Technology start-up sector grows tenfold in MENA

Dubai / Emirates Business

The tech entrepreneur sector has grown by over tenfold since the nascent Venture Capital industry emerged four years ago. This encouraging revelation has been made by BECO Capital, a regional venture capital firm focussed on technology investments in the Gulf Cooperation Council (GCC) countries. This growth has allowed more and better quality investments in promising start-ups in this region.
Dany Farha, Co-founder and CEO of BECO Capital, who will speak at STEP conference on Monday, 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.”
However, more needs to be done at the angel, incubator and accelerator level, and entrepreneurs must lead this revolution.
“Unless the full investment cycle matures in the MENA tech start-up 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,” stated Farha.
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.
New angel and accelerator money is coming through, driven by governments, especially in the GCC, looking to trigger a major shift towards knowledge economy. As a result, they are supporting the tech start-up ecosystem at the incubator stage through government and semi-government initiatives. Recently, the UAE has surpassed Norway, South Korea, Turkey and Japan to be ranked 19th in the 2016 Global Entrepreneurship Index.
“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,” stated Farha.