One venture capital firm has said that unicorns are real in the Middle East. A “unicorn”, in VC terms, is a start-up firm whose valuation has exceeded US$1 billion.
Beco Capital said yesterday that home-grown online marketplaces, such as souq.com and jadopado.com, would lead the digital growth in the Arab region, with retail sales alone expected to surge to $100bn in 2025 from the current $10bn level.
“The opportunity to build regional $1bn online marketplaces has been unlocked, and we already have a handful of ‘unicorns’ in the making in our portfolio,” said Dany Farha, chief executive of Beco Capital. “For an online marketplace to thrive, it has to be able to generate scale. The second pillar of success we looked for is the ability to trigger a dramatic transformation in an entire industry.”
Beco Capital has made investments in technology companies, including propertyfinder.ae and medical insurance start-up Bayzat.
The e-commerce market in the Middle East was forecast to be worth $15bn this year, according to a 2013 report released by the electronic payment platform PayPal in conjunction with the research company Ipsos.
The Middle East’s e-commerce market grew nearly 30 per cent to $9bn in 2012 from $7bn in 2011, according to the report.
“With high GDP per capita and the highest smartphone penetration rate in the world, the Middle East represents one of the fastest growing e-commerce markets,” said Ronaldo Mouchawar, the chief executive of online retailer souq.com. “The UAE and KSA are leading the e-commerce sales growth within the region.”
According to reports in April, souq.com was involved in a round of fund raising that had the potential to value the company at about $1bn.
However both souq.com and jadopado.com have changed their business models since founding. Souq.com has moved from an auction site to straight retail, similar to Amazon, while jadopado.com changed from an Amazon-like model to a model closer to China’s Alibaba – an online market place hosting retailers.
“The growth in the digital environment is very obvious here, we have signed up 1,800 companies to retail on our platform since February,” said Omar Kassim, founder of online market place jadopado.
“No region is easy to break, but you have to choose the correct model. Our new retailers aren’t just local companies but retailers who see opportunity in this region.
“Businesses from Hong Kong to Europe see the digital entry as a cost-effective way of reaching a customer base that had regulatory and geographical barriers to them.”
ascott@thenational.ae
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