Nuwa Capital Launches New Fund for Middle East & Africa

Nuwa Capital’s $100 Million Fund and Expansion into African Markets

Nuwa Capital, a venture capital firm with offices in Dubai and Riyadh, revealed the initial closing of its $100 million NVFI fund in February. This milestone represents three-quarters of the fund’s target and was achieved within a year of the firm’s establishment in February 2020.

The firm anticipates a second closing by the conclusion of the current year or during the first quarter of 2022. Nuwa Capital was founded by Khaled Talhouni, Sarah Abu Risheh, and Stephanie Nour Prince, and concentrates its investments on markets throughout the Middle East and the broader GCC region.

Investment History and Geographic Focus

The founding partners possess a proven history of successful investments in Middle Eastern ventures, including companies like Careem, Mumzworld, Golden Scent, and Nana Direct. However, their investment portfolio also extends to East African startups, specifically Twiga Foods and AZA.

To date, the new fund has allocated capital to three companies: Eyewa and Flexxpay, both based in Dubai, and Homzmart, located in Egypt. Despite a primary focus on the Middle East and GCC, Nuwa Capital intends to significantly increase its investments in African startups, with a particular emphasis on Egypt and East Africa.

Insights from Nuwa Capital’s Partners

A recent discussion with the partners explored their previous investments, their interest in the African market, and the similarities and differences between the regions in which they operate. The following is an edited transcript of that conversation.

TC: What motivates Nuwa Capital’s interest in Sub-Saharan Africa?

Khaled: While not our core market, Sub-Saharan Africa represents a key secondary focus. We believe valuable lessons learned from our Middle Eastern investments can be applied to opportunities in Africa, particularly in East Africa, as digital adoption rates continue to rise substantially.

TC: Beyond Homzmart, are there other African startups Nuwa Capital has invested in or is planning to invest in?

Sarah: We’ve observed a substantial flow of potential deals in North Africa, beginning in December. We are currently evaluating numerous companies in Egypt, Morocco, and across North Africa, and anticipate making investments across this region in the coming months. Currently, Homzmart remains our sole investment in Africa.

Navigating the African Investment Landscape

TC: How does Nuwa Capital plan to approach investing in Sub-Saharan Africa?

Sarah: Our prior fund included investments in two Kenyan companies, Twiga and BitPesa (now AZA), providing us with an established network in East Africa. This experience and the due diligence conducted during those investments have informed our belief in the opportunities available in the region.

TC: How does the African market differ from the GCC, from your perspective?

Sarah: Key differences lie in population sizes, purchasing power, and the types of companies that attract investment. Success in Africa often hinges on volume – a large number of users or customers. For example, Twiga’s success stemmed from connecting a vast network of farmers and vendors, demonstrating the power of population scale.

Stephanie: From a venture capital perspective, the GCC has seen a surge in new funds in recent years, leading to increased capital availability. This level of capital influx isn’t yet fully mirrored in East Africa. Furthermore, capital in East Africa appears to be concentrated among a select group of founders.

Investment Strategy and Future Outlook

TC: What investment strategy will Nuwa Capital employ in Africa?

Sarah: We seek companies aligned with our core investment thesis. We are particularly interested in fintech, SaaS solutions across various industries, e-commerce and marketplaces with private label or private brands, and companies disrupting traditional industries through technology in sectors like education, health tech, and agritech.

We typically focus on seed and Series A funding rounds, with the potential to participate in Series B rounds as well.

Stephanie: We’ve observed a growing number of companies pitching to us in healthcare, agritech, and various intersections of fintech, which are particularly intriguing as we expand our focus.

TC: Given your relative newness to African investment, will you seek partnerships with existing VCs on the continent?

Stephanie: Collaboration is integral to our approach. The regional nature of venture capital often leads to co-investments with funds that share a similar mindset. We anticipate leveraging existing relationships and forging new partnerships with African VCs.

Egypt as a Key Market

TC: Egypt is gaining prominence in both Africa and the Middle East. What factors contribute to its appeal?

Stephanie: Egypt is a primary market for us, generating a significant portion of our deal pipeline. We’ve witnessed a marked improvement in the quality of entrepreneurs and founders emerging from Egypt in recent years, demonstrating greater maturity and experience.

Sarah: Egyptian companies typically target expansion into either the rest of North Africa or East Africa, with some venturing into the GCC, depending on their industry. Our increased investment in Egypt, coupled with our East Africa strategy, will provide valuable exposure across the continent, informing our future fund allocations.

Fund Allocation and Future Plans

TC: Is a specific portion of the fund dedicated to the African market?

Khaled: While we don’t have a fixed percentage, Africa is a central component of our overall strategy. We are targeting a significant portion of the fund for Egypt, with the intention of allocating at least 5-10% to Africa, excluding Egypt. We are optimistic about the potential of the African market and anticipate increasing our presence in subsequent funds.