High-profile investments by international investors in Souq.com and Careem represent a “transformational moment” for tech start-ups in the Middle East, with similar deals likely in the near future, according to the UAE’s leading VCs.
The acquisition of the e-retailer Souq.com by Amazon, for a reported US$650 million, coming shortly after a record $1 billion valuation for ride-sharing app Careem, vindicated the faith of local venture capital firms, said Khaled Talhouni, the managing partner of Dubai’s Wamda Capital, at the Private Equity Mena Forum in Dubai.
“For a long time we [in the VC community] felt a little on the fringes trying to evangelise that you can build technology companies of size that will disrupt the status quo within the region,” said Mr Talhouni, whose fund was one of Careem’s earliest investors.
“The fact that both transactions happened within a close space of time indicates that we’re at a transformational moment, and the time for this is now.”
Careem secured $350m worth of funding in December, led by Saudi Telecom and Japan’s Rakuten, valuing the company at $1bn.
“For everyone in the local ecosystem to see that you have the ability to have an extremely successful monetary outcome like that is just fantastic,” said Danny Farha, a managing partner of Beco Capital, another early investor in Careem, on the sidelines of the forum.
“We need all entrepreneurs to step up, to transform the two to five-person start-ups to become a 100-person or 1,000- person organisation to create impact on all fronts.”
Mr Farha forecast “a significant exit or two on the horizon in the next 12 to 24 months” within the tech space, giving no further details.
The region’s tech industry is already firmly on the map of major VC funds in the US and Europe, he said, with 10 of the most prominent VC funds in the world already investing in Middle East companies.
“If you plot the graph it’s increasing and only going to increase further.”
The growing prominence of the region’s tech sector is likely to attract alternative sources of capital, said Mr Talhouni.
“Outside of our ecosystem there’s still some way to go for traditional sources of capital to start entering this space,” he said.
“This is serving as a bit of a wake-up call to be on the right side of history when it comes to technology.”
jeverington@thenational.ae
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