The new $250 million technology investment fund launched on Wednesday by Middle East Venture Partners (MEVP) will invest in about 15 companies, including a number of its existing portfolio companies, CEO Walid Hanna has said.
Speaking to Zawya on the sidelines of the launch in Dubai, Hanna said he was “absolutely confident” of being able to source enough investible businesses.
“We have four years. “There’s a lot that can happen in four years,” he said. “I believe we are going to invest in probably four or five companies per year.”
Hanna said at the launch that his company had identified 26 potential investments for the Middle East Venture Fund III, which would require capital of about $100 million.
“In year one, we tend to do smaller tickets but a bigger number of companies. In year two, we double and triple down on the winners and this makes a whole difference. The small companies that are not proving [to show] traction, we let them die.
“That’s the name of the game. It’s unfortunate. The best ones make it and the worst we write off, but these are small amounts.”
Dubai-based MEVP currently has 40 companies in its portfolio into which it invested through two earlier funds, which were set up to provide early stage and seed capital. About 70 percent of its third fund has been earmarked to provide growth capital to slightly larger firms – companies that are growing and have tangible revenues, but which may not be making a profit.
Hanna said that of the 26 potential investments, “three or four are from our existing funds”.
“These are stars that have made it really big that require a big ticket. We might go to the market and raise half of that ticket, and use our new fund to co-invest,” he said.
The company has already made about $100 million of co-investments alongside a number of banks, telecoms companies and with Saudi-owned media firm MBC Group.
“We love co-investments because when it’s multiple strategics and different eyeballs they add different value. They say an entrepreneur is very solitary, but when he has many co-investors we all help the company to grow,” said Hanna.
“We’ve already done one investment with the new fund. It’s also with a co-investor in the logistics space – a very big name that we all know, but we cannot announce because they are not ready to announce.”
The Middle East Venture Fund III was launched following an investment in MEVP in May by Emaar Properties founder Mohamed Alabbar, who has also invested in the new fund.
The fund has a lifespan of eight years and is aiming to deliver an internal rate of return to investors of 25 percent, meaning that it will need to treble the $250 million initial investment to meet its target.