Unlocking New Horizons: Strengthening Korea-Middle East Ties

In a recent landmark development, the Gulf Cooperation Council (GCC) and South Korea forged a new chapter of economic collaboration by signing the GCC-Korea Free Trade Agreement (FTA). This agreement signifies not only the growing synergy between South Korea and the Middle East but also the expanding opportunities for investment and partnership in the region.

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Under the terms of the new FTA, Gulf states will eliminate tariffs on 76.4% of traded products and 4% of traded goods. In return, Korea will reciprocate by eliminating tariffs on nearly 90% of all items, encompassing critical commodities such as liquefied natural gas (LNG) and various petroleum products.

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This FTA is part of a broader strategy by the GCC to forge stronger economic bonds with global partners. In addition to the FTA with South Korea, the GCC also signed an FTA with Pakistan last year, engaged in advanced negotiations with China, and rekindled talks with Japan. Discussions for an FTA with Britain are also underway.

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Shorooq Partners: Bridging Markets and Nurturing Growth

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As these trade agreements pave the way for increased economic collaboration, Shorooq Partners positions itself at the forefront of this emerging landscape, leveraging these opportunities to bridge markets and nurture growth. Recently, our colleagues, Shane Shin and Nathan Kwon, had an exclusive interview with the Korean Press EDAILY, offering insights into our firm's perspectives and aspirations.

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Shane Shin, Co-founding Partner at Shorooq Partners, shared our ambitious vision. "Korea and the Middle East have been actively cooperating to an extent that makes you wonder if they have ever been this close. The investment opportunities are just as abundant. With this as a stepping stone, our company wants to grow into the Blackstone of the Middle East." As a Korean based in the Middle East, he also expressed his determination to play a bigger role as the bridge between the Far East and the Middle East.

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Exploring Middle East's Startup Potential

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This vision, shared by our leaders, laid the foundation for Shorooq Partners, established by Shane Shin and Mahmoud Adi in 2017 to tap into the untapped potential of Middle Eastern startups. Shane explained, “Unlike in Korea, where banks readily provide funding to startups, the Middle Eastern startups could only receive equity investments." The two founders envisioned to establish a VC firm that could support startups with limited capital, accelerating their growth.

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The growth potential of the Middle East also played a significant role. According to Nathan, Principal at Shorooq Partners, the Middle East has entered a phase similar to Korea's in the 1990s, where the first generation of startups and investment firms laid the foundation for today's thriving tech industry.

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Supporting Innovation and Sustainability

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Our deep understanding of the regional market dynamics has shaped our investment strategy, focusing on nurturing innovation in promising sectors and supporting startups through venture debt. Shorooq Partners currently manages assets worth approximately KRW400 billion. Local investors in the Middle East include UAE sovereign wealth fund Mubadala, the Dubai Future District Fund (DFDF), Saudi Venture Capital Company (SVC), PIF's Jada Fund of Funds, Saudi government agency Takamol, Jordan's ISSF, and Bahrain's Al Waha Fund of Funds, among others.

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The firm invests in two verticals: venture capital and venture debt investments. We primarily focus on equity investments for early-stage startups, with a keen interest in emerging fields such as B2B deep tech, contents & entertainment, bio-tech, and blockchain applications. Shorooq Partners aims to identify innovative startups early and grow together.

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Venture debt, a form of support for startups to navigate the challenging initial stages, are also part of Shorooq Partners' strategy. While this approach offers a cost-effective option for companies in the growth stage to raise funds without excessively diluting shareholder equity, Shorooq Partners provides this type of investment to companies at the Series B stage or beyond.

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A Commitment to Korean Startups

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Shorooq Partners maintains a strong connection with Korean startups. Both Shane and Nathan visit Korea regularly, meeting with startup founders, investors, industry professionals, and government officials three to four times a year.

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Their criteria for investing in Korean startups revolve around customer retention and global capabilities. Shane highlighted that a startup's sustainability hinges on how many users of a service return the following year. This customer choice shapes a startup's self-sustainability, especially in challenging economic times.

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Nathan emphasized the importance of adaptability and understanding of global trends. Startups must understand the trends and culture of the countries they operate in. High customer retention indicates a deep understanding of the market, and the ability to adjust to changing conditions is crucial for success.

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Looking Ahead: Shorooq Partners' Goals

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Our ongoing engagement with Korean startups not only strengthens our investment portfolio but also guides our future objectives. We plan to leverage these experiences to broaden our investment scope and deepen our impact in the region. In the short term, Shorooq Partners plans to actively discover promising Korean startups, all while focusing on the Middle East as the primary market. We aim to invest a total of KRW15 billion ($10 million +) in Korean startups this year and expand our scope through debt financing solutions. Furthermore, we are committed to assisting Korean startups in entering the Middle East market, recognizing the attractiveness of this region for Korean companies.

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Shorooq Partners stands at the forefront of connecting Korea and the Middle East, fostering innovation, and supporting startups on their journey to success. As the economic ties between these regions continue to strengthen, we look forward to playing a greater role in shaping the future of investment and collaboration.

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