US venture capital fund Fenox seeks Middle East start-ups

With US$25 million in hand, the Silicon Valley venture capital fund Fenox is scouting for investment targets among Middle East start-ups.
Based in San Jose, California, Fenox plans to spend the $25m in the region over the next 10 years.
"Now there is a lot interest around seed start-ups but the challenge here in the Gulf region is that there are not a lot of home-grown developers," said Brent Traidman, a general partner at Fenox Venture Capital. "You need to [attract] them [from abroad] and keep them here for the long term."
He was speaking on the sidelines of the demo day for investors from start-ups at DP Word's Turn8 incubator on Saturday. It was the programme's second round of incubation since it started last year.
After 120 days at the accelerator with a seed funding of $30,000 for each, the five tech start-ups from the UAE, Australia, India, Georgia and Egypt pitched for investments between $250,000 and $370,000.
About 18 investors turned up to hear the 15-minute pitches.
The US venture capital fund, which plans to invest $100m globally over a decade, invests anywhere between $25,000 and $200,000 in each start-up, especially in the areas of e-commerce, mobile, social and cloud technologies besides those working on business-to-business software and hardware and advertising technology.
"So we are looking at a lot of companies," Mr Traidman said. "We are looking at seed and series A plus, but we are more interested in seed funding."
Fenox Venture Capital charges a 2 per cent management fee, while 80 per cent of the returns on capital go back to the investors and the rest to the fund.
It has already committed $10m and aims to raise the rest of the amount by January, mostly from Asia and also from North America.
The company's recent exits include the Japanese animation company Dream Link Entertainment when it went public on the Tokyo Stock Exchange's Mothers market for emerging stocks in March. Dream Link makes the Flash animination series Eagle Talon.
Fenox has previously sourced its investments from the Silicon Valley accelerators YCombinator and 500 Startups, and Japan's Samurai Incubate.
Fenox will have Kamal Hassan, the founder of the i360 accelerator in Dubai, as its Middle East general partner.
Another investor who is looking to invest in local start-ups is Sami El Shafai, the former executive managing director of Qatar's Salam Mediacast.
He has already invested in three companies from Turn8's first batch of graduates earlier this year, and after the second round of pitching on Saturday he said he is looking at two companies.
"But we need to discuss the business models," Mr El Shafai said.
He has been investing in Dubai start-ups for three years, and plans to invest $20,000 to $50,000 in each enterprise.
"Dubai can be turned into a knowledge base and it is promising, but we need more incubators and accelerators," he said.
Venture capital funds are becoming more common in the region, especially in Dubai. In January, the Aramex founder Fadi Ghandour launched a $75m fund as part of Wamda Capital for tech companies. Middle East Venture Partners announced a $50m fund in March.
The area is also attracting government players. Riyad Capital, one of Saudi Arabia's largest banks, said this month that it would start a 1 billion (Dh979.2m) riyal fund for new technology companies.
ssahoo@thenational.ae
Follow us on Twitter @Ind_Insights