The US government has pledged US$455 million (Dh1.67 billion) to support five private equity investment funds designed to help technology start-ups in the Middle East. The financial support comes in response to an announcement Barack Obama, the US president, made last June in Cairo when he said his country would launch an investment fund to support technological development in Muslim countries.
While there has been a constant stream of technology ventures launching services in the region, many entrepreneurs have lamented the lack of available funding and knowledgeable venture capitalists who can provide valuable assistance in becoming successful. Recognising the need to develop an environment of innovation, the Overseas Private Investment Corporation (OPIC), an agency of the US government that invests in businesses in emerging markets, has selected five organisations that have had a known track-record in funding technology start-ups out of a pool of 87 applicants. Of the companies, Riyada Enterprise Development received $150m towards its Growth Capital Fund, Accelerator Technology Holdings received $25m for its Innovation Capital Partners Fund, Kuwait Projects Company (KIPCO) received $150m for its Opportunity Fund, Citadel Capital received $100m for its Joint Investment Fund and Siraj Capital received $30m for its Palestine Fund.
Combined, the five funds could potentially generate more than $2bn of investment in the MENA region, OPIC said. "This is a major milestone because when these guys do their homework and see who in the region is doing something quite original, it says a lot about us," said Fawaz Zu'bi, the chief executive officer of Accelerator Technology Holdings. Mr Zu'bi said the fund would concentrate on making small, focused investments in the $500,000 range towards technology companies in the video games, animation, mobile finance and e-commerce industries. Other funds would make larger investments in established small-to-medium business sector.
The US government's investment also marks a significant achievement in recognising the potential that the region's technology start-ups have. Industry experts have repeatedly pointed to last year's acquisition of Maktoob, the Arabic-language online portal, by Yahoo for $164m as an example of the potential returns the internet space can yield. "This is why we have to be long term in our thinking," Mr Zu'bi said. "We have to build the base and if we don't make that first step, there will be no one else around to do it."
He said there was still plenty of time for the region's technology industry to peak and forecasts fivefold growth over the next 10 years. "We want to be a catalyst and we're not afraid of other funds to compete out there," Mr Zu'bi said. "The more the merrier. It will help us to allow for more exits that will allow us to continue to complete a technology ecosystem. It's not about the month, it's not about how much it is, it's about what we're going to be able to do with it."
