Ahmad Shamieh, General Partner, Homegrown CPG discusses how the company is creating a niche for itself in the fast-evolving CPG/FMCG startup landscape in the region and supporting startups to find their way in the highly competitive FMCG market. The company is excited to be part of the Sharjah Entrepreneurship Festival 2024, where it will be presenting with 5 startups.
How would you describe the CPG/FMCG startup ecosystem in the Middle East?
Delving into the CPG/FMCG startup scene, it’s like taking a walk through a bustling marketplace of fresh ideas and bold entrepreneurial ventures, especially in crafting innovative products. This arena is buzzing, with both homegrown heroes and global giants jostling for a spot in consumers’ hearts and carts. Startups here are on an exciting, albeit challenging journey, dealing with a maze of regulations and the nitty-gritty of getting products from concept to shelf. While it’s not all smooth sailing, especially with the scarcity of specialized accelerators and the ever-elusive funding, there’s a vibrant undercurrent shaping the scene. A noticeable wave in this dynamic world is the lean towards sustainability and eco-conscious choices, reflecting a shift in what people value in their purchases. In a nutshell, the CPG/FMCG startup ecosystem is very nascent here but a thrilling blend of challenges and opportunities, constantly morphing and brimming with innovation.
What role does Homegrown CPG play in this ecosystem?
Our focus is on homegrown, ‘better-for-you’ products; and it’s about fostering brands that align with the new wave of consumer consciousness. We are a robust team that has not only managed CPG/FMCG brand portfolios exceeding $1B but also with startup & investment track record. Our strategy blends market insights with a hands-on, growth-focused model, and we’re set to redefine market standards. We see this ecosystem where tech was 10-15 years ago and aim to be the spark & first of a big movement in the CPG/FMCG startup ecosystem. We are more than an investment vehicle; we want to build a platform for visionary entrepreneurs and savvy investors keen on reshaping the future of this industry & consumer consumption… and we are already garnering strong momentum.
For example, we’re starting some of this by collaborating with ecosystem partners, supporting networking platforms for startups, and fostering an innovative and collaborative community. On 4th Feb we are moderating a panel during Sharjah Entrepreneurship Festival 2024 and presenting with 5 startups in the Souq area. Also, we are co-hosting the 5th networking event for FMCG startups with Sascha from Marketing Strategiser and Jamal from Pitch Lounge at the event. Additionally, we’re actively working with local organizations in an ambition to launch incubators providing tailored programs and mentorship to fuel the growth of these startups. More to be revealed soon! Follow us on Linkedin.
Can you share examples of successful FMCG startups in your portfolio? How have these companies demonstrated growth and sustainability?
Homegrown started the journey in the fourth quarter of 2023, so far, we have two companies in our portfolio that are set to grow with purpose-driven founders, unique propositions & beautiful products, for example:
- Plaay, founded by Rashi Chowdhary, is a UAE-made rich indulgent chocolate snack that is guilt-free & playful because it is the ‘cleanest’ snack that is not only without sugar/nasty ingredients but also full of goodness. Available across major retailers like Al Maya, Choithrams, and Union Coop, and online e-commerce platforms such as Noon, Kibsons and more!
- Bambuyu, founded by Sahar Karoubi, is the UAE’s 1st tree-free & plastic-free tissue brand made 100% from bamboo & softer than your standard brands. Available on Kibsons, Amazon, and direct + many more channels launching soon!
How do you assess and manage risks associated with FMCG investments, especially considering factors like changing consumer preferences and market dynamics?
FMCG is one of the most resilient sectors with a lower failure rate in comparison to tech for example, however, we have to deploy multiple control points to ensure the success of our selection, e.g.
- Companies selected have to offer a better-for-you product from a health or environmental perspective, aligning with consumer awareness & needs
- Fostering a genuine relationship with visionary founders and aligning on long term early on, along with the assurance of patience & ambition
- Commercial & business due diligence with proprietary industry-specific methodology
- Selecting companies that align with consumer demands, not just for the short term but for the future, with an encouraging early track record of sales
- We have a network of experts within the FMCG space that analyze the product offering and company position within the category they are active in
- Deploy our proprietary playbooks that leverage our advisor’s expertise to reduce costly errors, and accelerate healthy growth
At what stage of the startup journey do you invest in a startup, and what is your typical investment size in a particular startup?
We have decided to focus on CPG/FMCG companies in the seed or pre-series A stage, we usually look at companies with proven sales record of $1M to $5M annually.
As for the investment size, it varies between $250K to $1M, depending on the opportunity, business size & need, and potential.
What is your due diligence process like for evaluating potential FMCG investments? Are there specific metrics or criteria that are particularly important to your firm?
We have a robust process in place which measures all aspects of the business, we build that into a proprietary scorecard that allows us to have an analytical base for our commercial due diligence, if we are to highlight two specific metrics on the list, that would be: a healthy gross margin and positive sales trend of $1M+ ARR.
Add to that the human factor. Coming from ‘operator’ backgrounds ourselves, we look to understanding the Founder’s ambition & style and building those relationships early on. It’s never only about the product or business, especially at the early stage, the Founder/Founding team play a significantly bigger role.
How do you typically engage with founders of FMCG startups? What qualities or characteristics do you look for in the founding teams you invest in?
Being founders ourselves, it is part of our DNA to be founder-friendly. We look for brave founders who have the ambition and talent to create a product or brand that challenges the market and offers something consumers aspire to.
What additional support or resources does your VC firm provide besides capital to the startups you invest in? How do you contribute to their success beyond financial backing?
We are not a typical VC firm. Besides growth capital, we also include as part of the investment, should the founder want it, an element of working capital with different terms. This comes in the form of non-dilutive funding with a different mechanism. Furthermore, given our extensive experience in the CPG/FMCG across different multinational brands and geographies and with our startups, we were able to build a strategic support model (playbooks) based on the 5Ps that can be deployed to startups within our portfolio, this support helps build the structure, foundations and strategies needed to reduce risk & accelerate the growth on solid ground.
How do you stay informed about the latest trends and challenges in the FMCG sector? Can you provide examples of how this market insight has influenced your investment decisions in the past?
Keeping a pulse on FMCG trends, innovations, and challenges is crucial in our line of work, so we’ve crafted a rich tapestry of strategies to stay ahead. This includes diving into industry reports and market research for nuggets of insight into consumer behaviour and emerging trends and stepping into trade shows and conferences to get a real feel for the latest products and to weave our network. We also tune into the buzz from thought leaders and influencers, grabbing diverse viewpoints. Engaging in industry forums and online communities keeps us in the loop with the latest hurdles and how to leap over them. Plus, we join forces with industry associations to tap into specialized resources and further our connections. And, of course, we harness the power of data analytics to decode consumer behaviour, spot market trends, and size up the competition. It’s all about a multifaceted approach to staying one step ahead in the vibrant world of FMCG.
How do you assess the competitive landscape for FMCG startups? What factors contribute to a startup’s ability to establish and maintain a strong market position?
In assessing the competitive landscape for FMCG startups, we focus on a blend of market analysis, innovation, and the team’s strength. It’s essential to understand the market’s size and trends, but what sets a startup apart is its ability to innovate and differentiate itself from others. We look for teams that are not just skilled but also deeply passionate, as this often translates into resilience and creativity in facing market challenges. Operational efficiency, particularly in supply chains, is critical in this fast-paced industry. Moreover, building a strong, relatable brand and maintaining financial health are key indicators of a startup’s potential. Lastly, we always consider how well a startup understands and engages with its customers, as this is where true, lasting connections are made. In essence, it’s about finding those unique startups that not only have great ideas but also the capability and drive to bring them to life in a competitive market.
How does your VC firm approach long-term partnerships with FMCG startups? What role do you see your firm playing in the growth and development of the companies you invest in?
As an investment firm founded by entrepreneurs, we uniquely understand the journey of CPG/FMCG startups and prioritize a founder-focused approach in our long-term partnerships. Our philosophy is rooted in empathy and practical support, recognizing that we’re not just investors, but partners in your entrepreneurial journey. We’re committed to being actively involved, offering not just capital but also mentorship, industry insights, and a network of connections that can accelerate growth. Our experience as founders allows us to offer tailored advice and empathetic support, especially during challenging times. We see our role as catalysts for sustainable growth and innovation, aligning with the startup’s vision while respecting the founders’ autonomy. Our goal is to create an environment where founders feel supported, understood, and empowered to make bold decisions, driving their companies towards long-term success in the FMCG sector. This founder-focused approach is at the heart of our strategy, believing that the best outcomes arise when founders are given the right mix of freedom, support, and resources.
What exit strategies do you typically consider for FMCG investments? How do you work with portfolio companies to achieve successful exits?
In our investments, we focus on flexible exit strategies like acquisitions, mergers, or IPOs, always aligning with the founders’ vision. The beauty of our sector is that if you can early on instil a healthy Gross Margin and efficiency on overheads, you are in the driver’s seat to set your preferred exit pathway, and there are surely many more than in tech or other sectors. Our role is to guide portfolio companies in building strong, sustainable businesses that are attractive for these exits. We provide hands-on support in optimizing operations and financial health, leveraging our network for potential deals, and assisting in negotiations. Our goal is to build healthy businesses and brands of the future & when timed right a smooth, successful exit that maximizes value for all, especially the founders, ensuring their hard work and dedication culminate in a rewarding conclusion.
Which direction is your company moving forward and how can a startup approach you?
Our focus for 2024 is to establish our fund and invest in at least 4 to 5 companies annually, startups can reach us via the “contact us” section on our website, www.homegrowncpg.com
