Behind the decision: investing in erad

Sarah Abu Risheh


September 19, 2022




Plautus, the roman playwright of Latin drama, is often credited with the saying you need money to make money. Although first cited over 2000 years ago, this truth continues to exist today, and for good reason. Companies unable to unlock capital can face a challenge tackling their unit economics, hack growth or unlock new markets.


Until a few years ago, financing options were limited and often very dilutive, particularly in this region. Equity financing can be dilutive to businesses that need to raise large amounts of money to scale. Debt financing through banks has proven very difficult in the region due to the nature of tech businesses having negative earnings or is very costly due to high interest rates.

Companies offering unsecured working capital to online businesses with predictable revenues are increasing globally and the industry is expected to grow by a CAGR of over 60% between 2020, and 2027, and reach over $40 B. The premise is that digital-first businesses no longer solely need to rely on dilutive capital or subscribe to predatory terms such as personal guarantees in order to finance their growth.

erad, one of our most recent portfolio companies, solves for the difficulties of non-dilutive financing for SME’s and digital businesses in the region. Globally, this business model works in different formats through companies such as Pipe and Clearco which offer diverse sources of financing for businesses when raising capital to grow.


erad’s solution can be seen as a partnership, as terms and repayment options are based along a company's growth projections. It is a more adaptative capital structure than traditional financing, as repayment rates adapt to the business levels. Rates increase as a business grows and reduce as business slows. This flexibility of repayment is what makes this type of debt suitable for growth.

The problem is evident, and the business model is attested.However, our decision to invest in erad goes beyond this.



erad is riding numerous digital tailwinds, including the rise of ecommerce stores and the increase in SaaS/Predictable Revenue based businesses across the region. Supported by MENA companies' post-covid renewed interest to utilize software solutions, and the region’s growing appetite for ecommerce solutions, we are likely to see more startups operating in these verticals.  

The other note on timing relates to the availability ofAPI tech and the recent increased integrations into company ERP systems that make erad’s solutions possible for so many companies. When a company applies for erad’s debt, erad integrates with a company’s commerce stack (via APIs) to access its historical sales data among other data points, which is analyzed in erad’s proprietary credit-scoring model and utilized to make immediate data-driven underwriting decisions. The stack includes payment processors, advertising systems, accounting systems, bank accounts, e-commerce platforms, etc. Such integrations are also used for auto repayment purposes making the reconciliation process simpler for users.



This is a product-led business

 Fares, Salem and Youssef, along with their tech teams, were driven by a self-experienced insight and an inclination to fill a gap in the alternative lending market. As such, the current iteration of their solution is built on product features that are centered on solving pain points regional entrepreneurs face.  

Our decision to invest in erad is complemented by our confidence in the founders’ long term vision to offer a broad range of services. Their proposition solves a broader problem than the immediate cashflow issues startups often face. It encompasses analytics, liquidity management and treasury solutions. It also creates a new asset class for investors and enables private investments in companies.

Their growth is also driven by their product. Its continuous evolution ultimately means a faster sales cycle, a better user experience, and a more efficient customer acquisition process (via self-onboarding, and self-service).


How big this can get

In the long-run, erad can target all digital SMEs and growth-stage startups in MENA region (c. 20 million local businesses) that can provide predictable earnings and have positive unit economics.  The opportunity in becoming the leading financial management platform for this segment of the market is massive.

To a larger extent, once erad has disbursed enough loans to prove its underwriting model, the company will be in a unique position to create a new type of asset class in the region, enabling private investments into the early stage tech asset class. With persistent inflation and a low-rate returns environment on both stocks and bonds, regional investors will seek to diversity their investments. This however will naturally take time to build confidence in as beyond the metrics used by erad to asses the credit worthiness of a business, performance history will be key, which will take time to build.


Beyond all, it is our belief in the founders’ ability to execute on all the above that gives us the confidence to invest in erad and the team.