The Middle Eastern capital shift — a potential bonanza for Islamic VC industry?
Middle Eastern money have been feeding global venture capital ecosystem for years. From the likes of Public Investment Fund (PIF), Mubadala and Qatar Investment Authority (QIA) to many Gulf-based family offices, the funds have been flowing to the best VC destinations — Silicon Valley, New York, London and Singapore. Many Islamic VC centers — Dubai, Abu Dhabi, Riyadh and Jakarta have been mostly left out of this spending frenzy.
Under the directions of Crown Prince Mohammed bin Salman, the PIF (with its $925 billion wallet) is now turning its attention to domestic market, still the largest in the GCC. For many years, the PIF and its counterparties in the UAE, Qatar, and Kuwait have been trying to offset the future dwindling oil revenues by growing new “tomorrow’s” industries. In the GCC, only in the UAE and Bahrain, oil and gas revenues amount to less than 50% of GDP — where they are 32% and 24% respectively.
Overall, the Middle Eastern investment participation amounts to 12.6% (not even including fund commitments), while the GCC share of the global GDP is a bit over 2%.
The things changed in the last couple of years. The PIF officials now require investments in Saudi Arabia in exchange for capital commitments. The QIA initiates its first regional fund-of-funds to bring international VC firm to Qatar to give a helping hand to local and GCC-based startups.
Some startups are listening. A large Chinese AI company is now negotiating a Shariah compliant round of investment with the Saudis to set up the region’s largest AI center in the Land of the Two Holy Mosques.
All these changes represent a fantastic opportunity for local Islamic startups. They no longer have to compete with some other smart guys in California or Shanghai. Locking up capital in the region may seem sub-optimal, but this measure will allow even seed-round ethical startups a much easier access to growth funds. Also, through co-investment opportunities with large investors here, local Islamic startups will gain increasing access to global networks and expertise.
In just a few months I expect a substantial “brain drain” from many Islamic VC centers (Kuala Lumpur, Istanbul and Jakarta) and some Shariah-friendly conventional centers (London, New York and Singapore) to Riyad, Dubai and Doha. Well, there will be plenty of capital for all the worthy players.
2 months ago, our analytical department launched a study to determine the best universities for Islamic startup founders and Islamic venture capital professionals. In my next monthly column, I will include the results of the study. In the meantime, I would like to share some information on the top universities for Islamic VC professionals:
1. Stanford University (USA) — 156 points
2. INSEAD (France) — 143 points
3. London Business School (UK) — 141 points
4. Indian School of Business (India) — 137 points
5. MIT (USA) — 134 points
The point systems is based on responses from 100 Islamic VC practitioners.
