Introduction
The venture capital (VC) ecosystem in the Middle East, North Africa (MENA), and Pakistan is a dynamic and rapidly evolving space. Ahmed Elgabri, an investment professional at Shorooq Partners, recently shared valuable insights into the firm's investment strategies, the sectors they focus on, and the trends they observe, particularly in insurtech. This article delves into the key takeaways from that conversation.
The Journey to Venture Capital
Ahmed Elgabri's interest in venture capital and entrepreneurship dates back to his high school days. To break into VC, he knew he needed experience in two key areas: being an operator in a startup and having financial services experience. Ahmed gained hands-on experience working with fast-scaling startups in Egypt and later joined a publicly listed investment company. His diverse experience made him an ideal candidate for Shorooq Partners.
The Role at Shorooq Partners
Ahmed supports the partners on various strategic initiatives. His day-to-day responsibilities include sourcing startup opportunities, conducting due diligence, and assisting with portfolio management and potential exits. He describes his role as exciting, particularly given the current state of the VC landscape in the region.
Shorooq Partners: A Brief Overview
Shorooq Partners is a leading early-stage venture capital fund in the MENA and Pakistan regions. The firm focuses on four main verticals: software platforms, fintech, web3, and tech-enabled business services. With over $250 million in assets under management, Shorooq Partners is backed by some of the world's largest sovereign wealth funds and has invested in about 60 companies to date.
The Investment Philosophy
Shorooq Partners aims to add the utmost value to their portfolio companies. They are active investors and prefer to lead every transaction in which they participate. The firm also has a venture debt fund, providing non-dilutive capital to help businesses scale. Their extensive network and multiple offices across five countries enable them to offer unparalleled support to their portfolio companies.
Trends in Venture Capital and Insurtech
Ahmed observes different trends in insurtech based on market maturity. In Egypt, where insurance penetration is low, there's a focus on building the first layer of education through online brokerages. In contrast, more developed markets like the UAE see advanced solutions in claim management and user incentivization.
Emerging Markets and Embedded Insurance Solutions
Ahmed highlights the increasing prevalence of embedded insurance solutions in emerging markets. These solutions often take the form of micro-insurance for smartphones or motorcycles. This trend is fascinating because it has already gained traction in other regions like Latin America.
The Funding Landscape: Winter or Spring?
Ahmed notes that there is still an abundance of capital available for startups. However, the focus has shifted toward the sustainability of business models as capital has become more expensive. Despite this, the MENA region, particularly the GCC, is faring well in terms of growth and large funding rounds.
The Challenge of Late-Stage Funding
Ahmed identifies a unique challenge in the MENA region: the need for late-stage funding options. Unlike the U.S., where capital markets are more developed, the MENA region is still building its ecosystem. This gap presents both a challenge and an opportunity for growth in the region.
The Selection Process: A High-Level Framework
Shorooq Partners employs a high-level framework for evaluating potential investments. The first criterion is the team and founders, who must be closely aligned with the problem they aim to solve. The second is the size and complexity of the problem, followed by early signs of product-market fit and user retention.
Thesis-Driven Sourcing: A Thoughtful Approach
Ahmed explains that Shorooq Partners uses a "thesis-driven sourcing" approach to identify investment opportunities. This involves in-depth research into global trends, market mapping, and understanding the regulatory landscape. This method allows them to become semi-experts in the space before even engaging with startups.
A Case Study: Investing in Khazenly
As an example of their thesis-driven approach, Ahmed discusses their investment in Khazenly, an on-demand digital warehousing and fulfillment platform in Egypt. The investment was driven by the identification of a large and growing e-commerce market and the need for advanced fulfillment solutions.
The Investment Process at Shorooq Partners
The process is straightforward for startups interested in securing investment from Shorooq Partners. It begins with an initial call with a member of the investment team, followed by internal discussions. If the group decides to proceed, they request additional information and usually decide within a week to 10 days.
Staying Informed: The Importance of Continuous Learning
Ahmed emphasizes the importance of staying informed and up-to-date in the fast-paced venture capital industry. He recommends reading newsletters, both regional and international, to keep abreast of the latest trends and news. One such newsletter he highly recommends for business professionals in Egypt is called "Enterprise."
Advice for Aspiring Venture Capitalists
For those looking to break into the venture capital industry, Ahmed offers some sage advice. He emphasizes the need for optimism and curiosity. According to him, the job is perfect for someone who is naturally curious, as it involves speaking to a variety of people and companies across different sectors. His advice is to stay curious, stay interested, and keep learning about structurally similar markets.
How to Reach Out to Shorooq Partners
Ahmed assures that Shorooq Partners is highly approachable and open to speaking with passionate entrepreneurs. The firm has a "Get Funded" application on its website where startups can apply for funding. Every application is reviewed, and feedback is provided to every founder. Ahmed assures you that they always get back to you in a timely fashion and are excited to support passionate entrepreneurs.
Conclusion
This comprehensive article offers a deep dive into the venture capital landscape in the MENA region, as seen through the lens of Ahmed Elgabri and Shorooq Partners. From the importance of staying informed to how to approach Shorooq Partners for investment, Ahmed provides valuable insights for both aspiring venture capitalists and entrepreneurs.
