Why searching for unicorns risks missing the real returns of tech investments
As economic buoyancy and optimism returns to the region and investments in MENA start-ups already outpace last year’s totals, looking beyond short-term profits is the smartest approach for those investing in the tech firms of tomorrow
Hussain Al Alawi, international partner and member of the Global Advisory Board at M&A advisory Millenium Associates.
Whether you’re a family office reassessing your portfolio, a first-time investor dipping your toe in the water, or a government agency looking to invest for the long-term benefit of your citizens, there is one thing you all have in common – the ball is in your court.
You might even say that investors have never had it so good.
For those looking to traditional bricks and mortar, the uncertainties of the pandemic mean there are bargains to be had – especially across global markets. But it is the technology-driven ventures that are making headlines, fuelling Clubhouse conversations, and driving investor dialogue regionally and globally.
Whether it’s fintech or medtech, agritech or edtech, everyone wants to find that unicorn or decacorn or whatever the next mythical creature is that supersedes it. And there have never been more opportunities to support start-ups looking to secure funding at key stages of their lifecycles.
According to Magnitt, we are in the middle of a start-up investment boom in the region. From January to June of this year, $1.2 billion was invested in MENA-based start-ups. That’s already up on 2020’s full year totals of $1.1bn.
The bulk of this investment is being made here in the Gulf, and it’s no surprise that it’s the technology companies and platforms that are attracting the highest levels – many of those at later stages of funding once they have had a chance to demonstrate their potential and neutralise any early-stage risks.
And while the lure of high returns trumps the fear of high risk for many solo investors, family offices here in the Gulf are known for taking a more cautious approach, driven in part by prudence, and in part by fear of the unknown. It’s no secret that lack of technological nous can inhibit investment – particularly at the earliest, and potentially most lucrative, stages.
But what those more cautious investors who are naturally wary of walking into uncharted territories should remember is that while the technology may be unknown, the sectors in which it is being applied are not.
From January to June of this year, $1.2 billion was invested in MENA-based start-ups
When counseling clients who are looking to build higher risk/higher potential return tech-based investments into their portfolios, my advice is always the same. Rely on your sector expertise and understanding to assess the offering, rather than your appreciation of AI, and you won’t go far wrong.
For those with a heritage in the food and beverage industry, look at agritech. If you have a heritage of healthcare investments, consider medtech. Because first and foremost you will understand whether this technology is meeting a real sector need, and second, whether it is priced at a level that is affordable for its customer base while allowing the tech company to turn a healthy profit.
The third consideration, and potentially of much greater benefit to investors, is whether these assets can be leveraged within existing businesses to maximise efficiencies, deliver new revenue streams, or create a clear competitive advantage. This then moves the asset from a passive portfolio purchase to an active investment, increasing potential returns multifold.
It is this third area that is increasingly driving the strategy of today’s smartest government and corporate investors. They are asking, where and how can this investment add value and integrate with my existing assets? How can this make life easier for my customers or my citizens? And how will investing in this technology and the people behind it add value beyond the immediate bottom line?
For while there is nothing wrong with looking for quick returns from any asset, what is far more rewarding for me and my clients is seeing how investments can deliver step-changes in existing businesses, and perhaps even reignite passions in those entrepreneurial families who have done so much to advance the economies of the region in the past.
Because making investments in new technologies, particularly those being developed in the region, can and should be about maximising the opportunities we have before us. The chance to enrich our regional and national futures, develop our knowledge economies, and bring to the fore new technologies with the potential to change our lives and our world for the better.
That’s where the smart money is going. Because who wouldn’t want to tell their children and grandchildren that they played a part in making that happen?
Hussain Al Alawi, international partner and member of the Global Advisory Board at Zurich headquartered M&A advisory Millenium Associates
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Why searching for unicorns risks missing the real returns of tech investments
As economic buoyancy and optimism returns to the region and investments in MENA start-ups already outpace last year’s totals, looking beyond short-term profits is the smartest approach for those investing in the tech firms of tomorrow
Hussain Al Alawi, international partner and member of the Global Advisory Board at M&A advisory Millenium Associates.
Whether you’re a family office reassessing your portfolio, a first-time investor dipping your toe in the water, or a government agency looking to invest for the long-term benefit of your citizens, there is one thing you all have in common – the ball is in your court.
You might even say that investors have never had it so good.
For those looking to traditional bricks and mortar, the uncertainties of the pandemic mean there are bargains to be had – especially across global markets. But it is the technology-driven ventures that are making headlines, fuelling Clubhouse conversations, and driving investor dialogue regionally and globally.
Whether it’s fintech or medtech, agritech or edtech, everyone wants to find that unicorn or decacorn or whatever the next mythical creature is that supersedes it. And there have never been more opportunities to support start-ups looking to secure funding at key stages of their lifecycles.
According to Magnitt, we are in the middle of a start-up investment boom in the region. From January to June of this year, $1.2 billion was invested in MENA-based start-ups. That’s already up on 2020’s full year totals of $1.1bn.
The bulk of this investment is being made here in the Gulf, and it’s no surprise that it’s the technology companies and platforms that are attracting the highest levels – many of those at later stages of funding once they have had a chance to demonstrate their potential and neutralise any early-stage risks.
And while the lure of high returns trumps the fear of high risk for many solo investors, family offices here in the Gulf are known for taking a more cautious approach, driven in part by prudence, and in part by fear of the unknown. It’s no secret that lack of technological nous can inhibit investment – particularly at the earliest, and potentially most lucrative, stages.
But what those more cautious investors who are naturally wary of walking into uncharted territories should remember is that while the technology may be unknown, the sectors in which it is being applied are not.
When counseling clients who are looking to build higher risk/higher potential return tech-based investments into their portfolios, my advice is always the same. Rely on your sector expertise and understanding to assess the offering, rather than your appreciation of AI, and you won’t go far wrong.
For those with a heritage in the food and beverage industry, look at agritech. If you have a heritage of healthcare investments, consider medtech. Because first and foremost you will understand whether this technology is meeting a real sector need, and second, whether it is priced at a level that is affordable for its customer base while allowing the tech company to turn a healthy profit.
The third consideration, and potentially of much greater benefit to investors, is whether these assets can be leveraged within existing businesses to maximise efficiencies, deliver new revenue streams, or create a clear competitive advantage. This then moves the asset from a passive portfolio purchase to an active investment, increasing potential returns multifold.
It is this third area that is increasingly driving the strategy of today’s smartest government and corporate investors. They are asking, where and how can this investment add value and integrate with my existing assets? How can this make life easier for my customers or my citizens? And how will investing in this technology and the people behind it add value beyond the immediate bottom line?
For while there is nothing wrong with looking for quick returns from any asset, what is far more rewarding for me and my clients is seeing how investments can deliver step-changes in existing businesses, and perhaps even reignite passions in those entrepreneurial families who have done so much to advance the economies of the region in the past.
Because making investments in new technologies, particularly those being developed in the region, can and should be about maximising the opportunities we have before us. The chance to enrich our regional and national futures, develop our knowledge economies, and bring to the fore new technologies with the potential to change our lives and our world for the better.
That’s where the smart money is going. Because who wouldn’t want to tell their children and grandchildren that they played a part in making that happen?
Hussain Al Alawi, international partner and member of the Global Advisory Board at Zurich headquartered M&A advisory Millenium Associates
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