Venture fund to help MENA ‘techies’ launch startups

The Fenox Global Fund IV seeks to attract $100m from investors to provide funding for businesses across the MENA region, Asia and the US

As the Middle East and North Africa (MENA) region grapples with the highest levels of unemployment globally, a new venture capital fund offers a growing number of entrepreneurs in the tech sector the chance to take their ideas to the next level.

The Fenox Global Fund IV seeks to attract $100m from investors to provide seed, Series A and pre-IPO funding for businesses across the MENA region, Asia and the United States. Silicon Valley-based investment firm Fenox Venture Capital started the fund, along with Innovation 360, a consultancy headquartered in Dubai.

“There are a lot of promising start-ups (in the MENA region), a lot of promising opportunities left to die without the proper financing. There are different channels of financing but we don’t feel they are suitable for high-tech at the moment,” said Kamal Hassan, Fenox General Partner and president of Innovation 360.

Kamal said the company has been investing in startups for more than three years, mainly focusing on pre-seed, accelerator level and some seed level funding. However, there is a “serious gap in venture capital level funding” that is not met by the banking and finance sector, which is not the right channel for high-tech firms at the moment, he explained. Almost half of the fund will be allocated to the MENA region, said Hassan.

While investors are still joining in the fund, deployment of capital in start-ups is expected to commence between February and March of 2015, he added.

The fund will seek to invest in information technology startups – including Internet, computer hardware and software, and communications – as well as startups in the area of healthcare technology and clean tech.

“We believe there are great opportunities to grow beyond just the region and to be global start-ups, even in Silicon Valley coming out of here so we need to give them opportunities through this type of funding,” said Hassan. “There is demand but also lack of supply so we are filling a gap.”

The unemployment rate among the youth in the MENA region is the highest in the world, according to the World Bank. About a quarter of the region’s young population are seeking employment in jobs that are unavailable, according to a report published last year.

A recent survey by the Middle East’s biggest jobs website of working people born between 1980 and 1996, showed that 59 per cent of them relied on family for supplementary income, 28 per cent struggled to make ends meet, and 79 per cent identified finding a job as the biggest challenge of their generation.

While the recent venture fund will help create some jobs in the tech sector, it only caters to a small group of people.

“The high tech is a sector that does not create massive job opportunities because it employs very talented people. You can have a start up that can be valued at millions and hundreds of millions with 20 people in it,” Hassan said. “But am I fulfilling the need for blue-collar jobs? No, I’m not. I’m creating opportunities and start-ups that will create very specialised jobs and that’s what we need.”