Annex Investments began at 16 with a car leasing venture, overcoming challenges through strategic decisions and family support. Evolving into a central holding company, Annex oversees diverse ventures and investments, emphasizing community impact. Investments like Dukkantek and Alma Health showcase a sector-agnostic, collaborative approach. The MENA region’s startup ecosystem, especially in Saudi Arabia and Egypt, holds promising growth. Family offices post-Covid are cautiously embracing tech. Rising energy prices and geopolitical tensions are boosting startup investment. In essence, Annex Investments reflects a dynamic journey contributing to the evolving landscape of the MENA startup ecosystem.

Origin and Early Challenges of Annex Investments

We started the interview by asking, “How did the idea for Annex Investments originate, and what challenges did you face in the initial stages of starting the business?”

Ahmed replied, “The idea for Annex Investments originated when I was 16 years old and felt a powerful urge to be independent and create my own source of income. I graduated from school in Abu Dhabi and without informing my father; I decided to open a car leasing entity that leased economical cars to corporations.

Unfortunately, I quickly exhausted my savings due to my lack of experience in running a business. I was applying to the American University of Sharjah to study finance at the time and realized that I needed my father’s assistance. To gain his support, it became necessary for me to conduct a feasibility study and create cash flow statements, something I had no knowledge of as a fresh graduate. Fortunately, I had the opportunity to learn these skills from one of my father’s trusted advisors.

In 2011, my father made the decision to back my venture, but stressed the importance of self-reliance. I agreed and chose to continue with my business, secure in the knowledge that I could handle my own affairs. He providentially gave me some capital to start with and used his connections at several banks to help lower the interest rates for me.

My persistence paid off when I eventually amassed a fleet of 300 economical cars leased to major government and semi government companies under the banner “Trust Middle East”. From these humble beginnings, Annex Investments evolved into what it is today – A second generation family office Founder that owns a number of companies I founded and co-founded, and also an active investor in startups in the MENA region.”

Strategic Pivot

The Worlds Times: Can you elaborate on the decision to sell a majority stake in the business to overcome cash flow constraints and how it ultimately led to the expansion of the company?

Ahmed replied, “After initial stabilization, I felt the need to further expand the business but was constrained by cash flow. As you know this type of Business requires a lot of cash to be able to make good profit out of it. my only option was to sell a majority stake of the business, which I did, releasing 60%. Despite my apprehension due to being in the American University of sharjah at the time for a finance degree, I sold the majority stake knowing it would lead to greater income in the long run, retaining 40% ownership.

With this sale, the business thrived as we expanded our fleet to 800 economy cars and even branched out into garage services. Eventually, I exited and sold my remaining shares to the same shareholders. This was around the time I graduated from the American University of Sharjah.

Following graduation, I took up a role with Tawazun, a semi-government-owned company that invests and manufacturers in defense, my main responsibility was to introduce and implement Key Performance Indicators (KPIs), to all departments and subsidiaries under tawazun.”

Fitness Ventures

The Worlds Times: What motivated you to launch Level Up Fitness, and how did it contribute to the formation of Annex Investments as a central holding company?

Ahmed replied, “During my time in the government job, I always had a curiosity to explore new business opportunities and expand my knowledge. It was during this period that I decided to test the waters and embark on my entrepreneurial journey. In 2017, I launched Level up Fitness, offering a range of wellness services like yoga and Pilates to esteemed five-star hotels. The positive response and growth from this venture motivated me to explore further opportunities.

Building upon the success of Level up Fitness, I expanded my business portfolio to include several other ventures, both in traditional and tech sectors. Recognizing the potential advantages of consolidating these businesses, I saw an opportunity to streamline costs and minimize risks. This prompted the formation of Annex Investments, serving as a central holding company or investment company to oversee and support these ventures.

As my network grew, I began representing multinational companies and facilitating their entry into the UAE market. This allowed me to leverage my connections and sponsorship capabilities to support their business endeavors.

Additionally, I have had the privilege of being a founding board member of influential organizations within the region. In particular, the Emirates Angel Investor Association, the first angel network association in the MENA region to receive backing from the government, has been a significant platform for supporting high-net-worth individuals, the next generation of investors, and facilitating angel investments. Moreover, I hold a founding board member position at the Emirates Family Offices Association, the first licensed family office in the nation with the prestigious “Emirates” name, authorized by ADGM. These engagements have allowed me to contribute to the development of the startup ecosystem and collaborate with other experts in the field. Additionally, my membership in the Family Business Council Gulf has provided me with valuable insights and connections in the family business sector.”

Investment Portfolio & Operational Model

The Worlds Times: Could you share more details about your investments in Dukkantek, Alma Health, and other ventures, and how Annex Investments operates as both a family office and a venture capital firm?

Ahmed replied, “Dukkantek was my inaugural investment approximately 18 months ago. This innovative company focuses on providing Point of Sale (PoS) machines to small standalone stores known as bakkalas, which are spread throughout the UAE. These stores had traditionally operated on a cash-only basis due to high interest rates associated with card payment devices. However, with the emergence of Covid-19, these stores recognized the revenue potential in adopting card payment technologies, inspired by the success of shopping apps. Dukkantek stepped in to install PoS machines in thousands small stores, helping them transition to card payments successfully. This transformative solution has gained significant traction and Dukkantek is expanding its operations within the region. It has been regarded as an exceptional opportunity within the market.

Following my initial success, I directed my investment towards Alma Health, a digital healthcare platform. Alma Health seeks to leverage technology to revolutionize the healthcare industry, offering digital solutions to enhance access and convenience for patients. This investment aligns with the growing demand for digital healthcare services, especially in light of the recent global health crisis. By investing in Alma Health, I aim to support the development and improvement of healthcare services in the MENA region.

Following Dukkantek and Alma Health we invested in wellx, emushrif, holo, mascotte, lumi AI and barrakah

Annex Investments operates as a second-generation family office, overseeing various business ventures and investments. However, it goes beyond the typical family office model by also acting as a venture capital firm and venture builder. This multifaceted approach enables Annex Investments to not only invest in promising companies but also actively contribute to their growth and development. By combining the strengths of a family office, venture capital, and venture building, Annex Investments seeks to create a dynamic and supportive ecosystem for startups and early-stage businesses in the MENA region.”

Approach to Startup Evaluation

The Worlds Times: What is Annex Investments’ approach to evaluating and selecting startups for investment, and how do you ensure a diverse portfolio across various sectors?

Ahmed replied, “We maintain a sector-agnostic approach when evaluating startups for potential investment opportunities. Our focus is not limited to any particular industry but rather on identifying promising ventures across various sectors. We believe in the potential of early-stage startups and prefer to invest in them at minimum ticket sizes.

Our portfolio companies have demonstrated exceptional growth, consistently exceeding expectations. Many of them have achieved remarkable success in terms of their expansion and market presence. For instance, Alma Health, one of the startups in our portfolio, has experienced exponential growth, while Dukkantek has also shown impressive progress. Our other invested companies have similarly displayed strong growth rates, continuously flourishing within their respective industries.

To broaden our investment reach and enhance our network, we have established valuable partnerships such as Hub71 and engaged in direct co-investment with reputable organizations such as Plug and Play, GFC, and prominent regional venture capital firms. These collaborations leverage our extensive industry knowledge and connections within the startup ecosystem, allowing us to identify and support high-potential ventures.”

Risk Assessment at Annex Investments

The Worlds Times: As a venture capitalist, what criteria do you prioritize when considering potential investments, and how does Annex Investments assess risks and rewards?

Ahmed replied, “When it comes to selecting startups for investment, I have specific criteria that guide my decision-making process. One important aspect is whether the startup has a positive impact on the community. I prioritize startups that align with the values of giving back to society, just like Dukkantek and Alma have demonstrated.

It’s worth noting that I invest as a Venture Capitalist (VC) rather than an angel investor. With a team of 10 professionals working alongside me, we carefully assess potential investment opportunities. Before proceeding with any investment, we follow the practice of creating an Investment Committee (IC) memo to thoroughly evaluate the potential risks and rewards.”

Investment Philosophy

The Worlds Times: How does your approach to investing differ from the current trend of focusing on financial resilience over immediate profitability, and why do you prioritize a founder’s background and community impact?

Ahmed replied, “Venture capitalists are currently shifting their focus towards startups that prioritize financial resilience over immediate profitability. If a startup lacks the ability to reduce costs or lacks financial resilience, it poses a significant challenge. However, my approach differs slightly. While I remain unbiased across various sectors, my personal involvement as a founder makes it somewhat challenging for me to invest. I believe it is essential for startups to contribute to their communities. Additionally, I thoroughly investigate the founder’s personal background, family dynamics, and overall history. This knowledge greatly influences my decision-making process. Investing in a founder, rather than solely the product, is my preferred approach.”

Traditional Ventures

The Worlds Times: Could you provide more information about your traditional business venture, Morganti-Annex, and its joint venture with Morganti in Egypt?

Ahmed replied, “I am also involved in a traditional business venture. I have formed a joint venture with Morganti, one of the world’s leading companies in project management, consultancy services, and facility management. This joint venture, called Morganti-Annex, operates in Egypt. Morganti is a subsidiary of the Consolidated Contractors Company (CCC), which is widely recognized as the largest construction company globally. The point here is even if we’re shifting to digital transformation yet traditional Business is still essential.”

Navigating Growth in the MENA Startup Ecosystem

The Worlds Times: What is your perspective on the startup ecosystem in the MENA region, and how do you view the potential for growth and development, especially in countries like Saudi Arabia and Egypt?

Ahmed replied, “The MENA region is still in the early stages of developing its startup ecosystem, so it’s not fair to compare it directly to the US. However, the UAE government has shown great progress in creating a supportive environment for startups. They have reduced fees for startups and established tech hubs in both Abu Dhabi and Dubai, among other initiatives. It takes time for both startups and venture capitalists to learn from their mistakes and grow.

I am genuinely optimistic about the potential of the MENA region. Abu Dhabi, Dubai, Saudi Arabia, and Egypt all have excellent infrastructure for fostering a startup ecosystem. Oman also has promising startups. Saudi Arabia, in particular, has opened up and presents tremendous opportunities for growth due to its large population and increasing openness to attracting startups.

In the UAE, the market is quite saturated, and competition is fierce, making it challenging for startups to grow. However, in Saudi Arabia, the vast population and the opening of doors to entrepreneurs create abundant room for startups to scale. Saudi Arabia holds great promise as a market. Similarly, Egypt shows promise as well, although there is room for improvement in terms of rules, regulations, and policies.

Overall, the MENA region holds incredible potential for startups, and with continued efforts to refine the ecosystem, it can become a thriving hub for innovation and entrepreneurship.”

Adapting Investment Strategies

The Worlds Times: Considering the impact of the Covid-19 pandemic, how have family offices in the UAE and the wider MENA region adapted their investment strategies, particularly in embracing technology?

Ahmed replied, “A significant portion of wealth, approximately 70%, has been lost due to various factors, including poor financial decisions. Family offices in the UAE and the wider MENA region play a crucial role as the backbone of the economy, with around 80% of the workforce being employed by these offices. Their influence is significant.

During the Covid-19 pandemic, family offices became apprehensive and halted their investments. However, they soon realized the importance of allocating a portion of their wealth towards technology. Family offices tend to have a more traditional approach and can be hesitant to embrace new areas. Nonetheless, the pandemic highlighted the potential opportunities in tech investments, leading to a growing trend of family office events centered on this sector.

Though there are positive developments, I remain cautiously optimistic due to a perceived lack of emotional intelligence among family members. Effective communication and understanding between family members are vital for the success of family offices and their investments.”

Navigating Challenges

Lastly we asked, “With the rising energy prices and geopolitical tensions in the MENA region, how do you perceive the current state of investment and funding for startups, and what trends are emerging in this regard?”

Investment and funding in the MENA region are gaining momentum due to various factors such as rising energy prices and geopolitical tensions. These circumstances have prompted a shift in focus toward the region, leading to an increase in startups choosing to establish their headquarters here. As a result, we are witnessing a rise in funding and the overall success of startups in the MENA region.” Ahmed concluded

Connect Ahmed Nasser Al Nowais on Linkedin

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