Setting A Precedent (In The MENA Funding Landscape) NOW Money's recent raise of funds from American VC firms is good news for the MENA funding landscape.

NOW Money, the company I co-founded in 2015, recently raised funding from US venture capital (VC) firms Accion and Newid Capital. NOW Money provides accounts and remittance options to low-income migrant workers in the Gulf Cooperation Council (GCC). This was the company's second round of funding following seed funding in June 2016. Accion and Newid Capital are VC investors with a specific mandate to invest in fintech startups that help solve the global problem of financial exclusion. Although they are based in Washington, they invest globally. Accion and Newid invested in this funding round alongside Myrisoph Capital, a prominent local VC and private equity fund, and Women's Angel Investment Network (WAIN). Both are prominent investment firms that invest frequently in the region.

The startup scene in the GCC is relatively new. When we founded NOW Money in 2015, support for startups was virtually non-existent. However, support for innovative new technologies and companies has grown quickly, so much so that now there are a range of support networks from co-working spaces, regulatory sandboxes, and legal support, amongst others. However, availability of capital, such a vital element component for the success of early-stage companies, has remained lacking. The reasons for this are threefold. First is the number of quality companies that potential investors are presented with. There is no one quick fix for this– but already across the GCC, support networks and the quality of entrepreneurs are starting to rapidly evolve and improve.

The second is the attitude towards failure in the region's culture. Unlike in the West, where failure is often seen as a learning experience and a badge of honor, in Arabic culture, failure is not seen so kindly. Venture capital investment theory is built on a portfolio model, where if a VC investor makes 10 investments, seven will fail, two will be moderately successful and breakeven, and one will make a 10x-20x return or more. It is this big success that covers the losses of the others. This is important, as investing at an early-stage is more of an art than a science, with the large amount of variables and future unknowns making it virtually impossible to put a scientific probability of success on any single early-stage investment. This means that in order to capture the one investment that achieves the huge returns VC investors are looking for, they have to make a relatively large number of investments, and be prepared to see a large number –potentially the majority of their portfolio– fail.

The third is attitudes towards investment into early-stage companies in the GCC. Given the previous two factors, there has been a preference for safe and understandable investments. In the GCC, this has led to huge volumes of investments in property and gold. We shouldn't forget that the modern economies in the GCC are relatively new– the Western economies have been a constantly evolving model over hundreds, if not thousands, of years, whereas the economies in the GCC went from subsistence economies to some of the richest in the world over the course of a very short space of time. Attitudes and business models cannot change overnight, so there is naturally a lag whilst some elements of the economy catch up with others. Given these factors, one would have thought that there would have been a flood of Western capital coming in to fill the capital funding void- but there hasn't. So, the question arises: why not?

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The GCC is often misunderstood. Many in the West don't realize how advanced and comprehensive some of the economies in the region are, and the depth of industries and cultures that are represented. There is also an assumption that there's plenty enough oil money that floods into funding anything and everything. In addition, business environments are seen as relatively hostile, with Arabic-based law hard for Western business people to understand, and a perception of corruption and politics having widespread influence. However, the business environment and the opportunities available to those willing to put the time and effort into understanding the region are actually highly conducive to profitable businesses and investment. Accion and Newid, unlike most other VCs, are sector specific– they only invest in fintech startups. Due to this, they understand fintech as an industry, and have plenty of experience investing in similar companies to NOW Money. This meant that they had little fear or uncertainty around the industry, our business model, or the opportunity open to us; their only hurdle was to get to understand investing in the region. Thankfully, they did put a lot of time and effort into doing so. They came out to the United Arab Emirates and spent time with individuals in our target market, local corporates and SMEs, lawyers, other startups, investors, and UAE nationals. Like us, they came to understand that doing business in the GCC is not more inherently risky, corrupt or culturally removed from that in the West– it's just different, and with a little understanding, it's as potentially profitable and exciting an opportunity as investments anywhere else in the world.

The Accion and Newid investments into NOW Money, plus the later stage American VC investment into Fetchr, and a US$650 million Souq.com exit to US corporate Amazon, could be the catalyst to the early-stage investment market that the startup industry in the GCC is desperately craving. Startups in the region have relied on angel investors –primarily individuals– to help them in the very early-stages, but angel investment doesn't last long or set the path towards significant growth. The VC funds that exist in the region already, for perfectly understandable reasons, are increasingly investing in a later stage, PE-like manner, and not supporting the number of early-stage startups the economy needs to sustain a vibrant and innovative sector that makes a serious contribution to the local economy. Local VCs have had it all their own way for too long. This means there is a big funding gap in the region for seed and earlystage investments– the most crucial stage for the success of a startup.

A key element of making VC investments is the opportunity to get the big exit that gives 10x-20x returns, and the recent sale of Souq.com has given a big credential of just that. This added to the recent credentials of American VCs investing into NOW Money and Fetchr should give comfort to other VC investors. The opportunities are present, and the business environment is supportive enough to make early-stage investments. With global investment opportunities into traditional sectors, such as real estate and listed equities, becoming ever lower yielding, and VC funds in the West looking outside of their traditional markets to gain access to new opportunities, we hope the increased inflow of capital made available to early-stage investments, and increased competition for VC investments, will compel existing and potential investors make early-stage capital available to more companies in the region than has traditionally been the case.

The benefits to the local economies in the GCC of this happening could be profound and far-reaching. In London, the fintech ecosystem alone employs more than 60,000 people and contributes $60 billion a year to the economy. SMEs are the powerhouse of job creation (40% of GDP and 42% of jobs in the UAE are created by SMEs), and today's startups are tomorrow's SMEs and big corporates. As an example, Souq.com directly employs over 3,000 people, indirectly employs many more, and has contributed billions of dirhams to the UAE economy– and this is just one local startup.

Startups are also responsible for driving innovation and positive change far more comprehensively and quickly that corporates or governments ever could. Innovations always end up giving the biggest positive effect to the consumer– just look at Uber (and Careem), which have given us on-demand convenient taxis, and Souq.com that gave us online shopping. Souq.com and Careem are just two examples of innovations that have benefitted the local economy and its consumers- imagine the effects of many more. The next billion-dollar GCC success story is likely out there already, and the next few could currently be receiving the early-stage backing they need to get there.

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