Interview with Julie Ruvolo, Managing Director – Venture Capital
Julie: GPCA is an independent nonprofit membership organization representing private capital investors who manage more than US$2 trillion in assets across Asia, Latin America, Africa, Central & Eastern Europe and the Middle East. Our members are fund and institutional investors including private equity (PE), growth equity, venture capital (VC), private credit, real assets, pension plans and sovereign wealth funds, among others.
GPCA connects and influences key market participants and promotes the sectors, strategies and deals that will drive investment returns and meet societal needs. A cornerstone of GPCA’s work is generating proprietary data and research, like our recent MENA Data Insight report.
Julie: Following several years of largely dormant activity in the region, we have seen a significant resurgence in private capital investment in MENA since the beginning of 2020.
The global digital revolution, accelerated by COVID-19, is driving private capital momentum in the region, including record VC activity (USD1.4b invested in 1H 2022) and landmark PE deals for mature, tech-enabled companies like VFS Global (USD1.1b) and Group42 (USD800m).
At the same time, governments in the region are monetizing legacy energy assets, entering sale and lease-back agreements with private infrastructure funds, and using some of that capital to invest in local tech.
Finally, Middle East sovereign wealth funds have established themselves as among the most prominent global investors, participating in some of the largest recent infrastructure and tech deals in Asia, CEE and Africa.
Julie: Tech-enabled businesses across sectors are attracting private capital investment. On the PE side, we see the most activity in mature IT and business & professional services companies, as well as healthcare platforms launched from Dubai’s medical free zone. VC activity is led by fintechs meeting demand for crypto investment services, digital payments and ‘buy now, pay later’ options. Another important branch are restaurant tech & cloud kitchen startups, including a USD11m Series B for Bahrain-based Eat App a few weeks ago.
Julie: Egypt’s entrepreneurial ecosystem benefits from relatively high levels of engineering talent and local institutional capital. Given its trade linkages, startups in the region are also well poised for expansion into both MENA and sub-Saharan Africa. At the same time, we see government initiatives aimed at driving capital into private businesses, such as recent regulations requiring Egyptian banks to allocate 25% of their loan portfolios to support local MSMEs, with private capital funds representing one path to fulfilling their quotas. As a result, Egypt-focused funds have represented 44% of funds raised for MENA since 2021.
Julie: MENA activity has climbed rapidly in recent years from a low base. Overall investment totals have been driven up by recent outsized oil & gas deals, which represent some of the largest private capital investments recorded by GPCA since 2008. Still, PE activity remains below other global private capital (GPC) markets, but we are starting to see big ticket deals in MENA led by global players like Blackstone and Silver Lake.
And while VC activity remains below other GPC markets in absolute terms, MENA was one of the markets where we saw an uptick in deal activity in Q2 2022 amidst the global tech correction. VC activity in MENA today is comparable to the activity levels we recorded in Southeast Asia and Latin America in 2018.
Julie: There is a lot of uncertainty across global markets right now, but investors in our network expect to continue to find strong opportunities in MENA.
Given the global energy crisis and climate change concerns, investors are chasing environmental sustainability opportunities across our markets, but we have yet to see this theme play out in MENA. There have been a few notable climate-focused deals: for example, in April 2022, Actis acquired a 50% stake in Dubai-based Emicool with the goal of creating a sustainable and energy-efficient cooling platform for the MENA region. We hope to see more climate-focused deals in 2023, particularly as countries in the region aim to diversify their energy sources away from oil & gas.