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Abu Dhabi, UAEWednesday 20 June 2018

Bahrain to set up $100m 'superfund' for start-ups next month

Bahrain's non-oil economy grew 4.6 per cent in the third quarter of 2017

Simon Galpin, managing director, Bahrain Economic Development Board said the investment agency currently has around 100 startups in its portfolio.
[Courtesy: EDB]
Simon Galpin, managing director, Bahrain Economic Development Board said the investment agency currently has around 100 startups in its portfolio. [Courtesy: EDB]

Bahrain’s Economic Development Board (EDB) is set to launch a $100m 'superfund' next month to support the growth of start-ups in the smallest Arabian Gulf state, according to the managing director of the agency responsible for driving investment.

“We’re putting in place in the next month or so a ‘fund of funds’, which will aim to attract venture capitalists in Bahrain. They don't have to only invest in Bahraini companies, they can invest from Bahrain in start-ups across the region,” Simon Galpin, managing director, EDB told The National in Dubai.

Bahrain is the GCC's smallest economy and was the first in the region to discover oil. Ahead of regional peers, the country modelled a more diversified economy on the back of a solid banking sector and is also home to one of the world’s largest aluminium smelters, established in the 1970s. However, maturing reserves, the country’s occasionally fractious politics as well as the the rise of neighbouring financial hubs such as Dubai had put the brakes in its development.

But Bahrain’s EDB, established in 2000 and carrying a similar mandate to Singapore’s Economic Development Board, has worked to drive investment into the country and encourage development of key sectors such as information and communications technology as well, small and medium-sized enterprises and start-ups.

While hydrocarbons still account for a significant share of government revenue for Bahrain, which shares an offshore oilfield with neighbouring Saudi Arabia, SMEs account for 90 per cent of all enterprises and contribute 30 per cent to the GDP.

Mr Galpin, who is keen to distinguish between the steady base of SMEs as opposed to the start-ups the agency is helping support, noted that the EDB’s role was to help “fill gaps” in funding in Bahrain, where access to conventional finance remains challenging for smaller entities.

“If you dilute globally orientated, high-growth start-ups that are looking to pivot, to build networks very, very quickly, with a traditional SME they don’t really always fit together so we have to be a bit careful about that,” he said.

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The EDB, through its Startup Bahrain platform set up two years ago, is working with the country’s labour fund Tamkeen, the traditional supporter of SMEs in the kingdom, to develop “minimum viable product funding”, that Mr Galpin said will help fill gaps in accessing finance for entrepreneurs.

The EDB currently manages “around 100 start-ups”, he said, declining to share targets to grow portfolio this year.

Last year, the agency announced the establishment of a FinTech hub, spread across 10,000 square feet of space in the iconic Arcapita Building - the EDB's headquarters - in the island's Bahrain Bay district as it looked to support technology-orientated firms.

500 Startups, a global venture capital fund headquartered in California, is also eyeing more deals out of Bahrain on the back of initiatives by the EDB and other entities to accelerate development of growth.

“We’re very opportunistic. There have been a couple of good deals coming out of Bahrain, but I think going forward we’re going to see a lot more because there are five or six accelerators that are launching,” said Hasan Haider, a Bahrain-based partner for the fund, which has invested in five start-ups in the country.

“It seems there are a lot more deals for us going forward, that’s been great. [Through] the Startup Bahrain initiative, we expect to see a lot more deals coming out,” he added.