The Venture Capital industry in the Middle East and North Africa region is set to grow five-fold in the next three years, according to Dany Farha, CEO of BECO Capital, a regional Venture Capital firm focused on technology investments in the MENA region. Speaking at the Middle East Investment Conference in Kuwait today, Dany Farha said that this boom will be propelled by the UAE and Saudi Arabia occupying the number one and three spots in smartphone penetration per capita in the world, increased funds under management, a rise in winning technology start-ups and a handful of technology companies that are on their way to becoming billion dollar companies in the coming five years.
To support his point, Dany Farha said that the Venture Capital funds raised in the region in 2014 were six times larger than those raised in 2013 (or a 600% increase), with deal flow growing by almost four times (400%) in the same period. He said: “Fresh Venture Capital funds raised in MENA last year totaled US$175 million, compared to US$29 million raised in 2013. The region is gaining momentum and is on the way to experience its own boom in the technology sector in the next 5 years, following on India’s success story.”
In 2009 approximately US$800 million were invested in Indian VC. Today, this has grown to an astounding US$2.1 billion, attracting investments from the largest international VC investors.
Dany Farha affirmed: “The Middle East and North Africa region is next. When four or five of the current technology winners grow into the US$1 billion tech companies they promise to be, they will attract international VC investors. When this happens, it is going to be a quantum leap for the region.”
In 2013, VC investments per capita in MENA stood at US$0.56, almost a third of that of India, at US$1.44. Tech VC activity in the region is still on the rise across all functions, from fund raising and deal flow, to closing transactions. Almost 60% of the companies that BECO saw were revenue-generating and more 20% were close to break-even.
He added that BECO Capital is targeting investments in the whole of the GCC region, with a special focus on start-ups in Kuwait, Saudi Arabia and the UAE, Egypt, Jordan and Lebanon offering them next stage growth financing as well as a hands-on approach to generate operational improvements and true value enhancements.
BECO Capital’s ‘value creation’ business model has been successfully implemented through post-acquisition programmes in portfolio companies. As a result, the firm’s investments have not only continued to prosper, but have also delivered substantial growth. “Portfolio companies achieved a net IRR return of 35% over the last two years and we’ve only just started. MENA is next in line for the global boom in the technology sector,” Dany Farha concluded.