Emerging Venture Markets (EVM) startups raise record funds in fewer, larger deals, according to MAGNiTT's 2021 report

MAGNiTT, the largest venture data platform tracking startup investments across emerging markets, released its annual 2021 Emerging Venture Markets Report today. For the first time, this report analyses and compares investments in technology startups headquartered in MENA, Pakistan, and Turkey, as the Dubai-based data platform expands its coverage beyond MENA and into emerging venture markets (EVMs).

“2020 was a rollercoaster year that highlighted the importance of leveraging data to make opportunities visible across borders,” comments Philip Bahoshy, MAGNiTT’s CEO. “COVID-19 rapidly accelerated the adoption of technology across emerging markets, creating larger markets and more opportunities to scale. By tracking and analyzing startup investments in 19 countries and counting, we have been able to provide real-time intel to governments, founders, and investors to support them in making informed decisions and policies.”  

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The Big Picture Story - What happened in 2020?

Largely, the trend was that - across MENA, Pakistan, and Turkey - more capital ($) was deployed but in fewer, larger deals in 2020 (with a few exceptions).- Against the backdrop of COVID-19, startups in MENA raised a record $1BN+ of investment in 2020 despite a drop in deals;

• In MENA, the UAE ranked 1st and accounted for the lion’s share of total funding and the highest number of deals in MENA. Egypt ranked 2nd for both total funding and number of deals, and the fast-growing KSA ranked 3rd for both;
•  Lebanon and Bahrain also saw dramatic changes in 2020. Lebanon witnessed a steep drop in the number of deals, while Bahrain saw the capital deployed in startups triple (up 200%);
•  Startups in Pakistan raised $77M in 2020, up 97% from 2019;
•  Startups in Turkey raised a record $383M in 2020, up 182% from 2019.

The Impact of COVID-19 & Recovery 

The ‘COVID-effect’ was felt throughout the ecosystem and is most clearly reflected when comparing H2 2020 with H2 2019. The second half of 2020 saw $306M (down -13%) invested in 198 deals (down -35%):

• Another clear effect has been the relocation of capital away from early-stage ventures: There has been a marked shift away from pre-seed investments (deal sizes up to $100K) towards bigger-ticket Seed & Series A investments (between $100K - $3M). In 2019, 47% of all deals were less than $100K, in 2020, this number dropped to 27%;

• Industries that saw increased demand as a result of the pandemic, like E-Commerce & FinTech, retained top spots by the number of deals, with the two sectors together representing 24% of all deals in 2020. Similarly, the amount invested in Healthcare startups more than tripled, increasing by +280% to $72M;

• Noting that it takes an average of 9 - 12 months for startups in MENA to fundraise, we can begin to measure the entrepreneurship ecosystem’s “come-back” in the quarterly funding evolution in 2020: We saw a very strong Q1 & Q2, a very low Q3 (one of the lowest on record as we felt the full effects of the pandemic), and a stronger Q4 as MENA’s venture markets begin to show signs of recovery.

Looking forward, seasoned global investors remain optimistic. “2021 will be the tipping point for entrepreneurship in MENA,” says Courtney Powell, Chief Operating Officer at 500 Startups. “It’s the culmination of years of work throughout the ecosystem by key stakeholders, most especially the Founders. Deal flow is healthy and getting stronger every day, there’s more capital available than ever, and there’s intense hunger to see the region diversify away from historical GDP drivers and become a leading knowledge economy.” 

Cenk Bayrakdar, Managing Director at Revo Capital commented, “COVID-19 has been a catalyst for rapid technological change driven by the shift in consumer and enterprise behavior from the status quo. It has increased the appetite for experimentation and reduced adoption hurdles especially in fintech, retail, healthcare and education. Overall the world is becoming a digital pro-forma, and with access to the necessary capital, Turkish entrepreneurs and startups will be able to leverage that.”

“2020 proved that follow-on capital would flow to Pakistan quickly for startups that execute well,” says Aatif Atwan, Founder & Managing Partner at Indus Valley Capital. "Many top VCs including First Round Capital, Prosus, GFC, YCombinator, Pioneer Fund have invested in Pakistan in 2020. We expect this trend to accelerate in 2021. We're focused on bringing the Pakistani diaspora, aka Wapistanis, back to the country to help the startup ecosystem in its next phase of growth."

The data underpinning the report is sourced from the MAGNiTT platform. You can find a full list of all startups, investors, funding rounds, and exits included in this report on MAGNiTT.  

MAGNiTT’s annual 2021 Emerging Venture Markets Report, which highlights the venture capital trends in MENA, Pakistan, and Turkey is available online to download for free, with a full 100+ page report diving deeper by industry, country, investors, exits, and more, which is available for purchase.

Following the launch of our new 2021 Emerging Venture Markets Report, our CEO Philip Bahoshy will host four prominent investors for a roundtable discussion to deep-dive into 2020's startup funding landscape. Register now to save your spot.