● Funding
in the Middle East, Africa, Pakistan,
and Turkey crossed the $7 billion
mark again in 2022 thanks to a record Q1, but deals registered a 4% drop from
2021
● Fintech investment led the
way despite the “Crypto Crash” while Emerging Venture
Markets continued to mimic the global VC landscape
● MAGNiTT
predicts correction in valuations will present significant M&A opportunities in 2023
● Pakistan tripled its exits
in 2022, exceeding its total in the last five years
MAGNiTT,
the largest verified data platform tracking venture capital investments across
emerging markets, released the 2023 edition of its annual Emerging Venture Markets Report today. The
report continues MAGNiTT’s tradition
of analysing and comparing VC
investments in
technology startups headquartered in the Middle East, Africa, Pakistan, and
Turkey (MEAPT) region.
Topline data from MAGNiTT’s latest report reveals sustained levels of funding – exceeding
$7 billion for the second year in a row – and a
steady number of transactions in MEAPT,
driven by a record first quarter in 2022. However, further analysis shows a decline in funding and deals in subsequent
quarters – in line with a worldwide pullback in venture investing – reflecting
caution by VCs as a result of several macroeconomic developments and a climate
of general uncertainty.
Alibaba.com to discuss e-commerce potential for Manufacturers, traders & entrepreneurs of Lahore on January 19
Within Emerging Venture Markets (EVMs), the MENA
region continues to attract significant interest, surpassing its 2021
funding levels and crossing the $3 billion mark in 2022. This increase was largely driven by a 72% jump in funding for
Saudi Arabian startups, while Egypt
led the number of deals in MENA at
160 transactions. Africa saw close to
$3 billion of
investment as well, driven by Nigerian startups
raising 29% of funding and closing 198 deals. Meanwhile, Turkey led EVMs
overall in number of deals, with 295 transactions in 2022.
Philip Bahoshy,
Chief Executive Officer of MAGNiTT, commented on the report by saying, “The
venture investment landscape across the markets we cover was turbulent in 2022,
echoing the global industry. We saw record highs in Q1 followed by rapid
realignment as macroeconomic challenges took hold. Interestingly, deeper analysis of the data showed
greater complexity in terms of investment divergence and funding success across
the different geographies.
Descon partners with US firm to provide engineering services in Gulf countries
Bahoshy added, “More than ever, and particularly during this uncertain
environment, there is greater engagement from governments, regulators,
investors, and founders with the
real-time analytics and the unprecedented depth
and verification we are able to deliver via the MAGNiTT data platform. As we
prepare to expand into Southeast Asia
this year and launch a new predictive analytics capability, we can only anticipate greater progress
for this
promising industry, supported by robust policy- and decision-making that is driven
by insightful data.”
Key Highlights
1. A record-high
first quarter drove funding in Emerging Venture
Markets, which crossed the $7 billion mark once again in 2022. However, total EVM funding of $7.24 billion in
2022 is 2.3% lower than the $7.41 billion
achieved in 2021. For context, there was a more than 238% jump in total funding
from 2020-2021 ($2.19 billion to $7.41 billion respectively).
2. Funding
amounts for deals of less than $100 million (or “mega” deals) increased by
11% from $4.14 billion to $4.60 billion. Most of
these were made in Q1, likely an
“afterburn” from
2021 as a result of delayed impact from more developed markets.
3. Funding and deals declined in Q2 and Q3
then settled in Q4. This continued
the downward trajectory from Q1 in line with the global venture capital
landscape, marking an uncertain environment as we enter 2023.
4. The evolution of EVM deal sizes in 2021
continued into 2022, with round sizes of
$1M-$5M, $5M-$20M, and $20M+ each gaining in
proportion over those in the 0-$1 million range.
5. Exits across EVMs continued their
upward trajectory to 144 in 2022, with an increase of 36% over 2021, reflecting
continued maturity in the region’s VC
industry. Middle East exits were the
highest among these at 49, an increase of 69% over 2021.
6. Fintech investments continued to lead
EVM deals in 2022, followed by E-commerce, Transport
& Logistics, Enterprise Software, and Healthcare in a repeat of 2021
rankings.
Pakistan Highlights
1. Pakistan-headquartered startups raised
$315 million in funding across 72 deals, with six exits in 2022
2. More than half the funding that
Pakistan saw was covered by its top five deals in
2022.
3. Although the number of deals in
Pakistan fell by 20% in 2022, funding declined by only 5.4%.
4. Exits reported in Pakistan tripled in
2022, thereby exceeding the exits of the last five years combined.
Record Exits Create Opportunities for
Consolidation
With Emerging Venture
Markets often manifesting the broader macro story playing out from prior
periods, the broad correction in startup valuations, and along with higher
interest rates and subsequent fundraising challenges and cash conservation,
opens up opportunities for VCs, corporates, international startups, and
regional players to consolidate their market positions by acquiring attractive,
promising companies in EVMs at lower valuations, which could drive significant
M&A activity in 2023.
“We witnessed a record number of exits in
2022, increasing by 36% to an overall record of
144,” Bahoshy
explained. “While usually an indicator of industry maturity, we can’t tell how
many of these are a consequence of the
challenging funding landscape or delivering returns for their investors. What
is clear is that a normalisation of valuations to pre-pandemic norms is likely
to see this exit trend continue into 2023 as opportunities arise for
international startups, regional corporates and well-funded companies from the
region."
Bahoshy also noted that, aside from M&A activity,
opportunities will still abound for smaller startups at earlier stages of
funding. “As liquidity becomes harder to come by, especially for larger investments, it is likely that startups
raising SEED rounds or early Series A will be in a sweet spot thanks to their
more realistic valuations, specifically those with product-market fit and a
clear path to monetisation for investors that still have dry powder,” he said.
MAGNiTT’s
Emerging Venture Markets 2023 Report,
which highlights the venture capital trends in the Middle East, Africa, Pakistan, and Turkey
is available online
to download for free, with a
full 100+ page report available for purchase that dives deeper by industry, country,
investors, exits, and more. The data
underpinning the Emerging Venture
Markets
2023 report is
sourced from the MAGNiTT platform.
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