The startup funding ecosystem in the Middle East region has seen remarkable growth in the last few years. From barely any investors to speak of a couple of years ago, the scenario has now transformed with several international investors, including some of the hard hitters, showing interest in the region.
It is no surprise hence, that the environment is perceived good for entrepreneurs. Even though the funding environment is still very nascent in the Middle East, there are positive indications of where the ecosystem is headed. “If you look back, the tech ecosystem was established in Latin America, South Africa and Asia. Fast forward a few years, and we suddenly see the Middle East region coming up the graph. Some high volume fundraising has been happening here, changing the startup-investor landscape entirely,” observed Dany Farha, an investor and CEO & Managing Partner at BECO Capital that features among the more prominent players in the region.
Value Matters
The right match however is critical in this relationship too, and there are smaller details to look out for in the equation. While seeking an investor, startups need to ensure that they partner with someone who adds value to the organization. “Whether it is something as basic as connecting to experts such as tech or research or being introduced to potential clients or even just getting visas for a region, a startup must identify and extract values from its investors,” advised Idriss Al Rifai, Founder & CEO, Fetchr.
Elaborating further on this, Propertyfinder Group’s CEO and Founder Michael Lahyani stated that startups need investors who support them in the ecosystem. “With not many venture capitalists (VC) back in 2009 when we were looking to grow our business, we raised funds from a local investor. But once you are scaling up, it is important for another higher VC to join in, so that you can complete the ecosystem and advance further,” he said.
With its recent fund raising of USD 20 million in capital from Sweden-based Vostok New Ventures, a transaction that Propertyfinder says values the company at USD 200 million, Mr Lahyani offers a three-point advice to all startups. “You should not talk about your valuation; you should be aware of your market size, which market holds more potential for you; and you should not waste time on investors who are not in your league. You should focus on people who are interested in your space.”
Beyond Investing
According to some experts, the changing landscape demands that the role of investors should no longer be limited to just funding the startup. “Everyone has to pull their weight. It is a cultural mind shift to open up wallets. Everyone has to chip in across the ecosystem eventually building a good relation and trust for a smooth transaction,” explained Mr Farha.
“Build a line, not just a dot. You need to create and nurture a relationship with the investor that is both long-term and strategic in nature. It is not about raising money once, you will need to do it multiple times. You need to strategically work towards your connections and networks. The investor should be more than just ‘investor’ – the relationship must run deeper for it to bring mutual benefits,” advised Allen Taylor, Managing Director at Endeavor Catalyst.
