Following a record-breaking 2021, startups in the Middle East, Africa, Pakistan, and Turkey continued to receive large sums of cash in the first half of this year, according to the most recent report.
However, market momentum has begun to show the first signs of a slowdown due to global economic obstacles such as market swings, as well as rising borrowing and operational costs.
From January to June, ventures in the Middle East, Africa, Pakistan, and Turkey raised more than $5 billion in capital, according to MAGNiTT, a startup data provider for emerging venture markets, in its “H1 2022 Emerging Venture Markets Report.”
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With over half the number of total transactions, this year’s funding has already gathered more than 65 percent of 2021’s record funding, mostly driven by mega deals, which refer to individual investment rounds of more than $100 million.
In 2021, the MENAPT VC ecosystem had raised less than $7 billion in capital.
The pace set last year has continued into this year, making January-March a record quarter. According to MAGNiTT, nine megadeals were closed this year, representing for 40% of total capital deployed in the first half.
Nigeria’s Flutterwave, Turkey’s Getir, and the United Arab Emirates’ Pure Harvest Smart Farms closed the deals.
According to MAGNiTT, agreements worth more than $100 million, as well as the prevalence of larger-sized rounds, drove the ecosystem across emerging venture markets (EVM) to aggregate 70% of the 2021 fiscal year record funding.
According to the report, all four EVMs, namely MENA, Africa, Pakistan, and Turkey, showed year-over-year contract growth in the first half of 2021.
Startups in Turkey raised more than $1 billion in the first half of the year, almost entirely through mega deals that accounted for about 80% of total funds raised.
Getir, the pioneer of speedy grocery delivery, raised the lion’s share of investment, raising $768 million of the $1.1 billion aggregated by the major deals, as it did last year.
According to the research, investment in the MENA area increased by about 50% year on year to near $2 billion. The majority of this investment has come from acquisitions totaling more than $100 million.
The figure represented a 46 percent increase over the previous year and accounted for approximately 62 percent of all capital raised last year.
The importance of megadeals and larger-sized rounds was mirrored in the significant increase in average round sizes.
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According to the research, Turkey had a mean round size of $13.9 million, while MENA had a mean round size of $8.2 million, up from $5.8 million last year.
“The prevalence of larger-sized rounds led to a significant increase in the value of average fund rounds throughout emerging venture markets,” stated MAGNiTT founder and CEO Philip Bahoshy.
The first half of the year saw larger-sized rounds conclude, but fewer deals than the previous year.
“In fact, Africa was the only EVM to exceed 50% of total transactions last year, while MENA, Pakistan, and Turkey averaged 43 percent in H1 2022 – anticipating an end-of-year funding imbalance coupled with a worldwide market cooling and a shift in VC dynamics.”
In comparison to the first quarter, MAGNiTT reported that the market turned bearish in the second three months, with a slowdown in venture capital activity resulting in a 65 percent quarter-over-quarter fall in capital investment across EVMs.
According to the report, MENA, Africa, Turkey, and Pakistan witnessed a 47 percent drop in funding quarter over quarter, while all except Turkey saw a decline in transactions.
According to the research, Turkey enjoyed an extraordinary first quarter, while the second three-month period was its worst since the third quarter of 2020.
“The funding activity in MENAPT in Q2 has signalled a more cautious VC activity for the rest of the year.” It remains to be seen whether EVMs can outperform last year’s results,” Bahoshy remarked.