EP02 - Investing Beyond Profits: Mohammed Al Rasbi's Perspective

EP02 - Investing Beyond Profits: Mohammed Al Rasbi's Perspective

Picture a world where investment decisions are driven not just by money but by a deep commitment to founders and their visions. That's the world Mohammed Al Rasbi, founder and CEO of R&D Ventures and Labs, is creating. With two decades of investment experience under his belt, Mohammed has refined his approach towards startups, one that values long-term commitment and potential paths over immediate financial return. As a managing director at the Oman Technology Fund, he's witnessed the lifecycle of startups from pre-seed to growth, providing him unique insights that he generously shares in our conversation.

With top tips for first-time founders, Mohammed simplifies the daunting world of raising capital, stressing the significance of coachability, adaptability, and a continuous willingness to learn. He brings to spotlight the importance of cultivating a supportive community behind a venture and reveals how certain factors like time-bound social programs can curb a founder's risk-taking prowess. As an added bonus, he gives a sneak peek into his plans for the upcoming Web Summit and his thrill about investor reverse pitches. Brace yourself for a wealth of knowledge, actionable insights, and a fresh perspective on the startup ecosystem as we journey through Mohammed's exciting career.

Connect to Mohammed on linkedin: https://www.linkedin.com/in/mohammed-alrasbi/

Transcript

Stewart Noakes: 0:46

Alright, and welcome to the second edition of the InvestorCircle interviews. Wonderful to have you here, and you know this is Mohammed. We met first in Web Summit. I can't believe that November was such a long time ago. Already You're here from R&D, ventures and Labs, so please tell us who you are, tell us about the thesis of what you're working on and let's go.

Mohammed Al Rasbi: 1:06

So my name is Mohammed Al Rasbi, founder and CEO of R&D Ventures and Labs. It's a company that's been around for about 20 years and we've been going through so many different pivots over the years. My last tent was a managing director at Oman Technology Fund, where we invested in startups from pre-seed-old to growth. Obviously, the terminology has changed from the geography and the time what happened? But the idea is we're certainly agnostic and following.

Mohammed Al Rasbi: 1:35

Look at basically what it's been doing in the past six years. The idea is to continue doing that and investing in startups, ideally in many regions, because we've gotten very good deal flow through that and I've been able to work with a lot of founders from the space or this geography and sector agnostic, and the rationale behind that is that I want to increase the top of the funnel and I concentrate more on the founders than the actual ideas that they work on. So because of that, I'm looking at long term instead of short term. So that's, in a very short description of what I'm trying to do over the next, hopefully, I know you've said to me before you like to think of founders like real people.

Stewart Noakes: 2:18

You treat them with a great deal of respect. How do you frame that nowadays with the new venture?

Mohammed Al Rasbi: 2:26

In a way I'm based. Hopefully most of them think of me as a codifier of startups. The idea behind it is being able to guide them, because running a startup is very, very painful and from everything from trying to launch a product, trying to figure out the space you're in being in a very let's say, in a month itself is a very small market, so trying to figure out what to do. I have to expand or grow outside the country. But also when I work with founders, the idea behind it is like I'm actually not interested in their first venture, I'm interested in the second venture, I'm interested in their third. So I'm always looking at would I be willing to work with this person over in the next 10, 20 years? Then I would like to engage with them In regards to if an investment is made or not, because there are some that sometimes I actually work with but I have not invested in them. But I like the fact that what they're doing.

Mohammed Al Rasbi: 3:23

I think money should not be the, let's say, the reason you engage with someone. It could be for many other reasons and I think basically I don't know if it's healthy or not, but my founders call me all times a day, in the midnight, past midnight. They're stuck with something they know they can get access to me and because of that I think I've built a disarray with them, and it's good. From pretty much all over the MENA region, from Pakistan all the way to Tunisia, I've been working with the founders all over the space and working in some different sectors as well, which is also interesting for me. My background is in mechanical engineering and I'm a geek and I've been coding for a long time. Wow, 37 years.

Stewart Noakes: 4:16

It's not possible, man, it's not possible.

Mohammed Al Rasbi: 4:21

So, yeah, I love coding, I love the problem solving, I love the fact you know and the chemical engineering is something that's like to say is the Godfather of all engineering, and where problem solving is the essence of it and this makes life easier. And because before I started with the Montecladi Fund, I had run my own consulting firm where we did online services and basically the thesis behind that is open up to anyone, and so I have very small clients, like one or two people, to very large multinational companies, and it gave me the ability to work with some on so many different projects that when I started with the Montecladi Fund, it allowed me to very quickly and so easily be able to support the founders. I said very quickly and then say, ok, there's something here, ok, how can we help? And then obviously, it's not just me but the mentors that I worked with over the past six years has helped a lot as well.

Stewart Noakes: 5:21

So I think when we spoke before, you mentioned that the fund had put together maybe about 200 investments nearly across the seed, in the sort of more gross stage. What are your numbers at this point?

Mohammed Al Rasbi: 5:32

So a Montecladi Fund invested in about 163 startups, with some of them we've doubled down. It's more than 200 plus investments, I think almost 250 if I'm mistaken. Some of them have done second and third follow-ups. Third, domestic, from pre-seed to growth, from the areas like from B2B Enterprise to electric cars to wedding platforms to drones, drone manufacturing, to everything under the sun. And for me that was amazing because a lot gave the geeking me the ability to work with some of the different founders.

Stewart Noakes: 6:22

So is that a key criteria on the selection process that they need to be geeky enough.

Mohammed Al Rasbi: 6:27

Or how do you speak to people. So I OK. Coachability is very, very important for me, and the reason for that is I have limited time and because of that, obviously, running a startup. There is one way. If there is a clear way to run a startup and it's very clearly if you follow this way, you'll end up being a new recording. Then everyone would have already done it and because of that, there's so many different paths and so many pivots that someone needs to do, and sometimes there's some of it's gut, some of it is gut feeling, some of it has to do with the space that the person is in.

Mohammed Al Rasbi: 7:08

So coachability is someone that is willing to listen, not necessarily accept, Just to clarify. They don't need to necessarily accept what I'm saying, but at least assess and then, based on that, make a informed decision. And, by the way, one of the main reasons I think we're successful is because I have mentors in our network that give founders basically so many different point of views that are completely opposite, and most of the time they all make sense and as founders, you need to make a decision which one should we follow, which one we are comfortable with, and basically be responsive for the decision they make. So coachability is not necessarily following orders. It's more of are you willing to listen and are you willing to take the time to try something out and if it does make sense, then follow it. So that's one.

Mohammed Al Rasbi: 7:58

The second is are they willing to and this is where it gets a bit tricky, because when you're in a place where you have a decent job, sometimes I do talk to founders like do you really want to do this? Because it's not easy. And if you have a cushy job and you have a family and you have everything in place, why would you go and start a startup?

Stewart Noakes: 8:20

It's an unreasonable act. Right, it's full of uncertainty.

Mohammed Al Rasbi: 8:25

So what I try to do is try to get them onto. We use different tools and one of the tools I always like is by Ash Moera, lean Stack. So we strive to that platform, so I get some access to that. They start doing a few calculations and they build up their Lean Canvas and then after that say if you're willing to do this, I can have other follow-up calls with them and based on that can I say are you sure you want to take the strip? If you are okay, let's go together. So that's one instance.

Mohammed Al Rasbi: 8:56

Another instance where we kind of assess is where we all have calls for applications, people that apply, and then we run an actual virtual boot camp where we have mentors come on and they run a series of workshops over the weekend and the whole purpose of this is to get them to understand how to pitch to us. And the rationale behind that is because sometimes and this is from experience, like if I found out, they're very good, they know what they're trying to do and there's actual general problem they're trying to solve, but the issues they're not able to articulate that and the purpose of these workshops is to get them to understand how to size the market and how to pitch. These are the two main areas that we want them to understand better. And then, when they actually pitch, we get them to record, we get them to go through a series of, let's say, gates, and if the person's going to go through all that pain, then we take the next step, where we actually assess them further. And then if we make a decision okay, we want to go further Then we actually run a series of one-to-one sessions with me personally and then with the depending on the time, could be with six other mentors, where there are three questions Should we invest? If we are to invest, what are the next steps and are there any red flags? Because we can make a decision that you invest, but then there is a red flag. It could be, you know, the cap table is not really done right or there's something wrong with it that we need to assess, and so from day one we try to figure out a solution for that or some other reason, or it could be that the person is good, but the third flag is that they're not ready yet to jump and start working on that. So we will say, okay, we will not come in now, we'll come in later on and then you know next actions, what should we do with them to help them to get to next step? So startups go through a series of iterations customer problem fits Is there a large enough problem, sorry, large enough customer base that are facing certain problems? Okay, that's good. Next step is problem solution fit. They'll go through a series of solutions that they will present to these customer base and see would they actually accept this solution? Will they pay for it If then, hopefully, they reach product market fit? But the idea is that it could be that there's series of iterations that you go through in the problem solution fit Because your solution number one might not work and then you try number two and number three.

Mohammed Al Rasbi: 11:26

Again, building a solution is not. The idea is actually presented as solution or potential solution without building it yet. So the idea usually the old methodizes a build, demo and sell, and the idea is actually demo, sell and then build, which is a bit contradictory to a lot of people. That great, how do I sell and how can I do with demo something that? So that's where we try to see. That's where coachability comes into play. Are they willing to take that? Because investments most of the time at the PC stage. You get a small amount of money not a lot of money and you're supposed to validate something. If you're not able to validate, I mean spend all that money in developing a solution that most probably will end up getting tossed away. Then you've built your potential opportunity that you can engage with investors in the future.

Stewart Noakes: 12:16

So where do you stand on things like solo founders versus teams? What do you look for there?

Mohammed Al Rasbi: 12:21

That's a very good question. So we've so out of so I'm responsible at the moment for 90 startups. Out of them, the majority are group of founders, and then we have some of their solo founders. Solo founders depends on their coachability, because at the end of the day, what happens is that they'll get bombarded with some different advice from some different people. If they're willing to listen, they're willing to actually be able to have a discussion, then I think they're fine, but then if you have a sole founder that is very stubborn, then that doesn't work.

Mohammed Al Rasbi: 13:00

Having said that, obviously this is where it gets to be. This is the thing I like about creating a community behind when you're running a fund and running a social program, what have you is actually getting as many people as possible to interact with each other, because even if you're a sole founder, you're interact with other founders and it doesn't feel as lonely as it would seem if you're doing it by yourself. So sometimes that's one of the parts of being part of a fund, part of a social program. A social program causes that interaction. Usually, funds in general might not always create these opportunities for people to interact. That's where a social program is going to come into play and people should actually assess is there value in it or not.

Mohammed Al Rasbi: 13:46

Unfortunately, a lot of our social programs do end up being a show more than anything else, and so personally I don't believe in the time-bound social program. So when COVID hit, I changed things around where I've opened up our social programs to everyone. So it doesn't matter which cohort you were part of Previously, we were doing a core basis of that was all, and that actually allowed a lot of founders to accelerate much, much faster. Because founders would know I don't only have the mentors for three months, actually have them more or less forever, and that allowed them to take more risk and be able to actually be able to move at a faster pace. So it doesn't matter if it's solo or group. For me personally it doesn't matter Because there is a group behind it. But if I do just direct invest, put in money, that's it. Then I would not invest in single founders and then we do not have the support system to be able to succeed.

Stewart Noakes: 14:46

Amazing, amazing. All you talk about coachability has reminded me of that very old joke, which is a proper dad joke, as my kids would say. So it's how many psychiatrists does it take to change a light bulb? And the answer is one, but the light bulb has to want to change right.

Stewart Noakes: 15:00

So it's kind of a silly thing, but it's a really important part of what we do for coaching in Canopy as well, which is when you meet somebody who says they need help. If you feel like they're going to actually take it on board, then you spend time with them. But if you feel like there's a barrier to the listening part of that and they're not even going to think about what you say, then it's pretty pointless even trying to coach them or to help them. So it's super interesting. You got that reflection and just as we finish off, really, I guess the most important question I should ask you is, if somebody's watching this and they're about to raise money for the first time with all your experience, like, what's your best advice for them? What's the sort of first thing or the best thing they could be doing?

Mohammed Al Rasbi: 15:39

So if you're raising money and it's the first time do your homework. One of the worst things you can do is you can the way you approach your VCs. So a lot of VCs are busy and they get bombarded with so many different they're defa, basically, and pitches and what have you. So you need to do your homework properly and the good thing is that there's a lot of information available online already and look at the type of startups that they actually invest in. If you just bombarded and spray and pray and then hopefully something you hope that something comes out of it the likelihood you will succeed is very low. But if you actually do your homework, do you understand what stage they invest in? Because also, that's another issue Sometimes founders will reach out to me and they either, so I would invest in the early stage precede, and so a founder comes to me and they're trying to raise 10 million. I'm on the wrong stage for you. The opposite is true as well. So if you go to someone that only would invest the minimum ticket size is 10 million and you're trying to raise 100K or 200, whatever, maybe much less than that, you've kind of burnt a bridge with potential bridge in the future. So another way to kind of do this is like usually, if you're raising a million, obviously we're not going and see some of that. Initial ticket is only 10 million. But let's say you would talk to other investors that understand the stage they're in. What are the requirements? So do a bit of fact finding, but then again remember they're busy. So a lot of this information is already available online. You can look at TechCrunch, you can look at CrunchBase, you can look at LinkedIn. I look at the other sites that they invest in. There's a lot of processes. Use all the different AI tools right now that are available that can help you in unarut. The data that might be a bit difficult for you to find and then see, as this is, would fit their thesis or not understand how their decision-making process is. Sometimes it's not easy. It's a bit difficult. So maybe you look at the junior analysts in the firm itself and try to buy them coffee or what have you, if you can, and try to understand the decision-making process. Do they have investment committees? Do they as unanimously have a decision that everyone needs at the partners they agree to, or is it just a single champion that would actually say I would like to do this deal and then everyone else would say okay. So that has a big impact on the decision-making process. Look at I would personally like if you were starting out, say pre-seed look at the different programs exhibition programs not necessarily to them, but actually going through the process of applying, because you will get basically torn apart by if you end up getting to different stages where they will bombard you with so many different questions to understand are you right for them or not. This in itself, the journey itself, will allow you to understand the benefit of the type of questions they get asked. Sometimes you get asked questions that you're not really sure how to answer them, and so you need to be able to be ready for answering questions that you don't have to answer to in a way that gives confidence to the investors. I always have to find this.

Mohammed Al Rasbi: 18:51

I like this thing where you're not selling fish in the sea. You're selling the idea that there might be fish in the sea. Okay, so there might be fish, there might be fish. So you need to get to that level. You're not selling, because if there is fish in the sea, then it's somewhat of an easy sell, but you need to go to one level further, which is actually selling the idea that there actually might be fish in the sea. So how can you convince someone? Because that's what VC is You're selling a future and the future. You don't know what the future will hold and a lot of them needs to understand are you able? Are you the right bet? Because basically it is a betting Are you a right bet for them?

Mohammed Al Rasbi: 19:31

Also, a lot of fun is to think of competition as something bad, but actually competition is very, very good, especially in the business space. They like to compare, they like to see what others have done and potential exits as well. If you seek investment from VCs, remember that there will be an exit and because of that, don't go to a VC expecting them to give you money and then that's it. They want you to reach a level of increase in valuation, so they end up exiting or the company either gets acquired or you hopefully get IPO'd. So there's an exit strategy that needs to be in place and needs to be clear to the investors.

Mohammed Al Rasbi: 20:07

The more you do homework for them, the more they will like you and that will actually help them. So sometimes you might get some investors that say, no, okay, maybe we're later on Send them either monthly or quarterly updates. I like monthly updates. It doesn't have to be long and as far as templates for monthly updates, there's so many available online, so do that. It does help potential investors and keep in touch with them. And even again, never go to an investor when you're out of money. Usually you don't.

Stewart Noakes: 20:37

It's a difficult conversation, right.

Mohammed Al Rasbi: 20:40

Yeah, and the likelihood that an investor can run out of money is you need to have something really substantial for them to actually invest, but the likelihood is very low. Or if they invest, then you might be taking advantage of. So, again, investors, by the way, investors, actually, they need to show their investors returns on their investment. So, again, are you the right bet? The more homework you do, and the good thing is and sometimes it surprises me a lot of people don't do homework. It's very easy, and now, with all the tools available to you right now, you can capture all this information very quickly. And some think that's a waste of time, but actually it's not.

Mohammed Al Rasbi: 21:20

Now, venture capital is not meant for everyone. So also realize are you the right fit for it or not? Because if you take the moment, you take money from VCs, that's the beginning of the end, because at the end, there will end up being an exit. So hopefully it's a positive exit, not a negative one, but it's at the beginning of an end. Are you ready for that journey or you're not, and so there's a lot of literature outside. You can read a lot about this process. So I think you should do a bit of homework, and the thing is, it's not a lot of work to understand the process. If you spend a couple of days, you will learn a lot that will help you make a decision.

Stewart Noakes: 22:04

Amazing, amazing insights. Thank you so much for sharing with us today. I'm really sorry you've overrun on time and I know you've got another meeting to go to and I promised I would stick tightly to time, so I do apologize for that. But thank you so much for sharing with the community those kind of insights. That's absolutely wonderful for this series. It's exactly what we'd hoped for to really share the mechanisms, but also the personalities and the way that investors think, and it's been fantastic today. Thank you so much, looking forward to seeing you in November at Web Summit and, of course, we're going to do the investor reverse pictures and stuff there as well. So, yeah, it'd be great to see you again.

Mohammed Al Rasbi: 22:38

Thank you. Thank you very much for having me.

Stewart Noakes: 22:39

Thanks for being here today. Thank you very much, Daniel.