UK $350m venture capital fund sees Dubai on the Horizon

Founder of London-based Digital Horizon targets investment potential in UAE startups 

London-based venture capital fund Digital Horizon is targeting the UAE for growth, with investments in its first Dubai-based startups expected to be completed later this year.

Alan Vaksman, founder and general partner of Digital Horizon, which has $350 million of assets under its management, is confident the Middle East and North Africa region (MENA) – and the UAE in particular – holds great potential for the company.

Digital Horizon, which was established in 2018, specialises in fintech and software as a service (SaaS) companies and its portfolio includes a number of successful startups such as Klarna, Lemonade, Monday.com, Ably, and Bolt.

Its group of investors is made up of mainly family offices, small asset managers and high-net worth individuals (HNWIs).

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With its focus so far mostly in the US and Europe, growing to India and Indonesia with small tickets in Africa, Vaksman is now turning his attention to the Middle East.

Currently looking for larger premises in the Dubai International Financial Centre, Vaksman told AGBI that talks have started with three or four potential startups in the emirate.

Digital Horizon’s pivot to Dubai comes as MAGNiTT’s 2022 MENA Venture Report shows the region saw $2.6 billion in venture capital funding in 2021, marking a record high for the region.

The total number of registered transactions recovered from a slight dip in 2020 to touch 590 deals in 2021. UAE startups accounted for 26 percent of all deals closed across the region, and 45 percent of all funding raised.

Vaksman said he is seeking founders operating in retail tech, fintech and innovative ideas around digital payments and crypto infrastructure.

We hope to get two to four startups in the MENA area this year

Alan Vaksman, founder and general partner of Digital Horizon

“Dubai is a hub port with a community made up of many nationalities and is high growth, so we are definitely targeting e-commerce in that environment but we’re also interested in real innovation around payments, crypto infrastructure and also trade finance (supply chain) and B2B,” he said.

“I hope we can announce our first one or two Dubai investments by September.”

He said one stipulation for investment is that every startup must be trying to solve a real problem while there must also be “real economics behind it, otherwise it will just waste investors’ money”. 

“They don’t have to be profitable within three years because you need to take market share but you have to clearly understand how you are going to get there,” he said.

The UAE is of particular interest to Vaksman, an Israeli national, because of Digital Horizon’s focus on supporting a diverse range of expat founders who are creating enduring and meaningful startups.

With the UAE’s expats making up more than 80 percent of its total population, Vaksman is excited by the possibilities.

“The UAE appeals to us as it’s one of the most cosmopolitan countries in the world. We feel comfortable investing in that because we know the culture of the people, we are those people ourselves.”

He added that the UAE also has high levels of “click trust” in the digital world, driven by the large numbers of Western expats.

Digital horizons beyond the UAE

It’s not only the UAE that is attracting the interest of Digital Horizon. Vaksman said Egypt also has potential due its size and gaps in basic needs in sectors such as transportation and food delivery. Saudi Arabia and Qatar are also on the radar.

“We hope to get two to four startups in the MENA area this year,” he said.

“When we come into a new jurisdiction we need to study the ecosystem there. You need to understand who are the players, who are the founders, who can invest, and who knows the technical side of things.

“While I’m excited about the UAE, we have a lot of work to do. When you dig into it there are few funds operating on the ground in Dubai.

“Dubai needs to start building that ecosystem of founders and funds which are there long-term, not just fly in and fly out. You need to incentivise that. In two to four years I think it will be flourishing.”

In a research note, Stuart James, Abu Dhabi-based partner at global law firm Ashurst, said: “The rapid rise of venture capital in the Middle East has not happened by accident.

“Facilitating the development of sustainable venture capital ecosystems, backed by their powerful sovereign wealth funds, has been a key pillar of the economic diversification strategies of the region’s oil exporting nations as they discard their historic petrodollar dependency. 

“The culture of transformation and innovation that this is creating – combined with the Middle East’s young, digitally connected population, who are ideally located between two other large emerging markets – looks set to ensure that this rapid rise continues.”

Digital Horizon has invested in 36 startups so far from its four multi-stage funds, the latest of which – expected to grow to up to $300 million – has a retail tech focus.