How does the appetite for later-stage deals in MENA play out and what are industries show the most promise in the game? VC trends and insight on MENA 2021
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There has been plenty to mull over in regards to MENA’s VC dynamics over the past year. Observing a 132% YoY growth in VC investment and 4% YoY growth in transactions closed over 2021, as recorded in our State of Startup Funding- 2022 Emerging Venture Markets report, the real remarkable progress the ecosystem has made is not readily apparent. However, if we deep dive into the granular data where, for example, out of the 3 Mega Deals closed by cloud kitchen network Kitopi, T&L turned FinTech Halan, and cloud communication software solutions startup Unifonic, 2 were geography firsts we find the true grit shown by these spaces. The progress that Egypt and Saudi Arabia have made could be reflective of an elevated VC ecosystem in MENA where all geographies are ramping up to level with more established markets like the UAE, Turkey, or even SSA which seems to have swept investor attention in the past year recording almost 300% YoY growth in funding.
In true form, the MENA VC ecosystem is an exciting space full of opportunity highlighted in every geography. As we release our 2022 MENA Venture Investment Report, we recorded a post-pandemic kickback in geographies experiencing growth in funding like Jordan (%450+), Bahrain (%150+), and even Lebanon (%200+). We also observed some major shifts in well-established geographies and industries as well. It is no surprise that the Food & Beverage sector was a leading industry by capital deployment with Kitopi’s $415M Mega Deal, however, diving into this growth on the backdrop of the entire ecosystem reveals some critical insights. This week we explore 2 critical VC trends in MENA recorded over the past year:
Early to Later Stage
Investors’ appetite towards later-stage deals over the past year has been growingly evident, where later-stage deal ($10M+) share of total transactions in MENA grew by 2PP to reach an all-time high for the region. Of course, this has been in congruence with a general later-stage trend across EVMs where $10M+ grew by 4PP in their share of total transactions to reach a new record of 12%. Surely, all key industries in investor mandates have received their fair share of Later-Stage deals for example in E-commerce KSA-based Sary closed $75M in their Series C and Egypt-based MaxAB closed $55M in their Series A, and in T&L UAE-based iMile and Lyve Global secured $40M and $35M in their Series A and Series B respectively.
However, this came with a strong opportunity cost where Early-Stage funding rounds (<$500K) took a dip across MENA in 2021. Following a 3-year consecutive dip in Early-Stage deals, MENA recorded a new all-time of Early-Stage deal share accounting for less than 50% of all transactions. The Early-Stage phenomena trickled down across all top geographies including in Saudi Arabia where Early-Stage deal share went below the 40% mark and in the UAE Early-Stage where deal share went even lower than 30%. However, it’s not all dire for the top 3 geographies where Egypt is still positioned as a hub for emerging ventures keeping a healthy pipeline of early-stage funding. In 2021, Egypt remains the only geography of the top 3 to observe an 8PP increase in Early-Stage deal share YoY courtesy of efforts by investors like Flat6Labs, 500 Global, SOSV, Edventures, Falak Startups as well as angel networks like AUC Angels and Alex Angels
Rise of FinTech and F&B Comeback
The FinTech sector in MENA gained more momentum in 2021 with major FinTech rounds closed in UAE including by payments provider Tabby and Crypto-powered FinTech BitOasis, FinTech rounds in Bahrain by payment gateway provider Tarabut Gateway and Crypto Exchange platform CoinMENA, and across MENA with major rounds closed by Rasan Information Technology (KSA), Expensya (Tunis), and Dopay (Egypt). While the industry reigned atop the most active industries in MENA 2021 observing a 44% YoY growth in number of transactions, it made out second in terms of VC investment after Food & Beverage which made a stellar come back this year.
The success of MENA-based FinTech startups in raising sizable investments over the years has been reflective of the support by governments through innovation initiatives, capital investment, and regulatory initiatives like Sandboxes. The Abu Dhabi Global Market RegLab introduced by the Financial Services Regulatory Authority (FSRA) in 2016 graduated InsurTech YallaCompare while an Innovation Testing License introduced by the Dubai Financial Services Authority in 2017 paved the way for investing and asset management platform Sarwa to emerge, and surely both startups have been targets of major investments over the past 2 years. Beyond that, FinTech solutions have been a great booster for market offerings which could be traced in acquisitions like that of F&B platform aggregator Foodics to Jordan-based POSRocket or in the acquisition of payment solutions Karny.ma by B2B platform Chari over the past year.
Access more data in our recently released reports: Startup Funding-2022 Emerging Venture Markets, 2022 MENA Venture Investment Report, 2021 Saudi Arabia Venture Capital Report brought to you by SVC, and 2022 UAE Venture Investment Report
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