VENTURE CAPITAL

Oman 2020 | FINANCE | B2B

As two of the leading venture capital firms in Oman, Phaze Ventures and IDO Investments have helped develop the local ecosystem and sourced leading innovators to solve real operational challenges.

Abdullah Al-Shaksy
ABDULLAH AL-SHAKSY
Co-Founder & CEO
Phaze Ventures
Mazin Al Naamani
MAZIN AL NAAMANI
Portfolio Manager
IDO Investments

What led to the establishment of the company?
ABDULLAH AL-SHAKSY Phaze Ventures was born out of a reflection of the local and regional business ecosystems following the 2015 global decline in oil prices. Through conversations and interactions with public and private stakeholders, we realized a fundamental missing piece of the local ecosystem was the lack of a bottom-up approach to innovation, focused on diversification and job creation through start-ups. In fact, most developed economies derive the majority of their employment and a large amount of their innovation output through SMEs. However, the ecosystem to support that sector simply did not exist in Oman, and creating it required a three-pronged approach: policy change; a healthy venture funding landscape; and an ability to create and attract top talent. So, we set off to do that, creating Oman's first private venture capital platform. In two years, we have invested in several local and international technology start-ups and partnered with organizations such as Petroleum Development Oman (PDO) and OQ to support the development of disruptive technologies.

MAZIN AL NAAMANI IDO Investments was established in 2016 to invest in technology ventures globally and develop the ecosystem in Oman. The State General Reserve Fund had access to the VC landscape, but sovereign wealth funds like them tend to focus on bigger ticket sizes, private equity, and public markets. As such, they decided to let IDO have that VC focus. We seek to help Omani start-ups with the potential to expand internationally, as well as international start-ups that fit some of the solutions and opportunities in Oman. We connect with large corporates and SOEs to understand the gaps and challenges and identify where there is an opportunity to develop a scalable business for new geographies and clients. While each deal entails its own exit strategy, we seek to maintain a 10-year horizon in our philosophy to be sustainable with a form of wealth creation for future generations.

Can you tell us about the optimal relationship between a larger private-sector player and a VC firm?
AA Our partnership with PDO is a prime example of how VCs, start-ups, and corporates are now part of a single innovation supply chain. The partnership started in early 2018 to develop PDO's internal capabilities to commercialize, partner, and invest in new technologies. One of the earliest products of that partnership was Spark Labs Energy, the region's first energy-focused start-up accelerator program. In its second cohort, we worked with 13 local and global technology start-ups disrupting the energy and logistics sectors. The program supports top technology start-ups from around the world with investment, expert advice, and real-world operations of our corporate partners.

How would you define IDO Investment's partnership strategy with the two VC firms in Southeast Asia and the US?
MAN We looked at markets that have interesting trends and are hard to access remotely. We identified Southeast Asia as one of those markets, where digital penetration is extremely high. Similarly, California has been competitive when it comes to VC. Getting access to the top deals in Silicon Valley is not easy, especially when you are sitting in this part of the globe; therefore, we invested in an emerging manager who shares the same philosophy. There are many three-digit partnerships on the table, and we are analyzing which ones make more sense either in terms of geography or sector.

What is your assessment of the current VC ecosystem in Oman?
AA In the last three to four years, we have developed a comprehensive ecosystem. Over 80% of the fundamental building blocks of the ecosystem—such as incubation programs, venture funds, hackathons, and angel networks—are already in place. For example, in 2015 there were no venture capital firms in Oman. Today, our four investments collectively generate an annual revenue of USD30 million and are now growing internationally.

What trends are impacting the global VC ecosystem, and how are they translated into Oman?
MAN Capital is abundant and a lot of it is being deployed at a later stage, even by private equity firms and large corporates. There is a lot of competition in that space, and now founders and entrepreneurs are being selective as to who they choose as investors. This increased competition translates, at times, to an unjustifiable increase in valuations, especially in the tech field. Another trend is a movement toward strategic investments, since many start-ups are trying to get corporate or strategic participation on their table by promoting ideas with a social impact.