The Middle East is seeing a rapid increase in the number of angels and their networks. Angels are individuals of high net worth looking to invest in private companies and ventures at an early development stage.
The Arab Business Angel Network (ABAN), funded by Dubai International Capital, has been actively encouraging the creation of business angel networks across the region. Walid Hanna, the CEO of ABAN, stated that the concept of a business angel investment and a business angel network is based around the idea of “smart money.”
Unlike venture capital firms that invest other people’s money, angels invest their own money in the venture proposed, replacing the traditional methods of accruing seed capital: FFF (friends, fools and family). Business angel networks are created to gather angels together and to help them find propositions that they can put seed capital towards. The aim of these networks, Hanna states, is to, “create companies, diversify the economies of the region, boost cross border trade and most importantly create jobs.”
These four goals are paramount for virtually all MENA economies and thus business angels are unsurprisingly being created at a rapid pace. The popularity of business angels has also been helped by positive returns on investments that have even surpassed private equity firms’ results at a general level. In the US, a report by the Angel Capital Education Foundation stated that angel investments reported a return of 2.6 times the original investment in three and a half years on average, although 52 percent of angel investments returned less than the capital put in by investors.
The prospect of good returns for investors has meant that in 2009 already three memorandums of understanding (MoUs) have been agreed, two in Saudi Arabia and one in Lebanon, to establish business angel networks. Antoine Abou-Samra, managing director of Bader, who signed the MoU with ABAN to set up a network in Lebanon, said the creation of a business network with ABAN will be highly beneficial in terms of, “the exchange of knowledge, deal flows and business contacts.” Hanna said Jordan and Egypt are following Saudi and Lebanon and signing MoU’s with ABAN to set up Angel networks. As networks grow across the region, hopes are that the angels live up to their name and bring the blessing of “smart money.”
