The Fundraising Landscape – Seeding the Future

Ali Al-Suhail, CFA

The Fundraising landscape in Iraq has continued to evolve over the third quarter of 2020. The newly formed Iraqi Angel Investors Network (IAIN) has had a profound impact on the scene facilitating three rounds of seed investments since its launch in August 2020. The AUIS based Takween accelerator announced the graduation of its first cohort and awarded a total of $70k to the first five startups. Finally, the International Organization of Migration (IOM) expects to announce the winner of its grants in a public event sometime in mid-January 2021.

The increasing activity at the seed and pre-seed stages will help develop the pipeline for later stage deals to take place in 2021 with bigger tickets. As I have highlighted in our previous letter, the seed stage faces a significant funding gap in Iraq, and it is a primed space for local investors to get involved in. We saw this materialize with the investments made by IAIN; which focused on the seed stage and was led by local investors.

As KAPITA, we have played an active role in all of the investments that were completed by the network. We led two of the investments and were a shareholder in the third. Below are the details of the three investment rounds that were facilitated by IAIN:

Tabib Baghdad:

KAPITA and Nass Al Iraq made a six figures investment into Tabib Baghdad, an online doctor booking platform. The company started its operations in Baghdad and plans to cover the rest of Iraq in the coming year. At present, Tabib Baghdad has more than 300 doctors on its platform and has facilitated more than a thousand bookings. We see a great opportunity in Tabib Baghdad as we believe the process of finding the right doctor in Iraq is hampered and that the community can benefit immensely from digitization. The main mode of finding doctors in Iraq is word of mouth and this concentrates patients with select doctors while leaving significant capacity with others. Through its ratings and review system, Tabib Baghdad aims to democratize this process creating more efficient ways for patients to find doctors.


KAPITA and a group of co-investors, including Mohammed Al-Hakim and Iraq Tech Ventures, made a five figures investment into Teami; a customer relationship management (CRM) solution for medical representatives. Teami was founded in order to provide pharmaceutical agents in Iraq a professional alternative to the current tools (mainly WhatsApp and Telegram) used to manage their on-field sales teams. Teami is a great product with a great team behind it, but what distinguishes Teami is that it is very well-tailored to the needs of the Iraqi market.


The members of the network; Amar Shubar and Jaafar Al Musawi, along with other co-investors, have made a six figures investment into Hi-Express, a last mile delivery focused on the B2B segment of the market and was co-founded by KAPITA’s founder, Mujahid Waisi. Hi-Express has grown to serve more than 170 vendors over the past year. Hi-Express is distinguished by its proprietary technology and the deep experience of its founding team. The company has been able to grow rapidly over 2020, despite the hurdles encountered by the last mile delivery providers.

Being at the forefront of the above investments provided us with some interesting insights into the way investors are thinking of early stage investing in Iraq:

  • Industry/theme agnostics: investors are looking for attractive startups to invest in across sectors rather than focusing on certain markets or themes.
  • Commercially viable: investors have a strong preference for commercially viable business models as opposed to superior technology.
  • Value-add investing: investors prefer startups where their value-add extends beyond the financial contribution, such as providing technical resources or supporting business development.

These are the preferences that dominate early stage investing in Iraq today. We expect these preferences to evolve over the coming year with the ecosystem. In general, there is a strong belief in the potential of Iraqi startups among investors despite the economic difficulties. The biggest challenge for most investors is finding startups that are able to combine well-built technology and a sound business model. We do see the pipeline improving significantly over the coming year. I was honored to be selected as part of the judging panel for the Takween accelerator demo day and have been a part of the judging committee for the IOM grants awards for startups. In both events, we were very happy to see the quality of startups coming into both programs.

We are already seeing certain sectors coming into focus with increasing startup activity to disrupt them. One such sector is healthcare; as the country’s already fragile healthcare system has been stormed by the COVID-19 pandemic. There are opportunities across the healthcare value chain from helping doctors establish better trust with their patients to helping medical representatives better manage their on-field operations. Education is another sector where we are seeing an increased startup activity, but the right business model remains elusive for most startups in this sector.

Post-investment, investors do face many challenges around company registration and governance. There is a general lack of expertise on term sheet clauses that usually govern the relationship between the investors and the founding team. Another issue is the registration process, startups at the seed stage are looking for the most cost-effective registration paths, and the typical choice falls on a Limited Liability Company. The registration process is lengthy and costly. Recently, we have seen an announcement by the United Nations Conference on Trade and Development (UNCTAD) on the launch of a single window to register businesses but this has yet to be fully active.

Reflecting on 2020, we have seen an impressive growth of the ecosystem. Miswag and Lezzo both secured investment rounds of more than $1 million and the onset of the COVID-19 has caused a massive surge in the overall e-commerce activities. We expect this trend to continue in 2021 with an increase in the volume of seed round investments and larger later stage investments.

The realities of fundraising in Iraq

Fundraising: An Iraqi Perspective

Written by: Ali Al Suhail, Managing Director at KAPITA, a development company that invests and incubates startups in Iraq. He is also the network manager for the Iraqi Angel Network

The fundraising environment in Iraq is getting exciting. Following the big news of Lezzoo securing a seven figure investment round, we are starting to see more activity with Iraq Tech Ventures leading a six figure investment round into Alsaree3/Zajil and Lezzoo acquiring Erbil Delivery. These activities increasingly validate the potential of the Iraqi market.

There are some interesting takeaways from what we saw so far:

Investments are geared toward B2C startups models in the e-commerce and last mile delivery spaces,
Most investors are diaspora based or foreign investors with established operations in Iraq, and
Targeted startups that are at their Series A stage, i.e., startups with a validated product / market fit, well-established tech and clear business model.

The last point is well understood given the inherent risk and volatility in the Iraqi market with investors seeking to invest in businesses with well-established operations and validated business models.

On the other hand, we are seeing an increase in support for companies at the concept and idea validation phase. IOM announced a grant program for Iraqi startups through its Enterprise Development Fund-Innovation, Orange Corner Baghdad has accepted its second cohort and AUIS announced the Takween accelerator. All of these programs are funded by donors and multilateral organizations. Those programs will serve as a great pipeline for innovative and exciting startups to address the many problems existing in Iraqi markets.

The intersection of investors’ appetite for Series A startups and development organization support for Pre-seed startups create a gap for startups at the Seed stage. We see many strong founders with exciting ideas that fail to build a business around them due to the ambiguity around funding. Founders with no path to funding end up resorting to building cheap technology infrastructures and overreliance on freelancers within key functions of the business. The end result is a shaky operating model built up on a weak technology that breaks a part with as soon as it scales. To address this gap, we have recently launched the first Iraqi Angel Investors Network to help all companies but give special attention to business at this stage. This is a space that can benefit immensely from investments from local entrepreneurs and investors as ticket sizes are small and founders can benefit from their networks and local knowledge.

Founders have a role to play as well to address this gap. There are few things they can do to de-risk their business and make it more attractive to investors.

Register the business: Investors are very wary of the legal complexities of investing in a business without a legal form. It is well understood that business registration is a lengthy and costly process, but founders need to at least start the process before tapping investors.

Build in-house tech capabilities: When tech is a key core of the business, you need to build it in-house. You can outsource some component of your tech but ultimately you will need in-house talent to manage and maintain this front. Investors are more comfortable investing in startups with strong in-house tech talent.

Leverage your equity: The most two important factors that will determine the startup success are the team and the market. In the initial days of the business paying a good salary is improbable, but founders can lure in strong talents with equity stakes.

Prepare to fundraise: As part of your fundraising, you need to create documents to market your business. Investors will look at your pitch and business plan as a reflection of your business and ambitions. Founders need to produce high quality documents with clear articulation of their ideas, plans and the target market.

Understand your strengths: In a business early day, every person on your organization chart needs to have a key role in the business including you. Founders cannot hide behind the CEO title and need to clearly demonstrate their value add to the overall business.

Fundraising is a difficult task anywhere in the world and it is especially difficult within Iraq given the dynamics and the volatility of the market. Founders need to build an awareness on the challenges and dynamics associated with fundraising.

We expect to see more fundraising news coming out of Iraq prior to the end of this year. As more investors enter the last mile delivery and e-commerce spaces, we expect new investments to come into other areas in the market. We are seeing many startups looking to address challenges in the healthcare value chain in Iraq. There are another two sectors that are receiving international attention but have yet to see any real startup activity; Agriculture and Fintech. Fintech is of special interest as innovation in this space to help transform the cash culture in Iraq and move consumers toward online payment will have an immense impact on the ecosystem as a whole. Things are about to get interesting!

What is an Angel Investor

An Angel Investor is an affluent individual who invests in the very early stages of a new startup company i.e. pre-seed or seed stage. An angel investor invests their own money and expects in return either equity positions or convertible notes. The financing that an angel investor provides could be a one-time investment or a series of investments, this makes angel funding perfect for entrepreneurs who are still financially struggling during the startup phase of their business.

There are many advantages of working with angel investors, for example they are willing to take more financial risks and provide advice and guidance to the startup. Angel investors serve as a critical bridge between the startup financing needs of a company and their larger capital needs later on.

Additionally, angel investors are experienced and knowledgeable people, who have had many years of success in running businesses or have had a high profile job. The knowledge that they bring to the startup often boosts the speed of growth and helps the team to learn from experts.

The concept of angel investment has grown over the past decade and it has become a primary mean for many entrepreneurs to fund their startups.

KAPITA is working to establish the first Angel Investors Network in Iraq, which aims to open up greater prospects for young investors and entrepreneurs to expand, invest and support the private sector.

What about you, would you utilize Angel Investment as a mean to fund your startup or next business idea? Or do you aspire to become an Angel Investor in the future?

Loan or Investment

As a startup, what is best for you, a loan or an equity investment? 

Loans are credits that you can borrow over a fixed amount of time from the bank. Loans can be secured or unsecured. If you borrow a secured loan you will be borrowing against an asset like a property. On the other hand, an unsecured loan is supported only by the borrower’s creditworthiness rather than assets. Borrowing a loan means you will have to pay interest, and the interest rate might be fixed or variable; this will depend on the type of the loan you decide to borrow. 

Lenders can be a financial institute, an individual or a bank. Most loans in Iraq are made by banks and it can be a logical option when trying to obtain money to grow your business. But what are the pros and cons of obtaining a loan?


-The benefit of obtaining a loan is that you are not required to give away any equity. Lenders will not have any influence over your startup and you will have the complete freedom in running it. Your profit will be impacted by the interest charged by the lender on the loan.

-One key consideration that can help you decide on whether to obtain a loan or not, is the size of your fixed assets base. If you operate in a business where you have a considerable amount of fixed assets such as manufacturing or transportation, you can use those fixed as collateral and get a better interest rate.


-Banks are often wary and strict when lending money to startups, therefore they need to be convinced that the business will be profitable in order to repay the loan in time. To qualify for a bank loan there are a series of protocols and procedures that must be followed, and this can be time consuming and may lead to frustration. Also, there is no guarantee that your business loan application will be approved, or you might not be granted all of the money you requested. We recommend that you conduct a very good research on the criteria to avoid rejection.

-Using collateral to secure a loan does put your assets at risk of seizure by the lender if your startup fails to make loan repayments in time. Many assume this will not be the case, but it will become a problem when your business is not able to meet its debt obligations. 

Think carefully before deciding to borrow a bank loan and in case a bank loan is not suitable for your startup, you can seek outside investors like Angel Investors or Venture Capitalists (VCs). But this funding method has its own pros and cons as well. 


-The benefit of obtaining an investment from Angel Investors or VCs is that they are willing to risk investing in the early stages of your startup with no collateral like personal assets or interest to be paid. If your startup goes under you will have no obligations to pay the funds back to the VCs or Angel Investors unlike borrowing loans from banks.

-Getting funded by VCs and Angel Investors means you have access to investors’ sector knowledge, expert mentoring and guidance, which can be of tremendous value for your company’s growth and your personal growth as well. Also the wealth of contacts and networks that they provide to successful entrepreneurs and business leaders might be able to help your business become more profitable.


-Deciding to go with an Angel Investors or VCs funding means that you have to give part equity in return, this means losing complete control over your business. The Angel Investor or the VC will have a say in how you run your business and will also receive a portion of the profit.

Each funding method comes with its benefits and its drawbacks. It is important for any person thinking about obtaining funding for their startup to quantify their personal resources, to understand their desire of control, their ability to service debt and finally to understand how to leverage negotiations.

Have you ever obtained a loan or sought an investment? What was your experience like?