Ecosystem Notes: VC Impact Investment in MENA

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As Venture ecosystems in MENA and across Emerging Venture Markets catch up with the latest world-class technologies and claim their pioneering positions in the region, we take the time to expand on our understanding of real VC investment impact. 2021 has been an exceptional year for VC investment, with funding nearing the $3Bn mark. Yet, what’s even more interesting is that this seems to be an indicator of a new norm- a larger VC ecosystem in MENA with transborder openness and growth capital fitting of scale potential. If the true attributes of venture capital revolve around unlocking the potential of present innovations to fast-track a better-fitting future, then surely imagining a future where VC and sustainability come hand in hand is on the horizon. 

Last week we released our debut 2021 MENA VC Impact Investment Report brought together with Wa’ed, the entrepreneurship arm of Saudi Aramco. The report presents data on Impact Investment activity in MENA between 2016 and Q3 2021. To GET you up to speed on what that means: it is VC investments that have an environmental, social, and economic impact beyond revenue generation. With 16% of total deals and 7% of VC capital deployed in MENA backing Impact-driven startups, there were many exemplary ventures and sectors paving the way. 

The five most-funded startups accounted for 32% of all VC Impact investment made into MENA-based ventures between 2016 and Q3 YTD 2021. Startups in Energy like Yellow Door Energy (UAE) and KarmSolar (EGY) ranked atop of the most funded startups in impact investment.  While Saudi-based startups closed the lion’s share of transactions, MENA observed a very promising record of investors and enablers driving the growth in investment funding with Egypt-based Flat6Labs in the lead of deals closed with Saudi Aramco Entrepreneurship Center, 500 Global, KAUST Innovation, and IM Capital following suite. 

As we dive into Impact investing for the first time, we invite Key Stakeholders and major ecosystem players in MENA to share their thoughts on impact investing at the age of VC and Technological breakthroughs: 
 


 


Salman T. Jaffrey | Chief Investment Officer, Wa’ed Ventures

Last year, more than $715 billion was directed globally towards impact investment, a huge increase from 2019’s figure of $502 billion. Although the majority of this capital was allocated in the US, Canada, and Sub-Saharan Africa, both investors and startups in Saudi and the MENA region are increasingly looking for ways to become more active participants in this space. As part of our initiatives to focus on sustainability and advancing investor awareness, Wa’ed was proud to sponsor the second edition of the Conscious Investor Fellowship program with NYUAD and VentureSouq, which takes a select cohort of investors and stakeholders on an intense journey of impact investing.

Hattan Ahmed | Head of Kaust Entrepreneurship Center

KAUST has a mission to advance research and create new technologies that address our greatest global challenge in food, water, energy, and the environment. We are starting to see more deep tech startups emerge regionally, disrupting existing industries and creating new solutions to these challenges. Deep tech startups are increasingly attracting conscious investors locally and globally. As the deep tech heard of Saudi Arabia, KAUST is uniquely positioned to nurture this ecosystem for real economic transformation in the region.

Noor Sweid | Chairwoman, Middle East Venture Capital Association

Time has shown that socially and economically impactful public companies tend to outperform those that aren’t. Private companies are no different. The future of the region’s investment landscape will be underpinned by an understanding that technology companies are not only fruitful investments with positive prospects for financial returns but also a vehicle for social change and impact. We will witness more investors choosing to allocate capital in businesses that are making positive contributions in areas such as financial, healthcare, education, equality, and job creation. The future of tech lies with companies that do well and do good.

Ryan Lefers | CEO & Co-founder, Red Sea Farms

The AgriTech sector is booming across MENA. Recent events such as COVID-19 pandemic and the Suez Canal supply chain disruption have highlighted the urgent need for local, sustainable food production. Through tech innovation, it is possible to grow food in the harshest of desert climates while reducing carbon and water footprints; this is our primary aim at Red Sea Farms. Economically viable and environmentally sustainable solutions are currently of great interest to regional investors, reflecting an overarching global trend for investment in companies aligned to the UN SDGs. Red Sea Farms has experienced this first-hand with the recent closure of its oversubscribed Pre Series A round.

 

 

Qusai AlSaif | CEO, Saudi Venture Capital, and Private Equity Association

The COVID-19 pandemic has pushed the ESG agenda across all aspects of the startup ecosystem, as equitable recovery is becoming inseparable from sustainable market growth. In Saudi Arabia and the MENA region, startup founders were the first to recognize that placing social and environmental responsibility at the core of the economic performance is the only way to accelerate the region’s entrepreneurial space. While impact measurements practices have a long way to mature, but as those metrics become more sophisticated globally, we need to strengthen our efforts to make sure we provide the necessary support for high potential, impact-driven, startups.


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