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Tech investor Shorooq Partners has launched its second USD 100 mn venture debt fund, Nahda Fund II, Shorooq Partners Founding Partner Mahmoud Adi told Asharq Business (watch, runtime, 6:31). The firm launched the second venture debt fund as a follow-up to Nahda Fund, which debuted in 2021, to address growing demand for financing for tech firms.
SOUNT SMART- What’s venture debt? Firms offering venture debt are effectively competing with banks. Why work with one, then? Venture debt providers have — by definition — higher risk appetite. They may charge more, but they’re also a lot more likely to understand and extend finance to a startup than many traditional lenders.
About Nahda II: With the first funding round for Nahda II already closed, the fund aims to deploy the USD 100 mn raised capital in early-stage, high-growth startups and enterprises in the Saudi and UAE markets. Nahda will focus on tech firms with top line profitability and fast growth, which demonstrate the ability to pay back the venture debt.
Shorooq Partners is currently in talks to invest in two fintech startups through the fund, Adi said, adding that fintech is best suited for venture debt, due to the nature of their business model — which ensures quarterly dividends between 12-15% for the fund’s investors — and opportunities for investors to acquire stakes in the companies through warrants.
Nahda I’s portfolio: Since its launch, the fund has invested in two startups in the region, Adi said. The fund participated in a funding round for Pure Harvest Smart Farms through a USD 50 mn green sukuk issuance. Nahda I also provided USD 50 mn in mezzanine finance to Saudi BNPL platform Tamara in November 2023. The Shorooq fund was joined at the time by Goldman Sachs, which arranged USD 200 mn in senior debt for Tamara.
About 45% of the venture debt has been repaid to the fund’s investors over 12 quarters since the fund’s launch. Investors have also received dividend payouts ranging between 12-14%. As a shareholder in some of the companies it funded, Nahda anticipates returns double the initially invested capital in the coming years.
