UAE-Based Enhance Closes US$1.5 Million Seed Round
Enhance, a UAE-based tech startup that builds marketplace businesses to meet the needs of Middle East and Africa consumers, has closed seed funding of US$1.5 million from investors iNet, 500 Startups, Shorooq Investments, and other angel investors from the Gulf region, Europe and the US (including a consortium of Saudi Arabia-based executives). With an eye on "reinforcing current operations and capabilities in the UAE, Saudi Arabia and Egypt," the company aims to utilize the funds to further its expansion plans in the Middle East.
Recognizing the potential of the region's gifting market, Enhance launched online gifting platform joi (www.joigifts.com) as one of the first B2C marketplace ventures under its umbrella (Medigo, a platform connecting patients and doctors globally is another), and intends to focus on both scaling joi, and launching other verticals. "In order to allow the Enhance model to deliver to its maximum potential, the next model will also be a marketplace targeting a specific vertical, where we would be facilitating a product or service that was traditionally offered offline to be taken online," says Enhance Founding Partner and joi co-founder Ritesh Tilani.
Speaking about how the entrepreneur duo (serial entrepreneurs and investors Tilani and co-founder Alper Celen) collaborated to launch Enhance, Tilani says the company's origin was a result of experiencing first-hand the Middle East's fragmented market and its challenges. "Enhance is built to mitigate these challenges by being able to reuse and share its infrastructure, marketing, technical, operational and funding resources across different businesses," says Tilani. "Alper and I are serial entrepreneurs, and we've faced the issues above with every venture we've had in the past, some of which failed specifically due to these issues. I have also been a VC, and we're both angel investors, and it frustrated us to not be able to share resources across our portfolio companies to create mutual benefit and unlock additional valuation for our portfolio as a whole," he recalls.
And, the founders expect similar positive synergies from the current investment as well. "Institutional investors like 500 Startups, iNet and Shorooq bring tremendous value in the form of guidance and best practices, not just in terms of fundraising, but also functional capabilities across the board," says co-founder Celen. "They have experience from their other portfolio companies that helps joi when it comes to areas like digital marketing. Having investors like them also gives us validation and credibility when talking to other institutional investors. They also have the ability to invest in future rounds, and tap into their network to co-invest with them," he says.
Though e-commerce continues to be an industry of choice for aspiring entrepreneurs in the region, Tilani says Enhance's "venture builder model" reduces their time to market and cost of launching, and thus increases their chances of success, compared to competition. He offers joi's brand recall and growth in the region's gifting industry as an evidence of this. The portal that hosts various gift categories, claims to match retail pricing, offers free same-day delivery, is reported to be growing 15% month-on-month, and says it's signed up over 200 merchants, and lists over 4,000 products- all this since launching in 2015.
As for fundraising, Tilani admits that they have been somewhat selective in pitching to investors, and with regard to what helped them clinch the seed round, he says, "We used a deck to support our pitch, but it was more about direct conversations with each potential investor, to explain the vision and walk them through the Enhance approach to building multiple synergistic ventures under one umbrella. This gives them a chance to see the passion with which we're attacking the problem, and increases their likelihood of joining us in the mission." Ultimately, the entrepreneurs believe that "letting the business speak for itself," i.e. encouraging potential investors to experience the joi platform themselves is what worked best for Enhance to succeed in achieving this milestone.
Enhance co-founders Ritesh Tilani and Alper Celen
Q: What's your take on the region's funding ecosystem? What needs to change?
Celen: "The Middle East tech ecosystem has matured significantly over the years, and seems to be doing so at an accelerating pace lately. We're seeing more and more exits, which are critical for the growth and healthy development of an ecosystem. We've also seen investors from more traditional industries enter the tech venture capital space recently. The pace of growth can be further accelerated through lowering of cost of doing business in key markets, and more government funding being made available to seed increased levels of startup activity, as has been witnessed in the past as being the enablers in more mature ecosystems."
Q: Based on your current experience in raising funds in the MENA region, what would be your three top tips for the region's startups to pitch and clinch funding for their ventures?
Tilani: "[First], don't rely on decks to do your pitch for you. Encourage potential investors to try your product or service and see how great it is, for themselves. Try to meet your investors face-to-face whenever possible so that you give your passion for your business to shine through. Along the same lines, look for passionate investors who will be evangelists for your business and actively help create value, especially in the early stages of your business where you'll need all the help you can get. [Second], avoid wasting a lot of energy and time on having to value your company early on. Instead raise money using convertible notes. The negotiation on valuation would be more meaningful at a later stage when there are actual numbers to base the negotiation on. [Third], try to inject variety into your investor base. This applies to both type of investor (e.g. angel, traditional VC, corporate VC, etc.), and also geography. International investors have historically been known to offer more founder-friendly terms on average, and can also widen your network for future rounds of funding, while offering the opportunity to learn from more mature ecosystems. Regional investors bring immense know-how and networks specific to our region, which is tremendously beneficial to founders and businesses at every stage.
Sindhu Hariharan is the Features Editor at Entrepreneur Middle East. She is a financial consultant turned business journalist with a FOMO when it comes to everything technology.