Complex Made Simple

Exclusive: Here’s one risk-embracing VC that doesn’t shy away from bold or boring

Nakeiya will take on and raise funds for the kind of investments that risk-averse venture capital shies away from

Nakeiya in Arabic means pure investments. We are not a venture capital fund. We are a venture capital investment company We believe social impact creates employment, creates return for investment and help local economies Companies offering ground breaking solutions could be sold later for $billions but the risk averse mentality here, in Europe, Africa, and most of Asia, except in China, won’t allow it to happen

Risk averse venture capital funds play it safe and usually miss out on opportunities that do not fall into the basket of ‘new tech’, or ‘attractive investments’.

Nakeiya Ventures Limited is a private investment firm with venture capital (VC) philosophies that seem to defy and turn uncertainty and risk into highly profitable businesses for shareholders and investors.

The trick is structured thinking built to identify, create and realise value.

And further to the idea behind the start-ups, Nakeiya is looking for certain types and trait of entrepreneurs to do business with.

The below is an exclusive with Yalman Khan, Founder and Non Executive Chairman of Nakeiya Ventures.

Yalman Khan

Who is Yalman and what is Nakeiya?

Yalman has spent over 22 years working in the Private Equity, Venture Capital, Management Consulting and the TMT (Technology, Media, and Telecom) sectors. He has worked for PricewaterhouseCoopers, Andersens, Oracle and Xerox before helping set up NBD Sana Capital and then Nakeiya Ventures.

Founded in 2009, Nakeiya Ventures' focus has been to invest in unique and compelling Japanese technologies and commercializing these globally. Their main focus remains in the Food, Energy & Water sectors. Agricel a Dubai based private company represents one of the most exciting investments in recent years.

Nakeiya, whose principals in aggregate are key investors in every transaction involved, starting companies such as Zawya and exiting them successfully, advises private clients and offices on venture capital and private equity transactions, mainly in emerging markets, leveraging connectivity across Asia, the Middle East, CIS and the Africa region.

“Nakeiya in Arabic means pure investments. We are not a venture capital fund. We are a venture capital investment company. After the global crash of Leiman brothers and others, it was difficult to raise new funds. So myself and my partner Kunal G. WadhwaniChief Executive Officer & Managing Partner, started new companies and grew them rapidly in 10 plus years and sold them,” Khan told AMEinfo.

Investments with an eye on social impact

The Nakeiya partnership brings personal experience in creating companies and Khan himself has been in venture capital investment for about 3 decades before creating Nakeiya.

“I have been involved in deals over $2.5bn with net raised equity about $1bn. So we have lot of experience,” he said.

“Intelligence is the ability to detect patterns. We did that. Unlike capital venture funds that invest in certain types of investment only, we were completely freedom focused. As Nakeiya, We looked at emerging markets and frontiers markets, and sought positive social impact.”

Nakeiya Ventures

Investments in Farms

He said the company’s 1st investment was to build clean ecological greenhouse farms in Japan, Singapore and China, then raised a few million dollars from a number of investors in Europe, Asia, the Middle East and India, Uzbekistan and others.

“We built farms there and the in Al Ain, UAE, got them producing, functioning, importing and exporting, and we created a lot of employment in the areas where it needed them,” explained Khan.  

“In terms of social impact, we created clean food to the mass market at affordable prices, pesticides-free, and when we sold that business in 2015, we generated 2.7x  returns for investors  and everyone was happy.”

Investments in pharma

Nakeiya also invested in healthcare pharma, recruited and set up a company in Dubai called Dayarn Pharma, a multi-national style organisation with the aim to deliver the highest quality standards of sales, marketing and regulatory activities needed to maximise brands in the pharmaceutical and healthcare markets across the MENA Region.

“We sold it at a 4x return in 2016 to an institutional European buyer. They now have over 117 employees. Most VCs won’t go for that kind of deal because it’s not a brand new tech, but we believe social impact creates employment, creates return for investment and help local economies,” said Khan.

“Traditional VCs would describe this as ‘unfashionable, not exciting’. We did 17 very profitable boutique hotels in SE Asia, tech and media deals as well. We have small and long term projects which create a lot of capital growth and getting the interest of investors like Kuwait Investment Authority and the largest families in Saudi who each would invest around $150 million each in our projects. We raise that money, deploy it and give them multiple returns.”

Typical VC approach is wait and see

According to Khan, VC investors tend to be ex-bankers.

“They are told to avoid risk. You cannot deprogram that mindset. I meet operationally risk- embracing VC people and in emerging market, you need that, to fix problems,” said Khan.

Khan explained that typical VC activity, while it does raise funds, it also adds unnecessary costs.

“I worked in Silicon Valley in 1990’s and I have done the fund side. We set up a private equity fund and raised $400 million in the MENA and south Asia. But these carry a lot of cost to investors. The minute you have a fund, you have project compliance, managing fees, and other costs that inflate investments and burden stakeholders.”

Alternative Financing

In Khan’s opinion, all SMEs face a credit gap to the tune of $2.6 trillion and he believes that alternative investment can plug it.  

Globally, in most developed countries, the SME sector accounts for between 50-80% of employment and GDP. The exception in G12 countries is Russia (30%) and the US (40%), according to Khan.

“Dubai is 42% but it is doing something called Dubai SME to push the needle up, making it easier for locals and foreigners to do business,” said Khan.

Khan said that in the last 10 years, the 2008-2018-MENA region raised or deployed $12bn in VC, $14 bn in S.Asia, $12 bn Latin America, and the emerging market as a whole $46.6 bn over 10 years, China not included.

“The US in one year did $58 billion and over 10 years, the US raised $600bn in VC. My point is that transformational deals get Chinese and Americans quickly interested, but not from the ME region. Companies offering ground breaking solutions could be sold later for $billions but the risk averse mentality here, in Europe, Africa, and most of Asia, except in China, won’t allow it to happen,” explains Khan.

“We are raising millions for a medical breakthrough that could eliminate migrains, seizures and other traumatizing head ailments using one headset. We are the type of VC that will do that.”  

SMEs predisposed for success

Khan said one has to find entrepreneurs who have positive energy, and avoid negativity at all costs. When spotting winners, we look at 3 attributes:

1-Do they have the attitude?

2-Do they have the aptitude?

3- Do they have the ambition?

Khan adds that every entrepreneur needs the 4Ms: 

1-Management

2-Money

3-Market

4-Magic

…or they will liikely fail.