MIC Ventures is a new fund in the Lebanese entrepreneurship ecosystem. Seeking to boost the value of startups and young companies that specialize in areas of interest from a mobile telecommunications perspective as well as establishing partnerships between sector companies and the two Lebanese mobile networks, MIC Ventures is itself a startup backed by governmental vision. Executive set down with the fund’s manager, Khaled Zeidan.
E When did MIC Ventures start to operate?
We had an introductory investment committee about two weeks ago [in the first half of February] and we expect to have a second one at the end of March [or] beginning of April. For investment opportunities, we are looking at four verticals and we also want to say that we are activists, we are not passive investors.
E So you are looking to create synergies and coherent portfolios of invested companies in each vertical rather than betting on the search for singular “unicorns” and super performers?
Yes. One and one in our thinking does not need to add to two but can be made into three or more, meaning synergies can be combined into tremendous value, but we need to put some acumen and effort into it to align interests and objectives. This is exactly what we are trying to achieve with this fund, by introducing young entrepreneurs to the two large Telecom operators in Lebanon as partners. We are seeking to identify opportunities and build a storyline that makes sense to the owners of the fund—which are MIC 1 and MIC 2 and ultimately the MOT [Ministry of Telecommunications]—and the entrepreneurs, while creating skilled job opportunities which is in line with the MOT, the PM, and the government’s vision.
E What do you want to achieve with regard to relations with local and foreign corporations, ICT companies that you want to invest in, and with other innovative companies?
We want to build partnerships with as many players as possible, and we want to be as agile and proactive as possible in creating opportunities. We are looking to invest in companies that are able to become cash flow positive with our help and the support of our sponsors.
E What is the size of your team?
For the moment we are a team of four. In the end, we aim to be a team of six.
E Can something be done on the level of MICV to assure that the consumers get the best deals from the companies in which the fund has invested?
The consumers will get new products and services. These new products and services are for the general public. In some instances, they would be free products and services paid for by the operators. In other instances, the products and services will be paid for by the consumers. The companies [that MICV will invest in] already exist and have proof of concept or are operating as businesses with revenues. All that we are doing is creating a partnership between the portfolio companies and the two operators.
E Will MICV have a policy of taking an equity stake in every portfolio company and a seat on the company’s board?
Absolutely. MIC Ventures will aim to take equity or quasi equity stakes, depending on the structure of the transaction. We will in many ways have approaches in terms of investment criteria and investment policies that meet basic global standards and are similar to the criteria used by funds established under BDL Circular 331. The only thing that will differ is that our target market will be slightly different from others. Having said that, we see MIC Ventures as being complementary to Circular 331 funds, not as a competitor.
E Will it be a strategy or policy of MIC Ventures to be a majority shareholder when investing in a company?
Our standard policy is not to have majority but to have reserved matters that protect MIC Ventures.
E Will you seek international VCs to co-invest with you in Lebanon?
Yes, we will.
E You also mentioned financial institutions. Do you see banks as your potential co-investors?
We see banks as potential co-investors on investments that are relevant to their businesses. For instance, if we have a specific investment in the Fintech space, it might be interesting for banks to come in as co-investors when MIC Ventures have a certain capacity and where they can fill the rest [of the investment need].
E As for the size of investments that you are interested in doing, what are the parameters? Would you go as small as investing in a fresh startup or look at entrepreneurs that have just completed an acceleration round?
We are willing to go as low as $100,000 and we have a cap of $2 million unless the board decides otherwise.
E But might there be limits from the perspective of the amount of work that is required for assessing a small opportunity, the due diligence and all?
We do not want to discard smaller investments if we see merit in them.
E Can you elaborate more on the structure of the board and the venture and process under which MIC Ventures will proceed?
First, there is the management team which will source opportunities [and] present them to the investment committee—which we expect will convene every two to three months—and the final approval will be done by the board.
E What is the structure of the board and investment committee?
With regards to the board, there is one independent member and the other members are equally split between the MICs. As for the investment committee, they are individuals who have a deep understanding in the ecosystem.
E Is there already a strategy for exits from portfolio companies?
The current ecosystem is not conducive to exits through public offering. We think that a trade sale or even an acquisition by MIC 1 or MIC 2 are more realistic exit strategies. We are realistic and that is why we are looking for companies that will survive and thrive without our continuous injection of capital.
E How many board members and how many investment committee members do you have?
The board right now is composed of five individuals but will be expanded to seven. In terms of the investment committee, right now we have seven individuals.
E What will be the frequency of the investment committee meetings?
In the beginning we will have them every two months and then probably every three to four months later on.
E As to governance on the board level, do you adhere to standards for private enterprise?
It is a private entity and transparency standards will be applied on all transactions. We will have a website listing our portfolio companies.