Mr Detelinov joined Riyad Capital in 2013 as a Senior Portfolio Manager exclusively dedicated to the Riyad TAQNIA Fund. He brings a wealth of technology and investing experience from North America and Europe. From 1996 to 1998, Mr Detelinov worked in the technology equity research department at Merrill Lynch where he covered publicly-listed Enterprise Software companies. From 1998 to 2001, he worked at MWI & Partners, a private equity fund associated with Merrill Lynch. Following the completion of an MBA degree (Finance) from New York University’s Stern School of Business in 2003, Mr. Detelinov joined the Financial Sponsors Group of Merrill Lynch, where he assisted in origination, diligence and deal execution global PE and VC firms in New York (for seven years) and in London (for three years). He is a CFA Charterholder.
What is the current market climate in the tech sectors and how do you see the future trends?
There is a lot of excitement around investing in tech globally, as well as in the MENA region. We see the current investment opportunities as Artificial Intelligence, HealthTech, mobile payments and FinTech (including insurance tech), Autotech, cloud computing (specifically SaaS), cyber security, and both industrial and consumer Internet of Things.
In our view, all of these themes are still at the nascent stage of development and the pace of innovation in each of them is accelerating. We expect that these investment themes will continue to excite MENA VC investors, along with any forms of e-commerce and consumer mobile-enabled services, which are very common investment themes in the region due to a very favourable population demographic.
How is the funding scenario in the VC ecosystem different from 3 years ago?
The number of MENA VC investments has remained steady at around 200-210 deals for each of the last 3 years. We understand that the total amount of capital deployed in 2016 increased significantly by over 70%, but with the caveat that this was due to big-ticket investments, such as Careem and Souq.
We continue to see a lot of interesting tech opportunities across the themes we mentioned from UAE-based companies, which use Dubai as a launchpad to service the entire MENA region. Our general observation is that the quality of the opportunities has been better over the years and we are very excited to now have the challenge of choosing between a few investable deals at any given point in time.
There has been a clear rise in interest in tech investment. Are family offices and corporate VCs emerging as the latest sources of funding for new companies?
The number MENA investors have now grown to a cumulative number of 150, which matches the global trajectories and trends for investors setting up investment vehicles. The ecosystem added 10 new funds between 2009-2012; 20 new funds in the period 2013-2014; and 30 new funds in the last two years, according to recent research from ArabNet Business Intelligence.
Pure corporate VCs represent 10% of MENA VC investors (the research was conducted by number and type of investors, not by the amount of investment capital they manage). Some of the accelerator funds are also associated or fully managed by a corporate, so that number is probably higher in reality and closer to the mid-to-high teens.
Pure, institutional VC funds represent the majority of the investors in the MENA VC ecosystem (30%) but my general observation is that family offices are not common participants as LPs in institutional VC funds.
Where families are mostly represented is Angel networks (12% of investors in MENA VC ecosystem) and seed funds (14%). However, the participation of corporate VCs and family offices in the MENA VC ecosystem is expected to grow.
How will corporate VC involvement benefit the ecosystem?
Very simply and pragmatically speaking, corporate venture capital grows the available investment capital in a VC ecosystem, which by definition is a very significant addition. They are particularly helpful if they are returns-oriented, because this means that the VC funds would find corporate VCs suitable, trusted and well-aligned investment partners.
Corporate VCs are even more beneficial to the VC ecosystem stakeholders if they focus their investments on the ‘core’ industry of the corporate parent, or on ‘adjacent industries,’ whereby the corporate parent already has some or substantial industry expertise. This corporate VC industry know-how, the strategic relevance of the investment to the parent and the value added to the investment throughout its life cycle go well beyond the simple provision of additional investment capital.
Fortunately, many of today’s leading global corporate VCs are structured with the clear objective of maximising the financial return on a predefined capital amount and enjoy independent decision-making from the corporate parent’s management.
How are you attracting family offices to invest in technology via your fund? What are the main objections you have faced and how have you overcome them?
We met with many family-backed investment firms during our fundraising roadshow and discussed not only our fund but also the VC asset class in general. We found that most of the family offices have had exposure to VC funds in the past, including the US and European VCs (some, unfortunately, around the 2008 financial crisis) and are currently very cautious around them.
A few family office comments were heard consistently:
1. An aversion to the standard ‘blind-pool’ VC fund model, whereby the LPs contractually commit investment capital but have no true decision making in the underlying investment that the fund makes.
2. Expectations of dividends/liquidity on a periodic basis, which runs contrary to the cash flows of a typical VC funds; and 3. A general unwillingness to embrace the VC risk/return trade off, due to past experience or current macroeconomic uncertainty.
In our view, the only way for the VC ecosystem to win the support of family offices is for the VC fund managers to create numerous, attractive investment precedents (i.e. successful exits from investments), which would naturally attract the family offices.
On October 31, 2017, Naseba will be hosting the 3rd MENA Private Equity and Venture Capital Summit in Dubai, United Arab Emirates. The primary focus of the summit is to offer a deal flow platform that will introduce representatives of sovereign wealth funds, traditional PE and VC firms, regional conglomerates and family-owned businesses to innovative business cases from around the world.
The summit will combine insightful panels led by key regional and international tech investors and experts and pre-scheduled introductory meetings between up to 30 healthcare, life science and ICT investment opportunities and key regional investors and strategic partners, to raise capital and form strategic and commercial partnerships, in an informed and exclusive environment.
To access the Middle Eastern investors and strategic partners submit your business case here,
Oops! We could not locate your form.
Alternatively, email me at alexbnaseba.com to schedule a meeting with me.
+971 4455 7954