An exclusive interview with Tamer Azer of Shorooq Partners.
The challenging environment of the last few years has seen international tech investors become increasingly wary. The pandemic and its associated impacts have muddied the global waters. However, Africa’s emerging markets are seeing increasing levels of investment, as investors seek out unique firms and engaging products and the continent shows huge potential.
Shorooq Partners is one of the GCC’s leading technology investors. With offices in Saudi Arabia, Dubai, Bahrain and Abu Dhabi, the firm specializes in finding companies offering unique solutions or products. Here, we speak with Tamer Azer, a partner at Shorooq, about the tech and investment environment in the MENA region and Shorooq Partners’ approach to investment.
What is the current environment for tech investment in the emerging markets?
Without question, investment sentiment for tech investments in emerging markets from international investors, especially at the later stages, has turned sour. Emerging market investors however continue to invest, albeit after accounting for market corrections.
To what extent did the pandemic affect tech investment? Who were the big winners and losers by sector?
The pandemic was a boom for emerging market tech investments, people and international investors all of a sudden felt that anything is possible in the new normal. The world suddenly felt flat, and appetite grew.
Food security has become an increasingly prevalent subject, particularly as inflation soars and the Ukraine conflict shows no signs of letting up. Tell us more about your investments in agriculture and how you’re supporting a more sustainable approach to farming.
Shorooq Partners has backed Pure Harvest Smart Farms since the very beginning, leading the pre-seed and seed rounds. Other investors shied away from the challenge and there were countless times when we were told that launching an AgriTech startup in the Middle East just would not be possible – and now Pure Harvest serves as a leading AgriTech growth company, born in Abu Dhabi and with roots throughout the region, Saudi Arabia, and soon in Kuwait, with ambitious plans to grow to Asia.
The Shorooq Partners’ team worked extremely hard to support IMM Investment Corp., a leading Korean investment firm, to mark their first Middle East tech investment by co-leading this round. Our ability to bring such esteemed growth investors to the region is one of the strengths that sets Shorooq Partners apart. We will continue to look at opportunities to bring such partners to the region to invest in the region’s flourishing startups.
Supply chains were another business line to have been affected by the pandemic – tell us more about your investment with Khazenly, the Egypt-based logistics platform and why you believe their approach will support faster, more affordable solutions.
E-commerce in the region is growing at an unprecedented scale, yet the infrastructure remains lacking. Some areas have stronger players than others, yet some parts of the same value chain remain underserved. One such area is fulfilment. We see many players in the first, middle and last mile space, yet who connects those and manages their relationships with enterprises? The answer is companies like Khazenly. Many of the companies now selling through e-commerce are just embracing the front end of e-commerce, which are platforms on which they reach the end consumers. But what happens, in the back end, after a customer clicks “pay now” is still messy and complicated. Companies like Khazenly make that problem go away and in the process complete e-commerce’s virtuous cycle for companies in the region now eager to sell online to an increasingly digitized customer base.
Shorooq Partners launched its USD 150 million Bedaya Fund II in March, aimed at investing in early-stage startups across the MENAP region – what has been the response to date and in which sectors do you see the most opportunity for startups to make an impact?
We always feel lucky when things work out well, but the reality of luck, as internet memes teach us, comes after a lot of hard work. When my partners Shane and Mahmoud first launched Shorooq Partners, many of the region’s major investors believed in their vision and tenacity. This has remained as true for Bedaya Fund II as it was for Bedaya Fund I, especially now that we have shown our partners what we are truly capable of. We are very lucky to have had a very strong first close and we have soft commitments for almost the entirety of the fund at this stage and have been backed by many, many exciting partners both new and old.
What investments are you seeing by GCC companies in Africa?
We are seeing many GCC companies expand in Africa through acquisition. One such company is our very own Aumet. Aumet’s expansion to Egypt happened through the acquisition of an Egyptian competitor called Platform One. This is one of the things Shorooq Partners supports its portfolio companies in achieving. It also creates an opportunity to land in a new market with very different dynamics and hit the ground running. Better capitalized GCC players have made several such transactions in companies in Egypt, Morocco and Tunisia and we expect to see many more such transactions happening in the future.
How are Egyptian companies investing? Are they staying local or going international?
I’d say this depends on the nature of the business. Some companies go deep in the Egyptian market and own their local market first and some people perfect their model in Egypt then scale it across quite quickly. Those that make the leap to international markets first tend to be SAAS companies, while others tend to dominate locally first.
How can governments better support investment, both at home and abroad?
One of the biggest challenges facing investment in the region is at the later stages. There are two issues here, local investors are jumping at investing in technology companies at the later stages and typical late stage investors from overseas aren’t very excited about the region. These are areas we can work on. We can start investing our own money as a region into our own companies that have the potential to be global leaders in a vertical. We can also start building bridges between local and regional early stage investors and overseas late stage investors. The regional governments can work to provide those large investors with information and a sense of comfort to help them get excited about investing in the region. These two initiatives would add tremendous value to our ecosystem in the long-run.
Finally, an interview in the UAE-based newspaper, Khaleej Times used the headline to describe Shorooq Partners as being “in a habit to back winning horses”. What is your secret to successful investment?
It’s not that we have a magical way of picking companies. It actually comes from a place where we are honest with ourselves about who we are and who we invest in. Beyond the obvious things like team, market, businesses model, etc. We look for relationships that work in the long-term and invest with people who we believe are fellow warriors from the trenches who can roll up their sleeves and fight, just like we do. Once we invest, we really become founding partners and work tirelessly to add as much value as we can to our portfolio partners. We will go as far as we possibly can every time for our founders. Period. These relationships, built on mutual respect and hard work as well as deep collaboration, are what help create winners.