Good Funding: Q&A With Faith Capital’s Co-Founder Abdulaziz B. Al Loughani

Abdulaziz B. Al Loughani is co-founder and managing partner of Faith Capital, a Kuwait-based regional VC fund; and CEO of Floward, an online flower and gift retailer. He was previously vice chairman of Kuwait’s National Fund for SME Development and a co-founder of Talabat, the Middle East’s largest online food-ordering platform. He talks about opportunities and the growth of entrepreneurship in the region.

Global Finance: How has the startup ecosystem here evolved in the last decade?

Abdulaziz B. Al Loughani: I think the most important milestone has been awareness. It’s a complete cultural-mindset shift. In a country where 90% of our workforce is state employed, the natural thing for any graduate was to enroll in the public sector; but today, a lot of people think of creating their own future. Entrepreneurship is a topic that has been very well promoted across the region, including in Kuwait.

GF: Which sectors offer the biggest growth opportunities for startups?

Al Loughani: In the Arab world, you have a population of around 400 million, including 200-250 million internet users. Our regional economy is around $3 trillion, and the online share of that is less than 1%. Out of those 1%, the vast majority is travel—hotels and air tickets. Then you have all the rest. It’s a desert! Wherever you look, all the big offline industries that are established or fragmented are all real opportunities, whether in flowers, eyewear, groceries, ride sharing, car washes or even house cleaning. These are all very low-hanging fruits. We think new leaders will emerge in the next four or five years and take over these industries. Basically my feeling is that the last 15 years were about getting people online, and the next 10 years will be about getting them to pay online.

GF: What are Kuwait’s key strengths and weaknesses?

Al Loughani: I think that for online consumer businesses, Kuwait is a very good market to experiment with. First, we have very high average revenue per user. A lot of locals are state employed, which means they don’t have much to do and are well paid. As a result, consumer spending is very high and saving is low.

The country also has great infrastructure, with cable, internet and telecom operators that offer affordable data plans with very high performance and speed. Kuwaitis are tech-savvy consumers and try to always be on top of internet trends. Finally, the market is small in size. Geographically, it’s easy to maneuver. All these strengths really put Kuwait on a priority list for most Arab founders and others who wish to enter the market.

As to the weaknesses, the talent pool when it comes to technology is quite challenging. It’s a global epidemic of course, but in Kuwait there are lots of skill sets we lack. On the company side, things also tend to move quite slowly, whether it’s within the private sector or on the government-procurement side.

GF: Is access to funding a challenge for entrepreneurs?

Al Loughani: No, I honestly never felt that. I think good companies, good founders, always find very good funding. In a region where there is an abundance of cash, it would be hard not to find. Even if you are an average, mediocre guy looking to raise capital, you will not face a problem. For investors it’s actually the opposite! Finding interesting ideas and entrepreneurs is more challenging than finding money.

There is not so much venture capital though. If you look at the region overall, what really moves the needle is sovereign funds and governments. In any country where the government has taken a step forward in establishing a fund-of-funds structure, or directly investing, you see that the momentum and activity of startups has increased significantly. In Kuwait, there is plenty of developmental money from the government, but there is no real commercial venture capital being deployed; and maybe that’s a weakness.