Khaled Talhouni, Managing Partner of Nuwa Capital, says the recent proliferation of tech IPOs in the Gulf demonstrates that a “window is opening” for investors on stock exchanges in the UAE, Saudi Arabia and some of their neighbors.

Talhouni, 39, has a broad view of developments in regional finance, having opened offices in both Dubai and Riyadh for the venture capital firm, which manages $100 million in assets.

After attending college at Duke University in the U.S., Talhouni returned to the UAE for a job at Dubai International Capital, where he worked on the region’s first seed capital fund. He directed investments and strategy at twofour54 in Abu Dhabi and went on to become a Managing Partner at Wamda Capital. He started Nuwa in 2020.

Nuwa’s backers include Saudi Arabia’s Al Faisaliah Group, Abu Dhabi’s Mubadala Investment Co., Jada Fund of Funds and the Dubai Future District Fund. Among its 30 portfolio companies are Calo, a Bahrain-based meal planning start-up; Zest Equity, an online platform for managing venture capital investments; and Raqamyah, a Saudi crowdfunding platform.

The interview has been edited for length and clarity.

What are the major trends you see these days among investors in Middle East businesses?

I think with what’s going on in Saudi Arabia with a lot of very successful IPOs having happened in the past 24 months – particularly but not necessarily in tech, but across the board – we are seeing huge interest in participating in late-stage tech or late-stage, pre-IPO types of deals. That is because investors are seeing how there is a quick return on the back of that.

Also in the UAE, there is the Talabat deal coming up soon as well. So IPOs seem to be the hottest topic in town. I would say that is kind of moving in a big way.

One thing you see a lot more are direct deals, a lot more, so you do see people much more interested in going direct, as opposed to funds. You do see an interest in profitability. I would say that’s kind of increasingly of interest.

As we head into 2025, do you see further new companies being founded, or do you see more acquisitions than founding opportunities?

I think a couple of things are going to happen. First, I think funding is going to pick up because a lot of people are coming into some new dry powders. Some new funds are closing so things are moving. Then those who are sitting on the side have some deployment pressure that they need to deploy.

Secondly, I think a lot of early-stage companies, as funding has dried up relative to what it was in 2020-2021, [are going to be acquired]. We are going to see a lot of mid-tier companies and startups start consolidating into larger ones. So there is a lot of consolidation. More “aqua” (acquisition) hires. So bigger tech companies buying up talent or buying companies, or aqua hiring, or merging with companies that are smaller than them, that basically augment their offering, or add to their existing offering. 

 In terms of founding companies,  that trend is secular. So that trend is continuing no matter what. So you see more and more every year, more companies being founded, regardless of what’s going on in the capital market.

Do we foresee a market correction where only the best companies will survive and move on to series A and beyond? 

That’s the natural state of affairs. It should be like that. The unusual period was those couple of years in 2020, 2021, 2022, when everything was getting funded all the time. That’s unusual, but I think the natural [way that things] occur is actually, the majority of companies don’t survive going from Series A to Series B.

We are seeing movement within the IPO space while, at the same time, smaller businesses are struggling. What’s going on in the market? 

There is a slowdown, a little bit of a consumer slowdown, particularly in Saudi a little bit. That’s definitely kind of happening in some small way. I think there’s also some liquidity constraints. So that’s definitely happening overall. I think it is very sector-specific. 

However, consumer spend overall is being stretched. Which is why, on the other hand, companies, in BNPL (Buy-now-pay-later) and consumer credit seem to be doing so well. So they are really growing very, very aggressively. It is a little bit of a tale of specificities depending on which segment you’re in, you’re having a very different reality.

How has the wave of IPOs and exits shaped the current venture capital environment within the region? What do you think is going to happen in the next coming years?

So on the IPO front, it is extremely positive. I don’t know if you remember this, this whole route was not open. You know, as early as three, four years ago, there were no tech IPOs in the region, and there are very few IPOs overall. Right? Like, it was not a very vibrant capital market generally. So I think the fact that this window is opening, and there is demand, and there’s regulatory reform, and there’s opening up, especially on the Tadawul exchange in Saudi but even on the DFM in Dubai and ADX in Abu Dhabi, I think is extremely positive. 

So that’s kind of spurring all kinds of more activity in the space to create validation that you can exit your startup through an IPO, which is typically, if you look at in other developed markets, it’s not the main way companies exit, but it’s not the majority of how startups exit, but it’s where the largest exit has happened. That had not really been open to our region before. And now this opening up really kind of creates some ability, some exit paths for startups at the larger base.

How does Nuwa Capital see the whole startup ecosystem moving forward? What role do you play in this within the region? 

We see that the sovereign system is maturing. We do still think that there is still a huge room for more and more companies, for more and more companies to get funded, and more capital to throw on the startup ecosystem. I think there are probably too many individual VCs. So I think it’s a bit fragmented, and I can see that the market is also consolidating and or kind of getting a bit more concentrated, with the larger firms and the more established firms getting disproportionate amounts of the capital in the long run.

As for us, we are very keen on continuing on our mission, which is to kind of really invest in early-stage companies, impact the very best founders, and grow our business on the back of that.  We have some companies that are beginning to mature within our portfolio. So we are hoping to position for exit in the coming two to three years. But then we also have a very young portfolio as well, so we will see how that kind of evolves over the coming years.

A jump in dealmaking across the Middle East and North Africa has generated an estimated $1 billion in investment banking fees so far this year – a 27% boost over the first nine months of 2023, with HSBC leading the pack.

London-based HSBC earned $80.4 million in fees during the first three quarters of 2024, or 7.8% of the total investment banking pool, Zawya reports, citing LSEG Deals Intelligence.

Coming second in the banking field’s league tables was Standard Chartered with $56.5 million in fees, followed by First Abu Dhabi Bank with $56 million. The highest amount of investment banking fees were generated from Saudi Arabia ($470.7 million), followed by the UAE ($395.9 million), Qatar ($45 million), Kuwait ($41.7 million) and Egypt ($25.1 million).

The largest deal in the MENA region during the first nine months of 2024 was ADNOC’s $14.8 billion takeover offer for German chemicals company Covestro, according to the LSEG data. The largest during the third quarter was UAE clean energy firm Masdar’s offer to buy Spain’s Saeta Yield from Brookfield Renewable for $1.4 billion.

Having visited U.S. President Joe Biden earlier in the month at the White House, UAE President Sheikh Mohamed bin Zayed is continuing his international travels with a stop in Moscow.

Russian President Vladimir Putin hosted the Emirati leader for dinner on Sunday, with an official meeting set for today that will focus both on commercial relations, as well as the conflicts with Ukraine and in the Middle East, according to a Kremlin statement.

Trade between the two countries has tripled to $7 billion over the last three years, even as Russia has been subject to sanctions applied by the U.S., the U.K. and the European Union.

Putin personally thanked the UAE President for mediating a prisoner exchange between Russia and Ukraine, the statement said.

Following the Moscow visit, Sheikh Mohammed will travel on Tuesday to the Russian city of Kazan for a summit of the BRICS group of nations, which it joined in January.

UAE retail giant LuLu plans to sell a 25% stake of the company in an IPO starting Oct. 28, with its shares hitting the ADX trading floor on Nov. 14.

The business, which owns hypermarkets, supermarkets and malls across the MENA region, as well as in India and Malaysia, is looking to raise as much as $1.8 billion through the share sale, Zawya reports.

The Abu Dhabi-based company founded by Yussuf Ali counts ADQ as an investor, having sold the sovereign wealth fund a 20% stake in 2020.

Emirates NBD Capital, HSBC Holdings, Abu Dhabi Commercial Bank and Citigroup are joint bookrunners on the IPO, with Moelis & Co. retained as financial advisor.

Hassan Alnaqbi, the CEO of Abu Dhabi-based Khazna, is trying to solve the riddle of satisfying the enormous energy appetite for artificial intelligence development without sacrificing the company’s commitment to phasing out fossil fuels.

Alnaqbi, who heads the UAE’s largest operator of computer data centers – a subsidiary of the sovereign wealth-backed AI firm G42 – announced at the GITEX Global conference on Tuesday that Khazna will soon open its most sophisticated facility yet.

The new 100-megawatt data center, located east of Dubai in the emirate of Ajman, will showcase Khazna’s latest technological advances in supporting AI development and serve as a model for future operations in the UAE and abroad. A central selling point in  Khazna’s expansion plans will be its ability to align the data center’s power needs with climate goals.

“Clients are now demanding a sustainability roadmap from any organization they work with,” Alnaqbi said in an interview with The Circuit. “This has become a criterion for partnering with any player in the market.”

Alnaqbi, who has led Khazna for 10 years after its 2012 founding by the Mubadala sovereign wealth fund, has been in the inner circle this year as G42 has signed deals with Microsoft, Nvidia and OpenAI, all of which are dependent on his data centers.

The interview has been edited for length and clarity.

What trends do you see shaping the data center industry in the Middle East and its importance to the development of AI technologies?

The trend is AI, a buzzword that has been in the market for some time. However, sustainability is becoming increasingly important. Energy also has become a key pillar for the growth of this business, especially with the demand AI brings in terms of energy. If you look at where global demand for AI is heading in the next 10 years, it’s fascinating. We are talking about at least 10 to 13x the demand of what we have today in terms of gigawatt so that all brings challenges to technology and to using energy.

What are the biggest challenges facing the data center industry in the Middle East at the moment?

Today, the data center, and the system you put to build it, needs more energy.  We have seen the UAE has spearheaded this by announcing the net zero target by 2050, so for us, it’s not really enough as an industry. We need to help the government with their target. As an industry, energy becomes really important, especially with AI coming in. So energy is, by far, the biggest challenge at the global scale.

So how do you handle the energy challenge?

To handle it, you need to partner with the global players and you need to partner with the government authority. As Khazna, we are spearheading investment in sustainable energy. We have undertaken some investment alongside players like Emerge, where they help us build sustainable energy so we can get clean power into the facility. We have about 7.5 megawatt of solar plants that we have invested in alongside global players like Masdar and Emerge to bring more clean power into the facility. There are a lot of investments happening at the government level when it comes to solar plants and nuclear, so we are partnering with some in the government to help accessing these resources as well,

What strategies are Khazna implementing to achieve carbon reduction targets given AI’s massive energy needs?

If you look at the overall life cycle of data center design, building and operation, we have been trying to tackle this issue from the get-go. It started with where we could find the land and how we find the power sources that are within close proximity to the land. So we worked with the government to understand what is the portfolio of sources of power that they have around that particular land. Once we get that, then we start with the design. Within the design, we make sure that all the materials we select are sustainable materials. We select the system, the cooling and diesel generators, etc. that are actually more sustainable. We started with water cooling systems and then we moved into air cooling systems in the past two years, and now we are more into adiabatic cooling systems where we use water more efficiently.

We have a zero-waste policy, meaning everything generated as waste is taken by certified suppliers, not to landfills, but to factories that convert it into energy. We collaborate with partners and the industry to support this strategy and aim for more sustainable projects in the future. 

Are there opportunities in all of this?

Yes, definitely. I mean the opportunities are there. For example, we are now working on a project in Kenya. We have access through our partnership to do thermal plants within Kenya and that is a more sustainable source of power than in any market. So we went there to actually try to use this opportunity to attract foreign investments into a market such as Kenya. 

Can you tell me about Khazna’s origin story and spinout from G42 and Etisalat? 

Khazna was established in 2012,  it was majority-owned by Mubadala Investment Co. During 2012, they began to see that there was no key player in the market that could provide critical infrastructure in the form of a data center.  I joined in 2014 before the start of the operation. So I was lucky to actually lead the company to where it is today. The intention was the market was trying to evolve into becoming more of a digital market, with all the initiatives that were made by the government in terms of the smart government and the blockchain and later on, the adoption of cloud technology. All of that made the business make even more sense. Mubadala heavily invested in this to try to create an ecosystem within the country. 

We started with two data centers – one in Abu Dhabi and one in Dubai. In these two data centers we managed to attract the local players and the likes of telcos and the likes of large enterprises and some government and semi-government.  We started evolving in 2017 when we began changing our design and trying to adapt our design to become more cloud-ready. Then itself we began landing some of the hyperscalers who invested in the technology to actually offer cloud computing as a service. It was the growth trajectory for us. 

2020 in particular is when G42 acquired Khazna from Mubadala, and then we became 100% owned by G42 at that time. G42 was also in the process of building their own data center, so that integration allowed us to take ownership of all their future data center requirements and put it under Khazna’s umbrella because we are the data center experts that came into the group. 

In 2021, G42 and (UAE telecom company) Etisalat decided that it is also time for Etisalat to integrate their data center business under one umbrella. That was to create a powerhouse within the country that not only provides state of art facilities but also exports this technology in different jurisdictions. So that’s how these two businesses merged their data center businesses under Khazna. Today G42 owns 60% of Khazna and Etisalat owns the remaining 40%.

Given that you are owned by G42, what’s your relationship with Microsoft, Open AI, Nvidia and other top international firms?

We work with all the global players. What’s happening with these global partnerships is that companies have access to international expertise and talents, in addition to advanced technology. There is a lot of knowledge sharing, and they have access to standards and practices that come within these partnerships, and that helps companies improve efficiency, but also helps improve innovation. So that’s one angle to it, but also having these global partnerships is beneficial for the country in general. It attracts foreign investment in the country and therefore boosts the local economy. With that, there will be a lot of job creation. There will be a lot of talent attraction into the market and that benefits everyone including Khazna of course. 

What sort of future opportunities does working with such tech giants help Khazna? 

Aligning with these big tech companies and aligning our international practices and procedures has helped us access new markets. Of course, when these companies come and invest in the region, they need partners to help them unlock some of the local markets within the region. Khazna is actually at the forefront of that, and we are aligning our international practices procedures and standards to meet the demand and help basically reducing their risk for the cross-border operation.

In terms of market share, at least within the UAE as a market, we have the majority share. On a regional level, that is the Middle East, Africa, Turkey and India, we are probably the biggest data center player in the entire market in terms of capacity. I can confidently say we are one of the largest infrastructure players in the entire market. That is because we started early in this journey. 

What is Khazna’s position in the Middle East data center market?

In terms of market share, at least within the UAE as a market, we have the majority share. On a regional level, that is the Middle East, Africa, Turkey and India, we are probably the biggest data center player in the entire market in terms of capacity. I can confidently say we are one of the largest infrastructure players in the entire market. That is because we started early in this journey. 

Robots ambled through the vast exhibition halls of the Dubai World Trade Centre today, capturing the attention of thousands of participants during Day 2 of the GITEX Global 2024 conference, The Circuit’s Omnia Al Desoukie reports.

Racing through the international crowd were late arrivals for panel discussions featuring some of the top luminaries in AI research, many delayed by the bumper-to-bumper traffic that annually accompanies the Middle East’s biggest tech conference.

Those who squeezed into today’s showcase session heard Peng Xiao, CEO of the UAE’s G42 artificial intelligence company, back from a trip to the U.S. after recently completing deals with Nvidia, Microsoft and Open AI.

“What I can tell you right now is that the relationship bilaterally, between the U.S. and the UAE cannot be stronger,” Xiao said. “Everything from defense to technology collaboration – we reached a new height.”

Calling attention to a new Climate Technology Center that he announced earlier with Nvidia CEO Jensen Huang, the G42 chief said the two companies are using advanced hardware and software capabilities “to unlock the mystery of weather forecasting and the prevention and handling of extreme weather,” adding, “We are right now working with the best and brightest.”

Among those visiting the conference during its opening day on Monday was Sheikh Mohammed bin Rashid, Ruler of Dubai and the UAE’s vice President Prime Minister, who pointed to a 40% increase in international participation at the event as an indication of Dubai’s global importance in AI. Among the pavilions at which he stopped were those of G42, Microsoft, IBM, Oracle, Etisalat, Huawei and H3C.

“We have a clear vision to advance the UAE’s leadership in the global digital and technology landscape, making it the world’s most future-ready nation,” Sheikh Mohammed said.

GITEX Global 2024 kicked off today with tens of thousands of investors, startup founders and geeks from around the world elbowing their way through the world’s biggest tech conference, Omnia Al Desoukie reports from the floor of the Dubai World Trade Centre.

While the event pulses all week with dealmaking, product launches and pounding hip-hop music inside the colossal exhibition halls, it has also snagged Dubai International Airport and virtually all major traffic arteries leading to the venue, with top hotels fully booked months ago. Some 1,200 investors and 1,800 startups from more than 100 countries are participating in GITEX, organizers said.

Opening the proceedings on the main stage this morning, UAE Minister of Economy Abdullah Bin Touq Al Marri presented the small Gulf state’s ambitions to become a superpower in the development of AI technology and a magnet for the world’s top tech talent.

“The UAE wants to shape the global dialogue on AI, creating policies that promote responsible usage while pushing the boundaries of innovation,” Al Marri said. “The idea is to bring policymakers and tech experts together to create an environment where innovation thrives.”

Among other government and corporate leaders scheduled to appear were Omar Al Olama, Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications; Peng Xiao, Group CEO of G42; Michael Spranger, President SONY AI; Isabell Gradert, Airbus Vice President of Central Research & Technology; Dr. Najwa Aaraj, CEO of the Technology Innovation Institute; and Dr. Mohamed Al-Kuwaiti, Head of the UAE Cybersecurity Council.

At the Expand North Star conference on Sunday, a GITEX spinoff focused on startups, Al Olama told the crowd of thousands at Dubai Harbour that putting money into the country’s early-stage companies will pay off for investors.

“We believe the future of the digital economy will be created in Dubai – in the UAE,” Al Olama said. “The UAE stands for building a business environment that is truly global.”

Lunate, the upstart $105 billion asset manager fueled by Abu Dhabi sovereign wealth, is mulling an investment in the fast-growing private credit market.

The firm, launched in January by Sheikh Tahnoon bin Zayed’s International Holding Co. may buy a minority stake in New York-based HPS Investment Partners, which itself is considering an IPO or sale, Bloomberg reports.

Lunate is evaluating an investment of $1 billion or more in HPS, according to the news agency, which says the company is also entertaining interest from BlackRock and private equity firm CVC Capital Partners.

The origins of Lunate trace back to two of Abu Dhabi’s most active holding companies, IHC and sovereign wealth fund ADQ.

It was in March 2023 that IHC announced plans to establish a multi-asset class investment manager, which later became Lunate, and bring on U.S. private equity firm General Atlantic as a strategic partner and investor.