The Evolution of Propeller

Hani Azzam joined Propeller in 2025 as a principal and was promoted to partner by the end of the year, stepping into a pivotal moment for the firm. He helped launch Fund III, a $50 million early-stage fund focused on software infrastructure and AI companies built for global markets. In this Industry Voices feature, Hani shares Propeller’s evolution across its first three funds, how the team identifies MENA founders ready to compete in North America, and his perspective on the emerging intelligence phase in developer tooling.

The Road to Propeller Fund III

Hani describes Propeller’s evolution as a series of arcs that culminated in its third fund. Founded in 2017, the firm began as a regional B2B SaaS investor in the MENA region. Since then, Propeller has steadily narrowed its sector focus while expanding the markets its portfolio companies are built to serve.

The first fund backed startups solving local problems, from POS systems to HR and benefits platforms. “That first fund was very much a regional B2B SaaS fund,” Hani says. “We invested in a lot of great companies building for the Middle East.”

Fund II marked a transition. While some investments still reflected Propeller’s original B2B SaaS focus in the MENA region, the firm began narrowing its thesis toward infrastructure software and companies with global ambitions. This included startups that were born in the Middle East and later moved to San Francisco to build for North America, as well as companies that were North America–based from the start. “It was a middle period,” Hani explains. “We were still doing some of what we’d done before, but we started investing in infrastructure companies going after global markets.”

Those learnings ultimately shaped Fund III. With its $50 million third fund, Propeller has committed to a narrow but ambitious thesis: backing software infrastructure and AI infrastructure companies built for global markets. In practice, that means North America, where demand for these technologies is deepest. “When we say global, the largest market for infrastructure software today is North America,” Hani notes. “That’s what we’re mainly focused on.” Propeller invests at the pre-seed and seed stages, with check sizes ranging from $500,000 to $1.5 million.

Narrowing the Sector and Expanding the Market

Propeller’s decision to narrow its sector focus while expanding beyond the MENA reflects a few kernels of business wisdom the team, especially Zaid, the firm’s general partner, gained over the years of building Propeller.

“Focus really compounds,” Hani explains. By concentrating on a smaller set of areas, such as developer tools, cybersecurity, and infrastructure software, Propeller can build denser networks, generate better deal flow, accumulate more expertise, and deliver more value across its portfolio. That focus is especially important for a lean team. 

“We need to be very efficient with our time,” Hani says. “Building deep relationships in a space like cybersecurity, hosting events, sponsoring events, and spending a big part of our day meeting people in that space only makes sense if a meaningful portion of our portfolio is in it.”

The strategy also reflects where Propeller has real expertise. Two of the three members of the investment team are career software developers, and even Hani comes from a product background. Narrowing the thesis wasn’t just strategic; it was an honest recognition of where the firm truly excels and where its passion lies.

Expanding geographically was the natural counterbalance. “For venture in particular, you want to be going after the biggest markets out there,” Hani says. For infrastructure and developer-focused software, that market is North America, where there is the highest density of founders, customers, and early-stage capital.

He compares it to football. “If you want to be considered the best in the world, you need to play in the Premier League,” Hani explains. Similarly, Propeller believes that founders, including those from the MENA region, need to build for the U.S. market to compete at the top globally.

Evaluating MENA Startups for Global Markets

Propeller approaches geography with flexibility: the firm primarily invests in North America and the Middle East, but isn’t limited by a founder’s location or ethnic background. “Many of our Fund III investments are in founding teams based in North America from the start, and about half don’t even have a connection to the Middle East,” Hani notes.

For startups from the MENA region, Propeller looks for founders with global ambition and products capable of competing on a worldwide scale.  “MENA is our ancestral home,” Hani explains. “Zaid lives in Riyadh, and that gives us unique access to founders who want to scale globally.” Propeller evaluates whether a company wants to scale globally, particularly to the U.S., by looking at how founders articulate their vision, whether they’ve already demonstrated their product, and signs that they are actively pursuing the American market, such as prior experience in the U.S. or regular travel to the region.

To further test MENA founders’ readiness for the U.S. market, Propeller recently launched Kernel Camp (applications still open!), a two-month program in San Francisco. Five selected founders live in a downtown hacker house, immersing themselves in customer discovery, investor connections, and peer learning. “It’s a sink-or-swim exercise,” Hani says. “Our decision to invest will be based on what we see during that program. This is essentially the best litmus test to see if a founder is ready to succeed in North America.”

Portfolio Construction & Risk Mitigation

When it comes to portfolio construction, Hani emphasizes that Propeller’s approach is still evolving. Risk mitigation, he explains, doesn’t just come from spreading investments across unrelated sectors; it can also be achieved by balancing different risk profiles within a focused thesis. “Even inside a focused sector thesis-driven fund, there are ways you can mitigate risk,” he says. 

Propeller pairs high-risk, high-reward bets, like StarCloud, which is building data centers in space, with startups following more established paths, such as developer tools and cybersecurity. “Venture is risky by nature,” Hani adds, and over-engineering safety can be counterproductive. “The best-performing funds embrace high-risk, high-reward outcomes rather than applying the risk logic of other asset classes to venture.”

Key Indicators in Software Infrastructure Investments

Different end-customer personas require different ways of validating a problem a startup is solving for, Hani explains. For instance, developer tools’ adoption often starts bottom-up, resembling consumer products. “You might look at metrics like how many stars a tool has on GitHub or the size of its developer community,” he says. One Fund III portfolio company, CodeMod, for example, has a 30,000-strong developer community and an active Slack workspace, all built through open-source and free-tier adoption.

In cybersecurity, the focus shifts to go-to-market indicators. Sales cycles are longer, often 18 to 24 months, so Hani looks for founders with pre-existing networks and strong relationships with key industry stakeholders, such as CISOs. “Some of those elements might carry more weight as an investor than in other sectors.”

Entering the Intelligence Phase of DevTools

Hani describes the current moment in developer tooling as the “intelligence phase”, a shift toward software being written autonomously or semi-autonomously with AI. “AI agents and code agents feel like members of engineering teams, doing tasks that humans would historically handle manually,” he explains. This includes planning, writing, testing, deploying, and monitoring software, faster, at higher volumes, and potentially with greater quality.

The opportunity, Hani notes, lies in making this process truly intelligent, rather than producing a flood of low-value code. “The tools are already here. The question now is how to use them effectively so that the explosion of new software actually improves outcomes, rather than just adding noise.”

Some of the areas Propeller is increasingly exploring include human–AI collaboration and tools that help “humans and agents collaborate, trust, and verify each other’s work”. One example is Pebble, a portfolio company enabling developers to coordinate with AI agents that autonomously resolve low-level bugs. Another area Hani is excited about is tools that monitor AI agents and provide actionable insights, helping teams refine prompts and optimize outputs for a better end-user experience.

2025 Wrap & 2026 Outlook

2025 was a pivotal year for Propeller. The firm publicly launched Fund III, made six investments, and announced Kernel Camp, an innovative program designed to prepare MENA founders for global markets. Hani reflects on stepping into the partner role as a major milestone. “I was very fortunate to come in as a principal and feel like I had a strong say in investment decisions,” he says. Moving to partner introduced new responsibilities, particularly managing LP relationships and bringing the right people into the firm’s network. “Each person is super important,” he notes, likening it to the early hires of a startup—partners shape the team that drives the fund’s success.

Looking ahead, Hani sees 2026 as the year to fully execute Fund III’s strategy, including running Kernel Camp for the first time. The program will put founders to the test, and the team will continue investing in infrastructure and AI companies with global ambitions. “The bigger challenges lie ahead,” Hani says, “but you only get there by knocking out the ones in front of you. We’ll run hard after exciting problems, fail in some places, and build on what we accomplished in 2025.”