Yahoo’s Yamli to Attract Arab Venture Capital Investments

Habib Haddad says when he needed money three years ago to fund Yamli, an online Arabic transliteration service, he had to sell his furniture. His deal with Yahoo! Inc. (YHOO) this week is a sign investors are more willing to put money into Middle East startups.

“I had $100 left in my account and my credit cards were maxed out” after initial investments from two Google Inc. (GOOG) executives ran out, Haddad, 31, said in an interview with Bloomberg in Dubai May 28. That day, Haddad, who also runs a fund investing in startups, announced an agreement making Yahoo the latest company to use the technology he developed with fellow Lebanese entrepreneur Imad Jureidini.

Deals like this may encourage a growing breed of early- stage investors and venture capital funds in the Middle East to boost investments to lure global companies, say investors such as Con O’Donnell, a Cairo-based entrepreneur. O’Donnell sold his stake in the digital media company he co-founded to Vodafone Egypt (VODE), a unit of Vodafone Group Plc. (VOD)

Funds run by entrepreneurs such as Haddad are investing in Egypt, Lebanon, Jordan and Bahrain, extending a lifeline to struggling startups and defying an economic slowdown in countries hit by political unrest. Bank lending to small businesses in the region is the lowest in the world, according to a World Bank study. Policy makers across the Middle East say the growth of small companies is critical to lower the world’s highest youth unemployment rate.