Muslim Money Talk
Introducing the Muslim Money Talk Podcast, a place for all things Muslim and Money related.
Every week we'll be sitting down with Founders, leaders and industry experts from across multiple disciplines to discuss lessons learned, mistakes made and most importantly 'How they did it?'.
Brought to you by Kestrl: The Muslim Money App, software to help Muslims grow their wealth without compromise. Find out more here: https://kestrl.io/
Muslim Money Talk
The 7 Secrets of Succesfull Fundraising | Sokhiba Mukhitdinova - MMT Ep 32
Meet Sokhiba- super angel investor and one of our very own investors at Kestrl! she shares her ‘Secrets to a Successful Fundraise’, from hiring well to not giving up too much equity. A great episode for startups and investors alike!
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Show Notes:
00:00 - Opening
02:15 - Growing up in Kazakhstan
05:58 - Starting a Career in the UK
08:38 - Becoming an investor
12:06 - Syndicates and Tax incentives
14:33 - Is the UK still good for startups?
18:00 - Secret #1: Laser Focus
20:00 - Secret #2: Start a Side Hustle
21:45 - Secret #3: Get Smart Capital
23:40 - Secret #4: Bootstrap to Revenue
28:22 - Secret #5: Staying Lean
29:42 - Lessons from Theranos Scandal
30:55 - Crazy Term Sheets and Female Founders
34:54 - Secret #6 Hiring A Killer Team
37:40 - Is YC always worth it?
39:44 - Community Building in Fintech
44:30 - The 2 Chanel Bag Rule
47:24 - Building B2C vs B2B
49:13 - Angels vs VCs
51:48 - Secret #7 How Much Equity to Give?
53:37 - What Investors Look For In Founders
56:28 - Why Invest in Kestrl?
I saw a term sheet which said, like it was several years ago for female founder, that you will not get pregnant for next five years. And I'm like, really I said, the person who wrote this doesn't understand the psyche of a female founder Building a startup. Why are we building in the first place? We are building a better future for our children. We want a better retirement for our parents.
Speaker 3:Now, the title of this episode is the Seven Secrets to a Successful Fundraise. You had seven that you really wanted to share with us. Do you want to start with number one? In today's episode, I'm joined by Sakiba Mukeddin, one of the principal members of InsurTech Venture Capital, as well as a prolific angel investor. Right here, in.
Speaker 3:London. I first met Sakiba exactly a year ago through a chance encounter at an accelerator, where she actually decided to invest in us, so we're really excited to bring her on, for her to share her seven secrets to what makes a successful fundraiser. Without further ado, let's get to the show. I'm your host, areeb Siddiqui, and this is Muslim Money Talk. Before we begin, we actually noticed only about 10% of you are subscribed to the podcast. So if you like what you're listening to and you want to hear more from us and see more things Muslim and money related, then please consider subscribing and, of course, leaving this episode a like and share it with your friends. Leave us a comment or a review, because it really really does help us out and help more people to find us. Thank you. Now back to the show Sakiba. Assalamu alaikum, welcome to the show.
Speaker 1:Walaikum assalam and thank you for having me. I'm delighted to be here.
Speaker 3:You're, I think, our first shareholder, our first Kestrel shareholder, who's actually been a guest on this podcast, and we've had a lot of guests, so that means a lot. So thank you so much. It was very last minute, very last minute. Yeah, I think when you woke up this morning you didn't think you'd be on a podcast.
Speaker 1:No, but I knew I will be meeting one of my portfolio company founders.
Speaker 3:Yes, Well, thank you for doing us the honor and spending your time with us. There's a lot I want to ask you about, about your career, your background, how you ended up in VC, as well as, of course, the title of the episode the secrets for a successful fundraiser. But before all of that, was this what you wanted to do when you grew up? How did you find yourself in VC?
Speaker 1:I was always good with numbers and I was always good with money. I was counting money when I was 10 years old, I was able to count my father's salary and somehow allocate it. Like you know, like I was 10 years old and I would be able to count full salary and saying like, why don't we put it this way or why don't we spend it this way? So I kind of was always, as my father say, good with finances. Yeah.
Speaker 1:Yeah, so although I'm from, my parents are from music. My father is a music teacher and our ancestors were musicians. Really, I was like I'm fourth generation musician, so my great granddad was musician. My granddad was very famous musician. Wow. So, but I was always good with money, so my father was laughing that somebody needs to count the money we are earning.
Speaker 3:What was it like growing up in Kazakhstan?
Speaker 1:Well, I think I grew up during, I saw the transition from Kazakhstan being part of Soviet Union to becoming an independent country, and I saw this kind of transition.
Speaker 3:Wow, and what was the biggest change? Like, I saw this kind of transition, wow, and what was the biggest change? Did you see a sense of freedom coming about, so that people feel like they were reclaiming their identity?
Speaker 1:Yeah, but also it was like it was also a very difficult time because they kind of lost. There was a transition which was kind of you wake up tomorrow it's an independent country, but the currency change and everything was changed, so there was a lot of fear and anxiety and the job changes and the government changes, but I think our parents did their best to give us an education and to give us a happy childhood, as all our parents do. They do their best right.
Speaker 3:Is that what pushed you to seek a career in the UK?
Speaker 1:In my I always my. My parents always believe in education, so they wanted to give us the best education, so initially I started working in the bank in kazakhstan oh, no way okay without having a full-time degree.
Speaker 1:They had an apprentice program yeah where you join after school yeah so I passed that one because I was good with numbers and I passed their IQ test. So I joined in a very like the bottom of the career in the banking and then, after five or six years working in the bank, I wanted to, let's say, to upgrade. And then I studied in university, part-time or, let's say, open university, and then I always wanted to have this experience of studying abroad. So I saved up. My father was selling his car to afford my education, we had my uncle selling his ship to give money, to contribute money for me, so the entire family was contributing. And I remember there was a neighbor who came and she gave me a new towel. She said I don't have a money, but please, at least the entire community was just so happy that I will be going and studying abroad is it so?
Speaker 3:it was so uncommon at that time that everyone came together.
Speaker 1:It was common for, let's say, but it was very expensive. You can imagine the salaries at that time. So my father's salary was enough for Oyster Card in London. That's how correlation is.
Speaker 3:That must have been incredibly humbling for you to see all of these people friends, family, neighbors coming together just to send you away.
Speaker 1:Yeah.
Speaker 3:I can't imagine how that feels.
Speaker 1:Yeah, and my father's friends were trying to get together to buy me a plane ticket whoa so they, they were so like wanted to help his, their friends, so they were like friends.
Speaker 3:Getting together was it quite a culture clash coming to the uk, because, well, maybe not other parts of the UK but London in particular because I was joining a master degree, I was studying my MBA in in finance.
Speaker 1:The entire class was very international, so everyone was coming from different parts of the world. There were people from coming from Europe, from Africa, from India and also from, let's say, soviet Union countries. So, because we kind of, let's say, I joined in the university. It was slightly softer entry rather than just moving.
Speaker 3:Yeah, straight there. Which university was it?
Speaker 1:I did in London Metropolitan. Okay, the one we could afford.
Speaker 3:Something wrong with that. Yeah, there you go, but.
Speaker 1:I did my degree. I met some incredible friends with whom I'm still friends today amazing, amazing. And you decided to stay in banking after that in my case, I was, uh, one of the uh, I would say lucky ones that I got a graduate program. Okay, uh, in, in, uh in, let's say, in banking, yeah, and then I, I continued staying there was it hard for you.
Speaker 3:Was that always the plan that you wanted to not just study in the UK but then start earning in the UK?
Speaker 1:no, that was not an original plan. But then you know sometimes you need to follow the flow yeah, yeah.
Speaker 3:How did your family feel about that?
Speaker 1:my. Initially I thought that I will study and then come back, and then I thought I would work a few years and then come back.
Speaker 3:But then after three, four years I realized, like this is, I would like to stay yeah, but was that difficult for everyone back home being like, okay, she's, she's, you know, maybe they were thinking you'd come back? I don't know, it's different. I guess in like pakistani culture, like my background, um, there's like an expectation that one day you'll, you will come back. I don't know, it's different. I guess in like Pakistani culture, like my background, there's like an expectation that one day you'll return, you will come back. Yeah, you'll come back.
Speaker 1:And my father was saying that he see me being happy. So he say I would rather would like you to see on Skype and with shining eyes, rather bringing you back, and then I could see you unhappy and then I will feel bad that I was the reason for that unhappiness. So actually my family was slightly different. They were always supportive. Actually, in Kazakhstan, sending daughter alone to study abroad is a nonsense. Wow so my father was kind of always allowing us to make our choices and our mistakes.
Speaker 3:Did you have lots of brothers and sisters?
Speaker 1:I have a brother and sister, yeah, but they live in Kazakhstan, but they live in kazakhstan, okay.
Speaker 3:So that's a huge deal, big testament to your parents, to your father yeah particularly for allowing that. Um, and then you continued your career in banking. Yes, how did you move into venture capital?
Speaker 1:well, in my case, one of my classmates, who I'm still in touch with some of my classmates he was after MBA. He was building his own, let's say, startup. So it's back in 2016, 17, and then first round he was fundraising. He is from engineering, let's say, software developer background. He started receiving some investor questions which he didn't know how to respond, and so he reached out and when I see, I was like I understand the questions and I kind of know how to respond, but I need to speak with a couple of people and from events I was attending, I knew a couple of people who were angel investor, professional ones and there is even like the big names.
Speaker 1:So I reached out to one or two. So once I sent over the startup to me and I will speak with him, another one actually paid attention, had a call with me, explained how it works, and then he said okay, I will send you a link to an event which is tomorrow. You should go and you will see yourself what it is about. It will give you a bit more understanding and when I went to that first event, it was all I would say men in their good 60s really I was the youngest one and what field was the startup in that they were?
Speaker 3:were they in fintech?
Speaker 1:no, the startup was. I think they were tackling something related to health data Okay. So, and he was working for a startup and he was, if I'm not mistaken, like some head of development. Right.
Speaker 1:So they were like three co-founders one from health, one from development and then I went to this event with pitching and I felt so home, like this is mine. This is first time I'm listening and people are pitching. And I feel so home, like this is mine. This is first time I'm listening and people are pitching, and I feel so home. I came home and say I want to be part of that really. I.
Speaker 3:This is like I feel, like you know when you find your niche yeah that's how I felt but what were the questions that your friend couldn't answer, that he wanted to reach out to you? Were they all financial? Financial yes okay, like, okay. Tell me your cap table what your financial forecasts are forecast.
Speaker 1:It was related to forecast. They couldn't figure out, you know this kind of really technical financial questions. Yeah, and then from then on, at that time, I see clearly that some startups were better at pitching. However, what they were building was average, while some startups especially female founders they were too shy to pitch while they were building was average, while some startups especially female founders they were too shy to pitch while they were building very interesting thing. So I started after the event or during the coffee.
Speaker 1:I started basically a little bit of coaching them because I said, oh, if you do this, if you do this. So I started having friends and all these female founders and then, of course, course, I was also reading a lot of books and anything I could get hands on about angel investing. While I was not investing myself, I was mentoring female founders right. So free of charge, nothing attached. Then I started getting some PhD students building some really interesting things and I continue attending these angel events whilst you were working at the bank.
Speaker 1:Yes, yes, I worked well and then I was. I started doing angel investments okay and I think my first angel and ticket was in 2018 2018, gosh, and it's supposed to be non-stop still since then yes as an, but then also part of some syndicates as well. I was part of the syndicate and I'm still part of four syndicates today. Yeah.
Speaker 1:And I believe that if you want to become an angel investor, the first thing you do you join an angel syndicate, because there will be people who are doing this for 10, 15 years and even if you will be new to this, based on other people's knowledge and expertise, you will be feeling more comfortable doing angel tickets okay but it's I should be mentioning it's very high risk angel, angel investing, because you're coming in earlier yeah, it's. 90 percent of startups fail really so angel investing is a very high risk.
Speaker 1:It should not be like. That's why UK puts certain regulatory requirements.
Speaker 3:So that's why there are regulatory requirements that are there to protect. Yeah.
Speaker 1:To protect you guys as angels effectively or no, there is a lot of initiatives to support angel investing and let's say it's called CIS, CIS programs. Yes, right, support angel investing and let's say it's called cis, cis programs right, which are like tax incentives, as well as like, which is only in uk, like there is nowhere else in europe they have that does anything like that? Wonderful tax incentives and I think that was a backbone of uk being still number one in terms of it was incredible, like when we first started kestrel.
Speaker 3:We found out about the seis and then the eis tax breaks for people who don't know. If you have a startup and you can fit into it absolutely apply for those things because it gives incredible tax breaks to your angel investors and even in the event that your startup doesn't succeed, people can also claim some money back in some cases up to 50 percent for seis, in some cases up to 30% for EIS. So it's just like a no-brainer for an angel investor and really encourages an angel investor to invest into your startup. That's how we raised our first pre-seed round.
Speaker 1:Yeah, and I think that's why, when people say what's the secret behind the success of UK becoming this international hub for startups, like the money-wise wise, like you know how much money was raised in uk and let's say the next one is, let's say, paris or france or germany, like in 2023, like I didn't see the number for for 20, but 2023 uk was like really far behind, like 20 plus million billion while the germany and and France were in 10 billions.
Speaker 1:So there is a huge gap. Why it's? Because there is this incentive supporting angels to invest in startups.
Speaker 3:Do you think the UK is still a good place to found a startup?
Speaker 1:There is a big pool of talent. We have all these major universities. We're talking about Imperial, we're talking about Cambridge. We're talking about imperial. We're talking about cambridge.
Speaker 3:We're talking about oxford, which has these amazing facilities to research, especially if we're talking about specialized uh startups which are building anything to do with health, with, like something niche like climate, has a lot of people who are graduates from, let's say, imperial yeah, that's, very true yeah but even with the capital gains tax has gone up now in this country, I've had friends who were looking to exit their companies so they went to resettle in dubai or saudi or in some cases even america, just because it wasn't as lucrative anymore to be an exited founder in this country. Do you see that at all with your portfolio companies?
Speaker 1:I would be very honest. I don't have an exit yet Because I think, until I become full-time in this world, I was investing very safely. My tickets were small and I was still trying to figure out what I was doing. I think my pickup momentum was during COVID.
Speaker 3:So what's your advice to people who want to become angel investors? Because you've been very specific with the types of companies in your portfolio. Is it a case of invest in what you know?
Speaker 1:Yeah. So while I was still in the banking, I went to an investment seminar by Mary Buffett, for example, the daughter-in-law of Warren Buffett, robert Kiyosaki you name them Like the biggest investors. I was trying to learn about it and that's what I understood, because then you become a smart capital. But in my case, initially I didn't know that, so I just joined an angel syndicate. I was attending these events and then somebody said I could see clearly that you're too interested. Like you have a lot of passion, let me put some, let's say guidelines to make sure you don't burn your hands too, early.
Speaker 1:So the man was a super angel, as we call it, like he had massive portfolio, so he saw me being very good with numbers and cash flows so he would sometimes share some of these deals while he was, let's say, from business background and he would wanted my independent opinion so I would sit down and review the numbers of the startups he wanted to invest In return. He was coaching me like he was mentoring me in angel investing. So it was his idea. He said you should focus on fintech because you work in the bank, you know all the solutions you you are using. You can check out the prices of the solutions the bank is using from your it team and you will be like you will know what people are building.
Speaker 1:So, he was saying FinTech, but then I was also mentoring a lot of female founders, right. So I wanted that my world investment will make a difference. And he was saying, okay, but it should be 50 50 like. So impact investment and fintech should be in equal, like if one of each. Okay, yeah, but in my case my impact went into climate climate.
Speaker 3:So that's why you have a lot of climate tech type companies in your portfolio.
Speaker 1:Yeah, also, I'm still having a lot of female founders, diverse founders, I would say them.
Speaker 3:Are we your first Islamic fintech? Yes, there we go Now. The title of this episode is the Seven Secrets to a Successful Fundraise. You had seven that you were really wanting to share with us. Do you want to start with number one?
Speaker 1:Yes, so I, everywhere I go. I'm a member of several syndicates. I'm attending a lot of well. I transitioned now to full-time being a VC and I'm still, when I meet these people who did super big exits, successful like I was attending an event by an angel investor who invested in seven unicorns Wow, like we're talking about big An angel.
Speaker 1:An angel ticket, seven unicorns and I said what is one thing you're looking about? Big An angel, an angel ticket, seven unicorns. And I said what is one thing you're looking in? Startup Founder? He said laser focus. Okay, he was saying I'm only investing in founders who are laser focused on their business, on their progress, on their traction. If I see and he said, of course he receives a lot of cold and everyone wants to get his ticket he said, if I see that they, they do have a several businesses or, like you know, he was saying that I will not invest in them. So, and he has, if I'm not mistaken, he was sharing that in the term, in the term sheet they have, that the founder should be focused 80 percent of his time on this particular startup 80 percent of his profession or his or her professional time yeah and what would the rest be?
Speaker 1:well, but at least at least 80, at least 80.
Speaker 3:Okay, so basically you're looking for someone who's full-time or close to full-time yeah on their startup as opposed to building something alongside yes they're doing and the I guess the focus there is if this is your only source of income, if you are almost dying to make this work.
Speaker 1:Yeah, also, like, of course, we understand that actually building a startup from scratch is very, very difficult, especially if you have a family. Yeah.
Speaker 1:Right, like it's difficult if the family is there. So before and this is my second secret before actually going to your startup full time, you should do it as a side hustle, without registering company, without like you know, but you should spend your weekends, you should start reading about it. Maybe you're not fully building it, but you are reading about building the niche you are building before you fully commit to your startup. And the second thing is you should have at least six to twelve months personal savings before you start anything so that from an investor perspective, would you expect someone to be doing it as a side hustle before?
Speaker 3:is that like a plus as an investor that someone's been doing as a side hustle? They have six to twelve month savings and now they've decided to take the next step. Because with us, when we started with our pre-seed round, I was working at pwc and consulting my co-founder dying. We just graduated from the mpa so he was full-time on it. We needed that pre-seed round to start going full-time but I was still kind of the 80 20 sorry, pwc 80 20. I was still 80 focused on kestrel, yeah. But so even if it is your side hustle, you want to know that you're obsessed with your side hustle.
Speaker 1:Yeah, and of course that's the most difficult part, that's get that early money. But again there is something called FFF round which is like friends, family and fools. So the initial support will come from your direct network, right Okay? The initial support will come from your direct network, right, okay, and the people who and that's why I'm saying like you should also. That's one of the okay. So this is actually was my last secret, but let's say, let's put it now you should seek for smart capital.
Speaker 3:What do you mean by smart capital?
Speaker 1:It's usually, let's say, people who are in your network, possibly work network, who have, let's say, 10,000, 15,000 to invest. But they know your capacities, they know your work. Okay, they know your capabilities.
Speaker 3:They know you as an individual.
Speaker 1:And they know that you will get it. You will figure it out.
Speaker 3:Thank you for listening to Muslim Money Talk. If you like what you've heard so far, you might be interested in checking out what we do at Kestrel, the Muslim money app. Kestrel is a service that helps Muslims who want to grow their wealth without having to compromise, whether it's on their belief or user experience or price. I founded Kestrel because of how fed up I was at how poor Islamic financial services were in this country. Often people didn't use them because of how bad the user experience or customer service and indeed, how high in price they were. So Kestrel was the answer to that. If you download the Kestrel app today, it can help you by creating a budgeting plan. Plug in whatever bank account you have and it will create an auto budget just for you. You can then tell us what goals you're saving for and we'll save towards them automatically into pots and then, crucially, linked you towards sharia compliant investment and savings products as well. So download kestrel today and try it out for yourself. Now back to the podcast.
Speaker 1:That's it's quite scary, I think, because we did a friends and family round and it's kind of like okay if you were to take vc money and it didn't work out, it's okay they're professionals yeah but if you take your friends and your families and it doesn't work out, then you feel like you've let all these people down and it's your own personal um reputation which is on the line there yeah so it can be really nerve-wracking in that way and that's why I think again uh, the secret number three is bootstrapping, and as far as you can get so you have some traction, because once you get to, let's say, first, two paying customers, then that's when the angel investors come so try and get to revenue trying to get to this as much as you can like mvp to revenue, even if you have two customers paying. That's where the angel investments come, and with angel investors, of course, you will be initially targeting individuals.
Speaker 3:You should target individuals who understand what you're building subject matter experts yeah, subject matter experts who do care, understand what you're building.
Speaker 1:Subject matter experts yeah, subject matter experts who do care about what you're building. And also, you should target angel syndicates.
Speaker 3:Instead of pitching one by one, you should target angel syndicates okay, so just to recap what we talked about so far Number one maintain laser focus. Number two begin as a side hustle before going full-time on it. Number three seek out smart capital people within your network. Number four bootstrap. And bootstrap until you can start generating revenue.
Speaker 1:And then again we are back to UK. Uk has a wonderful program called UK Innovate yeah, and they have different programs for different startups, which allows you to get some grants depending on the startup. Let's say, major causes like cancer treatments, they could get a bigger grant because they require a bit more money to do development and research. Yeah, smart grants through.
Speaker 3:UK Innovate and that's a really interesting form of, I guess, fundraising.
Speaker 1:But you're raising money without giving away equity or giving away parts of your business. Yeah, and another secret is actually applying for startup pitch competitions.
Speaker 3:Yeah, I mean, anyone who follows me on LinkedIn has probably seen me holding a few giant checks. But that's good in a couple of ways, because it is equity-free. Money Also gives you visibility. Visibility. But that's good in a couple of ways because it is equity free. Money also gives you visibility. Visibility, that's the other thing. So with us on the b2b side of our business, we build a lot of software for major islamic banks. That was amazing b2b visibility for us.
Speaker 1:We did that in pakistan and saudi here in the uk because people who are attending this start, let's say the judges who are reviewing the pitches. They are not there because they have nothing else to do, but they are seeking for the next big thing. And then also people who are sitting in the audience. You never know, like how we met, for example, you never know who is sitting in the audience. Maybe there is an innovator, like head of innovation in a major bank.
Speaker 3:We should probably share the story of how we met actually. So Kestrel was part of barclays rise accelerator and we used to work from the barclays rise office here in shoreditch, uh, in london, in east london, and we just held a board meeting almost exactly a year ago and it was us and one of the members of our one of our board advisors, salim chowdhury, who I think was episode number three or four on the podcast, I tell, like he was one of our other shareholders. He'd been on the podcast before, but salim was there and he was really giving us a hard time about like we need to be driving for growth at all costs. We need to be getting more and more revenue, let's get some more banks, let's do this and this and this, and we were sat downstairs in the shared workspace and you happened to be sat on the table with us overhearing our conversation no, I didn't overhear it, but, but I think I saw that there was a big discussion about the bank and fintech.
Speaker 1:So I realized you were a fintech while I was sitting, let's say, on the other side. And then I went for coffee and you came to have a water.
Speaker 3:Yes, and then?
Speaker 1:I say where do you guys have cups here?
Speaker 3:Yes.
Speaker 1:Because I was not part of Barclay Ross.
Speaker 3:Very good memory. Yeah, I'd forgotten about that.
Speaker 1:And then you said, oh, here it is, and this is a coffee and this is how machine works. And then what was, I asked? I said what are you building?
Speaker 3:Yes, what am I building? And then I had it my 30 second Kestrel elevator pitch, where Kestrel Muslim money app helping Muslims grow their wealth without compromise.
Speaker 1:We have a consumer app in the uk, but we also do b2b software services for major islamic banks, and I think.
Speaker 3:And then the rest is history. There we go, but I remember one of the first things that you, that you said to me, though, the one. The first thing was you need to be looking at smart capital. That was one of the first big pieces of advice that you gave um. The second thing which you, you spoke to us about was how do we um stay as lean as possible?
Speaker 1:yeah, and this is so how we have. How many secrets?
Speaker 3:now four, right so far we have five. So just to recap, be laser focused. Start as a side hustle. Smart capital is number three. Number four bootstrap until your revenue generation and grants yeah yeah, number five smart grants and competitions, or is that?
Speaker 1:oh, it was part of the. That's part four. Okay, we'll keep that part four. Now we're on five critical thing and this is, like you know, one of the founders. I know that there is not much money available, so stay lean as much as possible because you can. The further you are with your bootstrapping, ideally if if you get to revenue, the higher is your valuation and you will be more attractive for investors and they will also check your time from establishing to get to first revenue.
Speaker 3:So, in a world where people are writing checks for anyone who's doing a generative AI type startup and there's a lot of guess easy money going in in Silicon Valley or in other parts of the world, is it still easy or viable to stay lean and stay bootstrapping in that way, or how do you? I don't know.
Speaker 1:If you have a good product and you have VCs approaching you, it can be quite hard to say no to those people you should select your vcs okay you should, for, for example, one of the vcs should be segment focus, so in this case it should be a fintech focus vc, because it gives a comfort to vcs which are generalists that if there is a, if there is a specific VC, specialized VC, it gives them a comfort that maybe we don't understand what they're building, but I think these guys are specialists. And to anyone who didn't read the book called Bad Blood, you should read about the book called Bad Blood by John Carreo about Theranos.
Speaker 3:Oh yes, Elizabeth Holmes.
Speaker 1:Elizabeth Holmes and I'm not suggesting to do the similar thing, but for all of my startup founders, I think it's a bigger street about how to build a board about fundraising. Unfortunately, there's a mistake there. She received a lot of money from family offices, so we were doing it as part of our cap table exercise at once. She didn't have any health tech or biotech vcs yeah who are specialist investing. So all of her money was most of her money was from family offices, that's crazy that she was able to.
Speaker 3:How much did she raise in the end? I think it was around six or seven hundred six or seven hundred million, including people like bill gates, yeah, who came in and invested. Yeah and no one more dark and yeah, and no one looked under the hood to say that this technology is impossible and this doesn't make any sense yeah, because it was.
Speaker 1:It will be able like if, if there is a health tech vc, yeah, who is specialist. So I'm not suggesting, but one of the ways is that if you have a lot of VCs approaching you, you should select a VC which does follow on for your next fundraising, which is a specialist. And then, for example, the last thing, which is a bit on the spiritual part, when you are selecting your investor, you should listen how do you feel with them? Because you are selecting a partner for next 10 years.
Speaker 3:What are some of the worst examples you've seen where someone has not assessed their VCs properly?
Speaker 1:I have seen many things and unfortunately I have seen a girl like female founders is kind of my. A lot of people come to me and I never say no. I saw her cap table. I say you are an investable Because when she started building it was so exciting, it was very beautiful what she was building and a big, if I'm not mistaken, family office give her a big check yeah, for 50% of her cap table. This is we are talking about, first time founders.
Speaker 3:So she immediately lost control.
Speaker 1:Exactly and basically there was not much left for any like she's building. But there is not much left. And now who has the power? This big family office? So I always suggest stay lean, do not over fundraise. Like do you really need this much? Maybe you need twice less. If you will be lean and creative. There are so many creative ways of building it out and I know it's very big to fundraise from VCs and yeah, but you don't have to. There are so many businesses which like bootstrap to revenue and once you got to revenue technically, but there will be a moment and like there is like a gold opportunity when you say you receive a big contract and you know for that expansion, like your pot will be too small to cook this big fish and that's the momentum when you need to actually fundraise I mean this is very timely, because with our conversation over coffee, you basically did the same thing, you.
Speaker 3:We told you about some of our plans and you're like do you really need to do this? You really need this?
Speaker 1:and that's like I'm honest and like, for example, one of the worst cases. I saw a term sheet which said, like it was several years ago for female founder, that you will not get pregnant for next five years. And I'm like really, I said, the person who wrote this doesn't understand the psyche of a female founder.
Speaker 3:What would happen if she got pregnant? They'd claw the whiny back or she'd lose the company.
Speaker 1:But I was like you should not accept this, because I mean building a startup. Why are we building in the first? A better future for our children. We want a better retirement for our parents. There is a big why inside of us which drives us through startup. Building is very lonely journey and it's very difficult. And if there is no big why which drives you forward, yeah, so you should. You should see how a single mothers work. Sometimes they do mid nights and six o'clock because there is you know when the kids are asleep.
Speaker 1:Yeah, so, yeah. So, you know, and I was saying like the person who wrote this, but then I had cases when people turned down the term sheets if they were too aggressive terms murder yeah so and I said you did the right thing and then, interestingly, like recently, the founder turned down the term sheet from big name because they thought something is off. He said I don't know, but I feel I should not accept it and I suggested him to go with a gut.
Speaker 3:Really that gut feeling that still counts. It's crazy because you can be dealing with huge amounts of money here and something just doesn't feel right.
Speaker 1:Yeah, and you should follow your intuition, because your intuition will always know what's best for you.
Speaker 3:Yeah, life-changing decisions yeah, exactly, so that was number five stay lean as long as you can, and it's okay to say no to money yeah okay, fantastic number six number six again, especially at early days.
Speaker 1:We are talking about a team. So at the pre-seed level you will be it's all about the founding team, okay, and even at the seed stage, even at the series a, it's all about the team. So I know you, it's difficult to find a team when you have, when you're limited in resources. But then you should learn to build that vision, like what of what you're building, how it will impact society. Right Like eventually we want to leave a legacy that what we are building somehow will improve society, right Like somehow we'll make it a better place. And finding these A players is very, very difficult. And I always say one of the most important decisions is recruiting and unfortunately, founders don't spend enough time with recruiting. Difficult. And I always say one of the most important decisions is recruiting and unfortunately founders don't spend enough time with recruiting. Because if you recruit well at the founding level, your startup will go ahead what should founders look for?
Speaker 3:in when you say recruiting, do you mean looking for a co-founder or do you mean looking for, like, a head of business development?
Speaker 1:It depends. So let's say if you're a single founder and you have your specialty, you can only be good at, let's say, one or two things. Right? So you clearly see that building this tech through consultancy will be too expensive. Then sometimes I suggest joining an accelerator right, because at accelerator maybe there is somebody. If you are building, let's say, in fintech, then try to find a fintech accelerator. If you are building something, if I'm not mistaken there is a YC co-founding meetup or something.
Speaker 3:There is, yeah, yc Startup School. Yeah, yeah, it's online. I've had, I know, a few friends who've met their co-founders through that.
Speaker 1:Yeah, it's online. I know a few friends who've met their co-founders through that, yeah, and I know some people who met through that. Sometimes a possibly co-founder will be sitting in another accelerator trying to.
Speaker 3:That's why I always suggest joining an accelerator. Yeah, no. For sure we went through Techstars and I think the biggest thing that we got out of Techstars London was just immediately. We were an environment surrounded by other high-powered, highly competitive founders. We, you know, we were the only fintech there, but it really kept us on our toes like okay, someone got a time sheet. Okay, let's try and get a time sheet.
Speaker 1:The vibe of the tribe yeah yeah, like the vibe of the tribe, like because, um, it's a vibration that everybody is kind of you're trying to, because everybody's building and you're kind of trying to not to miss out. Yeah. Yeah, so it's. That's why I suggest to join Accelerator.
Speaker 3:Definitely.
Speaker 1:But sometimes I suggest not to join if I see clearly that they are too far on their journey. So it depends on where you are.
Speaker 3:How do you feel about Y Combinator in that case? Because I've got friends who are looking at yc. Some of them are a bit far on their journey. Some of them have hit 1 million in recurring revenue and when they speak to accelerators like yc who have big brand names, they say you should still come and join, we can still help accelerate you. The brand itself is so valuable. It's going to help you later on. How do you feel about that?
Speaker 1:I guess it depends on what you're building right and whether, especially if you're expanding if I guess all the startups have in mind expansion to us, because that's where the exits are right, that's where the big rounds are, because unfortunately in europe one of the problems is growth stage money like the Series B and onwards usually comes from Silicon Valley or, let's say, us VCs consider joining a YCombinator because, again, the power of their network and the investors and the support they could get from the founder community there because some of the founders are already built a unicorn, so you can.
Speaker 1:I guess there is all. It's all about community and that's one of my that's my last secret secret is, whatever you are building, you should have these early customers. The earlier you start having the list of customers, early adopters community who you can, let's say, test case your product so they will know they are. It can be your friends, it can be university friends, it can be a group from the gym. However big is your community related to what you're building? I'm sure you can relate to that. You have one of the biggest communities for fintech. It's kind of you connect with them. So, let's say, you are starting with beta version, but you should somehow test it.
Speaker 3:No, I think in Islamic fintech in particular, we've seen a lot of people make mistakes on that side in identifying who their real idea, their real early adopter market is. So, for example, we saw a digital bank launch, I think four or five years ago when we were starting up, and they just thought okay, we're going to go down to every mosque in the country and we're going to present them with this card and people are just going to eat it up, not realizing that they were almost the hardest market to capture because they'd been burned before by other banks and they needed a lot of education to bridge that marketing gap.
Speaker 1:The customers were not ready yet.
Speaker 3:Yeah, they weren't ready yet, Whereas if they had gone to I don't know, I'm part of a big whatsapp group called, uh, the london muslim tech pros group. Shout out to anyone listening. Um, and part of the reason we started this podcast is our early adopters. The people who really, really champion us are likely to be the ones listening and tuning in and checking out that long-form content there. So I couldn't agree with you more. I think a lot of startups fail by not actually knowing who their first customers truly are.
Speaker 1:Yeah, and I agree with you because. So, for example, like whatever you're building, you should have at least 200 people yeah who would be testing better testing, because if you build and then you start building community, it will be already too late, and I have seen that a lot. Okay, so what happened? There was a case of female founder. She was building a fintech education. Yeah, in some countries it requires license.
Speaker 1:So, instead of starting like, investment topic is still a heavily regulated topic because you don't suggest people investing unless they have, like you know, even with angel investing, there is a lot of clauses and regulatory, so but I was like the problem was she was she spent a lot of time I think she spent three years trying to get a license and a lot of money on the specialist consultants who are this kind of banking lawyers to get a license.
Speaker 3:The time she got a license she had no community because she spent all of her time just in the legalities.
Speaker 1:Yeah, trying to get that and gosh so she got it and now she needs to build up that community. Well, it should have been the other way around.
Speaker 3:The other way around.
Speaker 1:So you start with teaching people the basics. Uh, like you know, whatever is without regulatory approval yeah having that community, being honest with them, that you know we don't have a license, blah, blah.
Speaker 3:And then, while when you have a community of, let's say, 50 000 or 10 000 people, then you start applying yeah to provide them some sort of financing when I think about um, community building and fintech, and the people who did it best probably the ogs were monzo, yeah, when they were coming about right, because they were just thinking, okay, we could go down the long, the longest route possible and take two years or more to get a whole banking license and spend millions of pounds to do it, or we could try and get the quickest route to market possible, and now everyone does it when they want to launch a digital bank, which which is they use prepaid cards or e-wallets. But Monzo were the first ones to do that, thinking let's just get cards out in people's hands. Before then it had really only been used for children At that point, just to help them spend and save. But Monzo were like let's get cards in people's hands, get a beta app out on Tesla.
Speaker 3:And then you see all these orange cards with Monzo and cards and people started getting checking it out, like the real product-led growth that that was the growth loop that they created is that people saw the card and they gave them an experience to talk about and to share and say like, listen, I've got this app, it's giving me this cool card and it's doing stuff that no other bank that is out there right now is doing. I can split my payments, I can put stuff into saving spots, I can send money through like a whatsapp link or something to someone so it's seasonality, so fundraising has seasonality.
Speaker 1:So when you're building your startup and that's why I say, do not rush to establish a company, do not rush to leave your job, because fundraising has seasons. Fundraising has like tough times. Last year, let's say 2023, 2024 was really tough to fundraise.
Speaker 3:Okay, the valuations were lower, like, and it was difficult because people were more conservative yeah, I mean, I think, where we've been in a high interest environment for the longest time yeah it's not been as beneficial for vcs and investors in general to take risks. I've seen a trend and sorry, we put a call out for questions for you, and this is one of the questions I'm jumping in now.
Speaker 3:There's been a trend that some people have spotted and other people have talked about, that in this high-interest environment, people are going for less risky type businesses, B2B, like those who are servicing other businesses, as opposed to direct to consumer let me, let me put one step sure behind right.
Speaker 1:So anyone who wants to become an angel investor, there is a secret number two. So, firstly, invest in what you know and what you understand in in sector you have worked at least 10 years so you have this kind of niche expertise. Because what is smart capital? What angel investor does apart from capital helping you to fundraise and get ready for your next round, helping you to, let's say, put structure in the house. Helping you to open the doors to clients. Let's say, if the person is smart, capital, has a lot of network in the area of what you're building, then the good angel will be also helping you to get this contract. The early pilots or, like you know, opening doors, also help you to with recruiting relevant experts in whatever field you're building.
Speaker 1:The second thing I wanted to mention is so invest in what you know. The thing and this is what I learned from the super angel he said and that's why my name become a Chanel bags. He said what is your most expensive item you spend on yourself? Very simple Chanel bag. He said maximum two Chanel bags. So your investment ticket should be apart from your house and the car let's say, for example, a holiday.
Speaker 1:So how much you spend on holiday? It should be maximum two holidays. And he was saying, let's say you lose your bag, and he said you will cry for two years or for two weeks, sorry, but you will not die because of that, because you know. So I suggest because it's very high risk. Uh, it's called alternative investments. It should be only out of all money available for you to invest let's say you should not invest all savings into this out of all the money available, 90 or let's say 90 percent should be in the safe areas investment savings, savings bonds and only 5% to 10% of your total capital should be allocated to startups, and even that one you should do with a good care.
Speaker 1:But if you are an expert, you know the trends.
Speaker 3:Yeah. So it's basically okay look, look, divide your capital, reserve 10 of it for alternatives, in this case startups, but even then, focus on what you know in your industry in your case, it was fintech and banking but you also reserved a little bit for stuff that you really wanted to focus on female founders, climate yes, and so that's why my and my tech, my capital was small, right because I didn't have much to to invest, and that's why my capital was small.
Speaker 1:right, because I didn't have much to invest, and that's why one of the secrets to become an angel investor is joining syndicate. So, because you can.
Speaker 3:You're moving with other people With other people and you can gain their expertise in that way. Okay, fantastic. So back to this question from one of our avid listeners Is it still possible to do a successful fundraise for a B2C?
Speaker 1:It depends on what you are building and again, let's say you are building some sort of consumer goods. First and foremost is what is called distribution strategy. It takes a lot of money on marketing to build it, let's say, from scratch, b2b, b2c product, because you need to spend a lot on marketing, on content creation and yeah it's.
Speaker 1:it takes a lot of time, but if you build it correctly if let's say b2b2c, so the end consumer is normal person yeah, but you built it through distribution. There is someone who has that community. Let's say, gym, you're selling a item for gym and you have this big contract with one of the big names for gyms and they have a lot and they will put it on all the gyms or all yoga centers. That is a nice strategy yeah, for sure.
Speaker 1:Right, you get to direct consumer, but you're not selling it one by one, you're so.
Speaker 3:So with b2c as an angel investor, the main thing you're looking at is your distribution channel.
Speaker 1:That's your main differentiator distribution channel, what they're building, and I think, yeah, distribution channel. And second thing is unit economics yes what are the margins? Because I have seen some things it was like really like person was paying eight euros to buy and, let's say, to final product, and she was selling for 40. I was like I love the margins.
Speaker 3:Wow, yeah, I think that's where a lot of fintechs, especially digital banks, fail. The unit economics never work and a lot of them say, well, we're just going to keep on fundraising, fundraising. You can't really fundraise yourself out of that hole anymore, especially in today's environment. Okay, so that was question number one. Number two what are the pros and cons of raising from a VC versus from angels, and would you recommend one over the other?
Speaker 1:I would say depends on stage. So initial the proceed is most likely most likely like. It's interesting that angel investor usually invest in the locals like there is a big success case. And I have so much respect for man. Uh, his name is peter crowley. He recently passed away. May he rest in peace. He was. He built a cambridge um angel syndicate related in Cambridge yeah. And he was investing only in Cambridge.
Speaker 3:Okay, so Did he create the Cambridge Angel Exactly? Oh, no way. Yeah, so Did he pass away recently?
Speaker 1:Yes, he passed away from stage four cancer and. I have so much respect for him because reading his book, one of was it's called Invested Investor, was one of first books I read on angel investing. Really. Yeah, so he was investing locally. He was investing and of course, his contribution to UK was major, but he invested only in local businesses. So your first round will come from local networks, local people. Yes.
Speaker 1:People who understand what you're building local syndicates. If you are part of university, possibly your university has a little angel network. So for the first pre-seed round it's usually angels who take the risk. And once you get to seed round, sometimes there are angels who are slightly more conservative. They would like to see you a bit more growing. Yeah.
Speaker 1:But the earlier you start talking with angels the better. Just for feedback. You don't ask for money. You say can you give me an opinion on how much is the valuation, what I'm building? Blah, blah, blah. And then you start building relationships. So certain angels are a bit late angels, as we call them. They are not professionally, they are not doing it full time. It takes time for them to make that decision. So for seed round it's usually a mix of both. However, now the VCs seeing this trend, there are certain VCs who are pre-seed VCs, so they actually enter at CIS stage.
Speaker 3:Okay, okay. So sometimes, yeah, there's SCIS specific VCs that are out there these days. Yeah, yeah, yeah, you just want to pick up the full, but I think mix of both.
Speaker 1:So you should select a VC who knows what you're building, who is supportive, what value they could add, and then, if they are a sector specialist, they might help you to build your product or, let's say, to find you what you're building, yeah, something like that.
Speaker 3:Is there a rule of thumb for how much equity you should give up each round? Because I've heard 10%, I've heard 20%, I've heard some people say even 30%, other people just saying whatever you can get.
Speaker 1:No, there is, of course. There is some certain statistics, because otherwise you will have, let's say, at the beginning, at pre-seed, it's usually 15%, 15 to 20, because that's your earliest days and that's your biggest supporters, that's your champions who believe in the team. The next fundraiser, let's say seed round, should be around 10, 15%. Series A, because by the time you exit, which is series B, they should be still.
Speaker 3:Enough for it to make it worth you playing the game.
Speaker 1:And also there is me, coming from VC, our InsurTech New York. We are specialist VC, we invest in InsurTech startups and that's what we do and we also help them to build the product, to fine tune the product, to get capacity. But because we are specialists, but sometimes I decline because cap table is non-investable, because they already lost a lot of money.
Speaker 3:So what would be an uninvestable cap table?
Speaker 1:The one I told you, for example when she's 50% gone. There is not much, so at seed stage it should be still a good 60. Like at seed stage. Of course the more founder has the better, but of course everyone understand. So let's say 10, 15, 15 to 20% at pre-seed, 10, 15% at seed. So when you reach a seed easy, they should be still good. 50 plus percent left.
Speaker 3:Got it, got it Okay. And another question we got in what kind of characteristics from founders does an investor really look at? What's the most important characteristics that you look at from a founder, as opposed to from the company themselves? Is there something that because often in those early days you're really just judging the founder you know off of how they act maybe it's their career, their CVs, what university they went to Is there something you look for specifically?
Speaker 1:It depends on the VC. It actually depends on angel investor you're talking in, and that's why I become an angel investor to invest in people just like myself.
Speaker 3:So that's true. People look for people like themselves.
Speaker 1:Yeah, so, for example, I'm from Asian background, women diverse and I support most of my portfolio companies are diverse immigrant founders or, let's say, from different backgrounds, because I could relate to them more and I think one of the characteristics so, firstly, people invest in people like themselves and they try and or they have a personal story why they support particular yeah.
Speaker 1:Yeah, so there is funds which are specific to immigrant founders. There are funds which are specific to female founders. There are funds which I say we only want the PhD are funds which are specific to female founders. There are funds which I say we only want the phds which are scientific. They're you know. So there are funds for different founders, but I think uh again focused. Another secret is when you see uh like for me it was interesting how fast was the pitch deck? How fast oh, how was the pitch?
Speaker 3:how quickly the pitch, how fast the pitch went how fast I received the pitch oh really.
Speaker 1:So I would like I would go to this event and they will try to pitch me and I would what I say send me your pitch deck, right?
Speaker 3:yeah, and it depends on how fast was so ideally you want it as soon as possible always in a day.
Speaker 1:Okay, but if someone takes like a week, two weeks, three, weeks, yeah, and then you say they are not ready to fundraise yet.
Speaker 3:Yeah, because they obviously started putting it together. Yeah, yeah.
Speaker 1:Because? And a similar thing with founders submitting their let's say, for the existing investors reporting. Good founders have good organizational skills. They will be, even though there is a. Of course, everyone understand that in startups there's many things going around. You should have this kind of discipline, will be the word yes, yeah to send this kind of investor updates at least once in a quarter. It's a good discipline for founder because the moment you get into bigger rounds and bigger VCs, you will have to have that kind of reports. For sure.
Speaker 1:But the earlier you start the discipline and keeping your housekeeping let's say, all the documents are very well archived. Another like when I see the data room, I could see clearly how organized the founder is. I might regret asking this question why did you invest into us? I relived in what you're building because, again, I, as I told you, you invest in what you know. So I knew the fintech, I had a friends who did islamic banking. So before decision, yeah, I, I didn't go alone, I went with Syndicate, if you remember.
Speaker 1:We did with Syndicate, so they were all of us, starseed Angels.
Speaker 3:Shout out to Starseed Angels yeah.
Speaker 1:And to my very good friend Luca who is a founder of Starseed Angels. All of us were from fintech, from finance.
Speaker 3:Yes.
Speaker 1:And we believed in what you're building. We like the team, we like the traction, we like the progress you are making, and for me it was also personal Like me, let's say, growing up from Muslim family. I thought it combines, and most of my investments do. They combine both.
Speaker 3:The personal and the professional.
Speaker 1:Yeah, it's basically. It's a fintech or climate with heavy impact element, Because I want to invest something which will actually change society into a better place.
Speaker 3:Well, maybe you can bring us to Kazakhstan.
Speaker 1:One day, inshallah.
Speaker 3:Fantastic. We're pretty much out of time now.
Speaker 1:And one more thing about the founder characteristic yeah, be true to yourself. Okay, because I know there is some stereotypes of how the founder should look like and the females also trying to look like more like founder, like you know, like.
Speaker 3:I guess you should be true to yourself you mean like wearing like a steve jobs turleneck?
Speaker 1:Yeah, because that's the stereotype, Like the thing that if I will look like a founder, I will fundraise faster, whatever it takes right. Yeah. But you should be true to yourself and true to your values and authentic, because that could be felt by investor. And that's a very important thing, because if there is no trust, there is no business.
Speaker 3:That's a fantastic point to end on.
Speaker 1:Yeah.
Speaker 3:Sakiva, thank you so much for your time.
Speaker 1:Thank you for having me.
Speaker 3:We'll have to have you back soon.
Speaker 1:Yeah, thank you, assalamualaikum, assalamualaikum.
Speaker 3:Thank you for listening to the Muslim Money Talk podcast. If you like what you heard, then please subscribe to Muslim Money Talk. Wherever you might have been listening to this, give us a like and share it with someone who you think might be interested. It really, really helps us out. Thank you, as-salamu alaykum, and see you next time.