The asset management and investment banking platform will target tech-enabled startups across the GCC with a form of investment that is still finding its place in the regional ecosystem.
Considered one of the leading asset management and investment banking platforms in MENA, Dubai-based SHUAA Capital has announced the launch of a new venture debt fund worth $250 million. SHUAA Venture Partners is Shari’ah compliant and will focus on aiding the growth of what the firm calls ‘regional leaders’ in the tech space.
Venture debt is still a somewhat nascent form of funding in MENA, though it has the potential to unlock less intrusive venture investments for growth-stage startups. Venture debt (or venture lending) is a type of loan for venture-backed startups. Typically, it is less expensive than equity financing and has often been used between equity rounds or to supplement them.
It's especially valuable to growth-stage startups who have limited access to large pools of capital and non-equity financing, and there’s been a small but noticeable increase in venture debt deals, as startups look for alternative methods of funding. The GCC has witnessed a 112% YoY increase in venture capital deals, though the majority have been early stage. Alongside that sharp rise, venture debt has increased 4.2x since 2020, with over $250 million deployed across 14 deals - a small number, all things considered, but one that indicates the rising demand for alternative financing.
Ultimately, venture debt allows startups to grow without severely diluting their shareholding, and there are more benefits to be found with the way that SHUAA Capital has structured the fund. “We aim to support the growth of businesses, create jobs, lead further developments in innovation and technology, support economic diversification and guide founders towards realising their vision,” said Natasha Hannoun, Head of Debt at SHUAA Capital. “Our investors have the opportunity to diversify into a new asset class in technology, with a shorter investment horizon, frequent distributions and attractive financial returns.”
SHUAA Capital has been one of the most active pushers of venture debt, having deployed $545 million in private debt transactions in the last 11 years, including a $50 million deal with UAE's Pure Harvest as part of its $60 million growth funding round in March, 2021, and the PIPE (private investment in public equity deals) funding for Anghami, which went on to become the first Arab tech company to list on NASDAQ earlier this year.