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The Al Waha Fund of Funds: Fueling FinTech and Startups in the Middle East

EntrepreneurshipFinanceFinTechGCCStartup

For startups in the Middle East, this is an exciting time as governments across the region are working to cultivate ecosystems that can support their growth. In the past, they may have been overlooked, but in the last few years they have been put front and centre.

For all the progress that has been made, there are still challenges. When we talk to FinTechs and other startups there is one area that consistently comes up more than any other as a major constraint on growth – funding. There are talented entrepreneurs with great ideas for the next disruptive tech business, but these will not be realised unless they can be connected with the capital they need.

This is why we were particularly excited when Bahrain Development Bank launched a new $100m venture capital fund of funds – capitalising on Bahrain’s position as a regional financial centre to help address this challenge.

The Al Waha Fund of Funds will invest in venture capital funds that have a presence in Bahrain. As a result, it is expected to help attract new funds to Bahrain, boosting the local startup ecosystem by bringing funds and expertise to the country.

But while funds need to have a presence in Bahrain, they are not restricted to investing in the Kingdom. The fund will not only provide a boost to Bahrain, but also help startups from around the Middle East gain access to the capital they need in order to expand.

As a matter of fact, we have already seen rapid progress.

The fund successfully completed its first $100m fundraising round and one third of that is already in the process of being allocated. In June, the Limited Partners Advisory Committee met for the first time to close the $100m fund and set the strategic direction of the allocation. The limited Partners Advisory, reflects our Team Bahrain approach, and includes several of the major public and private sector entities in Bahrain, such as Mumtalakat, National Bank of Bahrain, Batelco, Tamkeen and Bahrain Development Bank.

While venture capital is not the whole solution, it is clear from the experience of established FinTech hubs around the world that it can be a key factor. Venture capital investment in the MENA region is just a fraction of the level in markets like the USA and China. By raising that investment, we have the potential to make a big difference.

Of course, the launch of the fund isn’t an isolated initiative. Bahrain’s ecosystem has benefitted from a number of major economic reforms in recent years, including a reduction in the minimum capital required for starting a business, the launch of the region’s largest FinTech hub – Bahrain FinTech Bay, measures to enable onshore crowdfunding in conventional and shari’a-compliant finance and the introduction of a regulatory sandbox for FinTech.

Additionally, we are also looking at a number of other innovative initiatives to connect private capital from around the world with investments in Bahrain. For example, we recently saw the launch of the Bahrain Energy Fund, the first fund of its likes in the GCC that is seeking to raise $1bn. The Fund will be unique in providing institutional investors with access to local energy assets.

We are excited by the opportunity that the region’s economic transformation provides – and we believe startups can be a central part of that. We think there is real potential to transform the financial and tech sectors if entrepreneurs can be connected to the ecosystem and capital they need – and there’s also the prospect of exciting returns for the investors who back them.

David Parker

Executive Director – Investment Development for Financial Services at Bahrain EDB