MANAMA, Bahrain – In the heyday of Bitcoin, the four co-founders of the Rain cryptocurrency exchange saw a tantalizing opportunity when the Central Bank of Bahrain issued regulations allowing certain digital assets to be used for payments and handled by commercial banks.

The move in 2019 toward normalizing crypto trading under a regulatory framework established the small island kingdom as an influential player in the notoriously unregulated industry and generated the interest of venture capital firms from the Gulf to Silicon Valley. Among the early funders of Rain was Bahrain’s Al Waha Fund of Funds, lending credibility when Kleiner Perkins, Paradigm and other top venture firms later decided to invest their own money.

In fact, the money from Al Waha was dispensed through a variety of Gulf venture capital firms such as Middle East Venture Partners, VentureSouq and 500 Startups, which helped Rain establish itself as a regional leader among cryptocurrency exchanges. Little public note was made that the money originated in Al Waha, an arm of the Bahraini government that is backed by the tiny island kingdom’s $15.4 billion sovereign wealth fund, Mumtalakat.

Al Waha, which has $100 million under management, prefers to stay behind the scenes, its director and fund manager, Areije Al Shakar told The Circuit. Similarly, Al Waha provided funding for Calo, which analyzes a user’s nutritional needs and delivers meals custom-cooked according to the data, through 500 Startups.

“There’s a huge opportunity that we’ve seen, and I think our success has shown that as a fund of funds, we’ve been able to back a number of Bahrain-based founders and their companies that springboard out of here and then work across the entire Gulf [region],” Al Shakar said in an interview on the sidelines of last week’s Connect2Innovate conference in the capital city of Manama. The event, organized by the Bahraini Ministry of Industry and Commerce and Israel’s Start-up Nation Central, brought together some 500 participants from the two countries, according to the organizers.

The conference took place at Bahrain’s 46-story Wyndham Grand hotel, which looks like a twisted drill bit piercing the skyline. In the hotel’s top-floor ballroom, the conference got underway with Bahrainis in native robes mingling with jacketed but tieless Israelis over glasses of juice – the Wyndham doesn’t serve alcohol – and spinach pastry hor d’oeuvres. Among those greeting the participants were Bahrain’s Minister of Industry and Commerce Abdulla bin Adel Fakhro, and its ambassador to Israel, Khaled Al Jalahma. The group also watched a video address from Israeli President Isaac Herzog and were greeted by Ambassador to Bahrain Eitan Na’eh and Avi Hasson, CEO of Start-Up Nation Central.

During the interview, Al Shakar said that because of Bahrain’s small size, it takes operating and raising funds across the six nations of the Gulf Cooperation Council and beyond for companies to reach a valuation of $1 billion. That’s the marker that separates the most attractive companies, which are adoringly referred to in the VC industry as “unicorns,” from smaller, struggling startups.

“What we’ve seen is that unicorn status really comes because you’re able to expand across the GCC,” said Al Shakar, a 42-year-old career banker who previously worked for BNP Parisbas, Lehman Brothers and Citibank. She earned degrees in finance from the John Molson School of Business in Montreal and in public policy and management from the School of Oriental and African Studies at the University of London.

Among other Mideast-focused funds in which Al Waha invests are BECO Capital, Shorooq Partners and BY Venture Partners. Since the Abraham Accords normalized ties between Bahrain and Israel in 2020, Al Waha has also invested in LionBird, a firm with offices in Israel and the U.S. that focuses on digital health startups.

“There’s a lot of knowledge transfer that happens,” Al Shakar said. “Whether it’s fintech, whether it’s healthcare technology, there’s a lot for us to learn from the Israeli ecosystem.”

One of her contacts in Israel is Aaron Applbaum, a partner in Mizmaa Ventures who had met Al Shakar earlier through the Kauffman Fellows program, an international network for venture capitalists, and attended the conference in Bahrain. “She is one of the more talented fund of funds managers I have ever met,” Applbaum told The Circuit.

Among a series of agreements and memorandums of understanding signed during the three-day conference was a partnership announced by Israeli startup BladeRanger and Bahrain energy company Alpha Solar. The two businesses said they will work together to sell BladeRanger’s robotic technology to clean and inspect solar panels across the region.

“I am proud to say that approximately three years after the signing of the Abraham Accords, collaborations, in all fields, are expanding, and we always strive to grow them even more,” Al Jalahma told the participants at the conference. “I am confident that the technological tools and products developed by the Israeli startup companies will bring great benefit to the Bahraini economy and vice versa.”

Na’eh told The Circuit that Israel is an increasingly attractive place for Bahraini ventures even though business executives have been cautious. “They’re coming to visit and they’re impressed with our technology. They want to find the next thing,” Na’eh said.