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On The Right Track: BECO Capital Managing Partner Dany Farha On The Evolution Of The Startup Ecosystem In Dubai (And The MENA Region) "Dubai needs diversity in the companies on our exchange, world-class governance to instill confidence in the platform for foreign investment, and foreign investor-friendly regulation to incentivize them to bring their dollars here."

By Ashok Raman

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

BECO Capital

This article was co-written with Nazmia Nassereddine.

Dany Farha, co-founder and Managing Partner of BECO Capital, and Board Member at the Dubai Chamber of Digital Economy, clearly remembers hearing about the internet for the first time, and how it was going to change the world, back in 1999. At the time, it was still a new concept in the UAE, with only a 15% penetration rate within the local population, a measly fraction compared to the 38% penetration in the US at the time. It was the beginning of the internet revolution.

Fast-forward 23 years, and it's interesting how tables have turned; the UAE has ratcheted up internet penetration to 99%, compared to 92% in the U.S. Granted, the UAE is a much smaller region with a population that is just 3% of America's 331 million inhabitants. But, the point is how quickly the internet enveloped the world, and how the internet economy and tech industry rose to power.

1999 was also the year when H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, announced the creation of Dubai Internet City. By this time, Farha had already founded two successful brick-and-mortar businesses -a laundry service, and a catering business- after having worked in an investment bank for several years straight out of college. Reflecting on that time, Farha recounted, "Naturally, my co-founder and I ran to get a Dubai Internet City trade license, and we moved in a year later when the complex was built."

Farha continued, "We could all see the writing on the wall- quickly scaling profitable technology businesses being built in developed countries, and replicating their success in Dubai was the way forward." He also noted how important the internet was in leveling the playing field for emerging markets like Dubai at the time. "There was little stopping us from building winning propositions we saw popping up in places like the US, particularly with the tailwinds created by our forward-thinking government," he added.

In 2000, Farha co-founded the region's first jobs portal,, with a few friends, hoping that they could help the two million internet users in the Middle East find jobs easily. Within two years, had racked up 240,000 members and nearly 5,000 corporations, expanding and opening multiple offices across the UAE and Saudi Arabia. Five years in, had one million members, and it was launching new products annually. Farha exited after 10 years, before founding his venture capital (VC) firm, BECO Capital, in 2012.

Related: Raising Capital In The MENA Region: The How-To

On his decision to launch a VC firm, Farha said, "When I exited [], I wanted to stay in the startup space, but I also wanted to create a larger impact. The space was still very nascent in 2011… When we started in 2000, there wasn't a single VC in the region, no accelerators, no incubators. Ten years later, when I exited, there was still a long way to go." Indeed, Google had only opened their Dubai offices in 2008, the first startup accelerator in Dubai didn't launch until 2012, and funding was very hard to come by for regional startups at that point in time. "So, I decided to start a VC firm to create impact through supporting incredible founders," Farha said. BECO Capital, now, is one of the oldest, and is the largest VC fund in Dubai.

BECO Capital's first funding round in 2015 raised US$50 million. It was an exciting time in the region, from 2008 to 2015, with the talent pool deepening due to the influx of international tech companies such as Uber and Google. The ecosystem was gaining momentum, and the government was reforming regulations to make it easier to start and sustain new businesses.

The success of BECO's first fund drove them to raise US$100 million in their second round in 2019.

When asked how hard it was to raise the first fund, Farha's reply might come as a surprise. "The first fund was easier, because institutions were pretty much out of the question; they don't invest in first-time fund managers," he said. "So, we primarily raised our first $50 million fund from our personal and professional networks– people who knew us, knew our success within tech, and already believed in the space."

"When we upsized Fund 2 to $100 million, it became necessary to institutionalize the cap table," he continued. "Raising was a lot more challenging, as few institutions were willing to invest in the startup ecosystem then. The picture today has improved somewhat, but the participation is still lower than it should be, given how much the ecosystem has matured over the years."

BECO's investment thesis has remained unchanged since its launch. It is founder-focused, investing in the strongest founding teams in businesses that can scale and achieve not only defensibility, but also profitability. "We believe a great founder is what makes a business a success; deep founder assessment is a critical part of our investment process, alongside research and data deep dives," said Farha. "For example, we weren't big believers in the edtech sector before we met Abwaab. We were blown away by the founding team when we met them, and they're one of the best performers in our current fund."

To that end, he explained how Dubai offers a unique blend of characteristics that make it a magnet for global talent. "Capital and talent are the basis of a vibrant startup ecosystem, and will be what secures Dubai's position as the digital economy capital of the world," Farha affirmed. With the government opening its borders with new green/nomad visas and golden visas, as well as various other initiatives, to attract advanced technology companies and talent to set roots in Dubai, the Emirate is strengthening ease-of-access. According to Farha, ease-of-access, ease-of-doing-business, and access to capital are all essential for Dubai to achieve its ambitions.

Related: Swaying A VC In Your Favor: Five Questions That Can Make Or Break The Deal

He elaborated Dubai's biggest advantages. "Dubai is already a magnet for global talent, and a magnet for global talent with capital behind them, too," he said. Farha also spoke of the fact that Dubai attracted 4,000 millionaires to move to the city in 2022, the highest inflow of high-net-worth individuals, high-net-worth individuals (HNWIs), in the world, and a 208% year-over-year increase. He even commented on the importance of a diverse education system with over 140 international schools that make it easier for senior talent to relocate to Dubai with their families. "With state-of-the-art infrastructure, one of the largest and most connected airports and airlines in the world, and a business-friendly regulatory and administrative support system, all of this has propelled Dubai to become the number one city in the world to start a business," he added. "The lifestyle, safety, tolerance, and progressive outlook of the city is attractive to both entrepreneurs and investors."

As Dubai thrives in the digital ecosystem of the UAE, as well as the greater MENA region, we asked Farha on how he expected the startup and investor landscape in the MENA to change in the next five years. After all, Saudi Arabia nearly hit the $1 billion fundraising mark in 2022 with just a few years of startup activity, whereas Dubai-based startups only crossed the $1 billion fundraising ceiling one year prior.

Farha was quick to point out that a thriving Saudi startup ecosystem is a thriving MENA startup ecosystem. "We should celebrate Saudi Arabia's emergence- it's great for attracting foreign investors to the region. More importantly, Saudi Arabia is not only investing heavily in its local digital ecosystem, but also in the wider region, and the impact of this is already growing a vibrant ecosystem within the region that will produce many successful digital companies in the coming years. The UAE and Saudi Arabia markets are complementary akin to the interplay between Singapore and China- one large market that can be served locally, and one hub that has the capability to build regional and global businesses."

He then gave us a few numbers. The number of invested startup capital per capita in Saudi Arabia is ±$27, which has already surpassed other emerging markets such as Latin America (±$16) and India (±$9). The availability of capital and investment in infrastructure will mature Saudi Arabia's ecosystem massively and quickly. "The invested startup capital per capita in the UAE in 2022 was ±$127 across 153 deals," he noted. "That still presents a lot of room to grow when you compare to other global business hubs like Singapore (±$783 across 249 deals), and Israel (±$1,591 across 826 deals)."

Farha was optimistic that as long as the UAE keeps backing the best local entrepreneurial talent to build new businesses and support them throughout their lifecycle, it will maintain its place as the global business hub in the region, and eventually establish itself as the digital economy of the world. He also remains optimistic about the future of Dubai ecosystem, stating, "We've come a long way in the last 20 years, and we've made tremendous progress in building a world-class tech hub in the region. But there's still a long way to go, and we need to continue to invest in the ecosystem, both in terms of capital and talent, if we want to achieve our goal of becoming the digital economy capital of the world."

Related: Middle East VCs Give You Three Industry Insider Rules To Note

Farha said he's modelled out the scenario, and that Dubai's ambition of being home to 20 unicorns by 2031 is very realistic. To make this a sustainable reality, however, he stressed the need of funding across the entire startup value chain, particularly in growth stages, pre-initial public offering (IPO), and post-IPO. "We're seeing continued interest from international investors, which indicates we're on the right track. In 2022, three out of the top five investors in the MENA ecosystem, from a capital deployed perspective, were from outside the region" he said. Nonetheless, Farha explained that 2022 valuations suggest that the competition for investors in growth stages is still low. "We need to see both local growth-stage funds, and more international investors fill this gap," he said. "There's a need for funding across the entire startup value chain, particularly in growth stages"

Finally, Farha explained that a viable path to IPO is an essential attribute of a mature startup ecosystem, which can bring true and deep liquidity into stock exchanges, and this may be one of Dubai's biggest obstacles in its ambition to become the digital economy capital of the world. On this topic, Farha said, "Dubai needs diversity in the companies on our exchange, world-class governance to instill confidence in the platform for foreign investment, and foreign investor-friendly regulation to incentivize them to bring their dollars here." Farha added that having successfully listed tech companies will provide an attractive liquidity mechanism and will contribute to mergers and acquisitions (M&A) activity, which would further drive the liquidity flywheel.

The success of BECO Capital's three funds and more than 60 investments made so far is a testament to the increasing interest in the region's startups. As such, Farha is optimistic about what Dubai's future holds, and believed that with the right funding, governance, and regulation, Dubai would undoubtedly achieve its ambitions of becoming the digital economy capital of the world. "It's been a wild ride, and I'm grateful for the opportunity to be a part of this incredible community of entrepreneurs, investors, and supporters who are all working towards a common goal," Farha beamed. "I'm excited to see what the future holds, and I can't wait to see what the next generation of founders will achieve."

To get the lay of the investor landscape across Dubai and the wider MENA, and for insights provided by the investors backing the startups and scaleups that are changing the face of entrepreneurship in the region, check out our report, Dubai's Venture Capital Ecosystem, by clicking here.

This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa's tech and entrepreneurial ecosystems.

Related: Understanding The VC Business Model

Ashok Raman is a storyteller who uses numbers as his medium. He loves to crunch data, analyze it, and investigate deeper questions until the stories begin to emerge on their own. Ashok comes from a finance and consulting background, having worked in the strategy consulting and private equity fields across the Middle East and Emerging Asia for over 15 years, prior to becoming a business writer. When it comes to tech stories, Ashok has a penchant for startups in the fintech, B2B software-as-a-service, artificial intelligence, and machine learning spaces. He loves writing about venture capital, mergers and acquisitions, and the general investor landscape of startup ecosystems. Ashok holds a bachelor’s of science in electrical engineering from the Georgia Institute of Technology, as well as a diploma in finance.
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