Tag Archives: Middle East

A different story from the Middle East

I wrote about our first meeting with Chris Schroeder, author of Startup Rising, in May 2015. Startup Rising covers the rise of technology and entrepreneurship in the Middle East.

Fast forward two years, and the startup ecosystem in the Middle East has developed significantly. Companies like Souq, Namshi, and Careem have each proved that large tech businesses can be built in the region.

What hasn’t changed is Chris’ dedication to the region. In this insightful article in the MIT Technology Review entitled “A Different Story from the Middle East: Entrepreneurs Building an Arab Tech Economy”, Chris shares some of the most recent positive developments and entrepreneurial success stories emerging from the region.

Chris’ active coverage and global promotion of tech entrepreneurship in the Middle East continues to be very valuable for the region.

Building tech businesses in the Middle East

Souq, Namshi, and Careem are 3 of the most successful tech startups in the Middle East.

Horizontal e-commerce business Souq was recently acquired by Amazon for $650M, 51% of fashion e-commerce business Namshi was acquired for $151M by Mohamed Alabbar’s Emaar Malls, and car hailing business Careem is valued at over $1B.

Each of these companies is proof that large tech businesses can be built in the Middle East.

Here’s an interview hosted by Wamda Capital‘s Fadi Ghandour featuring the CEO’s of these impressive companies, Ronaldo Mouchawar of Souq, Faraz Khalid of Namshi, and Mudassir Sheikha of Careem.

Middle East Venture Partners and Mohamed Alabbar

Middle East Venture Partners (MEVP), our co-investors in Volt, announced this week that Mohamed Alabbar, chairman of Emaar Properties, has acquired a stake in the general partner which manages its funds.

The details of the transaction aren’t disclosed. However,¬†given the size of Alabbar’s recent moves with Noon.com in the Middle Eastern e-commerce space, it’s likely a sizable transaction. This will give MEVP much more firepower with which to invest while retaining the MEVP team’s operational control over its investments.

I congratulate the MEVP team on the transaction and look forward to seeing its positive impact throughout the region.

Two takeaways from Souq’s exit to Amazon

Earlier this week, Amazon announced that it acquired Souq, the largest horizontal e-commerce company in the Middle East, for $650M.

The transaction has been covered at length elsewhere so I won’t repeat this coverage here. Instead, I’ll share my two key takeaways from the transaction.

First, it’s proof that big tech exits do happen in the region. After Turkey’s leading food ordering marketplace Yemeksepeti’s $589M purchase by Delivery Hero in 2015, this takes us a step closer to producing the Middle East’s first billion dollar tech company exit.

Amazon, which has a track record of growing on its own in international markets, chose instead to acquire Souq. This decision reflects the quality, size, and strength of the company that Souq’s team built. Souq is a big entrepreneurial success story.

Second, making money as a regional tech investor is possible, but not easy. Souq is reported to have raised $425M of funding prior to its exit and its last $275M round is said to have been completed at a $1B post-money valuation.

The second fact suggests that investors in the company’s last round only got their money back or made a return because of the liquidation preference on their investment. In its absence, they would have lost money.

This also shows that headline private market valuations should often be taken with a grain of salt.

Regarding the first fact, since the Souq team also walked off with money from the exit, the return to the average investor in the company was less than $650M / $425M = 1.5X. That’s not a great return for a risky and illiquid asset class like venture capital.

In other words, depending on what the liquidation stack looks like, some investors made money on the exit but many others didn’t.

Just because you have shares in a company that achieves a large exit doesn’t mean you make money.

Modanisa’s new round

Modanisa, an online fashion retailer for conservative Muslim women where we’re investors, recently completed an approximately $2M bridge funding round led by Wamda Capital with participation from existing investor STC Ventures.

As Modanisa continues its fast global growth, Middle Eastern investors like Wamda and STC are valuable partners to better serve the company’s large and growing customer base throughout the Middle East.

Following Volt, Kapgel, and Insider, this also marks the fourth company where we’re fortunate to partner with Wamda.

We welcome Wamda’s new and STC’s follow-up investment in the company, and look forward to the next step’s in Modanisa’s global expansion.

Zafaf.net follow up

I wrote about our online wedding marketplace Dugun‘s Middle East expansion under the Zafaf.net brand name in an earlier post.

The Middle East’s leading tech news website Wamda recently also covered Zafaf.net. The piece¬†shares some of the initial challenges faced by the Zafaf.net team, describes how the team overcame these challenges, and highlights some of Zafaf.net’s promising initial metrics.

You can read the full piece here.