BECO Capital, a venture capital firm focused on technology investments in the MENA region and the GCC in particular, said that over 10 local technology start-ups are expected to exit in the next three to five years, with a handful of them having the potential to break the one billion dollar valuation ceiling, forming the first regional “unicorns” and creating a virtuous cycle for the start-up ecosystem.
According to the firm, the time taken to build enterprise value in a start-up has significantly been reduced. This is driven by regional market fundamentals such as economic growth, demographics, online and smart phone penetration, which are some of the highest in the world, and an increase in venture capital, will all contribute to the creation of such regional unicorns.
“While many of these online ventures are experiencing strong growth and possess solid business models, a few of them will actually receive unicorn valuations, meaning raising fundsat a valuation of US$1 billion or more,” shared Amir Farha, Co-founder and Managing Partner at BECO Capital.
The exit market for start-ups continues to improve, and the future looks very promising, with momentum continuing to pick up each year. Exits before 2005 took anything between seven to 11 years to materialise, and this has dropped to between four and eight years, at similar or higher valuations.
“We will see many exits coming at relatively high valuations of over US$ 100 million or more, but what will put the region on the world map of venture capital will be the first US$1 billion exit, whether through a trade sale to strategic company or even through an IPO. We see some regional companies that have this potential, and we are thrilled to be part of their exciting future,” continued Mr Farha.
Over 40 exits have been completed in technology start-ups in the region since the initiation of the sector, but Amir Farha thinks that some of them came too soon. He cautions the regional industry of losing their next unicorns if they don’t support their winners properly and if they don’t time their exits correctly.
“Some of the unicorns-in-the-making could complete their exits to international strategic firms or VC firms sooner. This might sound great if we do not take into account that these companies could be a bigger phenomenon than the region anticipated. They could become the unicorns we have been waiting for. So let’s not miss out on our future unicorns. We need to back our local and regional start-ups and build large leading companies that can capture the highest value,” explained Mr Farha.
Mr Farha was speaking at the Step Conference being held in Dubai.