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EUVC #205 Omar Hassan, MTF, on Raising Capital in MENA

EUVC #205 Omar Hassan, MTF, on Raising Capital in MENA

Read on for the episode's core insights and learnings 👀 or better yet: the full in-depth article covering the MENA VC landscape 101, relationship building, adaptation, wisdom & pitfalls 🤓

In preparation for the upcoming Expand North Star Conference in Dubai, we sat down for a candid conversation with Omar Hassan, GP of MENA Tech Fund for a dedicated episode centered around the art of raising capital in the region.

The surge of VC activity in the MENA region has captivated the dreams of global investors leading VCs from around the world to flock to the region's newly minted airports as Sir Walter Raleigh did in search of El Dorado nearly 400 years ago. But without the right map to guide them, they will find their travels destined for the same success as him.

In our conversation with Omar, it becomes clear that navigating the MENA fundraising landscape requires finesse in cultivating relationships, nurturing trust, and knowing how to establish genuine long-term connections.

Intricacy matters when courting MENA investors – an acute awareness of cultural sensibilities, the virtue of patience, and the astuteness to sidestep common pitfalls collectively form a foundation for effective engagement.

How should you think about collaborating with local partners? Is technology transfer and strategic alignment a must? And how does one prepare?

Join us as we dive in 👀 and watch the full conversation in the bottom ⏬

Table of Contents

  • Part 1: Decoding MENA's VC Landscape

  • Part 2: The Art of Relationship-Building

  • Part 3: Adapting Strategies for Success: Deciphering Market Nuances

  • Part 4: Time-Tested Wisdom

  • Part 5: Avoiding Pitfalls

But first, let’s get to know Omar 👀

Part 1: Decoding MENA's VC Landscape

A Paradigm Shift towards Tech Innovation: In recent years, the Middle East and North Africa (MENA) region has undergone a remarkable transformation, shifting its focus from traditional industries to a dynamic and rapidly expanding tech-driven ecosystem. This evolution has turned countries such as the United Arab Emirates (UAE), Saudi Arabia, Egypt, and Jordan into key players in fostering innovation and entrepreneurship. European venture capitalists (VCs) and limited partners (LPs) are increasingly recognizing the potential of the MENA market, drawn by its young and tech-savvy population, untapped markets, and strategic geographical location that bridges the gap between East and West.

Omar Hassan, an expert in MENA's VC landscape, highlights this shift, noting:

"There's been a lot of transformation in the last 10 to 15 years. It's gone from a very, very traditional mindset, which was pretty much based around banking, oil and gas, retail, and things like that, to an innovation economy."

The traditional industries that once defined the region are making way for technology and innovation, catalyzed by the growing number of startups and a renewed focus on fostering entrepreneurship.

Frontrunner Countries for Innovation: Key players in this transformation include the UAE, Saudi Arabia, Egypt, and Jordan. As Hassan explains, "Countries like the UAE, like Saudi Arabia, like Egypt, like Jordan, are very much on the forefront of technology." These countries have made significant investments in creating supportive ecosystems that encourage tech-driven innovation and entrepreneurship. The UAE, particularly Dubai and Abu Dhabi, has positioned itself as a global fintech and business hub, attracting international investors seeking exposure to the region's thriving tech scene.

Strategic Geographical Bridge: MENA's strategic geographical location offers a unique advantage for investors seeking exposure to both Eastern and Western markets. Hassan underscores this geographical bridge, stating, "It's strategically in between Europe, Africa, and Asia." This positioning enhances the region's attractiveness as a gateway for businesses looking to expand into multiple markets. Investors can leverage MENA's connections to bridge cultures and tap into diverse customer bases.

Join us for Expand North Star in Dubai - the ultimate startup and investor connector event.

15 - 18 October, Dubai

Discover the tech and investment opportunities fuelling growth across UAE, MENA, and APMEA regions at Expand North Star and GITEX GLOBAL, now the world’s largest tech and startup event

Join 1,400 exhibiting startups and 1,000 investors, at Dubai Harbour to scout for your next big deal, connect with other investors, meet public and private stakeholders to elevate your fund goals. Co-located with Fintech Surge and Future Blockchain Summit, and in association with GITEX GLOBAL; Expand North Star you’ll be serviced with an agenda over 4 action-packed days with a curated Meetings Programme, the invite-only Investor Forum, the Venture Studio and Accelerator Summit, and additional exclusive satellite events for fund managers in town.

Don’t miss out - register now.

Part 2: The Art of Relationship-Building: Unveiling the Key to Success in MENA's VC Landscape

In MENA and GCC, it’s integral to understand that building robust relationships is not just a strategy – it's the foundation upon which successful business endeavors are built. As Omar Hassan highlights:

Understanding the art of relationship-building is crucial for European venture capitalists (VCs) and limited partners (LPs) aiming to tap into this thriving market.

Let’s dive into the significance of building strong relationships and how to approach this task authentically and effectively with an example of two funds that provide shining examples: Cherry and Speedinvest.

“Since three years ago, Speedinvest would invest three or four visits a year to the GCC,"

By nurturing relationships over multiple visits and consistent engagement, these two firms have secured substantial capital from the region's LPs. For a deep dive on Speedinvest’s approach and experiences, listen to our episode with Daniel Keiper-Knorr on just this here:

Authentic Relationship-Building: The Cornerstone of Success: Hassan underscores the centrality of authentic relationship-building in MENA's business culture, stating, "Building relationships is key. It's a big part of the way the region operates." Unlike transactional approaches common in some Western contexts, MENA places a high premium on fostering genuine connections that extend beyond immediate business goals. Hassan's advice is clear:

"Take your time and build those relationships genuinely. It's not about just raising money or just getting a deal done."

Navigating Cultural Sensitivities: Engaging with the local culture is paramount to successful relationship-building in the MENA region. As Hassan aptly puts it,

"Just avoid the politics and anything around that. Build around networking."

This emphasis on networking aligns with the communal nature of MENA societies, where personal relationships often lead to professional collaborations. Cultural sensitivity involves showing respect, avoiding sensitive topics like politics, and understanding the nuances that shape business interactions.

Local Events and Engagement: The Path to Authentic Connections: Attending local events and actively engaging with industry players are essential components of effective relationship-building. Hassan suggests,

"There's a lot of events nowadays where a lot of these family offices, the local family offices, attend for you to start to get to know them and build that trust and build that relationship."

Participating in such events not only offers exposure to potential investors but also provides opportunities to immerse oneself in the local business landscape, gaining insights and perspectives that can't be gained from a distance.

Patience and Persistence: The Marathon Approach: In MENA, successful fundraising is akin to running a marathon, not a sprint. Hassan aptly describes it as "spending time on the ground and doing that work and being seen rather than come and ask and go." This approach emphasizes the importance of patience, as relationships need time to develop organically. Trust is earned over time, and patient persistence in building connections is more likely to yield fruitful collaborations in the long run.

💡 Key insight: In the MENA, the art of building relationships is the linchpin of success. European VCs and LPs venturing into this dynamic market must approach relationship-building with sincerity, cultural sensitivity, and a long-term perspective. By immersing themselves in local events, engaging with industry players, and cultivating authentic connections over time, investors can unlock the vast potential that MENA's business ecosystem has to offer. As Hassan advises, "Building relationships is not about the transaction; it's about the trust, it's about the credibility, it's about the connection." With this ethos at the forefront, European investors can navigate MENA's VC landscape with confidence and impact.

Part 3: Adapting Strategies for Success: Deciphering Market Nuances in MENA's Vibrant VC Scene

Omar Hassan underscores the significance of understanding the intricacies of the market and adapting strategies to the region's unique nuances. Let’s see if we can scratch the surface 🙅‍♀️

Dubai and Abu Dhabi: Distinct Investment Arenas: Hassan emphasizes the importance of comprehending the differences between various regions within MENA, stating, "Navigating the GCC requires a real understanding of Dubai versus Abu Dhabi." Dubai and Abu Dhabi, two prominent emirates within the United Arab Emirates (UAE), present distinct investment opportunities. Dubai, often referred to as a global fintech hub, offers a fertile ground for disruptive technologies in the financial sector. On the other hand, Abu Dhabi's focus lies in healthcare and energy, offering a unique space for innovative solutions in these sectors. When you go to the region, make sure you pick the right hub for you, as Hassan advises,

"As an example, if you're raising money for anything around sustainability, healthcare, cyber... I would go to Abu Dhabi."

Creating Synergy with Local LPs: Recognizing the region's priorities and tailoring investment strategies accordingly positions investors as valuable partners for local LPs seeking growth opportunities that align with regional needs. But making sure that investment theses are aligned with MENA's growth priorities is important as it doesn't just signal relevance; it also fosters synergy with local LPs as many seek partners who share their vision for regional progress and prosperity, though it’s important to note that the majority of the private families in the region are first and foremost financially driven.

💡 Key insight: In MENA, adapting to market nuances is not just a strategy – it's a necessity. As European VCs and LPs venture into the region, they must grasp the divergent growth trajectories of different emirates, such as Dubai and Abu Dhabi. Crafting investment theses that resonate with the region's growth priorities positions investors as relevant and valuable partners for local LPs. By delving into the region's context, fostering synergy, and aligning strategies with market dynamics, European investors can navigate the MENA landscape with precision, seizing opportunities and contributing to the region's ongoing transformation. As Hassan aptly summarizes, "It's about understanding the ecosystem, understanding the nuance, and understanding where those changes are happening."

Part 4: Time-Tested Wisdom: Navigating MENA's Distinct Fundraising Timeline for VC Success

If you’re going to do business in MENA, you’ll encounter a distinct characteristic that underscores the region's investment landscape – time. Let’s unpack this.

The Unhurried Path to Success: Hassan underscores the importance of time, stating,

"Raising capital in the GCC, it's not like fundraising in Europe."

In a region known for its rich history, diverse cultures, and unique market dynamics, the pace of business interactions differs from the hustle of other global markets. The MENA region operates on its own timeline, emphasizing the need for VCs and LPs to adopt a patient and long-term perspective.

Commence Conversations Early: Raising capital in MENA necessitates initiating conversations well in advance of a fund's closing date. Hassan advises, "Start these conversations six to 12 months before you're actually looking to raise funds." The prelude to fundraising involves establishing genuine connections, understanding local LPs' priorities, and building mutual trust. Engaging with potential partners early allows time for these relationships to mature organically, facilitating a smoother fundraising process.

Navigating Unique Decision-Making Timelines: A fundamental principle of MENA's VC landscape is the region's distinctive decision-making timelines. Hassan acknowledges, "There's always an agenda, and it's not the same as European agendas." VCs and LPs should anticipate varying timelines for negotiations and discussions. By adopting a flexible approach and adapting to the region's rhythms, investors can align their expectations with local practices, enabling more effective collaboration.

Building Trust Through Patience: The region's deliberate pace of conducting business is inextricably linked to building trust and cultivating authentic relationships. Hassan affirms,

"It's not a two-day trip, meet somebody, go home, and then in six months expect the money to come in."

Patient relationship-building fosters confidence among local LPs, ensuring that potential partners understand the investor's commitment to the region's long-term growth and development.

💡 Key insight: In the MENA region, patience isn't just a virtue – it's a strategic imperative. As European VCs and LPs embark on their fundraising journeys, they must recognize the significance of time in building meaningful relationships and securing investments. Initiating conversations well ahead of the fund's closing date, understanding the region's unique decision-making timelines, and cultivating authentic connections can pave the way for success. By embracing the region's unhurried approach and demonstrating a genuine interest in MENA's growth, investors can forge enduring partnerships that resonate with the essence of the region's culture and business practices. As Hassan aptly sums it up, "You need to give yourself that time to understand what that ecosystem is about."

Part 5: Avoiding Pitfalls in VC Fundraising

"Cultural sensitivity is paramount in the MENA region."

Investors must recognize that the region's rich history and diverse traditions shape its business interactions. MENA investors highly value respect and a genuine understanding of local customs and values.

A critical point of etiquette in the region is to avoid political discussions. Hassan underlines, "Just don't speak politics." The MENA region's complex geopolitical landscape requires VCs to focus on business-related conversations and steer clear of topics that can potentially cause discomfort or tension.

By adhering to cultural sensitivity, steering clear of political discussions, prioritizing authentic relationships, and conducting comprehensive due diligence, VCs and LPs can navigate MENA's cultural landscape with confidence. As Hassan concludes, "Respect the way things are done and just talk business."

A note on paid intermediaries A noteworthy caveat is to disregard paid intermediaries who promise expedited access to LPs. Hassan advises,

"Rule number one, avoid any fundraisers in the region."

Authentic relationships carry more weight in the MENA region than any other, and investors are better served by cultivating genuine connections with local LPs over time.

In-Depth Due Diligence: Thorough research into potential LPs is essential. Hassan suggests leveraging online resources and industry networks to assess credibility. He notes, "You can do background checks on potential LPs. A few conversations with local funds can provide valuable insights." This due diligence helps investors identify partners who align with their values and investment objectives.

The Power of Local Expertise: Collaborating with reputable local partners lends credibility to foreign VCs and LPs within the MENA market. Establishing partnerships with well-respected regional players signals a commitment to understanding and respecting local dynamics. This credibility enhances investor appeal and builds trust among local LPs, paving the way for successful fundraising endeavors. Hassan states,

"Partnering with established MENA funds or well-connected players can provide access to localized insights, deal flow, and regulatory expertise... Such partnerships not only accelerate your entry into the market but also enhance your credibility among local LPs."

Local partners bring invaluable knowledge about the region's market dynamics, trends, and emerging opportunities that can significantly impact investment decisions.

💡 Key insight: In the MENA region, It’s paramount for investors seeking to raise capital that they understand and adapt to cultural sensitivities, avoiding political discussions, building authentic relationships, conducting thorough due diligence, and harnessing the expertise of local partners. These principles create a strong foundation for successful fundraising endeavors, fostering trust and mutual understanding between investors and their MENA counterparts.

Watch the full conversation here 👀