How Middle East Venture Partners utilises PitchBook to conduct due diligence on investment targets

 

Founded in 2010, Middle East Venture Partners (MEVP) is a Dubai-based venture capital firm with additional offices in Beirut, Bahrain, Abu Dhabi and Riyadh and more than $260 million in assets under management. One of the largest and most established VC firms in the region, MEVP invests in the early and growth stages of promising tech startups with a focus on Gulf Cooperation Council (GCC) and Levant countries. In 2018, the firm launched its MEVF III fund with a target size of $140 million.

“Venture capital and the startup culture are young here, especially compared to the US and Europe,” Ibrahim Yamout, MEVP senior analyst, says. “But now there’s a lot of excitement and money being invested, especially into Saudi Arabia and the United Arab Emirates—the region’s biggest markets.” 

To help MEVP conduct due diligence on its investment targets, the firm leverages PitchBook’s comprehensive data on three million companies and creates valuations of both its investment targets and portfolio companies.

“PitchBook is one of the more efficient ways for an investor to find accurate information on the market, company performances and valuation multiples. It is our main reference for these data points.”

–Ibrahim Yamout

Conducting due diligence on investment targets

With an average investment size of $2-5 million, MEVP targets tech companies that are revenue-generating, established in their markets and looking to expand. The firm utilises PitchBook to conduct due diligence on potential investment targets—startups in the Middle East and North Africa that are Seeking Series B funding and operating in one of six focus areas. In March 2020, MEVP co-led an $18 million Series B funding round of Nana Direct, Saudi Arabia’s leading online grocery platform. Part of a $5.75 million Series A round, the firm also invested $2 million in Bykea Technologies, an on-demand transport, logistics and payments startup in Pakistan.

Yamout and his colleagues harness the power of PitchBook to analyse company information, including robust revenue figures, cap tables and financing histories—vital but often difficult-to-access data used across the industry to evaluate potential investments. “PitchBook is the best way to understand the market, what these companies are doing and what they’re looking for—especially in terms of the capital they’re raising and the investors they’re seeking,” he says.

Using PitchBook, the firm also surfaces similar startups to gain insight on a company’s positioning among competitors and assesses what types of investors a company has raised capital from in the past. “If we look similar to them, we know we’re on the right track,” Yamout says.

With this insight, MEVP can determine which opportunities to pursue and who to work with based on the big picture—with confidence.

Determining the valuation of investment targets and portfolio companies

Yamout says that MEVP’s investment targets are usually smaller companies with limited cashflows and lower EBITDAs—figures widely used to determine a company’s value. To better understand the market and multiples across similar companies MEVP is evaluating, Yamout relies on comparable transactions found in PitchBook for these smaller entities.

Taking advantage of PitchBook’s valuation workflow capabilities—including easy-to-use screening and search tools and accessible financial metrics—MEVP can create custom valuations for the early and growth stage companies it invests in.

Actionable data including deal and transaction history, investment data and comparables are especially useful. To determine valuations, MEVP also relies on PitchBook to research its investment targets’ competitors and gather intelligence on similar startups. All up, this approach gives the firm a clear valuation picture to fuel decision-making. Beyond sizing up potential investments, MEVP also uses PitchBook’s public and private company data to revisit its valuations of existing portfolio companies on an annual basis.

“This is one of the main reasons we use PitchBook over other platforms—it is the basis of all our valuation analyses,” Yamout says.

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