With war now disrupting commerce in the Middle East and North Africa (MENA), it might seem like an unfortunate time for founders seeking venture funding in the region, especially in Egypt.

But at Endeavor, our outlook hasn’t wavered. 

Over the past four years, our Endeavor Catalyst fund has been the most active MENA investor in series A and B, by number of deals, according to a recent study from Magnitt. One out of every six investments we’ve ever made in emerging markets—50 of them, so far—have been MENA-based companies. More than 10 of those hail from Egypt.

Endeavor is no stranger to operating and investing in countries going through difficult times. We’ve been doing it for nearly 30 years. Here are a few things we’ve learned about how startups can thrive in these challenging conditions, and why we’re as bullish as ever about MENA’s entrepreneurial future.  

Table of Contents

• The Case for Investing in MENA

• Investing for the Long Haul

• The 2021 Anomaly, and Its Upside

• Tips for MENA Founders Seeking Funding Now

• Looking Beyond the Headlines

The Case for Investing In MENA

In emerging markets, entrepreneurs often have to overcome incredible hurdles to innovate, which makes them more resilient, more persistent, and stronger than their brethren in Silicon Valley. So, where others see instability and risk, we see opportunity because we know from experience that, given the chance, entrepreneurs in the Middle East and North Africa will succeed and help their nations build a better tomorrow. 

When it comes to the Middle East, sophisticated investors and savvy founders are well aware of the geopolitical risks involved. The smartest investors in the region take a very long-term view and have worked hard to build the underwriting of those risks into their investment models and theses. I still remember 15+ years ago when a seed stage founder – who had grown up in Lebanon – presented to me a pitch deck that included a slide on “Our Plan” and a following slide on “Our Plan B, in case of war.” Needless to say, growing up in California, I had never seen such a slide from a start-up in Silicon Valley. 

Current events like the Israel-Hamas war are certainly not helping to attract new investors to the region. But for long-term investors like us, these events, while tragic, do not lessen our commitment. Egypt, Saudi Arabia and the UAE all continue to be in our Top 10 countries globally in terms of new investments. 

Our fourth Endeavor Catalyst fund, a $292 million fund we started investing two years ago, has already made 20+ investments in the MENA region, including six in Egypt. With great new entrepreneurs joining the Endeavor network in the past 12 months – including the founders of Breadfast, Nawy, and Taager – we will continue to invest heavily in Egypt, backing the country’s best and brightest as they build the future.

Investing for the Long Haul

Investing requires you to think in 10-year increments. Consider Nubank from Brazil: it launched its first purple credit card in 2013 and now it’s one of the biggest digital banks in the world, and a U.S. publicly listed company with a $51 billion market cap (at the time of writing). 

After a decade, we were able to generate an 11x return investing in Turkey, successfully exiting five companies, including Peak Games, which sold to Zynga in 2020 for $1.8 billion. However, in that same decade, Turkey has struggled through an incredible amount of adversity—currency devaluation, political turmoil, an attempted coup, a major earthquake. And yet, despite all of that, it’s been a great place to invest because great resilient entrepreneurs are solving real problems at scale.

Building a successful venture fund takes time. Even when we were about seven years into building Endeavor Catalyst, the exit possibilities for our early investments still were not obvious. We didn’t have much liquidity. Then, in 2019-21 a window opened up and we had nearly two dozen exits, including 10 IPOs.

In 2023, with that same liquidity window closing, our own board – which includes several very successful global venture capital and growth equity investors – told us to plan for zero exits, and yet we had two: an Endeavor portfolio company in Brazil, Pismo, got acquired for $1 billion by Visa, and InstaDeep, an AI business out of Tunisia where we had invested in the Series A, was acquired for nearly $700 million. 

We know that not all venture investors are ‘fundamentals’ investors. Many are better described as ‘momentum’ investors. When notable ‘fundamentals’ investors commit, a lot of momentum-driven investors tend to follow. That momentum is created by smart people who’ve already put money in. 

Unfortunately, in markets like Egypt, today there’s no momentum investing happening there from the global investor community. The momentum has broken down. We need to find more ‘fundamentals’ investors who will look at the size of the opportunity and want to partner for the long term in building it. 

The 2021 Anomaly, and Its Upside

In 2021, money was flowing everywhere thanks to a global zero-interest-rate policy (ZIRP) environment. There were many global pools of capital looking for yield in different places— so many that it caused inflation in most financial assets: the stock market, crypto, NFTs, you name it. People wanted to put their money somewhere, even if they weren’t doing all the due diligence they should. 

In the startup world, money flowed into frontier markets in a way it hadn’t before. More global capital was flowing into Pakistan, even Nigeria to a degree, and certainly in Egypt.

When the global macro environment changed in 2022, that particular pool of capital dropped to near zero for frontier markets. We now think that the 2021 spike in money was a very temporary, anomalous thing. Even as we look forward and work to build the entrepreneurial ecosystem in MENA in the next 10 to 20 years, we’re not counting on the giant pool of money coming back all at once the way it did in 2021.  

However, there are positives! A lot more people who work in global funds got exposure to frontier markets. They now have a portfolio company or two in these places, and as we fully emerge from COVID’s travel-less world, they may even be getting on an airplane for their first in-person board meeting in Cairo or Dubai. 

Tips for MENA Founders Seeking Funding Now

If you’re a seed-stage company in the Middle East today, you’re in a market where you can go out and raise money. You’ll also be able to do what we believe is the most important: attract a really good partner. 

Some founders will be distracted by the sky-high valuations companies raised back in 2021 and think, “I want to be like that.” But if you’ve seen the movie Men in Black, now is the time to take out that little memory eraser device and wipe your expectations clean, as if 2021 never happened. If you’re too psychologically anchored to what the market was doing back then, you’ll struggle to raise money at a realistic valuation for your new company now.

It’s a new venture capital environment, you almost have to go back to 2019 or 2020 to figure out where your ‘bid’ and ‘ask’ should be when raising funding. 

To succeed in the current environment, take the advice of Amr Shady, the CEO of Tribal Credit and board chair at Endeavor Egypt: Focus on value creation, not valuation. Focus on building a business someone would want to invest in.

When it comes to fundraising, our golden rule is it’s much more about partnership than it is about money. Focus on getting the right individuals to sit on your board. 

When you become a multibillion-dollar public company, nobody ever asks, “What was your Series B valuation?” It doesn’t matter. What matters is whether you have the right people on board to build this with you and whether you managed your equity and dilution effectively over time. 

Surround yourself with people who are better than you. That’s one of the fastest growth drivers. 

Looking Beyond the Headlines

There’s an old adage that everybody copies what’s built in Silicon Valley—that innovation starts there and then travels around the world. But I find that’s actually an outdated concept from 20+ years ago. Today, we see more business models specifically built for emerging markets. 

When we see what’s happening in India, Indonesia, and Brazil, those are the business models we’re going to see in Nigeria, Pakistan, and Egypt.

So it’s way underfunded, but there’s so much potential there.

My close friends tease me about my irrational optimism. Every time I return from a trip, having met the most talented founders on the ground in Beirut, Cairo or elsewhere, I say something like: “You wouldn’t believe how well things are going in Lebanon!” Their typical response is, “Uh…do you even read the news?” 

It’s vital that we always look beyond the headlines. They aren’t always anchoring news broadcasts, but high-impact entrepreneurs are doing really important work in the MENA region just as they are in all frontier markets around the globe. They’re building the future and creating the jobs of tomorrow. The smartest investors out there will start paying more attention.

If you’d like to delve deeper, I discussed all these topics in detail in a recent webinar with Amr Shady and Endeavor Egypt here

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