Persian Gulf Region Awash in New VC/PE Funds

The recent heavy rains in the Persian Gulf are an apt metaphor for the amount of money flooding toward VC and private equity firms in the Middle East.

At least 15 new funds are currently raising inaugural vehicles that range in size from $28 million to more than $10 billion.

Plus, another half-dozen other firms that attended the first meeting of the Gulf Venture Capital Association (GVCA) in Bahrain last week, told PE Week that they are in the early planning stages for funds while six more said that they have closed their funds.

Among the new funds being formed is a $10 billion buyout fund under the auspices of Hanah Taher, former chief economist of the National Commercial Bank in Saudi Arabia. Taher, who is now chairman of Gulf One, a Bahrain-based investment bank, has already raised an undisclosed amount from such limited partners as the Abu Dhabi Development Authority, the Kuwaiti Development Authority and a consortium of other investors from the region. He reportedly has said that he wants a private equity fund that will have the capital and clout to compete with KKR, The Carlyle Group and Blackstone, all of which participate in some deal activity in the Mideast region.

“We’re witnessing nothing short of the birth of the VC industry in the Arabian Gulf,” said one GVCA conference attendee, who was referring to the Persian Gulf. Many Arab nations refer to the area surrounding the famed body of water in the Middle East as the Arabian Gulf.

Formed by a consortium of firms and professionals in the region, the GVCA is an independent trade and industry association created last year to support the growth of venture capital and private equity industry within the Gulf region.

Last week’s conference, at the Ritz-Carlton Bahrain Hotel and Spa, was held under the patronage of Prime Minister Shaikh Khalifa bin Salman Al Khalifa with the theme “Building a Regional Venture Capital and Private Equity Industry.” The two-day event included presentations from international and regional speakers covering the state of the industry, regional success stories and lessons from around the globe.

The GVCA is largely about Arab LPs investing in Arab-founded and operated funds, though that didn’t stop many Westerners from attending the conference and working the crowds to seek professional work or to raise money for their own Western-based funds.

At the event, Bahrain Monetary Agency Governor Rasheed Al Maraj said that the Middle East has a long way to go before it can catch up to developed markets in the West, where venture capital has grown to become a mainstream asset class.

“Here in the Middle East, it is fair to say that venture capital remains a nascent industry,” he said.

Though it may be nascent, it seems headed to grow by leaps and bounds.

Among the firms raising or having just closed on new venture or private equity funds were Capital Management Advisors of the United Arab Emirates (UAE), Catalyst Private Equity of the UAE, Development Corporation of Bahrain, Gulf Capital of Abu Dhabi, Khazaen Venture Capital of Kuwait, KGL of Saudi Arabia, Large Day Ventures of the UAE, the Al-Tuwairqi Group of the UAE, Malaz Venture Captial of Saudi Arabia, The National Investor of Abu Dhabi, The Qatar Science & Technology Park, of Doha, Qatar, Strategia of Lebanon, and The Venture Capital Bank of Bahrain.

Plus, firms at the conference that said they recently closed funds to invest in the region included Shuaa Capital ($200 million); Inazjat Capital ($50 million); Abraaj Capital ($500 million); Intel Capital ($50 million) and Ithmar Capital ($150 million), among others.

Al Maraj estimated that the size of the institutional private equity market in the region is less than $1 billion. But he pointed out that current conditions seem favorable to the industry’s development, such as a booming regional stock exchange that has been fueled by a series of successful IPOs. The region also boasts a rapidly growing infrastructure that has been supported in part by rising oil prices over the last couple of years.