Last week I met with a venture capital fund that gave me hope for the prospects of venture in Jordan and the region more broadly: Accelerator Technology Holdings (ATH). First met with their associate, a young Duke graduate named Khaled Talhouni. Khaled is extremely bright and modest, and after only two years in the industry extremely well-versed in VC industry practice. I also met with the Fund's founder and CEO, Dr. Fawaz Zu'bi. Fawaz Zu'bi is warm, charismatic, articulate and genuine. He's the type to not forget a face or a name; they type to make you feel like you are the most important thing in the room when he is speaking to you.
In addition to generating attractive returns, ATH's mission is to advance the economic development of Jordan and the region by providing venture capital financing to early and growth stage technology, media and communications companies.
ATH was able to overcome the chicken and egg problem of raising venture financing: can't raise a fund because there's no track record and can't build a track record because there's no fund, due to Dr. Fawaz's strong network and track record as Minister of Information and Communication Technology and Minister of Administrative Development for Jordan. Thus, ATH actually has a fund of capital out of which to invest.
While the Fund doesn't currently face challenges on the investor front, it does face challenges on the investment front. Entrepreneurs in the region don't really understand venture terms. They often have inflated valuation expectations, little desire for succession planning and exit planning. Companies typically require a lot of hand holding during the investment period. And even if entrepreneurs want to plan for exit, exit opportunities themselves are scarce.
This makes me think: should entrepreneurs in the Arab World conform to Western venture standards, or should investors conform to the standards of entrepreneurs in the Arab World? I believe the answer is not straightforward. While I promised myself I would be cautious about taking the western model of venture capital that I believe in and applying it blindly to the Middle East, there are some things about it that I think should be applied. After all, investing in early stage ventures is a very risky business. If the formula doesn't allow for venture capitalists to have some degree of control and to work towards an exit that enables them to generate commensurate returns, investing becomes a fool's errand.
Venture capital can be very good for the entrepreneur. It creates access to capital that may otherwise not be there. The capital comes with years of experience growing profitable businesses and rich networks that lead to partnerships and customer relationships. At it's best, venture is a win-win situation that builds companies, creates jobs and promotes economic development.
However, investors in the Arab World are to a certain extent conforming to fit the regional circumstances. For example, if there is a lack of exit opportunities, investors can structure ongoing dividend payouts as a means of extracting return. If entrepreneurs are less seasoned in operations, investors are involved in a more hands-on way. If entrepreneurs are uneasy about minority control provisions, investors will require majority ownership stakes.
What I like about ATH is that they understand both the western model of venture and the local entrepreneurial culture very well. They are treading a line between both. They are adjusting their model to conform to the local entrepreneurial climate, yet they maintain high quality standards for the entrepreneurs in which they invest. It's a give and take. Slowly ATH, and firms like ATH (I mentioned the newly forming Middle East Venture Partners in a prior post), will change the entrepreneurial culture for the better. And the entrepreneurs will also force venture capitalists to adjust their model slightly to better fit the local culture.
With more firms like ATH who are nimble, have a willingness for flexibility, and strong drive to advance the economic development of the region, I think a venture industry can eventually flourish here.
Rainbow street provides a small glimps into reform efforts in Amman. Located in Jabal Amman (Mount Amman) off of the first circle, this is one of the oldest streets in the city. A few years ago the city decided to revitalize the street, creating a hip hangout destination catering to people of all ages while preserving the traditional style. Several outlooks offer beautiful views of old Amman. Cafe Jarra has a photo gallery showcasing the Country's history and monarchy. Art galleries, cafes and bookshops abound. Here is a quick picture tour of the area:
Books@ wall art:
