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Qatar’s first VC fund of $1B expected to 'fuel startup ecosystem in region'

The program has two objectives: to generate market-level commercial returns for Qataris and to develop a “vibrant VC and startup ecosystem” in line with the country's national development strategy.
A trader prepares before the opening of the stock market at the stock exchange in Doha, Qatar, July 31, 2017.

Qatar’s first venture capital (VC) “Fund of Funds,” worth $1 billion, is expected to “fuel the startup ecosystem in the region,” according to the CEO of a Dubai-based VC firm.

A statement on Monday by the Qatar Investment Authority (QIA), the country’s sovereign wealth fund that is investing in the initiative, said it will be investing in international and regional venture capital funds.

Fadi Ghandour, CEO of UAE-based Wamda Capital, told CNBC on Tuesday that the establishment of the fund was “great news for all startups, all funds” in the region. 

“This is a nascent ecosystem and I’ve always been saying that sovereign wealth funds are going to be the market makers, the people that encourage others to come and tag along,” he told the channel at the Web Summit currently underway in Qatar.

Ghandour, whose company invests in businesses including ride-hailing app Careem and ArabiaWeather, said that he expected to see family offices in Qatar more encouraged to invest in tech startups because of QIA investment.

“Now with $1bn from Qatar, you’re going to see that fuel the startup ecosystem in the region for sure, not only Qatar, but everywhere else, in the three big markets [in the Middle East],” he added.

In the statement, QIA said that the program will have two objectives: to generate market-level commercial returns for Qataris and to develop a “vibrant VC and startup ecosystem” in line with Qatar's National Development Strategy, which seeks to increase the number of startups and the availability of VC funding in the local market.

More specifically, the Fund of Funds looks to entice leading international VC funds and entrepreneurs to Qatar and the wider Gulf region, bringing expertise and contributing to the growth of a region’s base of venture capitalists and founders. Last year, VC funding in Qatar stood at 43 million Qatari riyals ($11.8 million), a year-on-year decline of 57%, according to data firm MAGNiTT.

The program will mainly focus on the technology sector, including fintech and edtech, as well as the health care sector. It will primarily invest indirectly via other VC funds, but will be able to make targeted co-investments with the participating funds, QIA said. The Fund of Funds program will only invest in VC funds and not invest in private equity, debt or any other funds.

“There is currently no dedicated pool of capital in Qatar for companies that are past seed funding and are ready for Series A to Series C funding rounds,” QIA CEO Mansoor bin Ebrahim Al-Mahmoud was quoting saying in the statement.

“QIA is launching this program to help ensure that innovative businesses can readily access capital and support from VC funds, enabling them to scale operations and expand market presence in Qatar, across the GCC [Gulf Cooperation Council], and ultimately onto the international stage,” he added.

Fund managers looking to raise capital using the new vehicle need to demonstrate a strong track record and commercial performance, QIA said. It added that these managers will be required to show “a commitment to Qatar” and be set to play an active role in the GCC VC and startup ecosystem. Commitments that may be required include establishing an operational footprint in Qatar, highlighting organic expansion plans across the GCC and setting up a senior-level presence in Qatar.

QIA said it would announce more on the fund’s launch, “in due course.”