How Can International Organizations Help Develop MENA VC Industry
How Can International Organizations Help Develop MENA VC Industry
I had a discussion last week with an international organization on how they can add value to the MENA VC scene, what can be done? And where to start?
It’s surprising how things are eveloving fast! 2015 has been an amazing year! And because of 2015, we need to change how we look at VC and Startups in MENA.
Below are the points I raised during the discussion:
1. We Don’t Have A Gap In Any Investment Stage Anymore
That was the case pre-2015, but now the whole spectrum is covered! We have accelerators, we have institutionalized angel networks who are actively investing on regular basis, we have seed stage VC firms, early stage VC firms and growth stage VC firms investing $4–5m. For late stage tickets of $10–50m and more, we have many international VCs participating and sometimes leading big rounds in MENA.
2. We Have More Dealflow Than What We Can Handle
Every VC in MENA gets between 300–500 deals a year, which is more than what those small firms can actually handle. I worked for 3 VC firms in MENA and we used to get even more in some years. Not all of them are high quality deals, I agree, but the overall quality is enhancing rapidly. So stop talking about the lack of dealflow.
3. Startups Quality Is Evolving Faster Than VC Quality & Good Deals Are Flying!
When you see founders getting rejected several times by MENA VCs, then raise millions of dollars from Silicon Valley VCs, you realize that there is something wrong in local VC! Quality startups are migrating to SV and bypassing all MENA VCs. Not only that, I can give examples of MENA founders who were accepted in SV accelerators, and others who raised capital on AngelList from USA, Europe and even Australia!! Quality MENA startups are skipping the whole MENA VC industry after getting frustrated of how close-minded and monopolized the industry is.
4. What We Need Is More Founder-VCs To Trigger A Constructive Competition
Just like the telecom industry in MENA, when more operators enter a market that was dominated by only one player, the resulting competition is massive, and at the end of the day, the enduser gets all the benefits. VCs in MENA are very few, and there is no real incentive to force them to learn more and evolve. If more is invested in educating and training new VC professionals, preferably successful founders who aspire to become VCs, more disruption will happen, and soon we will have a VC revolution.
5. Fund-of-Funds For New VCs, Not Existing Ones
Fundraising is tough, and it’s even tougher in MENA than in the rest of the world. Existing MENA VCs have already cracked this code. They have raised funds and they have their own LPs. But if more is invested in educating new VCs and helping them create more innovative firms, then there should be a fund of funds for those new VCs, like an anchor LP for them to kick start their fundraising with 50% of the target fund size, only if they are able to raise the other 50% on their own.
6. We Need A Serious Effort To Make Tech IPOs Happen In MENA
It doesn’t make any sense that all the entrepreneurs and VCs in MENA are not able to make one IPO! Not a single one!! We need to focus more on fixing this issue to get some local exits. We can’t keep investing in clones and hope that the original creator of the concept will expand to MENA by acquiring the local player! This is not happening as frequent as it used to happen in the past 5 years. To create true local and even global innovations we need to have local exits.
What else would you like to add to this? How can international organizations help develop MENA’s VC?
