Venture capital transactions pick up pace in the region

The venture capital industry in the region is expected to see more deals this year with most leading players claiming strong deal pipelines and improving the business environment in the Middle East and North Africa (Mena) region. Releasing the first collaborative venture capital (VC) report in the Mena region in Dubai yesterday, Mena Private Equity Association (MPEA), which is made up of leaders from venture capital industry in the region, said there had been a three-fold increase in the number of venture capital deals in the past two years, despite the global financial downturn. "There are clear indications of an uplift in the industry. When we consider deals in private equity and pure venture capital deals together, the upward trend is more evident," said Tom Speechley, chief executive of Riyada Enterprise Development (RED), the private equity platform of Abraaj Capital. He said Riyada did five deals this year and has seven more in the last stages of execution. Feroz Sanaulla, Intel Corporation's director for the Middle East, Turkey and Africa, yesterday said that there were ample venture capital investment opportunities emerging in the region. "There is a strong momentum building in the [venture capital] industry in the region. Irrespective of the number of deals that have been executed in the past, there are signs of increasing deal flow in the near future," said Sanaulla. The statistics on regional venture capital deals confirm the industry's optimism. The total number of deals increased from seven and five in 2007 and 2008, respectively, to 19 and 14 in 2009 and 2010 respectively, marking a 175 per cent increase in the entry deal activity of this industry during the periods in question. The industry has seen significant growth over the last two years, with 33 venture capital-related transactions versus 16 between 2006 and 2008. Venture capital firms raised $300 million (Dh1.1 billion) in 2010 representing 28.4 per cent of the total aggregated funds raised since 2000, and a 39.8 per cent increase in cumulative funds raised since 2006. The increase was also reflected in the annual fund raising activity of 2010 and marked a record year in the fund raising activity breaking the previous record of $133 million in 2006. Meanwhile, industry experts yesterday said that the recent political turmoil in the region had not had any negative impact on the industry. Instead, the newfound political freedom in countries such as Egypt and Tunisia is likely to give a big boost to entrepreneurship, they said. "The region's youth are becoming more dynamic, creative and entrepreneurial and they are exhibiting this new attitude in many ways, including starting new businesses. The outcome will be a growing number of opportunities to invest in promising companies, and, as a result, the number of venture capital funds will reflect this," said Imad Gandour, Cedar Bridge Partners. Rising populations and the growth of small businesses bode well for venture capital transactions in the Middle East and North Africa region. The industry has been a critical element in the solid growth of an economy. However according to experts from MPEA, in order for venture capital firms to be able to play an important role in regional economies, industry investment structures and the legal framework need to be improved. From / Gulf News