This post is part of the My Zawya Story series.
After the acquisition there were many decisions that had to be made by Ihsan and I, some quite contentious. Two that stand out are the new geographic location for Zawya and control of the finances of the company.
Although I am an Emirati, I founded Saffar in Bahrain, which up until that point had been the dominant financial hub in the GCC. Although Dubai had by that time taken some steps to building itself into a financial hub it was still early days and the terrorist attacks on the US on 11 September 2001 looked to be an extremely negative event for any positive developments in the region.
Ihsan, then based in London but committed to move to the Middle East, felt strongly that Dubai was the right location for Zawya. His view was that Dubai would continue to flourish and furthermore it was more important to be closer to the data, all the trading companies, than it was to be close to the users of the data.
After a lot of quite often tense debate I relented. Although I disagreed with Ihsan’s conclusion I could not fault his arguments. I also believe in not interfering unless necessary and I could not see a clear risk to the business. As it turns out, Ihsan had the better decision on this one.
The second decision had to do with managing Zawya’s finances. Although I was new to the online media business, my education, training and experience in finance, especially as the Treasurer of Union National Bank, meant that I understood financial statements, budgets and forecasting quite well. As part of my due diligence of Zawya it was clear that the finance function was not up to par, a common issue with startups where founders focus more on product and business development and cannot (yet) pay for the finance function.
I took a leading role in resolving that problem. The funds invested in Zawya were transferred to the company immediately, but management could only draw down on funds monthly based on pre-approved budgets (a draw down model) with the accountant reporting directly to me as Chairman. This allowed good corporate governance of the finances at a more macro level without micro-managing day to day fund flows. This model created a safety framework that allowed management to focus on business development whilst building the finance function at an appropriate pace. This also highlights the value a private equity backed board can bring to a company over and above independent non-executive directors.
Important decisions, especially early in the life of a business, will have a long term impact on the success of the business. These should be made based on commercial reasoning and not based on passionate pleas and arguments. Furthermore private equity teams need to understand their role in creating operational value.
In my next post I look at the critical issue of deciding the business model.