As a VC, one of the things that is becoming more apparent in the MENA region as the startup ecosystem develops is that there are more and more good startups. But as VCs, good is not great.
Don’t get me wrong, both can yield results, but the difference lies in potential and scale. Great companies define industries and create new markets rather than merely competing within them. Understanding and acting on this distinction can mean the difference between average returns and exceptional, legacy-building outcomes.
Good Startups: Solid Foundations but Limited Reach
A good startup typically has a clear product-market fit, competent leadership, and a well-defined roadmap. These companies are often cash-flow positive or on a clear trajectory to profitability. They solve existing problems effectively and maintain steady growth, often capturing a respectable market share in their industry.
Investing in good startups is relatively safe. They’re predictable, with metrics that align with industry benchmarks, and they generally achieve reasonable exits. However, good startups rarely disrupt markets or create entirely new categories. Their growth potential, while steady, is capped. They just don’t have that special something.
Great Startups: Transformative and Disruptive
Great startups, on the other hand, don’t just solve problems—they redefine industries. They often have visionary founders who can articulate a bold mission and rally talent, customers, and investors around it. These companies are relentless in pursuing scalable growth, leveraging innovation to create entirely new opportunities.
Take companies like Careem, which revolutionized ride-hailing in MENA, Foodics, which transformed the F&B industry through technology, Calo that redefined healthy eating and Floward that scaled gifting beyond measure. These weren’t just good startups—they were great ones, not because they followed market trends but because they set them.
The VC Perspective: Why Great Matters
As venture capitalists, our goal is to generate outlier returns. Going with the flow and investing in safe and good startups is not going to get us there. While good startups may provide some returns, great startups create outsized value. They are the ones that have the potential to generate unicorns and outlier returns.
The challenge lies in identifying these great startups early. It requires a willingness to take calculated risks in things that look strange and different and a deep understanding of the type of founders to look for and back through their journey of building a category-defining business. It’s interesting to note that a lot of truly great companies, early on in their journey, look many times like bad companies. Great companies when they get started are seldom the ones that everyone is chasing.