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MENA REGION: VC TRENDS 2020 AND BEYOND

I’ve spoken lots about how COVID has accelerated the acceptance and adoption of technology. For all the awful things that have happened due to the pandemic, it has clearly formed the tipping point for a technology driven revolution. Very few industries will look the same, function the same or even have the same incumbents leading them in the next 5 to 10 years.

One of the most visible uptakes has been in webinars, and the quantity and quality of these now available means audiences can quickly access information and key stakeholders.

Last month @SiliconValleyBank and @TechWadi hosted a GCC Venture Capital session, bringing together some of the most prominent investors in the region @BECOCapital @GlobalVentures @MiddleEastVenturePartners @500Startups to discuss the trends being seen through the current cycle.

From the 60 minute session, there were three major conversation points.

Companies have been triaged and sit in one of three groups.

Thrivers
Survivors
Strugglers

VC firms have had to be diligent in analysing each of their portfolio companies to understand how each has been impacted by COVID and what support they need moving forward. The surplus of dry powder that once existed has been primarily reserved for portfolio companies that sit in the top tier Thriver category.

Survivors and Strugglers are being supported by their existing investors to pivot, align to the current market needs and identify new potential sources of investment, the latter being a particular challenge.

Remaining runway, burn rates and the timelines to raise capital do not align.

When investors carried out an analysis of their portfolio companies in March, the average Startup/SME had around 10 – 12 months of runway, meaning that as of July those same companies are now operating on a runway of 7 to 9 months. This is concerning when you factor in that the typical capital raise remains more than 9+ months in “normal” market conditions.
For Survivors and Strugglers, the expectation is that the capital raise process will be even longer as opportunities to invest in Thriver companies take priority. The ability to quickly find investors and access capital is more business-critical than ever.

This crisis is a catalyst for the tech industry to boom but will create more competition.

Every crisis creates opportunity and certainly that has been the cause for companies in the technology sphere. Customers have been quick to adopt solutions (check out the performance of Zoom in 2019 versus today), meaning that it’s become faster and in some cases easier for tech companies to show proof of concept and onboard new users. As more companies move into the space however, what we will see is a much more highly competitive marketplace.

While it is universally accepted that adversity leads to innovation, the big concern still remains that through current tools, companies lack the ability to raise capital faster than they’re spending it; meaning that there is a high probability that much of that innovation will never come to fruition. In a market where CEOs and management teams are expected to pivot their business, create new product, or even overhaul their entire business model, they simply do not have the capacity to take on what is essentially a full-time job attempting to raise funds.

With many of the traditional sourcing channels closed, investors now find themselves faced with the question of how to find the industry Thrivers that sit outside of their own pool of portfolio companies. In a period where speed and accuracy are paramount, VC firms direct access to live and relevant deals, ensuring that they don’t miss out on the region’s next big investment opportunity.

It is against this backdrop that we launch N2 technology this month, connecting MENA SMEs and Investors, in order to accelerate the process of raising and deploying capital. MEVCA
You can read more on how we do this and register by visiting www.n2.eco

Thanks to Amir FarhaNoor SweidWalid Mansour and Sharif El-Badawi for the insights and to Andy Tsao and Priya Rajan for hosting

Derek Watson
Co-Founder
N2 Technology


Watch the full webinar session – recorded version below: