Six years ago, an eternity in startup time, entrepreneurs in the Arab world had limited options when it came to funding a startup.

The options were personal savings, cash from family and friends, international VCs or, after a certain point, regional private equity and banks.

Now things have changed considerably as there are many local and international venture capital funds and accelerators looking to invest in the region.

Which way should you go if you have the option: local or international?

International VCs for those with big dreams

“The VC ecosystem 12 years ago was nowhere like the ecosystem is today. You didn’t have the Wamdas and the Twofour54s of the world at all. You had super angels and very wealthy individuals [but] you didn’t want this capital at the growth stage that Bayt was at,” said Mona Ataya, cofounder of search engine Bayt.

She noted that raising money from international VCs came with a number of advantages.

“The fact that Bayt became profitable quickly allowed Bayt to be picky. They didn’t need the regional access to capital, they wanted access to the big capital abroad and the global network they could provide,” Ataya said.

“The international investment gives you the long term potential for exit, they give you access to talent you cannot find in the region, and access to global best practices that can set you apart regionally.”

The advantages of local VCs

Getting international funds may be glamorous but it’s not always something to look for.

“The only thing that an international VC can bring to a regional company is capital. Otherwise, international VCs are not on the ground and therefore rarely offer any support be it contacts, strategic partners, or even exits,” said Lana Alamat from Wamda Capital.

The challenges companies in MENA faced were often very different from the ones they faced in Europe or the US so international VCs’ good practices may not be that useful, she added.

In September 2015, Beco Capital counted 19 regional, and seven international VCs operating in the region, plus three focused on growth and later stage investment.

“Given the option now, I believe companies prefer local VCs,” Alamat said.

“Regional VCs give you access to a lot of benefits: region knowledge, networking, access to talents, know-how and they’re close to you,” listed Ataya.

Careem seems to prove that. In November 2015, Careem made its biggest statement yet with a $60 million Series C round led by local private equity Abraaj Group, alongside local venture capital funds Arzan Venture Capital, Al Tayyar, STC Ventures, BECO Capital, Impulse (a subsidiary of Kuwait Investment Authority), Lumia Capital and Wamda Capital.

Local VCs are now stepping up

Yet local VCs know they still have work to do.

Dany Farha from regional VC fund BECO Capital said there had been good levels of funding activity in MENA from seed through to growth VC and private equity stages, but this needed to change.

Regional investors had realized that if they did not step up to the plate, “there will be a ‘crunch’ at the larger series A and series B rounds and beyond”.

“We are all scaling up our balance sheets to address this issue, and regional private equity firms are starting to participate and look at this stage,” he said.

Farha said investors were also preaching to regional governments the importance of keeping the ownership of key startups - which he called “strategic assets” - in the hands of regional investors. Governments had started allocating funds to this sector and would continue to do so in increasing volumes.

“This stage of investor locally will start raising and deploying as soon as there are more than just a few success stories. It is a matter of volume of activity, which is increasing rapidly and so it is only a matter of time,” Farha said.

A time and place for everything

Getting international money too early can hurt because of the distance, believes Ataya, but it doesn’t mean startups shouldn’t look for international money.

Ataya’s startup Mumzworld, an ecommerce site for mothers and children, closed a Series B funding round led by Wamda Capital, Twofour54 and Endeavor Catalyst. She said she had an international investor, but had not revealed who that as by the time of publication.

They could have found all the money they needed in the region but since the option of international funding money was on the table, they thought why not.

“As a startup you can always need more money. The more money you have, the more innovative, the more creative, and the faster you can run,” she said.

International or regional VCs? There’s no clear answer, it all depends on your ambition, your needs, your product.