Could now be the time for CVCs to shine? Mashreq’s NeoVentures CEO thinks so

As some foreign VCs are expected to shy away from regional startups as ongoing headwinds hit sectors across the region, other local investors are ramping up investments. “We are not slowing down in terms of reaching out to the right founders and making the right [wagers] in this time of uncertainty,” CEO of Mashreq’s corporate VC arm NeoVentures and head of wholesale digital banking at Mashreq Amith Rajan tells EnterpriseAM.

“We believe that there are some things that will work and [for] those that will work, the fundamentals have not changed,” he says. “Dubai has a strong track record of navigating periods of stress well, including during the Covid-19 pandemic, so it’s all about how we respond to those crises […] All we need to do is look at the boost the economy got after Covid-19,” Rajan says.

As a bank-backed corporate venture capital arm, NeoVentures is able to deploy capital with a longer-term perspective, without the fund-raising pressures or forced exit timelines typically associated with traditional VC models.

They also follow metrics that are different from those of typical investors — and, in some cases, much more flexible. “We identify as ‘patient capital’ […] we’re not an undisciplined, ‘broad-based’ kind of investor,” Rajan says. He looks at four criteria to decide whether or not to pull the trigger on an investment: a) The business has a technology or solution that could help boost Mashreq’s own revenues; b) it has a technology or solution that could help improve customer experience somehow; c) it improves the bank’s risk management capabilities; and d) it helps improve their operational efficiency.

“When we invest in a business, it’s because it fits into our strategic priorities as a bank […] the strategic alignment allows us to explore synergies outside of just pure returns,” Rajan explains.

The other differentiator is venture building. While there are venture builders in the region, having a venture builder that’s housed within a bank offers some advantages. NeoVentures incubates and validates products within the bank itself prior to market deployment. “That’s where we validate it before we take it to market,” Rajan says.

That gives them confidence when they’re building something that there is a product-market fit. “We’re a commercial bank and we’re using it for ourselves, which provides early validation of value and fit,” he says.

It also gives the startup that is building those solutions scale and resources that are hard to find elsewhere. “We’re building the software in-house alongside our partners, so there’s appreciation for what the founder does and what their challenges are,” Rajan explains. “Because of that and because of the backing of Mashreq, we’re able to give them instant access to capital and to customers, we give them the [chance] to scale up, and very importantly, we give them regulatory and compliance coverage, because they come onto our regulatory and compliance rails, which adds that degree of credibility.”

The venture building side of things operates with a lean team, but the CVC “sits on the shoulders of a giant,” as Rajan puts it. He notes that the Wholesale Digital Studio and NeoVentures are closely integrated, allowing for product transfer and execution across the bank and venture arm. “There is a lot of cross-pollination between the bank and NeoVentures, and that’s the way we would like it to be.”

“One of the things that we are very careful not to do is setting up something that’s a siloed organization that operates completely separate from the bank, and then getting no one to use [the products we build],” he adds.

The investment strategy

NeoVentures always acquires minority stakes in fintechs it’s investing in, Rajan tells us. “We don’t want to run the business; we want to support the founder and help them grow the business.” Ticket sizes are tailored to the startup’s stage of growth.

The VC arm usually goes for seed to series B stage startups, and the strategy is to stay with a startup throughout its journey and invest in future funding rounds as well, Rajan says.

NeoVentures is looking for “category-defining fintechs” with the ambition and capability to scale meaningfully, first across the region and, over time, internationally. While it has so far had its eyes only on the region, it’s open to investing globally provided the investment prospects fit into the bank’s priorities.

What Rajan is bullish on

Given NeoVentures’s mandate to stay aligned with the bank’s own strategic objectives, areas of focus right now include payments, cross-border FX, and digital assets, Rajan tells us. “We're also looking at growing our trade business, our SME business, and our wealth business,” he adds.

Since launching in 2024, NeoVentures has made strategic investments in firms like NewBridge Fintech, which owns EMEA-focused loan syndication platform LoanBook, and has commercialized bank-integrated products such as Traydstream, a digital platform enabling secondary market sales of trade finance assets.

Right now, it’s building its largest product yet — an end-to-end credit platform that it’s getting ready to take to market soon, Rajan tells us.