Global Ventures' Sweid on Bloomberg TV

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00:00In terms of the flows of capital into your region, the Middle East and North Africa,

00:05and before we get on to the fourth fund and the opportunities you see,

00:08just talk to me about those international flows.

00:09Are you seeing a material pickup in international flows of capital into your region?

00:14We are. So last year the region across MENA had about $2.4 billion of venture funding,

00:19of which 52% was international.

00:22So those are international VCs investing in the region or international LPs coming into funds in the region

00:26and really fueling that venture growth.

00:28So there is an opportunity there.

00:30When you compare that with seven years ago, it was about 20% of a much smaller number.

00:34So there is that huge appetite.

00:36What are the catalysts for that increase in international flow?

00:38Part of it is that the region has become a technology hub.

00:41So the UAE has become a technology hub.

00:43Saudi Arabia is growing as a global hub for growth markets.

00:47When you take a look at both countries, their GDP growth rate this year was about 6%,

00:51which puts it way up there in terms of growth markets, emerging markets.

00:54And the other thing is that the UAE has indeed become an innovation hub,

00:57thinking what's happening in AI, in blockchain.

01:01The government's very avant-garde in regulating these industries.

01:04What is the AI proposition then in the MENA region, in the Middle East and North Africa region?

01:08What is the standard?

01:09What are the startups in your portfolio and those that you're looking to invest in doing differently

01:13that will differentiate them in the AI space?

01:15So part of it is the infrastructure in Arabic.

01:18So Arabic LLMs for healthcare that are being used by government.

01:22When you take a look at healthcare as an industry, we have one doctor per thousand people.

01:25Europe has four doctors per thousand people.

01:27So if you take that same concept that we had in fintech, which is we're not going to bank people using banks,

01:32we're going to use fintech.

01:33We're not going to provide access to healthcare and other industries in the traditional way.

01:37We're going to use tech.

01:38So what's the best way to bring tech in or AI in right now to accelerate that?

01:41So if you can have an Arabic LLM for healthcare, that becomes a first port of call for access to care

01:47that JS is now using, which is in the UAE, and companies and governments of that nature.

01:52Then you end up in a way where you're leapfrogging.

01:53So you're using AI technology to leapfrog industries and to create new industries rather than trying to emulate old ones.

01:59So it's an accelerant of access to healthcare, financial services, education across the board.

02:05How can we accelerate access for the population?

02:06And you touched on a number of sectors there.

02:08Is that where you're raising this new fund, so fund four?

02:11Yes.

02:11Which segments of the capital structure are you aiming at,

02:14and what different segments and sectors of the tech ecosystem are looking most attractive to you right now?

02:19So right now we think fintech, health tech are very attractive,

02:24but we're also very focused on supply chain tech and agrotech.

02:26Food security is a big thing.

02:27We still import 85% of our food.

02:29We don't think that will be the case five or ten years from now.

02:32So as we think about which sectors, those are very exciting.

02:34At the same time, we take a look at the continuum of capital.

02:37There's many funds in the Series A and under.

02:40We are one of the largest.

02:41We have the largest Series A fund across the region, which was our Fund 3.

02:44And then when you take a look at the 50 or 100 million or $500 million tickets

02:47that people are happy to write in the region,

02:49and make the front page every day, those are available.

02:53But when founders go to raise $20 to $30 million, that Series B gap is very acute.

02:57It's similar to where Europe was seven years ago.

03:00So we've come into the market now raising a fund that is focused on Series B.

03:03When companies have $30 million of revenue,

03:05they're usually about EBITDA positive in the region

03:07because of the lack of capital in the region for the region.

03:09And so we come in and we back those winners.

03:12They're already established winners,

03:13and it's really about accelerating their growth with rocket fuel.

03:15Okay, so you're looking to fill that gap.

03:18What is that increase in capital flow that we touched on

03:20at the top of the interview doing to valuations in the region?

03:24It's not really changing them much.

03:26In Saudi Arabia, we do have some valuation inflation.

03:29In the UAE, what you've had a lot of is talent coming in.

03:32So the UAE has really taken down its talent borders over the last five or 10 years.

03:36So you have many second and third-time founders coming into the UAE,

03:39setting up their next companies there,

03:40being able to attract and hire whichever talent they want in the world.

03:43And then off the back of that,

03:45their earlier financial backers are also coming in

03:47and supporting them and funding them with very reasonable valuations.

03:50So I don't think there's a regional valuation hype.

03:52I think there's an AI valuation hype,

03:54but I don't think that's specific to the region.

03:55It's more sector-specific.

03:56We've been talking this morning about the IPO pipeline starting to pick up in Europe.

04:02What are the conditions that are in place in the Middle East right now

04:05when it comes to IPOs,

04:07the clearest path to exit for your portfolio companies?

04:09So last year we had a record number of IPOs in the region,

04:12which was 30% higher than the year before.

04:14We had 54 IPOs last year in the tech sector in the region.

04:16So our IPO windows have actually stayed open

04:19and we've had an increasing number of IPOs over the last few years.

04:22Do you think that momentum continues?

04:23I think it does continue.

04:24I think it does continue.

04:25We have two companies in our portfolio that are looking to IPO in the next 12 to 24 months.

04:30One just had a $4.5 billion valuation.

04:33So that exists in the region.

04:35They're not as common as other parts of the world,

04:36but I started the firm seven years ago

04:39and if you had told me back then to imagine where we would be today,

04:42I would not have expected the industry to grow six-fold,

04:44the number of IPOs to grow as they have

04:46and I expect the same going forward for the next six years.

04:49What are the biggest constraints to the region then?

04:52I mean, you're touching on metrics that show that there is momentum,

04:55there's real growth, the capital flows are there,

04:57the IPO environment is there,

04:59you're talking about the talent that's being attracted to the region.

05:01What are the constraints at this point?

05:02I mean, right now, I'm going to say the biggest constraint

05:04is a Series B funding gap.

05:05So as companies get to scale and they really want to just reflect

05:08and they are profitable because of lack of capital in the ecosystem

05:11compared to other ecosystems.

05:13So, you know, great numbers,

05:14but me and I last year had $2.4 billion of funding.

05:17The world had just over $300 billion.

05:19So when you take a look at this market of 400 million people

05:21with such a small amount of funding,

05:23yes, the numbers growing are great,

05:25but the quantum of capital is still not that great.

05:29So as we think about this Series B gap

05:31and really funding that gap,

05:33that will allow that continuum of capital to grow

05:34and then those $50 and $70 million tickets

05:36will have a much stronger pipeline

05:37and you'll have more and more IPOs.

05:39That's the only real constraint that we're seeing right now.

05:42And you've mentioned Saudi Arabia a number of times.

05:44So is Saudi Arabia the key kind of nation

05:49within the Middle Eastern region

05:50that is a key driver of this activity?

05:54How widespread is this and how dispersed is it?

05:56Or is much of the activity focused on Saudi?

05:59How important is Saudi to this story?

06:00It's one of three markets that we are very excited about.

06:03So Saudi is important for Saudi.

06:05We see lots of innovation there.

06:06We have a company there called Hakabao,

06:08which has now had CNBC and Statista,

06:10have it as one of the top 10 fintechs in the world.

06:12We've had a company there called Tabi,

06:14which is the first BNPL or one of the largest in the region.

06:17And that's important because it's the first line of credit.

06:19So we're still less than,

06:21I want to say like 80% credit card penetration in the region.

06:24So when we think about that,

06:25that's really solving a problem.

06:27When we think about the UAE,

06:29that's breaking barriers

06:30because in the UAE you have lots of companies

06:32that are building globally.

06:33So it's innovation at its best

06:35with the world's best talent.

06:37That's where the UAE plays.

06:38Egypt builds for the region.

06:39So those are the three markets.

06:40Each one has a different story.

06:41No, fantastic.

06:42Thank you very much indeed for your insights on the region.

06:44And the capital flows, of course, North, Swede.

06:45Thank you for having me.

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