US and Tokyo-based venture capital firm SIP Global Partners recently announced the first close of $75 million for its debut fund, targeting $150 million in total commitments. The fund invests in early-stage US startups and supports their expansion across the Middle East and North Africa (Mena) as well as Asia. It has to date made five investments for its debut fund.
With a presence in New York, Boston, Tokyo and Riyadh, SIP is hoping to identify opportunities for US startups to scale and grow while contributing to the growth of regional ecosystems.
Wamda spoke with Matthew Salloway, co-founder and managing partner SIP Global Partners in New York to get his thoughts on the Middle East's startup ecosystem.
Are any of your investors based in Mena?
Yes absolutely. I think there’s a huge push towards venture capital and technology with family offices and local investors [in Mena]. For example, if you look at the Yale endowment which is really the gold standard of portfolio construction, they put in more than 20 per cent of their capital into venture capital. I think you see more and more smart investors looking at this as a place to allocate, so I think there’s an interest in making sure their portfolio has exposure to technology and venture capital.
Technology’s really driving portfolio returns in some cases. Every country and every region is different, but in general wherever you are, there needs to be an allocation to technology and venture. I think it’s becoming a more accepted and valuable part of the portfolio.
You invest in tech companies that have potential for growth in Mena, what would you say factors into determining that potential growth?
We look at companies that we believe are the best technology companies. We are mostly 80 per cent investing into North America, and about 20 per cent for the rest of the world. When we look at a company, we make sure that they have the right team, the best technology, the right market, and the right sales and marketing strategies. We then look at whether or not the technology is relevant in our areas of strategic focus which are Japan and ASEAN, where we have an office, as well as Riyadh, Saudi Arabia, where we also have a presence. We try to assess if this is a technology that people would be interested in adopting, and if it would fit well within the framework of Vision 2030. There isn’t necessarily a quantitative formula, but it’s really about relevance and what would be of interest to the region such as gaming, fintech, and 5G. 5G for example is an area where Saudi is spending more on per capita than any other country, and we believe that there is a tremendous opportunity with the push for smart cities. Those are places where we think we could really have an impact.
What kind of tech do you think is missing in the regional ecosystem?
I have written about Saudi Arabia becoming the next Silicon Valley of the Middle East. This is a country which we believe has tremendous opportunity, but is in its earlier stages because tech is a relatively new industry. A lot of the companies locally have been e-commerce and logistics, and I think there is going to be more of a push to creating companies that are more deeptech, and there has to be more of an expertise built around that. In terms of bringing technology in, we think that gaming is a space with big potential since the Middle East has a tremendous population of gamers, but we are missing games that are local to the region. There are games incorporated from other countries, but there aren’t any local ones that might be more relevant culturally and linguistically. Generally speaking, I would say the industries that have a lot of potential would be fintech, digital health, cyber security, and gaming.
How long do you think it’ll take for Saudi Arabia to become the next Silicon Valley?
The progress in Saudi has been significant over the last few years statistically, and there is tremendous growth. I think especially with the support of the government and Vision 2030, there is a lot of promise, and all of those factors are aligned for a huge bloom for Saudi to be the next hub of startup innovation. It is hard to determine how long it will take, but the biggest thing is the need for more deeptech and providing exit opportunities, since there has been a lot of focus on e-commerce and logistics.
Will SIP look into enabling any Mena-based startups to setup in the US?
We are always open to it for the right opportunities. Most of our areas of focus go from the US into the Middle East and ASEAN, specifically Japan, but we are also open to the reverse if there is a company that we believe is very relevant.