BECO Capital, a regional venture capital firm focused on technology investments in the Gulf Cooperation Council (GCC) countries, today said that the tech entrepreneur sector has grown by over ten-fold since the nascent Venture Capital industry emerged four years ago, allowing for more and better quality investments in promising startups.
Dany Farha, Co-founder and CEO of BECO Capital who is speaking at STEP Conference tomorrow, said: “We waited four years for the VC ecosystem to mature in quality and quantity to enable us to make a higher number of investments at the seed stage. We saw our deal flow grow exponentially year-on-year for the past four years, so we scaled our raising and deployment in parallel with the growth in startup activity. The same needs to happen at the angel investment stage so the whole value chain is working together to be appropriately funded, otherwise it will reach a bottleneck.”
“We are at a stage where additional regional pre-Venture Capital money should enter into the space and a diverse pool of entrepreneurs have to come forward with quality innovation and problem-solving ideas for investments. At the moment, we see funding in the middle of the chain at the micro-VC, VC and Private Equity levels.
More needs to be done at the angel, incubator and accelerator level, and entrepreneurs must lead this revolution. We ought to ensure that there is enough support for innovation in startups. We are feeders in the ecosystem and entrepreneurs are the drivers,” according to him.
“Unless the full investment cycle matures in the MENA tech startup sector, the business cycle for SMEs will suffer. However, when it does, the entire value chain will grow to a size where institutional investors and Sovereign Wealth Funds (SWFs) can start deploying to the VC asset class.”
Dany Farha believes that all sub-sectors in the value chain need to be invested in at the same pace and move together. “They are inter-connected and the growth of every part of the value chain should be going at the same pace as the rest and pass through to the next level,” he continued.
At the VC level, there is still enough dry powder waiting to be deployed and more funds are currently being raised for additional investments. Today, each of the big VC companies is looking at an average of 1000 potential investments, and will typically invest in less than one percent of those. “So each one of the main VC players can now make close to ten investments a year in early stage companies. This will start creating the impact we dream of.”
New angel and accelerator money is coming through, driven by governments, especially in the Gulf Cooperation Countries, looking to trigger a major shift towards knowledge economy. As a result, they are supporting the tech startup ecosystem at the incubator stage through government and semi-government initiatives. Recently, the United Arab Emirates has surpassed Norway, South Korea, Turkey and Japan to be ranked 19th in the 2016 Global Entrepreneurship Index. It placed the country at the top of 15 Middle East and North African countries.
Such economic diversification strategies are already paying dividends, with hundreds of quality tech startup coming online in Saudi Arabia, the UAE, Jordan, Egypt and Lebanon in particular.
