The Emerging Venture Markets have observed some critical shifts in VC dynamics across all 3 quarters this year. While total funding remains on par with that seen in 2021, we break down the deal, funding, and exit practices seen in 2022 YTD ahead of the release of our Q3 reports.
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With 2021 being the most exceptional year for VC across the Emerging Venture Markets, 2022 had a bolstering start capitalizing on the momentum established last year. As the third quarter of the year comes to a close, MEAPT has aggregated 84% of the capital accumulated over FY 2021 with 3 months to go in the year, recording a 16% increase compared to the same time last year. While global markets are tackling a market cooldown, the region has crossed the $6Bn mark showing that the funding is still on par with last year’s record. This might paint a promising picture for venture capital in the region but in reality, the funding this year is a story of 3 quarters. The last quarter has proven to be the lowest quarter since Q4’20 both in terms of funding and the total number of deals.
Out of the $6Bn raised so far this year, 57% of the funding was aggregated in the first quarter of the year recording a 71% growth in funding compared to Q4’21. While Q1 depicted a promising start to the year, Q2 started to show the first signs of decline in venture capital. By the time April was over, MEAPT had seen a drastic 75% decline in funding compared to a very steady March. Every region witnessed very strong turning tides with Turkey recording the strongest dip in funding (93%) compared to Q1. Q3 followed a similar pattern with the global economic downturn taking a toll on the Emerging Venture Markets’. The funding dipped further by 35% while deal count has observed a consistent drop in three consecutive quarters. The decline becomes even more profound in comparison with Q3 last year with funding dipping by 50% and deals recording a drop of 31%. A common feat across all 3 quarters was FinTech remained the most transacted and top-funded industry.
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While funding across all 3 quarters had a turbulent trajectory, we saw consistent Mega Deals in each quarter. Q1 was championed by Getir’s staggering $768M Series E round. Despite the phenomenal fundraise, the startup also had to bear the brunt of the market cooldown, announcing a staff cutdown and a halt in expansion plans back in May. MENA’s Bahrain also recorded its first ever Mega Deal this year, with crypto startup Rain raising $110M in its Series B round. KSA has had a very successful year in terms of $100M+ rounds, so much so that in Q3, KSA was the only Emerging Market that saw Mega Deals credited to TruKKEr and FinTech Tamara. 100M+ rounds also accounted for 37% of the total funding aggregated by MEAPT-based geographies.
In terms of deals, even though larger-sized rounds ($20M+) saw an increase in funding share in 2022 YTD, Q3 observed a funding dip while Early-Stage (Pre-SEED to Pre-Series A) funding has remained consistent after recording a drastic increase in the second quarter. The deal and funding dynamics across different stages have been reflective of the growing investor appetite for tech ventures in the Emerging Venture Markets. As a result, investor participation has increased on a year-on-year basis with the likes of Flat6Labs, Y Combinator, and 500 Global leading the deal count this year.
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Amid the global market uncertainty and the scarce availability of capital, the biggest winner this year has been the M&A activity. The funding crunch presented an opportunity for international players to mark their regional entry and in some cases, vice versa, resulting in 2022 as the year with the highest Exit activity. In fact, Q3 saw the highest number of Exits out of all 3 quarters with the Middle East recording the most Exits in MEAPT. In total 117 Exits have been recorded this year with market expansion being one of the evident motivators. To that effect, KSA’s Sary and Foodics acquired Egypt’s Mowarrid and Jordan’s POSRocket. International cross-market plays also made headlines this year with the likes of Jordan’s Jobedu getting acquired by US-based Web3 company Novajax and Egypt’s Dileny Technologies exiting to USA’s Astute Imaging. Pakistan’s FinTech Tez Financial Services also got acquired by Zoodpay marking the first FinTech-based Exit for the region.
This year has also seen more startups listing on public exchanges with Fawry on EgyEx, Jahez on Nomu, and Anghami and Swvl listing on NASDAQ. As we venture into Q4, it remains to be seen if the Emerging Venture Markets will cross the $7Bn mark and if the quarterly funding dip trend will be broken in the last quarter.
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