The Middle East’s fledgling entrepreneurship industry is rapidly gaining momentum and, as experts point out, the SME community now has access to a growing pool of regional capital.

A raft of start-up funds, venture capitalists and several new platforms have emerged to support strong and solid business concepts in the region.

Middle East-based funding companies capitalised 65 internet and technology startups between January 2010 and August 2011, according to a report by online portal Sindibad Business. The report also claimed that the new investments, valued at approximately $24 million, created around 450 new jobs.

Omar Christidis, founder of the annual Arabnet Digital Summit, says that at least $500 million is currently available in the region to promote start-ups.
“Across the region, there is a tremendous number of opportunities for start-ups,” he says.

“There is a range of mostly regional investors – from angel investors who are investing $50,000, $1 million or $2 million, to venture capital funds who are investing up to $250 million.”

Gulf Business outlines the different kinds of funds that support entrepreneurs, and highlights the most prominent ones within the region.

Accelerators

These funds provide $10,000 to $15,000 of funding and offer space and services to support entrepreneurs and help them turn their idea into a product within three to six months, explains Christidis.

Some of the top accelerator funds include:

Oasis500
Founded in 2010, Jordan’s Oasis 500 is endorsed by King Abdullah and provides early-stage capital, training and mentorship to Arab startups. Its goal is to accelerate the launch of 500 start-up companies by 2015.

While the king has provided initial financial and technical support, the firm is run by private sector businessmen and has raised funding from investors across the region.

SeedStartups
A UAE-based accelerator, SeedStartups focuses on digital media startups. The firm offers a three-month programme in Dubai to selected entrepreneurs who receive an investment of up to $25,000 in return for a flat 10 per cent equity stake. The programme includes an entrepreneurship “crash course” given by successful entrepreneurs, seasoned investors, and product experts.

Plug and Play Egypt
Based in Cairo, Plug and Play offers mentorship, training and between $10,000 to $1 million of seed capital to start-ups.

The firm also selects companies to attend Silicon Valley Acceleration programmes at Plug and Play headquarters in Sunnyvale, California.

Venture Capital Funds

Venture Capital (VC) funds can be early stage or late stage investment funds. While early stage funds often do deals that are $250,000 to $1.5 million, later stage funds will invest between $1.5 million and $5 million, explained Christidis.

Some of the top VC funds include:

Riyada Enterprise Development (RED)

The $650 million small and mid-cap investment platform of private equity fund Abraaj Capital was established in 2009. Following Abraaj’s recent acquisition of Aureos, an international fund focusing on financing SMEs, RED operates as Aureos’ Middle Eastern arm.

The fund has signed agreements worth $20 million this year, Tom Speechley, CEO of RED, told Gulf Business in May.

Saudi Telecom Company (STC) Ventures

STC Ventures is an independently managed venture capital fund whose anchor investor is Saudi Telecom Company. The fund specialises in firms operating in IT, telecoms and digital media/entertainment sectors in Saudi Arabia and the Middle East.

In November last year, the STC Group announced an initial investment of $50 million into the fund, which has a target of $250 million.

MEVP
MEVP is a Middle East-focused venture capital firm that invests in the early and growth stages of companies run by entrepreneurs in Lebanon and the greater Levant region. The company has a fundraising goal of over $20 million and currently has six diverse companies in its portfolio.

Wamda
Supported by Abraaj Capital, the Wamda platform includes a Capital Fund that invests in early stage tech and non-tech startups in the MENA region. The platform also includes programmes and products to help start-ups set up, run, and grow a company, and a media site that presents articles, reports, and videos to educate entrepreneurs.

Malaz Capital
Saudi-based Malaz invests in early to mid stages of company development with initial individual investments typically ranging between $100,000 and $1 million. Additional capital is reserved for follow-on investments.

The fund focuses on MENA-based companies in the fields of communications, IT, healthcare and education.

BECO Capital
Co-founded by Dany Farha, the co-founder of Bayt.com and a seed investor in daily deal website Gonabit, BECO, short for ‘booster engine cut-off’ supports regional SMEs. The company has started six businesses and invested in another six.

Government initiatives

Khalifa Fund For Enterprise Development

Launched in June 2007, the Khalifa Fund aims to help develop local enterprises in the UAE, and has a total capital investment of Dhs2 billion.
The fund seeks to encourage young Emirati entrepreneurs and support small to medium-sized investments in the country. Some of its financing programmes include Khutwa, a microfinance programme offering loans of up to Dhs250,000; Bedaya, which offers new SMEs loans of up to Dhs3 million; Zeyada, which provides early stage SMEs loans of up to Dhs5 million; and Tasnea, which promotes the expansion of existing SMEs.

Mohammed Bin Rashid Establishment for Young Business Leaders

Set up in 2002, the establishment offers government support, funding and an incubation centre to support entrepreneurs in Dubai and across the UAE.

The establishment has set up a $700 million UAE fund with the Dubai Islamic Bank to provide access to capital at preferential terms for new entrepreneurs.

For existing SMEs, the establishment provides loans at preferential terms through a network of affiliated banks, and also acts as an advisor to the entrepreneurs seeking the loans.

The Centennial Fund

Established in 2004, the Centennial Fund and its offshoot, the National Entrepreneurship Center, have three main goals: diversifying the Saudi economy through the creation of SMEs; reducing the failure rate of SMEs by providing long-term mentoring; and promoting successful entrepreneurs.

Saudi Arabia was the first Arab country to establish such a programme and the fund has supported thousands of projects since its launch.