What US Investors Can Learn From An Immigrant Venture Capitalist
Namek Zu’bi in New York City. Zu'bi is the co-founder and managing partner of venture capital fund Silicon Badia. Photo: Nina Roberts
Published in Forbes on June 4, 2018
Namek Zu’bi is the co-founder and managing partner of Silicon Badia, a venture capital fund that makes early investments in startups, namely “the unsexy ones,” as Zu’bi puts it. Based in New York City, Zu’bi launched Silicon Badia in 2012, its first regional fund based out of Amman officially launched two years later; totaling a ten-person team. Zu’bi has invested in more than 40 U.S. startups, primarily B2B, operating in sectors like agriculture, construction, waste management and even hair weaves.
Now in his early 30s, Zu’bi attributes his unique investment choices to being an outsider, an immigrant, unlike the majority of VC investors in the U.S. “When you look at VCs, you think white, all-American—maybe played collegiate sports,” laughs Zu’bi. He notes that today’s VC landscape the U.S. is indeed more diverse than when Silicon Badia first launched six years ago, but many VCs have similar backgrounds that often propels them to chase after the same types of deals.
Zu’bi grew up primarily offline in Jordan, a developing country in a hostile region. He arrived in the U.S. to study information systems and computer science at Carnegie Mellon University in 2004 and not business (despite Zu’bi’s early intrigue with Gordon Gekko’s lifestyle).
The cumulative life and education experiences has enabled Zu’bi to assess innovative startups through a different lens than most VCs in the U.S., taking particular interest in startups moving from offline to online processes. For example in 2014, Silicon Badia invested in Ceres Imaging, an agriculture technology company that helps farmers examine the status of their fields via aerial imagery and data, rather than exclusively by tractor or on foot.
Silicon Badia’s “unsexy” and under the radar investments have proven to be profitable according to Zu’bi, the fund has top quartile industry performance and the average exit to date is seven times the invested capital.
Zu’bi talks about his experience as an immigrant VC navigating the often hostile startup and VC ecosystem in the U.S., what he looks for in a startup and Jordan’s current economic unrest.
Nina Roberts: How has being an immigrant from Jordan impacted your investment choices?
Namek Zu’bi: I have been exposed to, and immersed in, two very different cultures and it pushes me to have an open mind without judging too quickly.
Roberts: Your choice in startups—under the radar, B2B, often outside New York City and Silicon Valley—almost sounds like the current trend of “impact investing.”
Zu’bi: Our U.S. funds are not considered "impact investing" per say, but we find ourselves investing in many of those types of companies. VCs with unconventional backgrounds seem to do this naturally; often we grew up in challenging circumstances.
I actually consider most VC investing to be inherently “impact” oriented. Meaning, you invest in small companies solving problems and they eventually become big companies that create jobs, wealth and should have a positive impact. However, that being said, there are a lot of stupid apps out there!
Roberts: What startup did you invest in that other VCs overlooked?
Zu’bi: We have a company called Mayvenn in Oakland, California, which allows hair stylists with a primarily African American clientele to create ecommerce stores specializing in weaves. The founder Diishan is a really smart guy and created Mayvenn to address hairdressers’ lost revenue stream, but he had trouble raising his seed round. We invested; we were one of the first checks.
People were like, “You are getting into the weave business? Are you crazy?” When I went to into African American hair salons in Harlem and The Bronx to do my due diligence, they thought I was crazy too. Fast forward, Andreessen Horowitz, one of the top VC firm in Silicon Valley invested $10 million in Mayvenn.
Silicon Badia quietly invests in these outliers and niche spaces; we are out performing the market by 200% on TVPI, which is paper and distributed gains, and by more than 300% on DPI, which is distributed returns. These companies are not going to grow from zero to a billion overnight, but they are going to get there and do it in a more efficient manner than the sexy ones.
Roberts: How did you get started in the VC world as an immigrant and as a student of information systems and computer science at Carnegie Mellon rather than business?
Zu’bi: After graduating I worked at Deutsche Bank in high frequency trading and eventually realized I wanted out. Through my old professor RF Culbertson I was introduced to and hired by a Texan here in New York City—he chewed tobacco, was in the Marines—who wanted to start a tech fund.
We raised a fund called Clove Hitch Partners. I knew nothing about venture capital, never worked with startups. We had backing from two families and we were thrown into the fire, that’s how I learned.
At that time one of my uncles in Jordan, Fawaz Zu’bi and a partner Emile Cubeisy, were doing venture capital in the Middle East for tech companies. We did a deal together in Switzerland, a security tech company. So, we started talking more and more, “What are you seeing in the U.S.?" “What are you seeing in the Middle East?”
Roberts: And so you launched Silicon Badia?
Nu’bi: Not yet. I eventually left Clove Hitch Partners, but it dawned on us that there was an opportunity between the Middle East and U.S. tech worlds—the Middle East is underdeveloped with a large youth population itching to grow and the U.S. is light years ahead.
In late 2011 I hosted a conference in New York City called Silicon Badia Meets Silicon Alley; “badia” is a Jordanian desert. Entrepreneurs and investors came from the Middle East to meet hundreds of people from New York and Silicon Valley.
Based on that event’s success, we thought Silicon Badia would be an accelerator, but then decided we needed to invest. It was my friend, mentor, and now legal counsel Lori Hoberman who told me to start my own venture fund in the U.S. I thought she was crazy. How could a nobody with a limited network start his own thing in an extremely intimidating, kill-or-be-killed city?
Roberts: How did you start? Do you remember your first Silicon Badia deal?
Zu’bi: We had to claw our way into this ecosystem, but the way we won most of our deals here in the U.S. is simply by resonating with founders. Our first deal was with Quartzy, a lab management software company. I literally chased one of the founders of into the bathroom after he gave a presentation at a conference. I loved the company.
Roberts: What do you look for in a U.S.-based startup?
Zu’bi: It’s a peoples business. Does the entrepreneur or founder have the psyche to understand how to build teams? How to manage teams? Or how to hire someone to manage teams?
The second is hustle and endurance. The media portrays the industry as—you wear skinny jeans, have flexible hours, take an Uber to work or bike around San Francisco—and oh, you wake up to become a billionaire. That’s the top five percent. The rest are sitting in their offices, pulling their hair out, taking salary cuts, moving apartments, figuring out how to survive. It’s tough.
Third, I look for a founder who has a realistic long-term view. This is a marathon, not a sprint. We love companies that are smart about cash flow, smart about being in Kansas City, for example.
Roberts: What about startup red flags?
Zu’bi: Any kind of scenario that’s hype- or FOMO [Fear Of Missing Out]-driven, if a founder sends an email that says, “Hey, we are raising funding, you have 24 hours to make a decision.”
A second red flag is when people underestimate how hard it is to find a product that resonates with a certain audience. Too many times founders say, “We’re going to grow to a million users easily. We haven’t launched, but I know how to do it.” The plan that founders envision is a straight arrow, but in reality it will be a zigzag arrow. Do they have a financial and mental cushion for this?
Also, I’ve seen too many pitches of later stage companies where founders are convincing themselves that it’s working—and it’s not. Everyone is feeding each other fluff.
Roberts: You mentioned Silicon Badia has investments in 35 startups located in the Middle East, what is the startup scene like there?
Zu’bi: Historically Jordan, Lebanon and Egypt were the early starters of tech and startups because we had tech talent and we didn’t have oil. We had to figure out a way to create industry.
Dubai came onto the scene in the last three to five years. In typical Dubai fashion, instead of coming onto the scene with a Kia, they came on with ten Rolls Royces! Money and flashy! Today there is a lot of activity in the area.
Roberts: How will the recent protests in Jordan over the weekend and the resignation of Prime Minister Hani Mulki impact the economy and startup world in particular?
Zu’bi: I think the events that are happening in Jordan are both good and bad for the startup ecosystem and us as VC investors. It causes short-term instability and uncertainty. Longer term, it can be a catalyst for entrepreneurs. We are confident in the leadership of King Abdullah II, he has always been a big advocate and supporter of entrepreneurship.
This Q&A has been edited and condensed for clarity.