When evaluating MENA startups, most investors focus on growth metrics, marketing traction, and headline partnerships. But according to Abhishek Pareek, Founder & Director of Coders.dev, the real warning sign often hides behind the noise — not in front of it.
We asked industry voices: What’s one due diligence red flag specific to MENA startups that you’ve learned to watch for through experience? What made this indicator particularly revealing in your investment decisions?
Here’s what Pareek had to say:
“In the MENA startup community, the biggest red flag that I have encountered in due diligence is the wide gap between aggressive and excessive marketing initiatives (i.e. public relations) and the infrastructure required to support them. The tendency for most of the startups in the MENA region is to accelerate their growth through large marketing efforts and/or landmark partnerships, rather than building a strong operational, back-office financial reporting and compliance (HR, accounting, etc.) foundation, which is essential for long-term stability and growth.
This pattern indicates to me that the leadership of the company may view capital as a tool for generating a positive perception of the business rather than an investment towards creating an operating capability. Additionally, I look closely at a company’s ability to articulate their unit economics on a per-market basis — if the leadership of the startup is unable to break down the cost of acquisition vs. customer lifetime value for the specific geographic area they serve, they are likely spending a lot of money trying to maintain an image of having made progress when they are actually losing money.
Based on my observations, when companies rely too heavily on external branding, without creating adequate documentation of the financial plumbing of their transactions, they will often encounter cash flow issues when economic conditions change. The most successful businesses will not always be the ones generating the loudest noise; rather, they will be the ones who show no visible signs of excess and who manage their revenue and payment cycles and their operations in a disciplined manner. If an organization is trading off internal transparency in exchange for an aggressive growth strategy, it generally does not bode well for sustained investment in their company.”
— Abhishek Pareek, Founder & Director, Coders.dev
Related Reads
If you’re interested in startup investing, founder strategies, and the MENA business ecosystem, explore these articles from Arabian Business Times:
- How to Build a Successful Startup in the GCC
- Top 10 Fintech Startups in UAE
- International Business Expansion Strategy: A Guide for Growing Businesses
- Multi-Touch vs Last-Click Attribution: Which Marketing Model Works Better?
- How GCC Leaders Are Using AI to Grow Their Business
Arabian Business Times regularly features insights from founders, investors, and industry leaders across the GCC and wider MENA region. Have a perspective worth sharing? Get in touch with our editorial team.
