Zest Your Equity | 11-June-2025

This week’s agenda 📜

• Our latest resource ✍️

• Zest’s terms and concepts 📜

• Who’s raising? 💰

• What we’re reading 📖

Let’s dive in 👇

Our latest resource ✍️

Data shows that 58% of global venture capital dollars went to AI and machine learning startups in Q1. In the MENA region, AI is the fastest-growing tech vertical for venture capital funding. The investor demand is real, but navigating the landscape of AI deals can be confusing to angels who want a seat at the table. 

In our latest article, we’ll walk through the key areas of AI investing and show angel investors how they can be involved.

Zest’s terms and concepts 📜

This month, we’re taking a look at common fund mechanics, including key clauses found in fund documents and distribution structures. Below, you’ll find two key terms that LPs should understand, along with a basic breakdown of how a PE firm splits profits among GPs and LPs.

Key person risk: The reliance of a fund on one or two individuals (typically the General Partner) who drive strategy, deal flow, and LP trust. In private funds, this person often has unique domain expertise or relationships. If they leave or become inactive, it can jeopardize the fund’s performance and future. Most LPAs include a key person clause that halts new investments until LPs approve a path forward. For LPs, it’s a control mechanism; for GPs, it underscores the importance of building institutional resilience beyond any one individual.

No-fault divorce clause: Allows a supermajority (typically 75% of LP interests) to remove the GP or terminate the investment period (without proving misconduct or breach). Unlike “for-cause” removals (e.g. fraud or gross negligence), no-fault clauses are a governance tool LPs can invoke simply due to loss of confidence or underperformance.

Waterfall return structure: The “waterfall” return structure determines how the fund and its LPs split the profits and receive distributions. The way this is structured heavily influences decision-making, incentives, and exit timing.

Most PE funds base their waterfall returns on the performance of the entire fund (rather than deal-by-deal profits), where LPs get their capital back first, then a preferred return (typically around ~8%), before the GP earns carry (usually ~20%), often including a catch-up phase where the GP receives most or all profits until their share is balanced. This structure aligns incentives with long-term fund performance, not individual deals.

Subtle differences, like whether there’s a clawback provision, GP catch-up, or tiered carry, can shift risk and upside between parties. For LPs, understanding the waterfall structure is critical for legal due diligence and determining the incentive structure for the GP.

 Who’s raising? 💰

• 🇦🇪 UAE-based fintech Qashio has raised $19.8 million in a mix of equity and non-equity funding, led by existing investor Rocketship VC, with participation from MoreThan Capital, regional banks, and family offices.

• 🇸🇦 Saudi Arabia-based fintech infrastructure platform Stitch has raised a $10 million seed round from investors including Arbor Ventures, COTU Ventures, Raed Ventures, and Saudi Venture Capital (SVC), with participation from regional family offices and other angel investors.

• 🇹🇳 Kumulus Water, a startup launched in 2021 between France and Tunisia, has raised $3.5 million in a seed round to scale its off-grid water production technology.

• 🇦🇪 UAE-based regtech Qanooni has raised $2 million in a pre-seed round led by Village Global, Oryx Fund by Salica Investments, TA Ventures, and strategic angels.

Want to learn more? Schedule a time with our team below!