OBBC PODCAST TRANSCRIPT Phaze Ventures

AOS

May 28 2020

Oman and Entrepreneurs

Mohammed Al Wahaibi

26 May 2020

This podcast has been edited for publication. Any mistakes or discrepancies with the original podcast are the fault of the Editor alone.

Oliver Blake Welcome to the first Omani British Business Council podcast in our series and I'd like to give a very warm welcome to Mohammed Al Wahaibi today. Mohammed is a graduate of Surrey University where he did his Bachelor's in Mechanical Engineering and the University of Bath where he read a Master's in Science in Automotive Engineering. He then went on to spend four years with Fluor, the energy and chemicals company in Farnborough and a further 5 years as Managing Director of the Assarain Group in Oman before then, in 2017, co-founding Phaze Ventures, the VC firm and innovation platform, which is the subject of our podcast today. Mohammed, a very warm welcome to you and thank you very much for taking the time to speak to us today.

And just to set the scene for our listeners, Mohammed is dialling in from a very balmy Muscat in Oman today and I'm sat on the edge a hill in Scotland where the sun is remarkably shining as well. I thought I'd launch straight into it and as I said, you created or co-founded Phaze Ventures in 2017 and it would be great for our listeners to understand where the idea came from. What was your inspiration and how did you get the concept going?

Mohammed Al Wahaibi I’ll start from the very start. My partners and I all studied abroad. As you just said, I also worked abroad before coming to back to Oman in 2016. Back then, there was almost no motivation to basically start your own thing. You’re expected to get a stable job with the family offices or one of the state-run companies. And of course, that's exactly what we ended up doing. Although, we were meeting at least three times a week in the evenings to discuss what else we could do to create opportunities for likeminded people, such as ourselves. Also, at that time, Oman was feeling the crunch from the last oil crash and we had highly educated people out of jobs or basically leaving the country, causing what we call a brain drain.

And so we decided to set up round tables and invite many of our peers and colleagues as well as some highly ranked government officials to discuss what we all felt were the gaps in the ecosystem, barring the youth from unleashing their full potential. We discussed what the government and the private sector could do to plug these gaps and create an optimal ecosystem that will allow determined entrepreneurs to create their own opportunities. One of the questions we always like to pose is why are all these well-known successful companies like Facebook and Twitter, Snapchat, all coming out of places like Silicon Valley and not from our region? Are the people there smarter? Or is there like some magic sauce in that region? Of course the answer to that is no. What Silicon Valley have managed to do is create an ecosystem that is inviting to young entrepreneurs and provide them with all the necessary services that allow them to fully unleash their potential.

Oliver Blake So, you had this real desire to create an ecosystem in Oman that would allow the local population to really engage and innovate. So, you decided to start Phaze Ventures to enable that. What was the next stage after that?

Mohammed Al Wahaibi We basically started Phaze Ventures and what we thought would be important is that one of our partners is an investor. I'm an engineer and the other partner is a software developer. And so, we put our minds together and having met with a lot of the big corporates as well, we collated all of these ideas and thoughts about the different projects that we could start in order to boost this ecosystem. And so the name Phaze Ventures comes from that. We did things in phases rather than just coming in and saying, ‘we want to be VC firm, just invest’. We would basically sit around the table twiddling our thumbs. There was literally nothing to invest in or it would be very difficult to find things to invest in. So, we had to go almost to ground zero and start from scratch and, and hence the name Phaze Ventures.

Oliver Blake And before we go into the details about the companies that you've gone on to invest in, incubate and help. Can you explain a little bit about the specific focus on energy because that's clearly an area in a sector that you’re heavily focussed on and you have a real link, a special link with the Petroleum Development Oman, the country's national oil company. Can you explain a little bit more about that and your thinking behind wanting to start, at least, in the energy space?

Mohammed Al Wahaibi Yeah, of course. Since it’s well known that our country and the region is still very highly dependent on the energy sector, we felt it to be the optimal place to start as we would be able to quickly add measurable value and show the impactful improvements that venture capital can actually bring. We felt, or we still feel, it is a very complacent industry that is very, very ripe for disruption. The link to PDO is that we partnered with them in early 2018 to support the local start-up ecosystem as well as try to help to grow Oman's presence on the energy innovation stage globally. PDO has always been known as an innovator and an early adopter of new technologies in the region.

So after having spoken to the leadership, they were really supportive and shared our vision for Oman. And so basically as partners, we can bring in investment, incubation as well as acceleration into their arsenal. One of those partnerships that is slowly getting quite well known now is the SparkLabs Energy Accelerator, which is the first of its kind in the region and only one of two globally, at the time that we launched. It focusses on piloting real-world technologies with corporate partners and that's a very unique value proposition that's very difficult to find it this time.

Oliver Blake And I suppose one of the key advantages that these companies then have through the PDO partnership is that unique ability to access the real time energy activities going on out in the field and therefore to be able to test their technological solutions and get the data back from those tests is, is that about right?

Mohammed Al Wahaibi Exactly. So, the value that we add to the start-up is we give them this platform where they are able to go from their concept or proof of concept to their proof of value. From the corporate side, they get to see technologies that are not available on the shelves. And so, they have the opportunity to co-develop this technology and be the first to adopt it and see the efficiency gains prior to it being globally available.

Oliver Blake I understand there are some very clearly defined areas that you like to focus on. We’re very used to now hearing about the fourth industrial revolution and robotics and artificial intelligence and the future of technologies coming through those pipelines, but I noticed that you, as a company, have identified four key areas; AI, material innovation, the industrial internet of things and also alternative business models. Can you explain a little bit about why you specifically chose those four pillars and how they link into your wider strategy of energy investment and your wider vision?

Mohammed Al Wahaibi Yeah, of course. So, going back to what really differentiates us from the typical VC model is our close ties to the industry through our partnerships with local international energy conglomerates. We get to see first-hand all the challenges our corporate partners are experiencing in their day to day operations. And so, based on our interactions with them, we're able to see trends and the direction that the energy industry is heading. And these focus areas that you mentioned, we feel are now reaching the maturity level, they're ready to be deployed in these enterprises to help them achieve their short term and long-term goals.

Oliver Blake So, these were the areas of potential fastest mobilisation, areas that you could, by innovating and by incubating companies focussed on these areas, achieve results on the ground quicker than let's say robotics or other technical areas?

Mohammed Al Wahaibi Yeah, exactly. So it really depends on the different innovations. Oil and gas and energy, in general, uses a variety of different innovations. Digital innovations usually are very quick to deploy and very quick to give good results as compared to something more industrial. We usually tend to look at more of the digital side of things to show quick wins.

Oliver Blake For you, venture capital investment and the whole process and strategy around it is your bread and butter, but many of our listeners will not have had much experience of how the VC process works. So could you perhaps, using one of your companies as an example, talk us through the process of how you identified them, what kind of processes and filters they have to go through in order to get to that final round where they achieve investment from you and then perhaps just a little bit about how you supported one of your companies and the success they'd gone on to achieve?

Mohammed Al Wahaibi Our investment process for local and regional start-ups is a little different to that of international start-ups. Usually we're a little bit more lenient in our mandates for local start-ups. Mostly, that's because of how young the ecosystem is and the lack of deals that we are seeing in the specific areas of focus that we work in. Having said that though, our typical process usually starts off with our analysts basically reviewing the start-up decks that we receive or start-ups that we find through research. If the company fits our high-level mandates, we then do a deep dive into the technology itself and understand how it works, the product market fit and of course, their financials. Once the team has all the information they need, they prepare an investment committee presentation, presented to the partners and we usually make a decision then. If we need any follow-on meetings with the founders, we also do that.

It’s a very, very close relationship. We like to keep very close relationship with all our portfolio companies and of course, companies that have invested through the accelerated program. There are a few additional steps as their technology needs to be vetted by the corporate partners. If you get through that really rigorous process, having been able to convince a potential paying client like PDO to run a pilot for them, it's basically a huge tick in our books.

Oliver Blake Absolutely and could you mention one of the companies that has been through that process? Is that something you're able to talk about? A company that has now achieved success through your system.

Mohammed Al Wahaibi Of course. A company out of Canada, Interface Fluidics, they developed a chip that is able to replicate a well. It's called a lab on a chip. And so instead of all the expensive processes that you need to go through with testing actual samples from the well, you basically test their chips. So it saves a lot of time. It saves a lot of money. It makes things a lot more efficient. So, we accepted them in last year's cohort, the first cohort. They then went on to be accepted to do a pilot for PDO. So this technology has been used previously in the medical sector, but never in the oil and gas or energy sector. And so, they were the first to transition this technology. PDO had the first eyes on, first dibs on this technology. The first pilot was so successful that now they're working on their second pilot and hopefully, once that pilot is finalised and the results are out, they continue on to get an actual contract.

Oliver Blake Fascinating and that leads to my next question. As an Omani VC firm that is investing in and assisting a firm from Canada coming to Oman to pilot, to test and to develop their technology through PDO, what stage were they at when you invested in them? And more generally, are the companies that you invest in always at a certain level of maturity, do they have to already be at a certain level, or have achieved a certain amount of success, before you look at them? And also, on top of that, what is the kind of financial bandwidth, are you limited in the amounts of early investment that you can make or do you flex that investment depending on the opportunity?

Mohammed Al Wahaibi Interface Fluidics was on the far end of what we currently invest in. So, our current fund, which is completely partner funded, we haven't taken outside money just yet, is predominantly focussed on what we call Seed to Series A. And that basically translates to a funding amount from, let's say, between a $100,000 up to an amount of $500,000. So, Interface Fluidics was in their Series A. It was a rare case, but we really loved the company. And so we were like, we can push our mandates a little bit for this, for this investment. Our current fund mostly focusses pre-Series A. Having said that, we are in the process of raising our second fund which will be an energy and logistics focussed fund. We're looking at companies a little bit later than that, so starting from Series A and beyond. And this will have much larger ticket sizes.

Oliver Blake So, is this now an indication that you are taking the very successful model you've built in the energy sector and you're now going to expand into other areas that are ready?

Mohammed Al Wahaibi When we say energy and logistics, it is mostly on how logistics intertwines with the energy sector because they're very closely related.

Oliver Blake In the longer term, do you think there is an ambition to go into a completely new sector all together? So, as you say, energy logistics, closely linked, but could Phaze Ventures ever try to incubate this kind of capability and talent in a completely different sector?

Mohammed Al Wahaibi Our expertise is definitely in energy. Our current focus is on Oman integrating with the global energy stage through both investment and strategic partnerships. We are always open to looking at other avenues for sure. Maybe not in the next couple of years, but moving forward, we will be looking at things in the finance space as that is another interesting sector in Oman as well.

Oliver Blake Given the real depth of your knowledge and focus on the energy sector, it would be great to get your thoughts on two things: What is your thinking now around the current energy situation in the region, in the Middle East, given such low oil prices? And kind of linked to that, we have recently heard that PDO is going to be moving to a new branded company called EDO, Energy Development of Oman, with a much greater focus on renewables. So, where do you see Phaze Ventures in all of that, both with the move to EDO but also in a climate where energy and oil prices are much lower?

Mohammed Al Wahaibi First of all, it's quite important to differentiate between what EDO plans to do, which is basically investing in energy infrastructure, and what we are doing, which is investing in the disruptive technologies that enable that infrastructure. I can give you a quick example on that, one of the companies on our last accelerator cohort is a company that is looking to transform one of Oman's largest solar plants into a 24 hour energy production plant through an energy storage technology, which uses a by-product of the energy industry, sulphur, which PDO currently spends money to get rid of. So, two birds - one stone win for everyone. From Phaze Ventures' point of view, we plan to work closely with PDO and other energy conglomerates to help them bridge that gap between the start-up and corporate worlds as well as basically try to aid them in enabling energy transition.

Oliver Blake Back to the sort of conventional energy side of things, I suppose companies such as yours and the ones you invest in are going to be even more important in a climate where oil companies have got to cut costs and save as much money as possible because of the lower oil prices. So, if the companies you invest in are enabling organizations like PDO to make savings, then that has surely got to be good for you, even more opportunity?

Mohammed Al Wahaibi Having worked in the energy industry, as you mentioned, I worked for Fluor for about four years, the energy industries are very, very risk conscious. They don't like taking big risks. If it is not broken, why fix it? However, as you said, now with the current oil prices, they basically are being forced to make big cuts. The last thing you want to do is cut costs by cutting employees, they are a big asset. You don't want to be doing that. What you should be doing is focussing on these types of technologies that can get you quick wins and bring you to the forefront of your competitors that are taking their time in this transition.

Oliver Blake Interesting. And you mentioned employees, and it draws me back to something I wanted to ask you about, which is really around the human talent side of all of this. You mentioned that a few years ago, when you started Phaze, there wasn't the kind of ecosystem that was required and that's something that you're helping to build. I am curious to know two things really - one, how are you finding the split between domestic and international investments with the companies you invest in? And equally, have you found that by having set up Phaze Ventures, over the last few years you are beginning to see more of a local throughput, a greater domestic pipeline of talent focussed on this space?

Mohammed Al Wahaibi As of today, we’ve invested in seven companies, four of which are actually Omani and three of which are international. So we're actually pretty proud of that. Going into this, we did not expect that. Some of the companies now have contracts with PDO, so I'm actually pretty happy with the current ratio. However, we would like to see an increase in local start-ups tackling the energy industry specifically. And I feel like through the programs that we run, such as the accelerator, we are basically able to bring international start-ups to Oman, have them rub shoulders with Omani entrepreneurs and encourage them to enter that sector.

Oliver Blake Fascinating. So it seems that there really is this growing domestic pipeline and given what you were saying earlier about your main focus being on energy and logistics, if there was another space that you think is absolutely right for the same sort of disruption, what would that be?

Mohammed Al Wahaibi The area that is getting disrupted right now is the consumer technology space. I think the most VC money is going into that sector; companies that are disrupting traditional businesses like restaurants and groceries, the tourism space. We have these apps that you are able, with one click, to set up a whole experience when coming to the region. In my opinion, it's getting a little bit too saturated right now. So, we would like to see people branch into the medical space. I would say going forward, those spaces are very important for not only Oman but the region as well.

Oliver Blake It is great to see the level of innovation that has gone on during this crisis. We have seen that with many companies coming out of the Oman Technology Fund. It’s very positive. I think we are sadly running out of time, so I just wanted to finish off by asking you one final question really, which is given that we now are entering a slightly different economic world with the lower oil price and as you sort of mentioned earlier, that historically there's been a tendency for people to want much safer, large corporate private sector jobs or indeed public sector or state owned company jobs, in this kind of new world where we feel sort of innovation and technology could be king, what kind of advice would you give to those young Omani men and women who are graduating from Omani universities or indeed international universities? What advice would you give them towards this whole space of embracing innovation and start-ups?

Mohammed Al Wahaibi Sure. So I mean, from experience as an investor in VC, we always like to see a founder that has come to us with an innovation after having worked in that industry for a good amount of time, because we feel that the best ideas are from the founders that have witnessed the challenges that their company has been going through and therefore has been able to produce something that has a great product market fit. My advice is definitely to look to get your dream job with one of the large corporates, be it in Oman or internationally, but keep an eye out for efficiency losses within the company, keep an eye out for areas of improvement that you can capitalise on. Once you feel you are ready, make the jump and start your own company. And that's usually how a successful idea is born.

Oliver Blake Fantastic. Great advice. Mohammed, thank you so much for your time. It has been a fascinating opportunity to talk to you and to learn more about the work that Phaze Ventures is doing in Oman. We wish you the very best of luck with continued investments and support. And of course, we are very much looking forward to having you as part of the OBBC technology conference in London. We don't know when the date is going to be yet because of the current crisis, but we very much look forward to having you there when it's back on the cards.

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