How to Spot the Next Big Thing

From Careem to ArabiaWeather, VC firm Wamda Capital has a canny knack of picking out the most exciting prospects from our region’s burgeoning startup scene.  

By Dina Al-Wakeel

Leading the region’s venture capital firms, Wamda Capital invests in propitious entrepreneurial ventures, from the taxi hailing service Careem to Jordan’s popular privately-owned weather website ArabiaWeather, and, the region’s leading online retailer.

The fund is run by prominent figures in MENA’s startup scene, led by Fadi Ghandour, founder of Aramex and a firm believer in the region’s entrepreneurs, Khaled Talhouni, Walid Faza, Fares Ghandour, and Lana Alamat.

Dubai-based Talhouni, Wamda Capital’s managing partner, said there was a lot of potential for creativity in the region, and it was the role of companies like his to help these ideas mature and overcome the hurdles on their way towards scaling.

What sectors are of particular interest to you at the moment?

Part of our investment thesis is the realization that we must not be overly dogmatic when it comes to sector focus. But as we look through our pipeline there are some themes and areas of focus that are emerging naturally, partly due to the structural reasons in the regional economy. Some of these sectors include fintech, content, e-commerce and marketplaces as well as enterprise and B2B offerings. Each of these sectors has shown a rapid growth in opportunity. Going forward, we will focus extensively on disruptive opportunities; companies that are clearly upending existing industries and changing the nature of doing business within those sectors. Our investments to date reflect that we havea broad sector focus with no single area dominating.

How do you go about selecting a company to invest in?

The type of risk and returns in which venture investors in the region operate necessitate us to look at investing in businesses that can have at the very least regional scale that is in line with our investment philosophy; we do not view target investments as being country specific. One of the key success factors for technology companies in the region is realizing that they cannot be focused on any individual country. Successful tech businesses in the region are able to optimize their operations in such a way that they maintain a commercial hub throughout the GCC and a development and back office operation in Jordan, Lebanon, and Egypt, thus effectively arbitraging the regional labor market.

With that in mind, we only invest in companies that demonstrate a clear regional offering and have begun to scale their operations on that basis. There are some exceptions, particularly around technology infrastructure and payments where a country specific investment thesis can yield adequate returns.But those opportunities are few and far between.

Closer to home, even though the Jordanian startup scene remains quite active, why have we yet to see another Maktoob appear?

Undoubtedly there will be another Maktoob.But in line with my earlier point, Maktoob at its time of operations was not really a Jordanian company.Its user base was across the region, its commercial operations were anchored in Dubai, the bulk of its users and revenue were GCC-based and its engineering, development, and back office capability were in Jordan. Maktoob represents a great example of a regional success story. I think it is critical to view these companies through a regional prism rather than a Jordanian or Lebanese or Emirati framework. Where tech is concerned these borders are fluid.

Some believe there’s a dearth of truly creative ideas in Jordan.Do you share this view? And when do you think they could start playing a bigger role as engines of growth and in creating much needed jobs?

I don’t think I agree with that premise. I think creative concepts are being created across the region on a daily basis. If anything, the momentum for creativity has increased in the past three years. The issue is not about the origination of the idea, but rather about the execution and aligning of all the necessary steps to bring an idea to life. That is also drastically improving across the region. There is no doubt that the region hosts an incredible amount of untapped creative potential. Our role as investors and ecosystem enablers is to find ways of unlocking this potential and navigating the macroeconomic and political hurdles.

Again, in 2000, IT was a negligible fraction of the country’s economic mix; by 2015 this has mushroomed to over 15 percent of GDP. I think this is indicative of a wider trend of adopting technology within the economy. Startups are a big part of that equation. I do think there is significantly more room to develop this ecosystem such that it becomes a larger percentage of the regional economy, but we are definitely on the right path.

You recently invested in online bookseller Jamalon.Do you think they stand a chance against Amazon, if it ever decides to push into our region?

With respect to marketplaces and e-commerce, we are particularly focused on high margin niche areas that are, by definition, harder for a newcomer to enter into organically. Therefore, we think that anyone looking to enter this space would be better served acquiring one of our existing marketplace/e-commerce companies rather than attempting to build it out themselves. The region has significant operational challenges that are unique to it. Local innovation helps address these issues and it is hard forglobal competitors to replicate local knowledge.

You also invested inCareem. How is it fairing against Uber?

Careem is one of the most exciting technology companies that have emerged from the region in the past few years. They are very effective when pitted against Uber and we think there is room for more than one player in this space as is reflected in other markets; DidiKuaidi in China, Grab Taxi in South East Asia, Ola in India—these are all markets where a local player is competing with Uber. The key here again is building a differentiated offering that caters to local needs.

What are the determining factors that convince investors to bet on your fund?

We’re actually in the process of closing out our fund at $75million. I think our track record speaks for itself. In the team’s earlier investment activities there have been numerous regional and international exits and our portfolios include some of the region’s largest winners.It is important to demonstrate your ability not only in picking potential winners but also in ensuring that you are able to support your companies through added value and regular engagement. We view our companies as partners and not as a financial instrument; we will go the extra mile for any of our entrepreneurs.