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The Al Waha Fund of Funds: Fueling FinTech and startups in Bahrain

EntrepreneurshipFinanceFinTechGCCStartup

For FinTech companies in the Middle East – and startups more generally – this is an exciting time. Governments across the region are working to cultivate ecosystems that can support their growth. If they have perhaps been overlooked in the past, the last few years have seen them put front and centre.

That said, for all the progress that has been made, there are still challenges. And 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 FinTech business, but these will not be realised unless they can be connected with the capital they need.

This is why we were particularly excited earlier this month, 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. So as well as providing a boost to Bahrain, the fund will also help startups from around the Middle East to gain access to the capital they need in order to expand.

The fund was launched at the Gateway Gulf Investment Forum, held under the patronage of His Royal Highness Prince Salman bin Hamad Al Khalifa, the Crown Prince, Deputy Supreme Commander and Chairman of the Bahrain Economic Development Board (EDB). Gateway Gulf brought together over eight hundred global investors and business leaders to explore ways of unlocking the opportunities being created by the economic transformation in the GCC. What was clear to us at the forum was that there is real interest in the Gulf opportunity among investors – and we think startups have a central role to play in driving the innovation needed to realise that opportunity.

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. KPMG Enterprise’s Q4’17 edition of Venture Pulse reported that global VC investment in startups hit a decade high in 2017, with over $140 billion invested Venture capital investment in the MENA region. However, that 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, measures to enable onshore crowdfunding in conventional and shari’a-compliant finance and the introduction of a regulatory sandbox for FinTech.

These advances were reflected in the recent Global Startup Ecosystem Report, released by the Global Entrepreneurship Network and Startup Genome, which included Bahrain in its list of global FinTech ‘ecosystems to watch’ – the only Arab country to be included in the list.

We are focusing on the sector because we are excited by the opportunity and by the entrepreneurs and the ideas in the region. We think there is real potential to transform the financial sector if those entrepreneurs can be connected to the ecosystem and capital they need. And there’s also the prospect of an exciting return for the investors who back them.

David Parker

Executive Director – Investment Development for Financial Services at Bahrain EDB