What makes Palo Alto, US, based early-stage deep-tech VC to look at the Middle East region for expanding its footprint? The answer seems straight forward. “The region is of increasing importance and focus for us and our portfolio companies”, says Karthee Madasamy, founding managing partner, MFV Partner, who recently concluded his trip to the region, including the UAE.

“The visit to Dubai was part of a global trip to meet with both portfolio companies and our fund’s limited partners. We just added our first partner based in Dubai — Ruchi Dana — who will be instrumental in helping our portfolio companies expand into the region and cover investment prospects in nearby countries such as Israel and India,” Madasamy told Khaleej Times in an exclusive interview.

What is deep tech? By its very definition, deep tech is proprietary, hard-to-replicate technology that often uses lab research to incubate innovations that can be combined with existing technology to solve new problems. This type of innovation is now driving every aspect of the global economy, explains the ambitious Madasamy, who has a portfolio of 12 companies,

“Given the scientific or engineering challenges that deep tech startups typically address, there is often a misconception that deep tech takes a long time to return on investment. That is not the case. In our experience, deep tech companies don’t take significant capital or time to become sizable assets. For instance, we were an early investor in PsiQuantum, the light-based quantum chip startup. They only took their first investment in 2016 and are already valued at over $3 billion,” said Madasamy.

“Furthermore, as deep tech is needed to address significant challenges with climate and sustainability, quantum, space, computational biology, manufacturing, and AI and quantum computing, it’s hard to ignore the long-term potential of deep tech. The UAE understands this and with the region taking steps such as pledging to reach net-zero carbon emissions by 2050 and announcing it would invest $163 billion in clean and renewable energy and key technologies, we can expect deep tech companies to play a major role in achieving these goals.”

Deep tech offers transformational benefits to both industries and society. Due to that, Madasamy believes it will be more insulated from market pullbacks and future downturns within the technology sector.

“I think deep tech is an area that the UAE needs to increase its exposure to. That means attracting more PhD type talent to the region, improving STEM education, and directing sovereign wealth funds to allocate more investment to the space,” said Madasamy.

As the founding managing partner of MFV Partner, Madasamy thinks the Middle East is a critical market for him from the limited partner and portfolio company perspective. “We continue to see strong interest from investors in the region seeking diversification and sustainability with their investments. They see an opportunity to invest in deep tech companies that genuinely disrupt global industries. Around $2.6 billion of venture capital was invested into Mena-based startups in 2021, which set a record. While Israel has led the region in deep tech-focused startups to date, we see more potential for deep tech investments in the UAE and even Saudi Arabia. With a burgeoning startup ecosystem and a government that continues to cultivate innovation, we believe that the UAE will be fertile ground for deep tech startups for years to come,” added Madasamy.

MFV Partners’ approach is to back visionary deep tech entrepreneurs developing products and solutions that disrupt traditional verticals and ecosystems across automotive, manufacturing, retail, agriculture, and knowledge services.

Madasamy says the UAE’s startup ecosystem and investment infrastructure have continued to improve over the last several years with notable examples including Amazon’s acquisition of ecommerce startup Souq.com and ride-hailing company Careem being acquired by Uber. The region has always had significant geographic appeal based on its positioning between the major financial centers of the west (London/New York) and those of the east (Tokyo/Hong Kong) and has become an economic bridge between the two which makes it very promising for entrepreneurs looking to bring innovations to the Arab world.

“Going forward, partnering with other leading entrepreneurial hubs and multinational organisations is a logical next step to attracting more technology talent and investment to the UAE. We’re already seeing this play out with companies like G42, the leading UAE-based AI and cloud computing provider, collaborating with global organisations like IBM and AstreZeneca to bring breakthrough innovation to the region,” concluded Madasamy.

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