Venture capitalist calls for more dynamism in region

Dubai: The legendary story of two graduate students who developed a set of algorithms that revolutionised web-based search, Google, actually took off when one enterprising individual put $100,000 into the project.

A member of the venture capitalist tribe yesterday asserted that those of his ilk would continue to be on the lookout for the next "fantastic idea that will radically change the world". Fred Korangy, chief executive of venture capital at New Enterprise East Investments (NEEI), was speaking at Gitex yesterday.

According to Korangy, the concept of venture capital was relatively new in the region since the focus was largely on private equity investments.

"In this region everyone has heard of private equity, [but] not very many people know about the concept of venture capital. Private equity targets a profit or exit return that's double or four times the investment. It has the attitude that it will own the business and create efficiency by owning the businesses. Venture capitalists have a target of seven to ten times the return on investment so we have a different risk profile," he said.

Venture capitalists look to invest in cutting-edge and disruptive technology, often generated at universities, he said. "We look for rapid growth, top line revenue, [the] venture capitalist looks at disruptive technologies and intellectual property."

Cutting-edge ideas which identify a problem and provide a unique, workable solution are the domain in which the venture capitalist functions, he said, adding that NEEI has received around 200 business plans from prospective entrepreneurs in the region.

Not exciting enough

"We have about 200 business plans submitted to us from the region. These guys are asking us to invest $2 million and they are saying there will be a $5 million company in three years.

"That's not exciting enough for a venture capitalist. What is exciting for us is if you're taking $2 million and actually can show that you are going to do $20 million or $30 million in three years and show us that you have built your plan with hard data, with facts, that is exciting for us," he said.

We look for rapid growth, top line revenue, [the] venture capitalist looks at disruptive technologies and intellectual property."

Fred Korangy

Chief executive, venture capital, NEEI