By Dany Farha
Almost 5 years ago, when we first embarked on our journey of building BECO, we looked for inspiration from around the rest of the world as we wrote our business plan. Where in the world were things working in the tech sector?
We focused on Emerging (EM) and Frontier markets (FM) as we felt that they most closely resembled our region. What models worked, what failed and why?
We looked around the entire globe for leanings. LinkedIn became our best friend as we reached out to other successful tech entrepreneurs and investors all over the world. We couldn’t find many VC’s in EM/FM, so we honed in on entrepreneurs.
We learned a lot.
- We learned that traditional funds in EM/FM often had to sell their jewels at the worst time, when their jewels had created tremendous nominal shareholder value, the funds duration had arrived (7-10 years) and they were liquidating these jewels when they had so much more upside, in order to return capital to investors. They had to make shorter term decisions as a trade-off to the longer term benefits to all stakeholders.
- We also saw that holding periods would be much longer than in the US and Europe. In the US, the average time for a liquidity event from startup to exit, via M&A or a listing, is seven years. In Europe, it is a few years longer and in EM/FM it would be even longer. This is why we created a company structure. A permanent vehicle structure with a listing as the final goal for our investors to achieve a path to liquidity.
- We also drew inspiration from Spanish speaking Latin America (Latam) which, much like our MENA region, was made up of 15-20 predominantly Spanish speaking countries (minus Brazil). Similarly, we all speak Arabic, but from country to country, we have slightly different cultures. A Venezuelan is not an Argentinian, as much as an Egyptian is not a Kuwaiti who is not a Saudi. Our economic blocks both had restrictions of people flows as well as custom duties and other such hurdles making eCommerce across our common economic blocks a tough proposition.
- South East Asia (SEA) also gave us inspiration in that our demographics were similar: Singapore to Dubai, Malaysia to Saudi Arabia, Indonesia and Philippines to Egypt — these markets share similar economic and population drivers in our respective economic blocks.
In 2012, Latin America had a few mega-successful entrepreneurs who IPO’d or sold their companies for mega bucks, in one case in the few billions of dollars! Wow! SEA was more like MENA in that there were a handful of successful tech companies but no exits. Both Latam and SE Asia were much more developed technology ecosystems.
Fast forward 4.5 years, I’m very proud of what we in the MENA VC ecosystem have achieved. We have leapfrogged our EM/FM counterparts. The largest 5-6 VC firms in MENA have raised approximately $250m from mid-2014 to 2015 and began investing aggressively. That’s a quarter of a billion dollars invested in under two years! Angels, angel networks, incubators and accelerators have been investing, all creating a viable and thriving technology ecosystem and in the process, deal flow for us in the VC community.
In 2012, we saw 80 deals in 2012 and we will see around 1,000 this year alone! Plot that graph, it’s not linear, it’s exponential.
Ladies and gentlemen, we have collectively created a vibrant ecosystem.