Venture Capital: The Rise of the Rest

Capital Inflow Trends & Ecosystem Growth

• Sub-Saharan Africa venture capital investment grew from approximately $100 million annually eight years ago to $1.3–$1.5 billion last year, though this remains a fraction of the $150 billion flowing into the U.S.
• Africa now hosts over 600 tech hubs, accelerators, and incubators, supported by near-universal mobile penetration (approx. 800 million mobile phones) and robust infrastructure.
• Mubadala Ventures launched a regional fund of funds to assist Middle Eastern startups in raising capital and investing in local growth.
• Jack Sealy notes that international startups are increasingly viewing the Middle East not as a secondary market, but as a critical growth market for accessing large corporates, government entities, and energy/defense sectors.
• Sarah Kunst operates a scout program with 10–15 active scouts globally, providing $25,000 checks to capture early deal flow and identify "velocity" winners for larger follow-on investments.

Investment Theses & Regional Differentiation

• Africa: Pule Taukabong (CRE Ventures) identifies the next Fortune 500 companies as likely emerging from African tech, citing local designs with global competitiveness and potential exits via strategic acquisitions, Johannesburg Stock Exchange listings, or U.S. IPOs (specifically Nasdaq).
• Middle East: Ibrahim Ajami (Mubadala) highlights the region's 5G leadership (launching before the UK) and high youth disposable income as key drivers, though talent scarcity remains a critical bottleneck.
• Israel: Avi Eyal (Entree Capital) attributes Israel's success to government-supported corporate collaboration (e.g., banks granting MVPs without risk committees), digital healthcare data access, and tax incentives for reinvestment.
• Silicon Valley/Global: Jack Sealy (Teal Capital/Founders Fund) outlines a multi-fund structure: Founders Fund (traditional LPs), Mithril (non-Bay Area focus, moved to Austin), Velar (international, later-stage), and Breakout Labs (hard science/biotech).

Ecosystem Challenges & Talent Gaps

• A primary constraint across all regions, including Israel and the Middle East, is a severe shortage of software engineers and coders.
• Avi Eyal notes that only 5% of Israel's tech workforce comprises Palestinians or Arab Israelis, prompting Entree Capital to launch scholarship programs and "Meet in Israel" initiatives to foster cross-border collaboration.
• Sarah Kunst is launching "Saga," an MBA internship program (partnering with NYU Abu Dhabi, Harvard, Yale) to train the next generation of investors and founders in early-stage mechanics.
• Ibrahim Ajami critiques the region for lacking a founder-centric mindset, noting that emerging funds often refuse follow-on investments without consent, unlike the collaborative culture of Silicon Valley.

Exit Strategies & Market Dynamics

• Early exits in emerging markets have largely been strategic acquisitions (e.g., Jumia, Talabat, Kareem) rather than IPOs, though listings on the Johannesburg Stock Exchange are increasing.
• Avi Eyal predicts that the next 10 years will see tech growth in Europe, the UK, Israel, and the Middle East exceed U.S. growth due to the "catch-up" opportunity and lower valuation entry points.
• Jack Sealy warns that the "zero negative rate" environment creates excessive capital sloshing, making early-stage VC in traditional markets harder and pushing investors toward frontier markets for growth.
• Mubadala has invested in regional general partners like Global Ventures, aiming to cultivate local "Founders Funds" that can achieve the same respect and conviction-based investing standards as top U.S. firms.

Strategic Partnerships & Future Commitments

• Ibrahim Ajami stated that Vision Fund 2 and 3 will occur in the future, with the current team fully focused on maximizing the portfolio of Vision Fund 1 in the short term.
• Jack Sealy suggested that Founders Fund should consider establishing a Middle East presence or partnering with Mubadala, though he deferred a final commitment pending internal approval.
• Sarah Kunst and Ibrahim Ajami agreed to collaborate on mentoring and launching an early-stage fund in Abu Dhabi, with Mubadala providing the first checks and international mentors.
• The panel consensus is that U.S. and European VCs will enter the region only after local early-stage funds provide validation (revenue/growth) and a "stamp" of local expertise, triggering a line-up of tier-one capital for follow-on rounds.

Technology Focus

• Ibrahim Ajami highlighted a shift from business model replication to "real technology" (AI, NLP, semiconductors, quantum computing), citing new university research initiatives in Abu Dhabi and Saudi Arabia as foundational for future deep-tech companies.
• Sarah Kunst noted that global technology (remote work, 5G) is shrinking geographical barriers, making it easier to operate global teams from emerging markets.