Biography
Zuhair Shamma’ and Rawan Baddour are the co-founders of Zest Equity, a UAE-based startup digitizing private market transactions in MENA. Zest builds software to smoothen transactions, streamline paperwork, and help stakeholders communicate.
Zest has digitized over $155M in transactions across more than 115 deals. The company just secured a $4.3M pre-Series A round.
Zest initially focused on secondaries (ie: shareholders, companies or individuals, selling their shares of a company), but you pivoted to give yourself a larger mandate. Why?
We started with the thesis that no dedicated, digital solution existed to support the execution of secondary transactions in MENA. We launched in 2021, at the height of the VC funding boom. We thus centered our MVP around VC secondaries.
A couple of months in, the VC market crashed. This created a mismatch between sellers and buyers, who held starkly opposed opinions as to companies’ valuations. We also realized that MENA’s tech ecosystem was still nascent, and that there wasn’t enough secondaries transaction volume to construct a business upon. There was a lot of information asymmetry as well, with limited access to financial and valuation metrics.
We’d built the infrastructure to enable private market transactions, so we decided to apply that tech to streamline a wider range of transaction types, with a focus on capturing <$100M transaction size segment.
Today, Zest users can create their pre-agreed deal, wrap up all of their investors in a single single-purpose vehicle (SPV) and handle all communications directly from Zest.
What Stripe is to payments, we want Zest to be to private market transactions. We did 5 deals in 2022, and grew to doing more than 55 deals in 2024.
RO insights: the VC funding clog
VCs traditionally have a fund life of 10 years, after which they are supposed to return money to their LPs. However, some VCs can face a conundrum if they hold non-exited, quality positions at the end of their fund life. The problem is more acute in emerging markets (EMs), where secondaries options to sell off those positions are scarce.
Here’s how Alex Branton, founder of Nodem (a fund specializing in solving that problem), explains:
“For the past decade, VCs in emerging markets (EMs) have enjoyed a sharp increase in LP funding, culminating in a 2021 peak. While billions in value have been created, liquidity has been hard to come by.
Many funds are nearing the end of their fund life and need to return capital to their LPs. Unfortunately, many of the companies they’ve invested in haven’t been acquired or gone public just yet. This creates a structural blockage, a clog, which hampers the flow of new money into the asset class. Maturing funds need to return capital to LPs, but GPs want to avoid accepting sharp discounts for their fast-growing winners just for the sake of liquidity. Further, whilst LPs need liquidity to re-up, they want to maintain exposure to the fund's performing companies.
The whole situation isn’t abnormal, per se. EM or not, there is a significant mismatch in the arbitrary length of VC funds (10 years) and the practical reality of how long outlier businesses take to exit (more than 10 years).
EM VCs face a problem that VCs in developed markets (DMs) have already faced. However, EM VCs don’t have access to the liquidity solutions DM VCs have access to.
[...]
Those raising VC funds deferred to the industry standard 10 (+2) year fund lengths, designed for a pre-2010s era where that exit timeline was proven.
That has changed. It will be 15 years on average before most funds are close to fully realized. It just takes a longer time for many companies to scale and exit - true of both EM and DM.
In EMs, a generation of new LPs entered VC with limited vintage year diversification and an expectation of substantial flows within 5-10 years. It’s taking longer than planned. A significant duration reality check is in order, which is now hampering fresh reinvestment into our ecosystems.”
Excerpt from Nodem: liquidity for emerging markets VCs, originally published in The Realistic Optimist
What’s the trickiest part of Zest’s product?
The product is designed to look seamless and smooth on the front-end, but no transaction looks the same on the back-end. There’s always some level of friction to handle when doing KYC, sending money…
That means that a lot of creativity and innovation happens in the back-end, digitizing process flows in a modular, flexible, and scalable manner. This is where you start reducing friction for customers and for us, operationally.
How does Zest make money?
We charge a fixed service fee per SPV we create.
The SPV is the beachhead, but we want to expand into other, more regulated activities that help reduce friction and streamline the transaction process. We want to add more value to our clients and their overall transaction process, no matter how complex the transaction is.
What does your client base look like today?