Al Waha Fund of Funds, which indirectly provides venture capital to Bahraini start-ups, aims to deploy all of its inaugural $100 million fund within the next two to three years, after allocating 45 per cent of it since its launch last June, a senior executive said.
"We want to build an extensive ecosystem of start-ups and backers, and a local marketplace where they can tap into valuable funding and expertise," Areije Al Shakar, fund manager at Al Waha Fund of Funds and senior vice-president and head of development services at Bahrain Development Bank – the fund manager for Al Waha – told The National.
Al Waha was set up by Bahrain Development Bank, a development finance institution, last June. Through its fund of funds framework, it distributes financing to existing global and regional VC funds, which in turn allocate funding to start-ups according to their own policies.
The fund has deployed $45m to five VCs to date – Dubai-based Beco Capital, Middle East Venture Partners, Wamda Capital, 500 Startups and European fund manager Finch Capital.
It is now tapping up other VCs across the region and beyond to bring them on board, Ms Al Shakar said on the sidelines of Euromoney’s GCC Financial Forum in Bahrain this week. “We are always in talks with prospective new partners, and have received interest from all over the GCC, as well as Europe and the US,” she said.
Bahrain, like other Arabian Gulf states, is working to increase the number of small and medium-sized enterprises to boost economic growth. The country has a debt-to-gross domestic product ratio of 85 per cent, the highest in the GCC, and had a budget deficit of around $3.5bn in 2017 – although this is set to fall by 35 per cent under Bahrain’s proposed budget for 2019-2020, unveiled this week.
Encouraging the establishment of private sector businesses is a key plank of Bahrain's five-year fiscal balance plan launched in October. Other initiatives to support SMEs and start-ups include the Flat6Labs accelerator programme, an initiative of Bahrain’s employment fund Tamkeen in partnership with Egypt-based start-up facilitator Flat6Labs, and a new national bankruptcy law to aid corporate restructuring, enacted last year.
Regional start-ups face numerous challenges including barriers to financing and lack of business support and expertise, Ms Al Shakar said. Al Waha aims to connect start-ups with these two crucial elements, while also gradually building a deeper venture capital ecosystem in Bahrain as international VCs see opportunities to invest in local businesses.
The additional hope is that Al Waha will prove an incentive to other companies within partner VC portfolios to expand their operations to Bahrain, further fuelling business growth in the country.
“There is not enough sovereign investment in [start-ups and SMEs] so we need to find other ways to grow the funding available to this sector,” Ms Al Shakar said. If the first fund is successful, it would “make sense” for Bahrain Development Bank to launch another, she added.
Bahrain's sovereign wealth fund Mumtalakat has invested around $30m in Al Waha's $100m fund, its chief executive Mahmood Al Kooheji told The National on Wednesday. However, he said this indirect investment is the furthest Mumtalakat would go in financing SMEs, as it focuses on larger opportunities.
“We are an equity house, not a VC – for that you need to be a different animal,” he added.
