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The internationalisation of the VC unicorn

Noor Sweid - superreturn Asia speakerUnicorns are traditionally thought to be creatures of Silicon Valley. But is that still the case? Noor Sweid, General Partner at Global Ventures, shares her thoughts on how the unicorn is now a creature of the globe and how companies can create value through technology and disruption, everywhere.

There has recently been an increasing number of unicorn sightings all over the world, establishing that they are not in any way unique to a mystical place called Silicon Valley. Specifically, approximately two thirds of the 63 private companies reaching unicorn status this year have come from outside the United States, debunking the theory that unicorns only live in specific zip codes.

China alone has become home to almost 30% of these elusive creatures, and one has been recently found in Colombia.

The internationalisation of the unicorn is a phenomenon that is simply a natural extension of the reality that technology has become global and ubiquitous; however, consumers of technology (both individuals and corporate) require different services and products depending on where they are in the world.

The missing link for a long time was talent: as long as talent was attracted to only one part of the world, that’s where the technology would be built. As talent globalised, and technology-based companies became easier to build, companies formed all over the world catering to discerning consumers and enterprises. The result? Successful talent in all corners of the world, from Dubai to Malaysia built companies that ultimately became unicorns.

These unicorns have created value in their respective markets. They are often based in emerging markets and identify opportunities that can only be seen by those on the ground, so they set about solving problems and offering much-needed solutions. They fall into one of two categories: consumer technology companies and enterprise technology companies.

1)      Consumer technology companies

The consumer technology companies typically identify problems that emerging market consumers may face. By creating solutions that solve these problems, these companies become local, and often regional, successes. They also have a first-mover advantage since they are proximate to the issues they are solving and identify them before global players do.

However, there is limited capital in most of those markets, making scale difficult. As an increasing amount of venture funding has been allocated to emerging markets in recent years, these companies have scaled more rapidly and aggressively, becoming unicorns. An example of this in the Middle East and North Africa region (MENA) is Careem, the region’s ride-hailing platform, recently receiving an investment from Didi.

2)      Enterprise technology companies

Scaling enterprise technology companies requires local relationships with industry players that are open to innovating within their industries. These are often co-investors and can create significant value for the start-ups, and for themselves. Examples of this include mobile workforce management solutions, such as Arrow Labs, which enables companies to manage their workforces more easily and efficiently, gaining productivity and saving costs; or Fetchr, which enables last-mile logistics using geo-tagging rather than street addresses (which don’t exist in most emerging markets). These companies were founded in Dubai, and have both scaled outside their home country, illustrating the innovation and enterprising solutions coming from emerging markets.

As the opportunities in global hubs become increasingly apparent, and the ability to scale and reach unicorn status is no longer theoretical or geographically restricted, capital has started to flow into new markets.  The consumer technology platforms require large amounts of funding and often operate in a very competitive landscape, whereas the enterprise technology companies grow and thrive when there is an ability to disrupt an industry by building bridges between old economy and new technology. It is the latter that is, in effect, more capital efficient to scale, and more applicable across markets, and therefore makes for an interesting investment focus.

In addition, with data capture and AI integrating into enterprise technology, the opportunity to create value and provide insights to enterprises, and thereby creating value for the underlying technology companies and investments, increases with each technology advancement. Specifically, industries that have yet to capture efficiency and productivity gains include manufacturing, construction and healthcare, all of which are potential customers for young companies providing solutions to enable these sectors to pivot and become better managed and more efficient.

We believe that some global hubs, such as Dubai, still offer very attractive valuations for investments. These markets offer an opportunity to experience valuation arbitrage by scaling companies across multiple geographies where capital is increasingly flowing, as well as realising value through growth.

Within the emerging market venture capital industry, the risk/return profile of some global hubs, given the lower valuations, the under-capitilisation of the venture capital ecosystem and the quality of the start-ups, remains attractive when compared to others.  Specifically, the technology and innovation coming from Dubai, has left an opportunity to invest at attractive valuations, and to use the city as a scale-up hub for young companies.

As many international companies base their regional or emerging market headquarters out of Dubai, it has become an attractive place for young, enterprise-technology companies to start and scale from, perhaps changing the city from an aviation hub to a unicorn hub.

Under the spotlight: Noor Sweid

Noor Sweid is the founder of Global Ventures, a Dubai-based, growth-stage venture capital firm. Previously, Noor was the Chief Investment Officer at The Dubai Future Foundation, focusing on developing the technology and innovation ecosystem in Dubai. Prior to this position, Noor was a Managing Partner at Leap Ventures, a growth-stage venture capital firm based out of Dubai and Beirut. Noor has been named in the Arabian Business 100 Most Powerful Arab Women list three times, and has been profiled on the covers of Forbes Middle East, Entrepreneur Middle East, and Arabian Business magazines. 

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