VC Market in the Middle East

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Venture capital firms are spreading out across the globe as entrepreneurship makes a place for itself in today’s technology based world. Effi Enterprises is a VC firm which provides money to companies that have a good potential for exponential growth. Usually, these companies are innovative and cutting edge and are expected to go public within 10 years. There are more VC firms which are looking at the international community with an eagerness to fund those enterprises that they feel are going to take off. They will typically invest large amount of money in a startup or emerging business for exchange of equity in the company. This can be a huge boost to any economy and help increase employment opportunities in various communities. The Middle East is one of the regions that are being closely watched by VC firms who anticipate astronomical growth in the near future.

History of Venture Capital in the Middle East

There are not typically too many startups in the region of the Middle East. It’s not because they lack innovative thinking. They actually have a consumer oriented outlook and their basic services are managed very well. Startups have to be must more ambitious and aim for the larger, global market rather than the local one. Even though setting up a business in the region is not difficult, especially in one of the “free zones” that do not require a local majority stake business partner it is still not likely to hear of a startup out of someone’s garage. There are many different licensing fees that have been linked with startups therefore there are many challenges and entrepreneurs have been indirectly discouraged. The Middle East has high rents, high labor costs and a high cost of living and all of these have been brutal on startups. Aside from that there are cultural issues that inhibit entrepreneurship. For instance, a bankruptcy is a criminal offence in many of the countries and a bounced check can put a person in prison.

Present State of VC in the Middle East

After recognizing that entrepreneurship is essential to grow an economy and even to making political progress in the region, it is just making an entrance. Seed Startup is a venture capital firm that has been instrumental in helping startups in the Middle East. They began a “startup accelerator program” in Dubai. When they find a company that they believe has potential to be successful, they invest between $20 and $25 thousand in the business and they agree to take 10% equity. Entrepreneurs who join the program will be required to spend 3 months in Dubai and be mentored by the VC firm. This allows them to put their ideas out before experienced professionals as well as get some valuable feedback. One way that entrepreneurship is being encouraged is through the use of media. A new television show, “The Entrepreneur” was recently launched on Dubai One. It starts out with 100 contestants and the local business professionals whittle it down each week until there are 10 finalists left. The winner by the end of the show will win enough money to jump start their business. It’s slow going, but entrepreneurship is being encouraged and this will mean a larger role for the venture capitalist in the future.

 The Future of VC in the Middle East

Although the beginnings have been somewhat rocky, just since 2011 there have been many venture capital firms who have begun investing in different regions throughout the Middle East. There are more than 400 of these VC firms who are willing to fund various businesses by investing in exchange for equity. It is expected that the VC industry in the Middle East will continue to grow as changes are made to encourage innovations and entrepreneurship.

 

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About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on January 15, 2013, in Business financing, financial history, investing, the economy, VC financing, Venture Capital and tagged , , . Bookmark the permalink. 1 Comment.

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