Dubai: In 2020, it seemed all that tech/digital startups in the UAE and wider region had to do was present a business idea or plan… and investors were willing to put up funds. If these businesses had a sufficient track record to show off, then they only had to ask.
Name any category – fintech, online grocery or delivery, ‘buy now pay later’ platforms, agritech, etc. – and there were takes for these ventures. All of which was jacking up valuations of these businesses beyond anything that was seen in the recent past.
According to Stephanie Nour Prince, Partner - Network and Operations at venture capital firm Nuwa Capital, it’s no different to what happened in the past.
“Previous downturns have spurred great innovation,” she said. “The dotcom bubble era saw the emergence of Salesforce, while the Global Financial Crisis saw companies like Airbnb, Stripe, Uber and others emerge and redefine their respective industries, each time changing the playing field.
“We feel that this dichotomy between tech and non-tech is waning as existing, more traditional companies are increasingly looking to digitize while digital companies look to expand their reach through “experiential” offerings.”
Paying more
But is that enough to justify paying ever increasing valuations? “No doubt there is some significant appreciation in the value of startups and tech companies both in private and public markets,” Stephanie added. “Historically speaking, there might be a correction at some stage.
“I think we are truly beginning to see that as software and technology permeating through every sector and every business. The centrality of technology is hard to dismiss and that is where the interest is coming from.”
Building up to $100m
Nuwa Capital, based out of Dubai and Riyadh, has raised $75 million to invest in a year since its launch. This is for its Nuwa Ventures Fund, and which will now be used to invest in ventures within the region as well as Pakistan, Turkey and Sub-Saharan Africa.
“We really see capital gravitating towards certain deals rather than most deals,” said Khaled Talhouni, Managing Partner at Nuwa Capital. “There is certainly a concentration around a specific number of deals, the number of which will most likely expand as we go forward and as more capital enters the market.”
For seed funding, Nuwa puts up to $1 million typically, for Series A it would go to $3 million, and all the way to $7 million for Series B.
"We think a number of industries are being redefined by tech - specifically by startups," Talhouni added. "These industries tend to have relied on more traditional ways of operating, which have not aged well. We’re very interested in companies that are changing education (edtech), financial services (fintech), real estate (proptech), F&B (foodtech), healthcare (healthtech and e-pharma)."
These are eyewa (eyewear e-commerce), Homzmart (furniture marketplace), and FlexxPay (a fintech that partners corporates to offer their employees access to already-earned salary throughout the month).
The fourth investment will be announced this month. The plan is to have a portfolio that will be a mix of seed, Series A and Series B funding.
Fintech sweepstakes
Anything to do with fintech is the flavour of these times, as these businesses try and disrupt the entire financial services landscape.
“The interest in fintech stems from very real failures in the financial services sector in emerging markets - and in particular in markets here in MENA,” said Talhouni. “The region has one of the world’s largest credit gaps both for SMEs and for consumers.
“Despite the large pools of wealth with ultra-high networth individuals, for 90 per cent of the population with some form of savings, there remains very little options with respect to access to global capital markets and structured products. As such investors have identified fintech as a clear area for investment as way to grow new market segments.”
