Investors turn to venture capital

Middle-Eastern venture capital funds are emerging as alternatives to speculative investment in property and financial markets.

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Middle-Eastern venture capital funds are emerging as alternatives to speculative investment in property and financial markets, internet industry professionals were told at the Submit conference in Dubai today. The development is good news for entrepreneurs in the region, who have historically lacked local options for early stage financing. "People have gotten very used to making easy money," said Nabil Alyousuf, who recently started a business after a high-profile career in the Dubai Government. "Now, things are different."

Mr Alyousuf left his job as the director general of the executive office of Sheikh Mohammed bin Rashid, Vice President of the UAE. He now runs an advisory business that specialises in developing what he calls "breakthrough ideas", and is considering launching a venture fund for entrepreneurs in the region. While a cultural aversion to risk and failure had limited the number of entrepreneurs in the past, he believes things have changed among younger generations. Today, pro-business governments and wealthy individuals are coming together to support a new entrepreneurial structure.

"There are many government initiatives that encourage entrepreneurs from social aspect," he said. "Private venture capital can do something complementary. It brings in-depth knowledge and expertise, the contacts and networks." However, Mohammed Meddah, who runs the website Startup Arabia, said of the more than 200 internet start-ups that he tracked on his website over the past year, only 10 had managed to get venture capital funding.

Today, the most common venture investors in the Middle East are Arab expatriates returning home from start-up hubs such as Silicon Valley in California, Mr Alyousuf said. One such expatriate, Mohammed Alzoubi, is in the process of establishing Arab Seed Ventures and will move from California to Jordan to oversee the fund. Funding from the Middle East often contributes to the deals done by western venture capitalists, said Mr Alzoubi. He hopes to keep some of that cash within the region with his new venture, building regional businesses in the process.

"What's the difference between the Mohammed who moves to Silicon Valley and the Mohammed who stays in Jordan?" he asked. "The Arab world doesn't lack the cash or the entrepreneurs, but there are not many people putting it all together, and that's what we are going to do." Mr Alzoubi's fund will identify promising start-ups and provide the "seed" money that typically precedes larger investments by venture capitalists. Strategic investors from Silicon Valley were already interested in the fund, he said, and he was now looking for partners in the region.

tgara@thenational.ae