The billion benchmark: Philip Bahoshy's overview of 2020's Emerging Venture Markets ecosystem
After what can only be described as an incredibly unpredictable and unprecedented year, MAGNiTT CEO and Founder, Philip Bahoshy reflects on the last 12 months in the Emerging Venture Markets entrepreneurial space, following the launch of our 2021 Emerging Venture Markets Report. Philip provides an expert take on his former predictions for the year and delves into the key data points from the report.
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What a rollercoaster year it has been! Exactly one year ago, when we published MAGNiTT’s 2019 Annual Venture Report, I stood on stage and predicted that - barring war or natural disaster - we would see $1BN invested in MENA’s startups in 2020. We saw neither war nor natural disaster, instead, a global pandemic that changed the world.
Pushing the boundaries
It has been a difficult year for all of us in many ways, and it is likely that the impact of the pandemic will continue to affect the global population as well as the macro-economic outlook for our region long into 2021. But 2020 was also a transformative year. For entrepreneurship ecosystems across Emerging Venture Markets (EVMs), a term we now use to identify startup ecosystems that are quickly developing, it was 12 months where decades of evolution happened. In fact, 2020 was a tipping point for the venture-backed technology startups across MENA, Turkey, and Pakistan that we track and cover.
As a matter of necessity, digital adoption hurdles were rapidly overcome in industries that saw unprecedented surges in demand. More than ever before, we witnessed how technology is solving new day-to-day challenges of social distancing for both consumers and businesses. This fundamental shift in business-as-usual has had the side-effect of growing addressable markets and creating more opportunities for tech solutions, especially those that can scale across borders. Governments embraced the importance of tech companies, many of whom were able to overcome challenges that traditional SMEs were not able to weather. We’re seeing founders, investors, governments, and enablers capitalizing on these opportunities and working to solve the painpoints of the ‘new normal,’ as venture-backed startups look set to play a key role in national economies, employment, and GDP returns in the immediate future.
Why "Emerging Venture Markets"
2020, despite its challenges, has been a defining year for us at MAGNiTT. We survived the pandemic, doubled the size of the team, have materially grown our database, and expanded beyond MENA for the first time to cover Turkey and Pakistan as part of our geographical expansion strategy. I would like to take this opportunity to thank our team for their dedication and resilience in the face of adversity. As we look to scale across Emerging Venture Markets, with inherently different attributes to those of more developed startups ecosystems like the US and Europe, our goal is to track, analyse, and compare data from startup ecosystems with similarities to create a tool that will provide real-time intelligence to this community and its stakeholders. At our office, we have a phrase on our wall that states: ‘Passion provides purpose, but data drives decisions’. In 2020, I believe this rings true more than ever. We are continually driven by the belief that data is the key driver to smart decision making. With this core value, we aim to service investors, government officials, founders, and corporate analysts to make more informed decisions and policies in 2021 and beyond.
Data in action
Allow me to briefly show you just one example of this data in action. Incidentally, my bold prediction in 2019 was correct: In 2020, MENA-based startups saw $1BN+ invested. On the surface, this is a positive indicator. But the incorporation of more data-points paints a more nuanced picture: This amount was invested in fewer startups.
Against the backdrop of pandemic uncertainty, investors tended to skew towards larger investments in later-stage startups, clearly at the expense of smaller-tickets in earlier stage companies. Two data points that I would like to highlight are:
1) Pre-seed investments made up 46% of all investments in 2019, while in 2020 this number dropped to 28%
2) The total number of startups invested as part of an accelerator program, those traditionally participating in offline programs, dropped by 42% in 2020
How this particular shift will affect the startup pipeline for investors in the next 12 months, is something that the entire entrepreneurship ecosystem needs to consider and plan for now.
As you read this report, or any of our reports, you will come across a multitude of data-driven insights, aggregated from thousands of startup investments amounting to $6BN+ (to-date) from across MENA, Pakistan, and Turkey that are relevant to you in varying degrees. This is a pivotal moment for all of us, and we would like to invite you to build this data into your decisions in 2021.
Following the launch of our new 2021 Emerging Venture Markets Report, MAGNiTT 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.