By Bernd Debusmann Jr / Arabian Business - Image Credit: Arabian Business
SOURCE: Arabian Business - Middle East Venture Partners: investing in the future of tech
What a difference seven years can make. When Walid Hanna founded Middle East Venture Partners in 2010, his first fund was sized at $10 million, with just 12 companies in its portfolio.
Now, seven years and several funds later, MEVP has $120 million in assets under management and is targeting a $250 million fund with about 25 potential investments.
For Hanna, this drastic change is no surprise – it’s simply the result of the region’s young, digitally savvy population creating what he terms “a virtuous cycle” for venture capital.
In this environment, companies can grow quickly – both in size and in value – before cashing out.
Speaking to Arabian Business at MEVP’s quiet and cosy loft office in Dubai Media City, it’s clear that Hanna is a long-time veteran in the world of venture capital, a man whose CV includes a stint as CEO of Dubai International Capital’s venture arm, the Arab Business Angels Network (ABAN), and also the investment-management team of Abraaj Capital.
He recalls that the scene that MEVP entered in 2010 was “very different”. Referring back to that time, he says there were considerably smaller amounts of money to invest, and that, in any case, companies that weren’t ready for success.
“We were really one of the first ones in this VC space. The number, the quantity and the quality of start-ups that we used to see at that time was small, and also very poor in quality,” he explains. “Seven years later, at the end of 2017, the numbers are completely different, and the quality is also much higher.”
He explains how not only are the numbers are very different, but also the speed at which start-ups grow.
“Everything has multiplied and you can say it has become a virtuous cycle. The ecosystem has multiplied by 100 in seven years.”
In September, this “virtuous cycle” saw MEVP team up with majority stakeholder Mohamed Alabbar to launch its third fund, MEVP III, with a target size of $250 million. In a statement, MEVP noted that the fund will invest in early-stage and growth-stage tech companies across the Middle East, North Africa and Turkey.
Walid Hanna (second from right) with Rabih Khoury, Mohamed Alabbar and Rashid Alabbar
According to Hanna, the growth of the funds – from the $10 million MEVP I to the $250 million MEVP III – is rooted in the changing demographics and digital literacy of the region.
“Today, people are spending six, seven hours a day on their mobiles, and they’re the consumers. They consume content, they buy stuff and they sell both digital and physical goods online.”
He says how the company’s growth in the past seven years – from 12 companies to more than 25 potential investments and 25 times the capital – since starting back in 2010 makes him “fairly positive” about the VC industry. “We invest in internet businesses and it’s very encouraging.”
While reaching a stage at which a $250m fund is perfectly doable may seem like a remarkable change, Hanna is careful to note that it was all very much part of MEVP’s plan from the outset.
“Our ambition was to create a big asset management firm for this specific asset class, which is VC. We were hoping to get to where other emerging markets got to,” he says.
“You have to start with a small fund when the ecosystem is small. Now we know there are three, four, or five other funds competing with us today that have big numbers as well.”
He is quick to note, however, that MEVP is still the largest independent VC in town.
“We’re independent, and we’re there for the bottom line. We’re there to invest in start-ups, grow them, exit and return healthy IRR (internal rates of return) to our LPs (limited partners).”
Diverse success stories
To date, MEVP has invested in 43 companies that range from e-marketplaces to financial technology firms and even a biotechnology company.
Hanna says “a few” of the companies that MEVP has invested in have been exited and investments cashed out. According to Hanna, MEVP’s complete portfolio represents the diversity and potential of e-commerce and technology in ways that few would have considered just a few years ago.
MEVP is an investor in One Click Delivery Services, a Dubai-based last-mile delivery service
Giving examples of this diversity, Hanna recalls one of his favourite success stories: Shahiya (Arabic for “my appetite”) is a user-generated, Arabic-language cooking website that grew to become the largest of its kind in the region.
In November 2014, the business was sold to Cookpad, Japan’s leading recipe site for $13.5 million – six times MEVP’s investment just two years earlier.
In this case, Hanna points out, regional success quickly led to success around the world.
“The interesting part is that Cookpad were on a consolidation spree on a global level, so they acquired the Spanish equivalent, the Indonesian equivalent and the Arabic-language equivalent.
“By building a MENA market leader in any vertical, you will be acquired. That’s exactly our investment philosophy,” he says. “In whatever vertical we look at within the tech sector, we want to build the number one company.”
Hanna proudly lists several other “number ones” within MEVP’s portfolio: Altibbi, an Arabic-language website similar to WebMD; Anghami, an online marketplace in which music labels and artists interact with consumers; and Lamsa, a popular website in the children’s “edutainment” space.