Sharif El-Badawi, CEO of Dubai Future District Fund, a fund anchored by Dubai Future Foundation and the DIFC to invest in the future of finance and future economies in Dubai, the UAE, and the broader region. He was a Managing Partner of Plus Venture Capital (+VC), one of the leading seed stage investment firms in the MENA, and co-founded and managed the first US-based venture capital firm with a dedicated fund for the MENA region, 500 Falcons, which has invested in over 180 start-ups across 15 countries.
Please tell us a bit about what the Dubai Future District Fund is and what is the main goal of this fund.
The Dubai Future District Fund is a venture capital fund of funds and direct investment vehicle that was set up by the DIFC and Dubai Future Foundation as the venture platform for Dubai. Its main goal is to invest in more VCs around the region and directly into the high-growth start-ups that are paving the path toward innovation and technologies across the future of finance and future economies.
How do you describe your journey as a VC and investor supporting new projects?
My journey is very common, starting as an entrepreneur as part of different types of start-ups. Post the web 1.0 movement, I got lucky and joined a start-up, well-funded by big names and the company ended up getting acquired by Google. I learned how to be a technology executive at a large-scale company, with a different sort of DNA, and a different set of skills. After leaving Google I launched the first U.S. fund to have a dedicated fund for the MENA region. We invested in 180 companies from 2017 to 2020. I’d say it’s a typical flow from an entrepreneur to a big tech executive to an investor.
What’s important for the upcoming projects and ideas to be future-ready?
The way we think about the story of helping build the ecosystem from a capital infusion perspective is by trying to identify the different gaps, which come in different layers. The very first layer is the capital that is invested in the VC funds that invest in start-ups, what we call limited partners or LPs, where we don’t have sufficient pools of capital. So that’s one area we’re focused on and that’s why the fund was set up.
The second is to diversify the pools of capital, institutional capital, and private capital that is available for founders. The founders need optionality and plurality in the types of capital they can raise, whether they’re in a certain stage, sector, or geography across the region or other emerging markets. Now you might see that the top line looks like there are 200+ investors, but really to each founder, it is a very limited set of potential investors that will meet the criteria of investing in their company. We’re trying to add more options and diversify the pools of capital that founders can use. VC funds cannot raise funds and invest in founders unless there’s capital for them, and the founders cannot raise unless there are enough options for them. The other part is how we involve the private sector, such as conglomerates to put more of their capital into the venture capital asset class. That’s a longer-term project that we’re working on and then we’ll be working on how we can give access to qualified retail investors, such as you and me, or any individual who wants to invest in the venture index of Dubai. We’ll be launching a new platform that enables that part and this will be announced next year. Therefore, we’re creating a fund of funds and direct investment platform, which is going to be an index covering the region serving the various investment needs of our community.
What’s important within a project to be eligible for the fund?
We look at the same basic criteria like team, traction, technology, and market potential. We look at whether the product or the solution is a good solution for what they state is a problem in the market. The relevancy of the problem and solution should be innovative and compatible so that the customers can keep buying that product. These are things that every investor must look and the degree to which we do that is based on the stage of investment.
We’ll do our direct tickets from pre-seed up to Series C. In each of these stages, that criterion has a different flavor. When I look at a pre-seed company, it’s about the team or the idea of the company. Later, we look at their traction, momentum, and growth in terms of revenue generation, the right economics, margins, the ability of the company to adapt to a new market, and so on. These differ on the basis of the type of the company. The basis on these metrics and how capital-efficient the company is, we have benchmarks for each stage of the company’s development. How much money has already been spent and how much more is required, post analyzing that we assess the exit opportunities.
Where do you think the current core strength for innovation lies, focusing more on Dubai?
Considering Dubai, we’re lucky to play on the current strengths that it has already established. A few of these strengths are the liveability and workability of the city. Several sister organizations around the fund are continuously asking for feedback from the audience and then trying to address those concerns, like the cost of living, and ease of doing business. A lot of things like Visa types opening, demand for housing, people and capital flows in Dubai, the supply is continuously increasing to allow people to rent and buy property, own their property, or open their businesses, 100% onshore. A number of these things are constantly pushing forward making our job, a lot easier than other hubs because other hubs are trying to create an ecosystem through incentives and pull people there. Dubai already has the pull, it makes our job of deploying capital a lot easier because people want to be here.
Even now there is still a traditional approach in the minds of parents that their kids shouldn’t be entrepreneurs, but rather take up safer jobs. What is your advice to them?
I was born and brought up in the U.S, and I don’t think it’s a regional-specific issue. This happens everywhere and all parents are concerned about their kids. They want their child to study and have stable 9 to 5 jobs, but the kids after our generation didn’t feel the need to bunker down like that. They were like, “Let me take my chances, let me find out my destiny.” I had already started my start-up journey from the time when I was in college, being an entrepreneur even then. After the company that I was working at got bought by Google, my parents misinterpreted the same satisfaction that I finally got a job.
Parents back then did not want children to go into entrepreneurship, but once they started using these apps themselves, they started gauging the importance of it. Parents right now are becoming more accepting across the region, nobody did it 5-6 years ago.
Once Careem and Souq got acquired, all the parents understood that this is real. Even the young employees that did not respect the ESOP got convinced after the exits. We need to go through a few more such cycles and then people will start to value the equity and ask for a lower salary. We have capital availability in the region, we’ve seen exits and we also have international investors coming. Many of these factors must be in place by the government. Now that we have it, we will see the increase in frequency and size of the exits.
What personal traits or value systems help make an entrepreneur successful?
At the core of a personality trait, I think it is resilience and grit, the ability to have a vision and be able to story tell your vision to yourself first because you must convince yourself every single day for years. Further, then translate that story to people who you want to hire and come with you along your journey. You must convince the best people to come with you, convince your investors and lastly convince your customers. You’re constantly storytelling. So, if you can’t tell a story, it’s very hard to be an entrepreneur.
Lastly, what message do you have for our readers?
I believe that the finance world is the hottest sector in venture these days and everyone wants to be a part of it. One thing we see is that there is a lot of investment ability in a fintech company because a lot of investors understand finance and like how it grows, so if you work in finance or fintech, you have a much better chance of raising capital. The talent pool from which you can hire is vast and you just need to understand banking, and credit to hire the correct people and hire them accordingly. But I believe the most important caution will be that not everything that glitters is gold, and you cannot become valuable out of thin air. For a fintech, the idea that two of us in a garage are going to sew up a little app and disrupt this giant banking industry is just not realistic. It happens when you combine traditional incumbent industries with innovative technologies and teams. Those industries are vast and complicated, and you must collaborate, that is what people are finally realizing in fintech. I think that’s a realization nowadays that I would say for the finance industry to be aware of.