Money is Raining on Middle Eastern (ME) Startups
“We are talking returns that are 10x and 20x, one phenomenal return is enough for you to retire on.”
Photo Credit : emirates247.com,
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The strongest persuasion to invest in startups versus traditional pursuits is logic.
The returns on tech startups is much higher than from oil and real estate according to Hassan Haider, part of the first Bahrain – based angel network. “We are talking returns that are 10x and 20x, one phenomenal return is enough for you to retire on.”
And what of where the investments are happening the most?
Out of ME, the emirate of Dubai has grown the fastest, and is the biggest. Jose of EQORIS says, “If you follow the money, i.e. go by value of investments - excluding Israel, UAE stands at the top, followed by Lebanon and Jordan.”
Even Bahrain is coming up. With good reason. It was one of the first to discover oil and but because of smallest repositories will be one of the first to run out of it.
Dr. Simon Galpin, is in charge of attracting startups around the world to setup offices in Bahrain. He says, “Although relatively new, the MENA (Middle East and North Africa) region’s startup scene is developing rapidly. With direct, easy access to neighbouring countries and as a compact market with a young, dynamic and highly-skilled local population, Bahrain offers a perfect testing ground for entrepreneurs wishing to try out new business ideas to serve the regional market, in particular the large customer base in Saudi Arabia.”
Money has never been a problem for the ME. Same goes for startup investment amounts.
Despite the real investor interest is only starting to show, Jose says, “Whilst much depends on the valuation and other variables, depending on the stage of the investment alone, individual investors would be investing in the range of 20,000 dollars for seed, and 100,000 dollars for series A and higher as a start. However, the average ticket size for an investment in a company would be in the range of 2 to 3 million dollars.”
That’s the average. Then there is the Noon.com, a billion dollar ecommerce company backed by the same investors who built the tallest building in the world (the Burj Khalifa). There are two other startups valued over a billion dollars, Careem Networks and Souq.com.
The returns are comparable to those in the US.
Chantalle Dumonceaux is cofounder of WOMENA, a ME based angel investor platform oriented towards empowering women entrepreneurs. Chantalle said citing data from the US, “The average angel investor has a 20-30 percent IRR (internal rate of return), depending which study you're looking at. The top quartile of venture capital firms have an IRR of about 20 percent.”
BECO Capital is the second most active VC in the UAE according to CB Insights (Wamda Capital is most active and STC Ventures third most according to same source).
Dany Farha CEO and managing partner of BECO Capital gives us more prominent ME startup investors. “Mohamed Alabbar (builder of Burj Khalifa, investor in unicorn, Noon.com) is the most prominent, famous investor lately investing in the tech scene but other family offices and sovereign wealth funds are all starting to invest as well.”
Of the institutional investors playing in the ME Dany said, “General Atlantic and Warburg Pincus invested about 500 million dollars in Network International, a credit card and payment processor; Vostok New Ventures led a 20 million dollar investment in ‘propertyfinder.ae’; Rakuten led a 350 million dollar investment in Careem Networks, the region’s leading ride-hailing app.”
Last words – Indians capitalize on ME startup scene too
Even Indian startups and entrepreneurs of Indian origin are riding the wave as startup interest reaches a peak in the ME.
Chantelle of WOMENA said this, “Boxit is an on-demand storage company with a brilliant Indian entrepreneur. Guiddoo is a travel app from great Indian entrepreneurs. And you've probably heard of Zomato which has made its way to Dubai.”
And how has Zomato fared in a region slowly embracing online services so far? Responding to BWDisrupt a Zomato spokesperson said,
“The Middle East is one of the biggest markets for Zomato. We cover over 14,000 restaurants across the UAE alone, allowing users to order online from over 3,000 restaurants. In Dubai alone, we get over 1.2 million unique users each month.
The total addressable market is about 1.2 to 1.4 million people in Dubai for a product like ours. These are people between ages18 and 45 that use the internet to make a decision. That’s a sizeable amount, around 90 percent of the addressable audience in Dubai uses Zomato.”
ME may have been late to the startup fest. But it sure is warming up fast. Nobody is complaining, Why should we if the startups from India have now found another market and not a competing startup ecosystem.
Three cheers to a ME that embraces technology like it did oil, in the era gone by.
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