BEIRUT: A $71 million Middle East and North Africa-focused venture capital fund named Leap Ventures was launched at this year’s ArabNet conference by Henri Asseily, a partner in the fund. “Leap’s mission is to draw on the partner’s extensive entrepreneurial experience to invest in and guide Lebanese knowledge economy startups through their growth phase all the way to large exits,” Asseily stated in a press release.
Leap Ventures is headed by four of Lebanon’s most seasoned entrepreneurs and angel investors in the tech sector: Asseily, who founded Shopzilla and Bizrate; Hala Fadel, chair of the MIT Enterprise Forum for the Pan Arab Region; Herve Cuviliez, the CEO of Diwanee; and Noor Sweid, angel investor, entrepreneur and IPO consultant.
Asseily told The Daily Star the fund plans to invest an average of $3 million to $7 million in no more than three companies a year over a lifetime of four to five years with the aim of securing large exits. The investment may reach up to $12 million but only through partnerships with other firms.
The types of investments Leap Ventures will be looking to make are known as Series B, investments in firms that have already experienced some growth and have potential.
“We expect the company that comes to us to be a company that of course has a team [and] has a product,” Asseily explained. “That has validated the product in the market and that has a good penetration in a local market. So we can see that it’s got validation, it’s got penetration, and it’s making revenues, not profit of course but it’s making revenues.”
Leap Ventures plans to take companies at this stage and expand them into a regional or global presence, Asseily said, so that they’re big enough to get to an exit or reach a much larger round of investment.
Asseily and his partner’s new venture capital firm is the result of Lebanon’s Central Bank Circular 331 initiative which was launched last-year to much fanfare. Circular 331 puts up to $400 million at the disposal of startups through equity investments by commercial banks in Lebanon. Banks have the option to directly invest capital in startups or through venture capital funds, such as Leap Ventures.
The circular was issued to boost the Lebanese economy, therefore all companies must have an SAL in Lebanon. Asseily is confident, however, that this will not prevent extremely successful firms issuing IPOs on the Nasdaq or London Stock Exchange as long as the core of the business remains in Lebanon.
Asseily lamented that existing players in Lebanon's startup industry were not utilizing the Circular 331 to its full-potential by not looking at the full life-cycle of the venture ecosystem.
“So when the [Central Bank] came up with the Circular 331 ... I saw that everybody was interested in doing seed funding, and barely series A,” he said. “I thought this horrible because nobody understands [that] in order to get an exit, you need players at every single level. You need somebody willing and able to provide you with the necessary funding in order to get you forward.”
Asseily recalled that his fellow partner Herve Cuviliez, whose company Diwanee sold a majority stake to French digital publisher Webedia for around $12 million-$16 million last year, had great difficulty finding the $5 million in funding he needed at one point to take his company to the next level.
Asseily said the average successful startup in the U.S. is worth $243 million on exit with an average investment of $41 million, i.e. the investment is one-sixth of the exit. He estimates that MENA startups could expect a minimum of a $30 million exit, which means they would need an investment of at least $5 million.
“So, if you can’t find that $5 million the company won’t be able to sell for $30 million. So if you don’t have that series B growth funding, you can’t get an exit, it just doesn’t work.”
Asseily felt the main thing hampering the Lebanese market today was a lack of talent in the programming and software engineering fields which itself was being deterred by poor connectivity. “We don’t have developers, programmers, enough of those guys, but I truly believe if we had a much faster Internet speed, we would have a better pool of talent to tap into,” he said. “There’s too much overhead. It’s too difficult to do these things. If you have a very fast Internet, you try it just for the sake of it.”