The Middle East has been deeply involved in the global alternative investment industry. It hosts some of the world’s biggest sovereign wealth funds and thousands of large family offices that are looking for new investment opportunities.
The last few years have also seen several successful venture capital firms and startups emerge from the region, making a mark on the entrepreneurial map.
Add to it the serious push by regional authorities to attract investment funds to set up their base in tax-friendly jurisdictions, and the Gulf is certainly buzzing with activity in the private market.
While global headwinds and a tight liquidity environment impacted private equity and venture capital deals across the world, key markets in the Middle East emerged as bright spots. Overall, PE and VC deal value and the number of transactions in the region edged lower in 2023. Total deal value fell to $11.5 billion in 2023 from $15.7 billion in 2022 while the number of transactions slipped to 430 from 728, according to S&P Global Market Intelligence data.
However, Saudi Arabia recorded an uptick in venture funding activity. The kingdom recorded a 33% growth in the value of VC deals in 2023 to $1.38 billion, although the number of deals fell to a three-year low of 125 from 157 in 2022, data by Magnitt showed. It was led by four mega deals worth a total of $879 million, including buy-now-pay-later platforms Tabby and Tamara.
That said, even though the startup world has seen a cooling off after the heady days of 2021, in sync with global trends in the technology space, the entrepreneurial zeal in the region is well preserved.
To gauge the investment opportunities in the region and assess how can limited partners (LPs) leverage their financial muscle to not just create returns but do so while pushing sustainability and the cause of seeing companies scale up with Middle East as their home base, VCCircle, the largest emerging markets publication tracking the alternative investment ecosystem, is organizing the inaugural Dubai chapter of its flagship LP event in India. The LP event in India is now in its milestone 15th edition.
The Gulf region has traditionally been seen as a source of capital. Investors from the region have backed and now own several large brands internationally. But they are viewed as a financial stakeholder. How can private capital create global champions in various industries with their home base in the Middle East? Can LPs and family offices back fund managers and thereby their portfolio in the region to go after large assets internationally via bolt-on deals to create Gulf-based business giants?
Investors in the Middle East are already operating with new acronyms like MEASA and MESA that cover Africa as well as South Asia. While sovereign funds and some large PE investors like Investcorp, Gulf Islamic Investments and Gulf Capital have been pretty active in India, several VC firms are also looking at the wider South Asia region, especially Pakistan and Bangladesh, to invest in local startups. In fact, India has emerged as the largest recipient of private capital from the Middle East across Asia during the four years through 2023, accounting for 51% of the total deals struck by Gulf investors in the continent, as per a report by Global Private Capital Association. How can investors in Gulf create the right winning combination in the MESA block?
What tools and metrics are LPs in the region putting in place to be in sync with the focus on sustainable solutions and sustainability as an overarching theme for the authorities in the region? How can they ensure deals are not greenwashed to confirm to an investment parameter and measure impact in a more tangible way?
Many family offices in the region tend to become business owners, creating an extension of their own conglomerates. How can they become a stronger source for channeling money through third-party fund managers—be it private equity, venture capital or private credit? What has been the experience of investing in the alternatives space in the region?
LPs and GPs have had mixed experience in the past due to less than appropriate due diligence over deals, assessment of fund managers and, last but not the least, the entrepreneur. The stakeholders need to design a diligence process that is faster, comprehensive and yet one that covers all the loopholes. What tools and processes can make LPs a better judge of GPs? What lessons can we draw from deals that went off track with respect to credibility of disclosures? How can investors minimize the risk of entrepreneurs taking them for a ride? How has the nature and focus of diligence changed over the years?
The UAE has been the key market but has been lately joined by Saudi Arabia in creating an entrepreneurial culture that goes beyond the oil money. How do VCs in the region see the startup ecosystem in various countries that make up MENA and how are they reimagining their investment strategy to leverage the opportunity?
Can LPs partner to drive more meaningful impact in the MENA and the wider MEA region? Africa at large and North Africa in particular have already been under the investment mandate for GPs operating in the region. How do LPs on either side of the Suez Canal back and build businesses via their direct or third-party GP bets to drive impact with commercial grade returns?
Blessed with a fairly well-developed local banking ecosystem, private credit as an asset class played on the side-lines but things are changing. With the new rules and regulations being created by ADGM and DIFC in UAE in the last two years, investors looking at diversifying their basket away from being overweight on equity, private credit is now on the main radar. What is the experience from the asset class in the region and can there be learnings from other emerging markets to spruce up activity?
Alternative investors in the Gulf have been active for several years now as the ecosystem is maturing from solely a source of capital to entrepreneurial activity absorbing money. But it all boils down to how the money is being recycled over time to keep the machine oiled for the future. What has been the experience of getting exits in the region, wrt mode of sale and returns? What are the learnings from other markets that can be leveraged to drive better and value creation and thereby more profitable exits for LPs?
Traditionally associated with oil, construction and trading, Gulf has come a long way in terms of sectors at play. From ecommerce, mobility and fintech under the new age tech pack, to renewables, smart farming among other sectors, offers attractive investment opportunities for deploying capital. What are the new sweet spots for investing in the region? What are the learnings from the past?
Dr Ruchi Dana is a qualified medical practitioner, who has transitioned successfully into a seasoned entrepreneur and Business Leader. Ruchi did her MD from AMU and her full-time MBA from Stanford University. Ruchi also received her PMP Certificate in Public Management and Social Innovation from Stanford University. Ruchi is a frequent speaker at various industry conferences and sits on multiple Corporate, startup, non-profits and University boards including Dana Group of Companies, Dubai, Duluth Medical Technologies Inc, USA, NGO Aaroogya Foundation, India and the California State University, Chico Cybersecurity Advisory Board. Ruchi has been recognized by Forbes Middle East as the “Next Generation Business Leader, Arab World” for 3 consecutive years 2017, 2018 and 2019. She has also been recognized by Campden Wealth as the “Women to Watch ” in September’18 issue, and was conferred with the YuvaRatna Award, 2018. Ruchi has also been recognized as “Top 75 Family Business Leaders” 2019 by Campden Research (UK). Recently, Dr Ruchi was featured on the Forbes ME Top Power Businesswomen 2020.
Dr Ruchi is actively involved in strategic planning for Dana Group and manages its investments in Healthcare and Digital innovation. Ruchi has also worked with Golden Seeds, an investment firm in New York and New Silk Route Growth Capital, a PE firm in Dubai, she has focused on healthcare related investments at both these firms.
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