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GCC’s Evolving Startup Ecosystem Needs More than Money

Written by Will Poole
May 20, 2024
Capria - Will presenting GenAI to investors in Abu Dhabi May 2024
Presenting to investors in Abu Dhabi

I just completed another week in GCC, having visited Abu Dhabi, Dubai, and Saudi for the second time this year. I’ve been working in and investing in rapidly developing emerging market startup ecosystems for more than 20 years; it’s never boring to learn about a new one. And while I and my partner Susana, our COO Sandhya, and others at Capria have been visiting and engaged in the GCC for nearly five years due in large part to our close co-investing relationship with Global Ventures, there’s nothing like immersing one’s self even more deeply in an ecosystem to accelerate learning.

The objectives of our recent trips have been three-fold: 1/ to help our growing portfolio companies from other regions make connections and expand their business in the GCC; 2/ to look for promising startups in our target sectors (which include Fintech, Jobtech, B2B SaaS, and other areas that can benefit from the deep application of GenAI), and 3/ to build relationships with institutional and family office investors looking for exposure to early growth startups in our portfolio across other rapidly growing markets in India, SE Asia, Africa, and Latin America.

Capria - Dubai 2024 May
Amazing Architecture of Dubai

For #1, we socialized the work of Betterplace (leading HRMS for frontline workers), Cusmat (ground-breaking VR training for industrial staff), 5C Network (already scaled AI-powered radiology solutions), and Bandhoo (solving planning and staffing needs for the construction industry). A joint venture with a Saudi family is in formation; other efforts are underway. We made good progress on objective #2 by partnering with VentureSouq in Dubai and STV in Riyadh to deliver GenAI workshops to their founder communities, similar to the work we did with Global Ventures earlier in the year. I’ve been continuously impressed with founders I‘ve met through all of our GP friends in the region, and even more impressed meeting female founders who are few and far between in the markets we operate in. Fundraising for objective #3 is a long-term effort; we’re pleased to be increasing our connections to investors in the region and look forward to meeting more.

I wanted to comment on a recurring theme we heard, which was essentially “What can you [as a global investor] do to invest directly in startups in the region?”. The sense we get is that there is fatigue due to global investors coming to the region only to seek investments to take out of the region, which is understandable as that’s been happening for years. And while we are indeed looking to invest directly in the region, that’s not enough in my view. I’ve seen both the good and the bad as global investors engaged in other rapidly evolving regions during boom times. The good is that they often bring later-stage capital and connections to global capital markets, which is badly needed in areas with the majority of VC investors being, of necessity, focused primarily on more early-stage companies. Good global investors make a long term plan to engage, put money to work, and actively help their portfolio grow locally and regionally/globally. The bad is when the global investors act as “parachute” or “tourist” investors – they come in, invest funds with limited oversight, sometimes bidding up prices irrationally, and then when things don’t go according to plan, they are gone.

Capria - Will presenting in Riyadh May 2024 smaller
Presenting to STV’s Founders in Riyadh

My point is that good global VCs should bring more than money – they should be bringing 1/ seasoned guidance from partners who have been through similar ecosystem evolutions before, with knowledge of how to lead and price deals, how to mentor founders through growth, how to restructure deals in trouble, and more; all of which is calibrated to nascent ecosystems and not solely with the established ecosystems of Europe and USA  2/ connectivity to portfolio companies and/or customers and/or other investors in similar markets who can contribute to the success of GCC-based startups, and 3/ domain expertise developed in other emerging and developed regions that can be transferred to the specific needs of GCC startups, including applying AI, growing talent in a talent-scarce market, etc.

Capria - Unicamel by Capria and ChatGPT 4o June 2024

UPDATE: My partner Susana recently published a thoughtful article on Medium about whether the VC industry in the Global South needs to be focused on unicorns or camels. It’s a global point of view, but I think it particularly relevant in the GCC. Read it here.

I hope that as we and other regional and global investors increase our engagement in GCC, the institutions and large families of GCC seek partnerships that extend beyond money in the areas described above, thus hastening the sustainable growth of startups in the region. We are looking to build such relationships and we presume other high-quality global investors will see the strong indicators of growth and opportunity in the GCC and do the same.

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