ANGEL INVESTING AND THE ROLE OF ABAN
MENA-OECD Enterprise Financing Network
20th – 21st March 2007
Rabih Khoury
Head of MENA Investments – Dubai International Capital
www.aban-18.com
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Arab Business Angels Network
What is Angel Investing?
→ Angel investment is funding and mentorship provided by private
investors, professional investors and money managers to young, rapidly
developing companies
→ Investment is typically in the form of pure equity
→ Has high potential rewards, although there is much more risk associated
than with later stage investments
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Arab Business Angels Network
Some well known companies funded by Angel Investments:
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Arab Business Angels Network
What is required to make successful Angel Investments?
→ Deal Generation – market awareness of investor’s existence, interest
areas and channels to get deals through
→ Due Diligence – calculation of risk, screening of deals, researching
market opportunities, investigating management and track records of
entrepreneurs
→ Determining Valuation – ascribing a value to companies that lack
traction, revenues or seasoned management. Subjective process that
requires negotiation to structure deals and set terms. Earn-outs are
common and capital is deployed on milestones
→ Entrepreneurship Experience – Ex-entrepreneur that started up with
angel funding is desirable as is having a firm grasp of direct private
equity investing.
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Arab Business Angels Network
Who are Angel Investors:
→ Savvy investors who channel a portion of their time and investment
portfolio – between 5 and 20% – into the private equity market or
alternative asset classes
→ Angel investors are successful private equity direct investors, pre-IPO
investors who are investing their own money
→ Active participants in the investment process – in the absence of a
middleman, typically also provide guidance and expertise to their investee
companies
→ Angel investors are increasingly joining organized groups (Angel
Networks) to facilitate and share deal flow generation
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Arab Business Angels Network
What is a Business Angel Network?
→ A network that brings together entrepreneurs seeking to fund early-stage
businesses and investors looking for high-potential seed capital
investments
→ Angel Networks function in the same manner as the investment
committees of PE funds
→ Characterized by a social element and the absence of a middleman
→ Created to facilitate successful Angel Investing and channel deal flow in
investors interest areas
→ Facilitate collaboration on deals thus spreading the deal risk over multiple
investors
→ Their numbers have grown substantially in the US and Europe in recent
years:
Region
Year
US*
Europe**
MENA
1999
~100
66
?
2004
~200
282
?
Source: *Angel Capital Association & Kauffman Foundation presentation 2004, **EBAN 2004,
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Arab Business Angels Network
Examples of business angels networks in the US and Europe:
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Arab Business Angels Network
Why a regional Business Angel Network?
→ Current economic environment within the MENA region is supportive for
SME development with markedly above-average real GDP growth
→ Contributes to job creation and economic diversification – high
population growth rates, high unemployment rates and a growing
concentration of young people in MENA populations
Estimated minimum 4 jobs created per angel investment in the US during 2005
(Prof. J Sohl, Centre for Venture Research 2005)
→ Increasing number of high net worth individuals (HNWI) within the region
and growth of liquidity
→ Growing sophistication of investors and demand for alternative asset
classes
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Arab Business Angels Network
Growth in HNWIs in Middle East Region
The Middle East has one of the fastest growing markets of HNWIs globally:
HNWI Population by Region, 2002 - 2004 (in Millions)
Source: Cap Gemini – Merrill Lynch World Wealth Report 2005).
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Arab Business Angels Network
Growth in Demand for Alternative Asset Classes
HNWIs are increasingly looking for investments in alternative asset classes:
HNWI Asset Allocations by Investment Class, 2002 - 2004
Source: Cap Gemini – Merrill Lynch World Wealth Report 2005).
*Includes: Structured products, hedge funds, managed funds, foreign currency, commodities (including precious metals), private equity
and investments of passion (the art & collectibles)
**Includes: Direct real estate investments and REITS, which are not common instruments outside the US.
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ARAB BUSINESS ANGELS NETWORK
www.aban-18.com
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Arab Business Angels Network
What is ABAN?
→ ABAN is the acronym for the Arab Business Angels Network
→ ABAN is a non-profit organization, set up to exchange information and
channel regional investor appetite in start-up and early-stage companies
within the Middle East and North Africa
→ Based in Dubai, ABAN is building a community of Angel investors in the
Arab region and aims to have a network of investors across 18 countries
in the Middle East and North Africa (MENA)
→ The proposed structure and organization of ABAN is modeled after the
leading Business Angel Networks in Europe and North America
MATCHING
ENTREPRENEURS ANGEL INVESTORS
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Arab Business Angels Network
Who is behind the creation of ABAN?
→ Conceived by the Young Arab Leaders (YAL) and Dubai Holding during
the Clinton initiative in September 2005
→ Dubai International Capital (DIC) is the founder and lead angel of ABAN
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Arab Business Angels Network
ABAN’s Mission
ABAN is a non-profit organization set up to exchange information and
channel regional investor appetite in start-up and early-stage companies
within the Middle East and North Africa.
WHAT IS ABAN’S MISSION?
→ Provide a platform to complement the economic development
objectives of the Arab world and launch young, dynamic ventures
→ Support Arab entrepreneurs and encourage the commercialization
of promising ideas
→ Act as a vehicle for the promotion of angel investing in the Arab
region
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Arab Business Angels Network
ABAN membership is extended by invitation to:
→ Experienced and proven entrepreneurs, CEO's, venture capitalists and
business leaders
→ Active contributors to mentoring, coaching and supporting
entrepreneurs that receive investment
→ HNWIs who are interested in making individual investments in earlystage, privately-held ventures that have the potential for high returns, but
may involve the loss of capital
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Arab Business Angels Network
ABAN’s Initiatives to Date
→ Held in 2006 in conjunction with DIC & YAL
ABAN’s founding partners and promoters
→ Up to US $1 million each to two winning plans
Equity funding from DIC
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Arab Business Angels Network
Rationale for the Arab Business Challenge
PROMOTION OF ARAB
ENTREPENEURSHIP
COMMERCIALIZATION OF
BUSINESS IDEAS
A dynamic entrepreneurial environment is
essential in the push for innovation, and the
development of the economy as a whole
Encourage individuals to turn innovative
ideas into operating businesses by
providing a funding mechanism
Challenge
PROMOTION OF ANGEL
INVESTING IN THE REGION
Demonstrating to the sizeable regional
investor community the scope for angel
investing in the region
INTRODUCING ABAN TO THE
ARAB REGION
An introduction to Arab investors and
entrepreneurs about ABAN and its role
and mission in the region
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Arab Business Angels Network
The Arab Business Challenge - Overview:
The Challenge ran for nine months between January and September 2006:
Tunisia
→ PAN-REGIONAL:
Morocco
Lebanon
Syria
Iraq
Algeria
Open to the entire MENA region
Jordan
Libya
Egypt
Saudi
Arabia
→ HIGH PROFILE PARTNERS:
Organized by leading institutions
Sudan
Kuwait
Bahrain
Qatar
Dubai
United Arab
Emirates
Oman
Yemen
→ PROMOTING ENTREPRENEURSHIP:
Targeted young Arabs to submit business plans
→ PROMOTING ANGEL INVESTING:
Simulated investor interest in seed-capital opportunities
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Arab Business Angels Network
Arab Business Challenge - Supporting Partners & Sponsors:
ORGANISING
PARTNERS
Dubai International Capital
Young Arab Leaders
SPONSORS
HSBC
SHUAA CAPITAL
MEDIA
PARTNERS
Al-Arabiya TV
CHALLENGE
ADVISORS
McKinsey and Company
CHALLENGE
ASSESSORS
PricewaterhouseCoopers
UNIVERSITY
PARTNERS
American University of Dubai
Yarmouk University in Jordan
Lebanese American University
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Arab Business Angels Network
Arab Business Challenge – Process and Phases:
Pre-launch
Mobilization
phase
Phase I
Develop the
idea
Submissions
Assessed
01/2006
Phase III
Finals
Refine the
offering
Prepare full
business plan
200 Teams Qualify
20 Teams Qualify
11 weeks
4 months
09/2005
Phase II
8 weeks
04/2006
Winners
announcement:
5 Teams Qualify
2 Winners
12 weeks
05/2006
3 weeks
08-2006
09/2006
→ Phase I: 933 Teams Register
Registered participants submit 5 page business concept
→ Phase II: 200 Qualifying Teams
Assessment of 5 page business concept identifies 200 teams. Teams in this phase received:
- Training workshops – held in 4 centers (Amman, Beirut, Cairo and Dubai)
- Panel presentations – filmed by Al-Arabiya TV
- Coaching – from YAL members
→ Phase III: 20 Qualifying Teams
Assessment of 15 page business plan identifies 20 teams. Teams eligible for coaching
and filmed panel presentation in Dubai
→ Finals: 5 Qualifying Teams.
2 Winners Announced at Televised Gala Dinner
Assessment of complete business plan identifies 5 finalist teams. Teams received
further coaching and took part in filmed judging panel in Dubai
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Arab Business Angels Network
Arab Business Challenge - Statistics:
→ 933 Teams registered with all eligible countries represented (both in terms
of country of residence and nationalities)
→ The largest proportion of teams registered from the following 5 countries:
Egypt, UAE, Jordan, Lebanon and Saudi Arabia. (Based on team leader
country of residence)
Top 10 countries of residence for registered teams
Top 10 countries of residence for registered teams
SYRIA
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ALGERIA
13
PALISTINE
14
MOROCCO
15
U.S.A.
17
49
SAUDI ARABIA
69
LEBANON
77
JORDAN
120
U.A.E.
468
EGYPT
0
50
100
150
200
250
300
350
400
450
500
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Arab Business Angels Network
Arab Business Challenge – Winners:
The two winning teams receive up to $1 million in equity funding from Dubai
International Capital:
→ Palm Paper
Egypt
Use of annually trimmed, waste leaves from date palm trees to
make valuable commodities such as Kraft packaging paper and
paper bags with various applications for the Egyptian market
Progress to date:
→ Detailed assessment and valuation completed by DIC
→ DIC’s evaluation identified a funding requirement of $1.55 million
→ Funding structure with earn-out has been agreed by the team and DIC
→ Legal documentation currently in the process of completion
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Arab Business Angels Network
Arab Business Challenge - Winners (Cont.)
→ Ostrich Farm & Slaughterhouse
Jordan
Provide local slaughterhouse, marketing and export services for
growing ostrich meat and leather production in Jordan
Progress to date:
→ Detailed assessment and valuation currently in process
→ Further evaluation of market entry mechanism and product viability in process
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