📖 This article is part 2 of wider series on “Fundraising 101 for MENA VCs” – you can check-out earlier instalments here.
First cheques are inherently more important than subsequent ones (they're not of course economically speaking… anyway), but because in a fundraising market this small and this networked, the identity of your anchor LP is for better or worse perhaps the single most powerful signal you can send.
It tells every prospective investor who comes after them that someone credible has already looked under the hood, done the diligence, and decided this thing is worth backing. At the end of the day, without that signal, you're just a person with a pitch deck and a DIFC licence.
If you see the region, most of the VCs have the GP or one of the GPs with a big family attached to them. So the cornerstone is usually the rich person in the middle. Which is not unusual globally, in the US we see it too, but it tends to be a founder that exited and from the exit proceeds has done something. Whereas here it's more the family.
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In the US, the archetypal anchor LP is someone who built a company, sold it, and is now recycling their proceeds into the next generation of founders. Their commitment signals operational credibility, after all, they've been in the arena, they understand the risk-return profile from the inside, and they're presumably backing you because they recognise something in your approach that reminds them of what worked for them.
Contrastingly, in the GCC, the archetypal anchor is generally a wealthy family, often one with a personal relationship to the GP, and their commitment signals something quite different i.e. social trust, reputational endorsement, and (let's be direct about it) the implicit guarantee that this fund will have enough capital to actually deploy.
Neither version is wrong, but the MENA version creates a set of second-order dynamics that every fundraising GP needs to think through carefully, because the terms you set with your anchor will shape the terms available to every LP who follows, and the concentration profile of your anchor will determine how painful your Fund II raise is going to be…
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