Dubai-based early-stage venture capital firm COTU Ventures is announcing that it has raised $54 million for its inaugural fund to support startups in the Middle East from pre-seed to seed stages.
With a final close achieved last year, COTU Ventures, which identifies and backs founders from the inception to post-product launch, invests between $500,000 to $1.5 million as an initial check.
Over the past two and a half years, COTU Ventures has actively deployed capital into startups across the GCC, focusing primarily on the UAE and Saudi Arabia and Egypt, with additional investments in Pakistan. The firm has already backed over 20 early-stage startups across various sectors, as outlined in its statement.
Founder and general partner Amir Farha revealed in an interview with TechCrunch that COTU Ventures is inclined slightly towards fintech and B2B software. However, the firm is open to opportunities across other sectors. Noteworthy investments by COTU Ventures include Huspy, a UAE mortgage platform backed by Peak XV and Founders Fund, and Egyptian fintech startup MoneyHash.
“The consumer wave happened with Careem and some other applications. Today, businesses are lagging a bit behind, so there’s a huge opportunity to build software to help solve many of their problems. We are also interested in high-margin industries where technology can play a massive role and capitalize on margin efficiencies,” said Farha on the opportunities COTU is keen on.
Careem, the poster child of the startup scene in the MENA and GCC region, was one of the earliest investments Farha made as a VC at his previous firm, Beco Capital.
Several years after personally investing in startups in Europe and later running an angel network upon return to the Middle East from the U.K., Farha launched Beco Capital in 2012, where he took part in the firm’s fundraising efforts for its first fund ($50 million) and second fund ($100 million+) before departing in 2021 to launch COTU Ventures.
While at Beco Capital, Farha and his partner returned the first fund following Uber’s acquisition of Careem. He also noted that Beco Capital’s second fund, which includes well-capitalized startups such as General Atlantic-backed PropertyFinder, Kitopi, MaxAB, and Fresha, “is doing really well.”.
Reflecting on the evolving investment landscape, Farha explained how Beco Capital was actively involved in seed rounds ranging from a few hundred thousand dollars to Series B rounds of around $5 million before the ecosystem evolved to accommodate more sizeable funds and bigger later-stage investments. In this time, venture capital investments in the GCC region experienced significant growth, soaring from $20 million in 2012 to over $2 billion by 2020.
As Beco Capital shifted its focus towards later-stage investments with larger funds, Farha decided to depart in 2021 and launch COTU Ventures, doubling down one early-stage investments. This decision, he explained, was driven by the recognition of a market gap. Despite the significant maturation of the GCC tech ecosystem in terms of capital and talent, there remained a crucial need for support beyond just funding at the earliest stages of startup development.
Farha asserts that a founder’s upbringing and early life experiences can offer valuable insights into their potential for success. At COTU Ventures, he emphasizes the importance of candid conversations that delve deep into a founder’s personal and professional journey, exploring significant life events and decisions. By fostering such open dialogue, COTU Ventures aims to establish trust and strong connections with founders, enabling informed investment decisions. Moreover, Farha highlights this strategy allows the firm to provide strategic guidance on fundraising, organizational development, and go-to-market strategy. He added that the venture capital firm also facilitates introductions to key stakeholders such as customers, hires, and potential follow-on investors, offering comprehensive support to its portfolio companies as they navigate Series A rounds and beyond.
“I love the chaos of the earlier stages where you’re discovering, experimenting and testing. Things look great, but one day, things look difficult, and then you are trying to help solve problems along the way. So that environment suits me as an investor well,” remarked Farha. “Also, there’s a gap. The region is still early and nobody’s owning early-stage with conviction. You have the bigger firms investing smaller checks in the pre-seed stages but don’t spend enough time helping them until they reach product market fit. So, I think there’s that space to be the go-to company that founders want to have on their cap table.”
COTU Ventures’ limited partners include Lunate, Mubadala, Dubai Future District Fund, Arab Bank, Bupa KSA, and GPs from VCs, including Foundry Group, Tribe Capital, Stride, and several family offices.
“We’re proud to have backed a fund that’s distinguished not only by its impressive portfolio but by the exceptional leadership and track record of its founding partner, Amir,” said Sharif Elbadawi, CEO of Dubai Future District Fund, in a statement. “Our confidence in Amir stems from his deep passion for supporting founders and his proven ability to find remarkable investment opportunities before anyone else.”