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Angel investors network opening in MENA

DUBAI — Entrepreneurship lies at the heart of a country's economic development. If nurtured and fostered and given the tools by which to grow, it will help propel a country to greater economic success.

The problem is that while the seeds of entrepreneurship are often present, as they are across the MENA region, they are unable to grow because of a lack of seed capital. For this reason the Arab Business Angels Network (ABAN) has been established. The official launch will take place on September 7, says ABAN's Chief Operating Officer, Lisa LaBonte, speaking to Khaleej Times.

She says there is "latent entrepreneurship" across the MENA region that could explode if more capital was available at seed stage. "We have liquidity, we already have the base of entrepreneurship. We have talented people, dynamic ideas and a rich legacy. We have all the ingredients but they are not being mixed."

The MENA region is "the cradle of entrepreneurship," she asserts. "Trading is entrepreneurship, figuring out how to move goods, make money and build markets. It is entrepreneurship at its finest".

Cultural restrictions in the Middle East can also make the finding of seed capital difficult. "The risk factor isn't there," she says. "It's there in terms of entrepreneurship but not in terms of people putting money on the table in riskier investments." And she says: "Banks won't give you money unless you have assets to collateralise the loan and a venture capitalist often doesn't want to invest until much later down the line when there is a clear revenue stream."

The missing ingredient for entrepreneurs across MENA therefore is seed and early stage capital and the lack of it may discourage people returning to the region if they are educated abroad. "A lot of people go abroad and never come back. We need to create opportunities to encourage them to come back and develop businesses in their own market. There is a really big picture here," says LaBonte. Recognising the importance, and urgency, of making seed capital available to entrepreneurs in the region, Dubai Holding and the Young Arab Leaders (YAL) forum made a commitment at the Clinton Global Initiative meeting last September to set up a network of angel investors across MENA to facilitate the flow of capital into emerging businesses.

"Dubai International Capital (DIC) took the ball, ran with it and executed in creating ABAN," explains LaBonte. DIC is a Dubai based international investment company that primarily focuses on private equity and is a wholly owned subsidiary of Dubai Holding. ABAN is DIC funded and HSBC and Shuua Capital are sponsors. The support of Sameer Al Ansari, CEO of DIC has clearly been instrumental in getting ABAN off the ground and the appointment of Abdul Aziz Al Ghurair, CEO of Mashreqbank, as the new chairman of ABAN should help to further foster the contacts and strategic alliances that such networks encourage.

YAL participation is also critical, explains La Bonte, because, as captains of industry "they are able to understand the importance of growing business in the region". Some members will be angel investors themselves.

The first initiative undertaken by ABAN is the Arab Business Challenge, a competition designed to find the leading young entrepreneurs across MENA. ABAN has received over 1000 submissions from 15 countries since the competition was launched earlier this year. The number of semi-finalists has been whittled down to 20 teams, comprising between two and four members, from which five finalists will be selected. The final two teams, who stand to win a total of $2 million investment capital from the DIC, will be announced at ABAN's official launch in September.

The concepts are all very different, says LaBonte. "There is an ostrich slaughter house in Jordan and dot.com company in Cairo, with a team member is Egypt and one in Saudi."

ABAN has already identified potential angel investors across MENA, 18 countries in total, "The goal is to have an average of 50 private investors in each country," says LaBonte. "Typically, an angel investor will invest between $50,000 and $2 million depending on the type of deals. Everyone's appetite is different." She also explains that each angel group will see their own deal flow and manage their own process, although there will not be independent country offices. Angel investors normally invest in their own country, in businesses they know best. Cross-border investment is rare, she explains.

Labonte also says: "The reason why a business angel's network it is so vital for our region is that an angel network will bring people together with a similar resource base. This network will "allow people to pool capital in a local market to invest in companies that need seed stage capital."