Emerging Venture Markets: Takeaways from an Exceptional Year
MAGNiTT CEO Philip Bahoshy takes a dive into some key takeaways from the past year and opens new horizons in the years to come for the VC ecosystem in Emerging Venture Markets.
Request specific data sets, export tailored directories, and explore the full potential of our Platform. Reach out to our Sales Team
With the release of our much-anticipated State of Startup Funding-2022 Emerging Venture Markets report available for free, we take the time to reflect upon the intricacies and remarkable VC trends in our Emerging Venture Markets.
This year we observed impressive entrepreneurial spirit from VC ecosystems across the Emerging Venture Markets that we cover in the Middle East, Africa, Pakistan, and Turkey. While the global pandemic posed great pressures on governments, the private sector, and startup ecosystems alike; the year 2021 marked the resurgence of VC activity with record-highs across the board. This was reflected in the 228% YoY growth in funding which drove capital deployed in EVMs to cross the $6Bn mark. We also observed a 30% increase in transactions closed with a specific surge of later-stage deals and surely an unprecedented surge of Mega Deals. While 2021 proved to be an exceptional year for VC on all fronts, here are some key takeaways we think are of most interest moving forward.
The power of cross-pollination
It has become clearer than ever that the true potential for startups in Emerging Venture Markets lies in the cross-pollination across geographies. This pursuit of scale has resulted in the creation of true regional players. These companies have emerged both organically through expansion or inorganically through acquisition. Success stories that highlight the latter include Nigerian HealthTech Helium health acquiring Qatari Meddy, UAE-based Trukker acquiring Pakistan-based Trucksher, or UAE-based Fenix acquiring its Turkish counterpart Palm. Scale is the name of the game, and no doubt a big prediction for 2022 will be more companies in different areas expanding across geographical borders. In light of that, what we’re most excited about at MAGNiTT, is ensuring that we can provide the information transparency needed to break these silos and detail out what were previously opaque markets.
As local startups prove successful in their scaling efforts, we’ve also been recording a burgeoning interest from international players in our Emerging Venture Market space. This has been highlighted by the record participation of investors across EVMs. In the MENA region, the number of international investors backing MENA-based startups grew by 146% since 2019. While in Pakistan 70% of the investors who backed Pakistan-based startups in 2021 were international. Reflecting ecosystem attractivity, EVMs welcomed first-time investors like USA-based Wavemaker Partners and Silver Lake while returning regional and global investors like Shorooq Partners, Global Founders Capital, and 500 Global, to name a few, expanded their mandates to invest across all EVM geographies. Even more, the local market depth and intricate innovation of home-grown startups presented attractive market entry propositions for more global players like Delivery Hero, Freshworks, and Zynga to enter the local markets. As a result, 30% of all acquisitions in 2021 were by international acquirers.
Mega Deals are here to stay
Looking back 12 months, with access to continuously refined data, we were able to correctly predict that VC investment in MENA will cross the $2Bn mark in 2021 which it did with an excess of $500M. We’ve also predicted the past year will observe a record number of exits across geographies, and surely more than 2x the number of Exits were recorded YoY to set a new all-time high.
Surely, with the plight towards de-risked later-stage deals in 2021, later-stage funding rounds (of $10M+) grew by 4PP between 2020 and 2021, to account for 12% of all transactions closed across geographies. This growth was observed as MENA records a 10% later-stage deal share of total transactions, Africa 11% (up by 3PP YoY), Pakistan 9%, and Turkey with a conservative 6%. A prediction we did not make, however, is the unprecedented surge of Mega Deals ($100M+). In fact, the number of Mega Deals raised last year alone was equal to that recorded over the past four years combined. As we celebrate 3 Megadeals by Turkey-based Getir, Saudi’s first-ever Megadeal by Unifonic, Nigeria’s 2 Mega Deals by Flutterwave and Opay, and a plethora of similar success stories, we’re also cautious of the 4-year consecutive decline in Early-Stage transactions. As the Early-Stage round (<$500K) share of total deals across EVMs fell by 30% since 2018, the challenge of building angel communities and ensuring proper infrastructures for Early-Stage ventures still lies ahead.
With that in mind, supporting key stakeholders and decision-makers in driving investment and infrastructural growth remains core to our mission at MAGNiTT. Moving forward, as we continuously grow to service stakeholders regionally and globally, our main focus gravitates around product development, geographical expansion, and data depth. A key objective over the next year, while we explore opportunities for further expansion, will be to tackle the challenge of valuation transparency to better serve our clients with relevant and effective data across the geographies we cover. We’ve also set forth to develop greater analytical tools for our clients, building granular evaluation and prediction avenues to hone their foresight and back their decision-making efforts.
Check out our most recently released reports: Startup Funding-2022 Emerging Venture Markets, MENA 2022 Venture Investment Report, 2021 Saudi Arabia Venture Capital Report brought to you by SVC.
A few years back we embarked on a journey of recording VC activity in what we identified as Emerging Venture Markets. As venture ecosystems continuously evolve to observe more watershed moments and critical years such as this one, we are excited about the role we play to support this growth and look forward to a promising future. For the years to come, and as we expand our team and platform offering, we wish to empower more stakeholders with effective data and benchmarking opportunities to drive their decisions home and record their impact on these fast-evolving VC communities.
Scan this venture space. Access real-time data on 21,400+ startups in Emerging Venture Markets