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Tue 9 Jan 2001 04:00 AM

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The ideal venture capitalist?

Focused on the Arab entrepreneur but well connected with North America's dot-com industry — Ibtikar believes it offers portfolio companies that little bit extra.

Introduction|~||~||~|Ibtikar Venture Partners has established itself as a major player in the Arab dot.com industry with a combined investment of $5 million in Arabia.com and Menafn.com. The US-based venture capital company was established back in May 1999, but between its creation and the recent announcement of these investments the company was taking a low key approach. As co-founder and managing member, Amal Alayan, explains, that was entirely deliberate. “In the absence of an Arab venture capital industry with a track record in helping create international technology-based Arab firms, a pioneering venture capital firm, before raising a fund, needs to go the extra mile,” she says.“It has to identify good investment show cases, close a number of deals and demonstrate with real examples its ability to partner with Arab startup companies. It has to provide them with company building expertise and strategic US industry contacts, especially if these companies aspire for an international IPO.”Ibtikar decided therefore that it would announce itself in the market only after it had investments in place that demonstrated its way of operating. Certainly, Ibtikar chose two high profile companies to back. ||**||What can Ibtikar bring?|~||~||~|What’s believed to be the larger of the two investments was made in Arabia.com, arguably the Middle East’s most well known and highly visited Internet portal. The second investment was in Menafn.com, a forthcoming offering that will launch into the potentially lucrative market of online equities trading and financial services. “Now we are ready to go out and start raising a larger fund,” Alayan says.She refers to a $20 million dollar fund that will most likely be invested in around ten companies. The venture fund will target what Ibtikar describes as, ‘technology and knowledge-based Arab startups’ irrespective of where the startups are located. Ibtikar definitely isn’t a so-called incubator, but Alayan is keen to stress that companies taking equity investments from Ibtikar are getting more than just a chunk of money. What Ibtikar offers, Alayan believes, is “operational experience” — in the form of its general partners’ and its advisors’ experience in building companies and helping start-up firms. Ibtikar also attaches weight to its industry contacts, and its proximity to and affiliation with Massachusetts Institute of Technology. “We believe in the potential of Arab entrepreneurs in technology,” says Alayan. “And we are committed to playing a pioneering role in creating a successful workable venture capital model for Arab entrepreneurs in and outside the Arab World.”The co-founder of Ibtikar, along with Alayan, is Omar Khudari, an Arab American who, according to his Ibtikar profile, has already helped build two successful companies. These include Papyrus Design Group, a computer game publisher that was acquired by Sierra On-Line, and Viaweb, which was acquired in 1998 by Yahoo. He has put his experience in building and running these companies to work as a seed and early stage investor in North American technology start-ups. Now he’s turning his attention to Ibtikar.Ibtikar also has advisory relationships with North America technology experts like Ed Roberts and Steve Woit. Roberts is a Professor in the Management of Technology at Sloan; an author and consultant; and an investor in start-ups, including the Chinese e-services & portal company, Sohu.com. Woit is the founder of Riga Ventures, a VC company, and he was a general partner at IDG Ventures, IDG’s venture capital partnership. Alayan herself is a Kuwaiti-born Palestinian/Jordanian who went to the US initially to study at MIT. The creation of Ibtikar is the culmination of a long dream for her, one that began at Kuwait University. As an undergraduate student, she initiated the first interdisciplinary R&D project in image processing between the electrical engineering and nuclear medicine departments.As a result of this initiative and subsequent work, General Electric, currently the world’s most profitable company, offered to license an image processing application from the nuclear medicine department and to finance further R&D work. The academic institution declined the offer. That experience influenced much of her subsequent research work at MIT Sloan School of Management. As part of her Master’s degree in the Management of technology, she studied the commercialisation of university research in the US and Singapore, and drew up models for how the same thing could be implemented in the Middle East. She also studied what she calls the “catalytic” role that venture capital has played with both universities and the entrepreneurial community.As a result of its combined operational experience, its contacts in the technology and finance world, and a proven ability to do deals, Alayan reckons Ibtikar is now a very attractive partner for New Economy companies coming out of the Arab World. “Almost every Arab Internet startup company came to us after we did the Arabia Online deal,” she says.||**||Operational experience|~||~||~|Ramzi Zeine, chief executive officer at Arabia Online, says that Ibtikar has provided him with more than just a cheque. “It was nice to have the money and they did contribute, but they have a good network of connections around Boston and MIT,” says Zeine. “They helped us with our business plan and introduced took us to a lot of investors,” he adds. That’s certainly important for a company that wants to raise its profile in the North American market, both to help it raise funding and to pave the way for a possible IPO. “[The IPO] is now something planned for next year,” says Zeine. “It depends on market conditions. You can’t predict how things are going to be, but we believe it will pick up.”Ramzi AbdelJaber, the CEO of Menafn, says Ibtikar has a, “fundamental understanding of what it takes to succeed in both developed economies and less developed economies.” VCs based in the USA, he says, “often don’t understand what goes in the Middle East.” Ibtikar bridges that gap for a regional startup like Menafn that strives to meet global standards.AbdelJaber also identifies “operational experience”, as a key Ibtikar strength. (These are the exact same words that Alayan uses in our interview to describe Ibtikar.) “Omar Khudari brings a lot of operational experience that we need,” says AbdelJaber. “When we took on the investment from efinanceworks [a North American investor in Menafn] we were leveraging mainly finance, but we also need someone to understand how operations really work.”Ibtikar’s regional contacts also appealed to Abdeljaber. “They have some good contacts in the Gulf after they came in with Arabia,” he says.Ibtikar is very much in touch with those contacts as we speak. Like the $5 million the company raised and organised for the Arabia and Menafn deals, the bulk of the $20 million dollars it now plans to raise will probably come from the Middle East and a portion will be raised from North America. Out of the money that has so far come out of the Middle East, a considerable share has been committed from Egypt. Dot.com and IT-related companies will clearly be a major area of focus for Ibtikar’s new fund, but Alayan says bio-tech companies are also seen as potential investment opportunities.||**||

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