 

Moataz: No, ed.

Uh, actually, funny enough, 10 years ago or even 15 years ago, I was, I, I also dabbled into entrepreneurship and, um, I had this partner and your point was so funny because it reminded me of that day where we were trying our best to talk to investors. Investors, and we were just talking to everybody. We finally convinced one of them to go in.

We actually didn't do our homework. First question they asked, they're like, what sector are you in? And back then that, that failed, uh, uh, attempt was in healthcare and the guy literally looked at us and he is like, you know, I only invest in x. Sector that's completely different. And we looked so red and embarrassed because we were so in a hurry to look for investors.

We actually didn't do our homework, like you said. So I'm sharing my, my, uh, learning experience just so that, uh, founders know that we all have done it before. 

Mehmet: [00:59:00] Absolutely. But of course I can, no one can blame Moataz at that time because, you know, it was hard to find this information. But today this information is easy, you know, especially Absolutely.

GCC countries here in, in, in the UAE and, you know, uh, in Saudi, and, you know, so we have now these communities and everyone, you know, you can just go and ask someone like, Hey guys, like ab, do you know, do you know if this investors by any chance invest in this? You know, like, and you need to just. Keep talking to people.

By the way, don't get me wrong, I was the introvert guy and I didn't ask anyone anything. But yeah, if, if you are an entrepreneur, you need to remove this, uh, you know, self, uh, blocking belief, I would say. And you just go out. You need to talk to people. Back to Mata's, first point. I like it. I think this might be, you know, one of the main part that kind of come up when we produce this research, research, research, research.

So, but, but it's very true. It's very true. Moataz like any final word, any final things you want to, to share with the audience and how people can get in touch with [01:00:00] you and learn more about what you have to offer for them? 

Moataz: Um, well thank, first of all, thank you so much for this very, very, I love when I talk to, uh, people who are like-minded and, and you, you strike interesting things for me to think about.

Uh, last things I wanna say. I think for founders, I. You have all my respect. I think the more you try, you're trying to create value. And that's very, very important. And, and, and, and Chapo to everyone who's trying to do this. Trying is the first step to success versus just dreaming and never doing it. All I wanna say is remember a couple of things.

Research, research, research, build a community. Uh, nobody goes through this journey. It's a very difficult journey alone. Uh, look for mentors. Look for people who have gone through this before. Look for people who are going through it with you again in different sectors. It's don't go through this journey alone.

And I'm not asking you finally not asking you to be a [01:01:00] financial expert, but pay attention. Like when you wake up every day, think about top five things I need to be looking at. Is it the month to month growth? Is it my revenue? Is it how much I'm burning every day? Pick two, three to five things and look at them almost every day.

That relate to your business so that you're at least getting used to looking at numbers and not having them, um, be a mystery to you. Even if you bring an expert, you still need to understand them because you need to make your decisions based on numbers. Um, and how can they reach me? Uh, they can reach me through LinkedIn.

I have also my website, marta hamer advisory.com. Um, yeah, and I'm reachable through LinkedIn. Uh, anytime anybody needs anything, please do contact me. 

Mehmet: Sure. Please do guys. Contact Moataz and you know, we are again, as Moataz mentioned, maybe I'm repeating myself a lot today. We are living in a lucky times because you don't need to go and learn everything because [01:02:00] in reality no one can, even me included Moataz.

Ah, me too. No one. Yeah, so, so this is why, you know, especially in startups. And guys, maybe you have seen it. This is why you have your team and then you have your advisory team, right? Absolutely. And this is where you know the expertise of someone like Moataz can come. You don't need to go and waste your time.

So you focus on what matters, but at the same time, you have this, you know, guiding mind, which tells you what to do from strategy and for your financials and for your investor readiness. So Moataz, thank you very much for being here with me today. Thank you. I'll make sure. So guys, don't look right and left.

So the link for MAs LinkedIn profile and his website, it'll be in the show notes if you're listening on your favorite podcasting app. If you're watching this, you'll be finding it in the YouTube description. And as I say, always. This is for the audience. Guys, thank you very much for listening or watching us today.

If you are here for [01:03:00] the first time, thank you for passing by. I hope you enjoyed it if you did. So, as I say, always give us a stand up, share it with your friends and colleagues. We're trying to build this learning community for business owners, startup founders, people in technology also as well, who are curious about, you know, this landscape.

And if you are one of the people who keeps coming again and again, thank you very, very much guys, like this year you put the show on steroids because I'm not able now to count which countries we are ranking in. So we are doing well this year and for the first time since I started this two years ago, we are now, I just checked the, and again 22nd of April.

So we were actually ranking in the top 200 in four countries at the same time. So never have seen this before. So this is cannot be happen without first. First my guest, but as you included, of course, thank you. And of course, the support of the audience. So thank you very much. It's an honor for me to be able, you know, at least in a [01:04:00] small scale, you know, give, uh, uh, back to, to the community.

And as I say, always stay tuned for any episode very soon. Thank you. Bye-bye.