Your SlideShare is downloading. ×
0
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
VENTURE CAPITAL IN MENA MARKETS
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

VENTURE CAPITAL IN MENA MARKETS

712

Published on

Published in: Economy & Finance, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
712
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
18
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide
  • X
  • X
  • X
  • X
  • MENA is an investment environment that has been turned on its head. While investment resources are plentiful, investment sophistication has not yet fully caught up with the wealth and opportunities that are available – and there isn’t yet a robust entrepreneurial culture driving a steady flow of business plans to private equity sources (the tone of the market however is such that this is coming – funds are looking for early stage businesses, and governments are setting up agencies to encourage entrepreneurialism) Initiatives that focus on developing markets across MENA are a relatively new phenomena -- as such, those that are doing it are truly pathfinders, finding ways to adopt best practices that are used globally elsewhere to the market realities of the region. All of MXV Capital’s investments will have a cross regional market focus – and MXV Capital will take advantage of the power of its network of portfolio investments by facilitating regular exchanges between them on market development discoveries.
  • X
  • Transcript

    • 1. VENTURE CAPITAL IN MENA MARKETS November 2007 MXV CAPITAL © 2007 All rights reserved
    • 2. <ul><li>A Shift in Global Economics </li></ul><ul><li>Outsourcing in India and manufacturing in China have demonstrated the power of such shifts and the magnitude of its impact globally. </li></ul><ul><li>We are also beginning to see the effect of almost $100/barrel oil prices from this region…planes….project finance…property </li></ul><ul><li>The next wave of changes that fundamentally impact business economics globally, will come from emerging markets </li></ul><ul><li>Over the next decade this will result in a shift in global GDP profile, flow of FDI to and investments in high growth emerging markets, increase in WTO participation by developing nations and impact of their open trade policies will drive these changes </li></ul><ul><li>Emerging markets will go through tremendous changes and will need to gain sophistication across a variety of sectors, as they connect to the rest of the global economy </li></ul>
    • 3. <ul><li>MENA IMPACT </li></ul><ul><li>MENA is one of the fastest emerging markets globally, yet lagging significantly in sophistication at both business and consumer levels </li></ul><ul><li>The region has a population of over 400M, yet the GDP is only 1/5th of USA. Some of the underlying factors for this include high unemployment and very fragmented markets, restricting trade and unification across borders </li></ul><ul><li>For MENA to evolve its social and business environments, it will require creation of various Next Generation Businesses (NGBs), that bring sophistication and efficiency through commoditization of new services and products </li></ul><ul><li>Real estate is very much needed, but will not be enough to build a complete socio-economic fabric for the region </li></ul><ul><li>We need to layer assets with services </li></ul>
    • 4. The markets within the GCC in particular are beginning to migrate to global capabilities <ul><li>Political and social reforms to develop a more liberal environment </li></ul><ul><li>Governments at various stages of joining WTO and developing FDI friendly economies </li></ul><ul><li>Privatization of state assets and restructuring of companies occurring as competition increases </li></ul>A fundamental shift in the mindset… Tremendous surplus and liquidity Leading to large scale investments in… <ul><li>Commercial and residential infrastructure </li></ul><ul><li>Expansion of hydrocarbon production capacities </li></ul><ul><li>Development of tourism industry </li></ul><ul><li>Expansion of airline and shipping industries </li></ul><ul><li>R&D and education initiatives </li></ul><ul><li>Regional governments are projected to have a current account surplus in the range of $337 Billion in 2006 as a result of the recent oil boom </li></ul><ul><li>Repatriation of capital from US alone to the region over the past few years has been in the range of $300 Billion </li></ul>Key Reforms Affecting Private Sector <ul><li>Increasing… </li></ul><ul><li>Investors in capital markets </li></ul><ul><li>Consumers of new services </li></ul><ul><li>Mobiles & Internet users </li></ul><ul><li>Inter-regional travel & leisure </li></ul><ul><li>Users of information </li></ul><ul><li>Small businesses </li></ul><ul><li>Awareness of global issues </li></ul><ul><li>Competition </li></ul><ul><li>Consumer sophistication </li></ul><ul><li>Expatriates & resident multi-national enterprises </li></ul>Capital Market Reforms: International standard regulations, liberalizations, new instruments Knowledge Based Initiatives : Emphasis on education, training, research, Centres of Excellence Financial Sector Development: Entry of top global banks, insurance and investment companies Clusters of diverse industries being developed: Energy City, Internet City, Media City, QSTP, Economic City, QFC, DIFC, Industrial Free Zones
    • 5. In the venture capital arena, there is a gap that exists in MENA markets compared to the global markets’ venture capital business model norm… Availability of investors for this asset class: Investors that are willing to participate in the PE/VC asset class with a long-medium term (3-7 year) return perspective with IRR of 30% Skills to manage the VC value chain exists: Sophisticated skills for raising funds, identifying and selecting deals, managing growth of new companies and finding high value exit routes exist Strong flow of ideas & entrepreneurs exists : Continual flow of entrepreneurs with innovative ideas and deep understanding of markets, risks and rewards Scalable and homogenous market structure : Large, homogenous market and infrastructure to scale immediately exists (laws, channels, connected audience from marketing perspective) Profitable exit markets: Sophisticated capital markets for IPOs and/or exit market opportunities for acquisitions exist Competitive markets and businesses: Sophisticated businesses in competitive markets that are willing and need to improve performance continually through innovation Global Early Stage PE Model Traditionally MENA markets lacked such investors as they have not seen such models work and hence were not convinced of returns. VC skills to manage the entire value chain were not particularly strong as it is not a widely practised business/model and few could operate this asset class Quality and quantity of deals available for such investments are low (hence it is hard to balance risk/reward equation). Markets not as well established for adoption Markets tend to be more fragmented/disjointed and unsophisticated, cost of scaling is significant due to inefficient channels Exit markets were not very readily available (M&A and trade sale) and capital markets were not very sophisticated. Lack of firms w/ global footprint in the region Due to governance, market dynamics, ownership structure, lack of transparency, businesses didn’t feel the urge to be as innovative , competitive or open to adopting change Historical MENA issues
    • 6. … but this gap Is slowly being reduced Availability of investors for this asset class: Investors that are willing to participate in the PE/VC asset class with a long-medium term (3-7 year) return perspective with IRR of 30% Skills to manage the VC value chain exists: Sophisticated skills for raising funds, identifying and selecting deals, managing growth of new companies and finding high value exit routes exist Strong flow of ideas & entrepreneurs exists : Continual flow of entrepreneurs with innovative ideas and deep understanding of markets, risks and rewards Scalable and homogenous market structure : Large, homogenous market and infrastructure to scale immediately exists (laws, channels, connected audience from marketing perspective) Profitable exit markets: Sophisticated capital markets for IPOs and/or exit market opportunities for acquisitions exist Competitive markets and businesses: Sophisticated businesses in competitive markets that are willing and need to improve performance continually through innovation Global Early Stage PE Model Traditionally MENA markets lacked such investors as they have not seen such models work and hence were not convinced of returns. VC skills to manage the entire value chain were not particularly strong as it is not a widely practised business/model and few could operate this asset class Quality and quantity of deals available for such investments are low (hence it is hard to balance risk/reward equation). Markets not as well established for adoption Markets tend to be more fragmented/disjointed and unsophisticated, cost of scaling is significant due to inefficient channels Exit markets were not very readily available (M&A and trade sale) and capital markets were not very sophisticated. Lack of firms w/ global footprint in the region Due to governance, market dynamics, ownership structure, lack of transparency, businesses didn’t feel the urge to be as innovative , competitive or open to adopting change Historical MENA issues Investors are seeking alternative investment vehicles and are becoming more sophisticated with venture finance A new breed of PE firms are being formed in MENA that target early stage ventures and have the skills to identify and develop next generation enterprises for the region Quality deals still lack in volume, but regional talent from US/EU market is beginning to return to MENA and catalyze the development of new businesses While fragmentation is still an issue, early stage interregional cooperation has set the stage for new market wide solutions Exit options are building within MENA’s regional capital markets and from international/regional players looking to enter MENA’s new market frontiers Markets are becoming competitive and international standards are being adopted across the region; this has led to the market requiring higher standards of sophistication and quality in services and products Shift in MENA VC Market…
    • 7. MENA’s VC sector is beginning to show an additional focus on investments in early stage, sophistication-driven services…but pure play VC firms may still be a few years away Stage : Early Stage Scale : MENA Region MENA PE shift over the next 24 months <ul><li>The projected trend over the next 12 months is for a significant increase in investment and development of early stage businesses. </li></ul><ul><li>This is being driven by the natural continued evolution of regional economies on the path to self sufficiency beyond energy asset dependence. </li></ul><ul><li>These investments will create a foundation of new businesses for the late stage and buyout markets downstream </li></ul><ul><li>PE/VC funding will focus on business and consumer services, product manufacturing and distribution, where current latent market demand is most significant </li></ul><ul><li>This focus shift has historically been typical in emerging markets, and MENA’s economic progression is continuing accordingly </li></ul>Type : Services & Products <ul><li>New businesses will increasingly be built to target the full MENA regional market opportunity as opposed to a single or small group of nation(s). </li></ul><ul><li>This scale shift is resulting from the creative use of IT/eBusiness – enabling the improvement of information transparency and sophisticated but inexpensive new market channels </li></ul>Up until now, the Private Equity market in MENA has been focused on investments in capital intensive, asset based sectors, such as infrastructure, energy, property & real estate. With the foundation of these base asset building blocks now in place, the market is now turning its attention the next logical phase of opportunities for development. In response, investment focus has begun to shift to creating a new era of regional level services and products.
    • 8. <ul><li>What will the VC business model need to take into account… </li></ul><ul><li>Lack of entrepreneurs in early stage, next generation services businesses </li></ul><ul><li>Market fragmentation; There are over 15 countries in MENA, hence it is very difficult to scale seamlessly. Legal, operational, cost, HR issues… </li></ul><ul><li>Several new businesses in MENA are not necessarily innovative at a global level. These businesses tend to be more “catch up” with global markets as opposed to containing the risk of a true innovative offering </li></ul>
    • 9. Our approach is to extend the traditional PE cycle by proactively identifying and catalyzing new initiatives <ul><li>Maintaining relationships with investors </li></ul><ul><li>Reviewing proposed investments, and overseeing those that are selected </li></ul><ul><li>Managing the exit of investments </li></ul><ul><li>Identifying and catalyzing new initiatives </li></ul><ul><ul><li>Proactively identifying and planning high impact opportunities for MENA with proven business models </li></ul></ul><ul><ul><li>Identifying and recruiting standout leadership from international and regional markets </li></ul></ul><ul><ul><li>Identifying and evaluating strategic process and infrastructure partners to lower costs , accelerate development and mitigate risk </li></ul></ul><ul><ul><li>Operationalizing new ventures from an optimal legal and physical foundation perspective </li></ul></ul><ul><ul><li>Assisting initiative leadership in initiative ramp-up with our deep regional and international know how and relationships </li></ul></ul><ul><ul><li>After a transition, stepping aside effectively to board review positions, enabling leadership to exercise their ownership of end results and find their own optimal approaches for success </li></ul></ul>Traditional GP PE Roles Additional Role +
    • 10. Some of the interesting areas where we are focusing to develop next generation services & products enterprises for MENA Key sectors for early stage enterprises in MENA Information Enabling Tech & Services Human Resources Services Sophisticated Financial Services Travel, Lifestyle & Media Services Industrial Services Advanced Education Services Business Process Efficiencies
    • 11. Key aim is to bring…. Sophistication Efficiency Enablement … to MENA markets

    ×