COTU Ventures initiates $54 million fund for early stage startups in the MENA region

COTU Ventures, an early-stage venture capital firm based in Dubai, has announced raising $54 million for its pilot fund aimed at supporting Middle Eastern start-ups from the pre-seed to the seed stages. The firm, which obtained its final financial closure last year, identifies and invests in founders from the conception of their idea to the post-launch phase, contributing funds ranging from $500,000 to $2 million while also reserving funds for future investments.

Over the past two and a half years, COTU Ventures has been actively investing in start-ups across the Gulf Cooperation Council (GCC) region, primarily focusing on UAE, Saudi Arabia, Egypt, and Pakistan. They’ve already invested in over 20 early-stage startups across various industries, as mentioned in their press release.

During an interview with TechCrunch, the firm’s Founder and General Partner, Amir Farha revealed that while COTU Ventures does lean towards Fintech and B2B software ventures, it remains open to exploring opportunities in other sectors. Notable investments made by COTU Ventures include Huspy, a UAE-based mortgage platform supported by Peak XV and Founders Fund, and MoneyHash, an Egyptian Fintech startup.

Commenting on the areas that interest COTU, Farha said that following the success of consumer-based applications like Careem, there now exists an enormous potential in helping businesses that are currently lagging behind. The firm is enthusiastic about developing software solutions to address these challenges. Furthermore, they are keen on high-margin sectors where technology can play a pivotal role and enhance margin efficiencies.

Amir Farha’s prior venture capital experience includes an early investment in Careem, often considered a trailblazer in the Middle East, North Africa and Gulf Cooperation Council’s startup scene. The noteworthy investment was made while Farha was working at BECO Capital.

Farha launched BECO Capital in 2012 after several years of working in corporate venture capital in the UK and Sweden and managing the first seed fund and angel network in the region backed by the Dubai government. In his role at BECO Capital, he was integral to the firm’s investment strategy, firm-building efforts and the running of both its first fund ($50 million) and second fund ($100 million) before leaving to establish COTU Ventures.

Under Farha’s co-leadership, BECO Capital was able to return the first fund, which had investments in General Atlantic-backed PropertyFinder and Fresha, a success largely fueled by Uber’s acquisition of Careem. Farha also noted the sound performance of the BECO Capital’s second fund, which included well-funded startups like Kitopi and MaxAB.

Looking back at the evolution of the investment sphere, Farha highlighted the active role BECO Capital played in seed rounds, which ranged from several hundred thousand dollars to Series B rounds of around $5 million, before the ecosystem developed to include larger funds and more substantial later-stage investments. During this period, venture capital investments in the GCC region witnessed colossal growth, shooting up from $20 million in 2012 to over $2 billion by 2020.

As BECO Capital started focusing more on later-stage investments with larger funds, Amir Farha made the choice to leave in 2020 and establish COTU Ventures, a firm dedicated to early-stage investments. He explained that his decision to concentrate on the early-stage sector derived from recognizing a void in the market. Notwithstanding the considerable growth of the GCC tech ecosystem in terms of capital and talent, there was an enduring requirement for more extensive support, beyond just capital, during the initial stages of startup development.

Farha is a firm believer that a founder’s early life and personal experiences can provide invaluable insight into their possibilities for success. At COTU Ventures, he places a great deal of importance on open and honest conversations encompassing a founder’s personal and professional life, exploring important life decisions and events. By encouraging comprehensive dialogue, COTU Ventures aims to establish a trusting and solid bond with founders, in turn allowing the firm to make better-informed investment decisions.

Farha points out that this particular approach enables the firm to offer strategic advice on aspects such as fundraising, organizational growth, and go-to-market strategies. Additionally, the venture capital firm can make key introductions to stakeholders such as future potential investors, hires, and customers. This provides wide-ranging support to portfolio companies as they navigate towards Series A rounds and beyond.

Talking about why he prefers investing in early-stage startups, Farha said, “I love the chaos of the earlier stages where you’re discovering, experimenting, and testing. There’s a gap in the region as no one is committedly focusing on the early stages. Bigger firms invest smaller checks in the pre-seed stages but do not dedicate enough time to help them reach product-market fit. Hence, I believe there is space to be the go-to company that founders want on their cap table.”

Limited partners of COTU Ventures include Lunate, Mubadala, Dubai Future District Fund, Arab Bank, Bupa KSA, and GPs from VCs, including the Foundry Group, Tribe Capital, Stride, among numerous family offices.

Sharif Elbadawi, the CEO of Dubai Future District Fund, praised COTU Ventures saying, “We’re proud to support a fund distinguished not only by its remarkable portfolio but also by the excellent leadership and track record of its founding partner, Amir. Our confidence in Amir stems from his deep commitment to backing founders and his proven knack for discovering extraordinary investment opportunities before anyone else.”