Abu Dhabi venture capital firm, Shorooq Partners, unveiled a new venture debt fund in partnership with South Korea’s IMM Investment Global. The Nahda Fund 1 will invest in startups based in the MENA region, a company spokeswoman told The National.
A complement to traditional venture equity financing, venture debt provides founders with a non-dilutive means of financing that requires little to no equity stakes to raise funds. This form of venture investment has existed in the US and Europe for many years and has recently seen a surge in emerging markets such as India, China and Southeast Asia but has yet to be properly implemented in the MENA region. Shorooq Partners aims to remedy this by bringing venture debt to the region with Nahda Fund I.
“The fund has already committed a majority of its capital including its investment into Pure Harvest, an AgTech company revolutionizing the region’s agriculture with climate-controlled smart farms,” Shorooq Partners said. Pure Harvest, develops technology-enhanced greenhouses for agricultural developments across the region. It raised $20.6 million in a Series A round in April 2020.
Apart from Pure Harvest, Shorooq Partners’ portfolio consists of robo-advisory platform Sarwa, digital freight company TruKKer, Lean, Capiter and Retailo.
The overwhelming amount of interest shown by founders toward the fund proves venture debt has been a long time in coming to the region. “Once a startup reaches a certain stage, it becomes very expensive to solely rely on equity financing for continued growth,” explains Samir Yamani, Shorooq’s Partner leading the venture debt practice, “with a relatively stable cashflow, utilizing debt for routine expenditures such as working capital leads to a more optimal capital structure.”
Founders are not the only ones who have shown interest, however. Since launching Nahda Fund I, Shorooq hit the fund’s initial fundraising target in just four short weeks and has now raised the Fund’s full harcap. Furthermore, over half of the Fund’s subscriptions come from international investors outside of MENA. One such is example is IMM Investment Global which has partnered with Shorooq to bring venture debt to the region.
“Nahda Fund I represents a pioneering attempt by both our firms in many aspects. This is IMM’s first foray into the Middle East and we are proud to have partnered with Shorooq to provide our investor base the chance to connect with top-tier opportunities outside of Korea” said Youngjoon Lee CEO of IMM Investment Global.
Shorooq is looking to provide financing to six or seven startups before the end of the year, with each ticket size ranging between $5 million to $10 million. The fund is targeting companies operating in the agritech, e-commerce, logistics and fintech startups.
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