By Lubna Hamdan
The Middle East will see an increase of family-led investment into social impact, according to Sophie Smith, co-founder and CEO of Dubai-based hybrid healthcare company Nabta Health
Family-owned companies are more likely to invest in social impact start-ups than venture capitalists or equity funds, according to the co-founder and CEO of Dubai-based hybrid healthcare company Nabta Health, which helps women manage their health using personalised care pathways powered by machine learning.
Speaking at the recent Arabian Business Startup Forum, Sophie Smith said family-owned funds understand the importance of social impact for future generations.
“This is a region that is very well placed to lead the impact investment initiative not just from a government perspective but if you look at the number of family offices here - 98 percent of offices in the UAE are family-owned - there is a lot of family wealth and families are more motivated than VCs or equity funds to invest into impact because what they are looking at the future for their families. They want to create a legacy that will support their family for the next three generations,” she said.
Smith, who launched Nabta Health in 2017 to address gaps in women’s healthcare and improve clinical outcomes by integrating digital components, said the social impact space will witness a rise in family-led investment capital compared to traditional VC and private equity investment.
“Family offices, they grow families. Anyone who has kids in the room knows that getting to the point where you see returns on your investment takes a long time, 30, maybe 40 years, before your kid turns from a tiny tyrant that dominates every aspect of your life to being a useful economic contributor. Family office money is much more patient and are now looking more to diversify outside of traditional investment as well. So we’re going to see an interesting between family investment-led capital and VC or traditional, private equity investment,” she said.
She added that while private equity funds invest in start-ups which yield faster returns in a shorter period of time, they ultimately face financial struggles in the long run.
"We’ve seen in recent months the meltdown of Abraaj as one of the largest VC burns in the region. There are others now which can’t be named, but who are facing serious financial problems because they have all traditionally invested into the Silicon Valley 'move fast and break things' model of start-ups and those struggle to be profitable in the long term, because if you put 20-25 of them in one portfolio, you might get one exit every 3-5 years but actually you will start to have cash flow issues and investors start to drop out because they don’t see returns on their investment,” she said.
Samer Choucair, director at CE-Creates also said the private sector needs to take more of a leading role in investing in social impact, as opposed to replying on the government to do so.
"You need very patient capital for social impact enterprises to flourish and the private sector needs to be the driver of this. We can’t rely on the government to drive this while we sit back as the private sector and pick the low hanging fruit ourselves. We really need to be going after this ourselves,” he said.
CE-Creates is part of Crescent Enterprises and acts as an incubator for early-stage, social impact start-ups to develop them into economically viable and scalable businesses.