Private investors on the hunt for GCC startup talent

Venture capital firms on search for startups able to scale beyond the Middle East

The fundraising landscape for GCC startups is shifting as private investors loosen the purse strings in search of local, scalable companies, experts said Tuesday.

In the wake of multimillion-dollar fundraising rounds, such as those by UAE-based e-commerce sites Mumzworld and Souq.com, the industry is nearing a tipping point, said Dany Farha, chief executive of venture capital firm Beco Capital.

“North of a quarter of a billion dollars has been raised in the last 18 months by regional entrepreneurs,” Farha, whose investments include the online taxi firm Careem and Dubai-based real estate portal Propertyfinder, told delegates at a Dubai event. “We’re seeing the start of a shift.”

“There are startups that are chasing us to write cheques, and startups we are chasing to give them money,” said Ihsan Jawad, managing partner of Middle East Venture Partners (MEVP), which has assets of $120m under management. The company counts Arabic-language medical advice app Al Tibbi, and secondhand online clothes portal The Luxury Closet, among its investments. “For entrepreneurs with the right mindset and the right product, financing is a walk in the park.”

"Appetite for investment is growing, because there are bigger players showing that it can work"Souq.com secured $275m from investors including Standard Chartered and Tiger Global Management in February, in the largest-ever fundraising in the region’s e-commerce space. In January, Mumzworld closed a multimillion-dollar series B fundraising round, to finance its expansion across the GCC. Earlier this year, Stockholm-listed investor Vostok New Ventures announced it had bought 10 per cent of Propertyfinder for $20m, valuing the online portal at $200m.

“Appetite for investment is growing, because there are bigger players showing that it can work,” said Mona Ataya, chief executive of Mumzworld. “Fundraising deals lift the market, because success breeds success.”

Still, raising series B fundraising remains a sticking point, she said. “Angel investment is easier to secure than it was, and we’re seeing investors take greater risks. B round funding is still the most difficult, because you’re not selling your business anymore [to investors]; you’re selling your leadership team.”

The rise in venture capital investments is a reflection of the GCC’s maturing startup industry, said Noor Shawwa, managing director of Endeavor UAE, a nonprofit that seeks to support entrepreneurs.

“International VCs are increasingly looking at the Middle East, the UAE in particular, as they see it is on the cusp of going from being a startup ecosystem, to beginning to mature,” he said. “There is investor appetite for the right product. It’s about finding the entrepreneurs who will take that money, plug it in for growth, and really have disproportionate results.”

Shawwa was speaking on the sidelines of Endeavor’s inaugural Scale Up UAE event, which aims to help entrepreneurs turn their startups into fully-fledged companies.

“I think the GCC is at the point where we’re seeing some entrepreneurs, who’ve been working at this for some time, turn the corner and see results,” he said. “We’re increasingly seeing startups accelerate their growth, and break through to the next level.”

Photo credit: Endeavor