📖 This article is part 4 of wider series on “Fundraising 101 for MENA VCs” – you can check-out earlier instalments here.
One of the things that becomes apparent very quickly when you fundraise in the GCC, particularly if you've done it elsewhere first, is that the line between financial capital and strategic capital is blurrier here than in almost any other market.
In the US or Europe, the majority of LP capital comes from investors whose sole objective is financial return: pensions, endowments, fund-of-funds, family offices acting in a purely allocative capacity.
Strategic investors exist, of course (corporate venture arms, sovereign-adjacent programmes), but they're a minority of the LP base, and a fund can usually be built without accommodating their requirements at all.
In MENA, the picture is essentially inverted. Sovereigns with national development mandates, family offices with operating businesses that want strategic deal flow, corporations looking for innovation exposure, DFIs with impact metrics to satisfy – if it’s not becoming clear already, a significant proportion of the region's LP capital comes with strings of one kind or another!
And the way you navigate those strings will determine not just whether your current fundraise succeeds, but whether your fund can actually perform once the capital is deployed.
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In Asia, the conversation is way more transactional. In conversation number two, you would ask, "Are you guys actually interested in the fund? What are you looking at? Potential check size?" And then you go into your fundraising spiel. That takes longer here. That takes significantly longer. I'd say where in Asia in conversation number two you would kind of ask that, here it's conversation number six or seven.
Six or seven conversations before you even get to the "are you in?" question is a structural consequence of a market where most LP capital has a strategic dimension that needs to be understood, discussed, and accommodated before anyone talks numbers.
The first five conversations aren't small talk (though they may feel like it), they're more so the process by which both sides figure out whether the strategic objectives of the LP can coexist with the investment objectives of the fund, and if the answer is no, it's better to discover that in conversation four than in year three of the fund's life…
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