Exclusive: Wamda Capital to launch second $70m VC fund

The Dubai-based company wants to expand its investments in Turkey and Africa

“We believe these [Africa and Turkey] markets are under-served so there is a great opportunity to play an active role in financing emerging companies that are coming out of there,” said Mr Ghandour, a partner at Wamda Capital. Reem Mohammed / The NationalShow less

Wamda Capital is planning the first close of its second $70 million (Dh257m) investment fund in early 2019, a partner at the firm said.

The Dubai VC company, which launched an inaugural $70m fund in 2015, is courting some of the same investors but hopes to attract new partners, said Fares Ghandour. The first fund, which is estimated to have allotted at least 80 per cent of its money by the end of this year, counted: now-embattled private equity firm Abraaj; the International Finance Corporation, an arm of the World Bank; Kuwaiti telco, the Zain Group; family offices; and other partners, as investors.

The new vehicle “will be the continuation of funding for the young demographic shift that is happening in these markets and companies that are looking to solve challenges for the up and coming, connected generation”, said Mr Ghandour.

The Wamda initiative was launched in 2010 aimed at budding entrepreneurs in Mena and was accompanied with an angel investor platform, a predecessor of Wamda Capital, now an investor in high-profile companies including ride-haling app Careem. Mr. Ghandour is a partner, alongside founder and chief executive Fadi Ghandour and managing partner Khaled Talhouni. 

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More than half of the second fund will be closed in the first quarter of 2019 and Wamda will have a year from then to raise the remainder and, possibly more than $70m, said Mr Ghandour. The fund typically invests up to $5m in pre-seed to Series A rounds, but has launched a new fellowship programme that will offer aspiring entrepreneurs a grant of $16,000 along with in-kind support, including a workspace in Dubai and other cities.

Besides investing in the Middle East, the second fund will expand its scope in Turkey and Africa, continuing to target tech companies, primarily in FinTech and consumer-related sectors. While the first vehicle is investing at least 15 per cent of its money in Africa and Turkey, the second fund will grow its investments to at least 40 per cent.

“We believe these [Africa and Turkey] markets are under-served so there is a great opportunity to play an active role in financing emerging companies that are coming out of there,” said Mr Ghandour.

“These are all markets that do suffer unfortunately from a similar fate as we do in the region, which is an underdeveloped venture capital liquidity pool. There is more demand for capital from quality businesses and quality entrepreneurs that are well-performing and well-positioned to grow than there is supply of capital.”

Besides sharing the same demographics and business conditions of the Middle East, Africa and Turkey are important markets for Wamda.

“Those are not only natural markets to churn out good quality entrepreneurs because of massive market opportunities but they are also natural expansion markets for our portfolio companies,” he added.

Overall fundraising has not been easy for VCs in the region and the bad taste left by the Abraaj meltdown has not made it any easier.

Abraaj "has definitely sent shock waves and I think the repercussions are not just being felt by us, but by the wider VC and PE markets in the region," said Mr Ghandour.

“It definitely has affected sentiment but not enough obviously to defer us from fundraising and conducting our first close very soon. Let’s call it a hiccup that will be a bygone in a couple of years.”

Other factors affecting the regional VC industry include its infancy and subsequent lack of returns that are expected to materialise in the next two to four years.  

“Most VCs [in the region] are on their first or second fund and none of them have ended the fund cycles completely and have returned an aggregate and generated liquid returns for limited partners,” said Mr Ghandour.

“Once multiple funds have proven themselves as a reliable form of outsized returns relative to what you can get in the market then we will start attracting much more financial investors rather than strategic investors.”

Correction: A previous version of this article incorrectly stated that Wamda Capital was an entity of Abraaj. Abraaj was an investor in its first fund with no further role.