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The Venture Capital ecosystems in MENA, Turkey and Pakistan have shaped out in interesting ways, as we revealed in our Q3 2021 update published earlier this week. Some of the developments were rather predictable, like the record-breaking levels of funding across all these Emerging Venture Markets. Even then, very few anticipated venture capital across MENAPT to cross the $5B mark. The Emerging Venture Markets also witnessed its largest ever funding round when Turkish E-commerce startup Trendyol raised a $1.5B round.
Another trend that showed early signs at the beginning of the year was the dwindling frequency of early-stage rounds. Across MENA, for example, deals under $500K accounted for just 41% of all transactions in Q3 YTD 2021, as compared to 71% in FY 2020. The drop was mirrored in Pakistan, where proportions fell from 51% in FY 2020 to 26% in Q3 YTD 2020. Turkey was an anomaly to this trend as the market saw more early-stage deals in 2021 so far than in all of 2020.
These interesting developments aside, one key trend came as a particularly pleasant surprise: higher investor participation in EVMs than ever recorded before.
Across MENA, 276 investors funded startups based in the region- the largest volume across any previous year. This was also the case in Pakistan and Turkey. The number of active investors in Pakistani startups doubled in Q3 YTD 2021 when compared to FY 2020.
Foreign investors looking towards EVMs
This wasn’t all. The number of international investors that deployed capital in these markets also touched an all-time high in 2021 by the end of Q3. The proportion of foreign investors of total investors jumped by 11 percentage points between FY 2020 and Q3 YTD 2021 across MENA, while it remained at four-fifth of all investors in Pakistan. Although the proportion dipped in Turkey, the increase in total investors between FY 2020 and Q3 YTD 2021 (+44%) resulted in more international firms backing the country’s startups.
The nature of investments by foreign firms is even more intriguing. 500 startups, the leading foreign investor in MENA by number of deals in Q3 YTD 2021, closed 18 deals in the year so far- 11 of the startups the firm supported were based in the UAE and KSA. And while early-stage rounds in MENA took a hit, two-third of 500 startup’s deals involved startups raising SEED rounds. As an accelerator, Y-combinator, with 11 investments in MENA in Q3 YTD 2021, also saw all its capital deployed in SEED or Pre-SEED rounds.
In Pakistan, UK-based Zayn Capital registered six transactions- most by any foreign investor in Q3 YTD 2021. Four of their rounds, too, pertained to startups in the in SEED or Pre-SEED stage.
The industry of choice for Zayn Capital was Fintech and E-commerce, the two top industries in Pakistan by deal count.
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