After reaching new heights in 2021, VC funding in EMEA slowed sharply in 2022.
While final full-year tallies are not settled yet, data from the first three quarters suggests that startups in Europe, the Middle East and Africa (EMEA) have clearly felt the chill of a funding winter, despite a relatively robust first half.
In this rundown of the year in funding, PYMNTS looks at the effects of the global economic downturn on venture capital (VC) investing across the EMEA region.
Europe: Market Conditions Hit Startup Valuations
As always, Europe took the lion’s share of EMEA VC dollars in 2022, and in the first half of the year was on track to surpass €100 billion in total funding for the second consecutive year.
But then Q3 happened, and it now looks as if the continent’s startups will close the year having raised less than €90 billion.
Retaining its title as a powerhouse of European innovation, the U.K. attracted the largest amount of investment of any country in the region. Yet nonetheless, in a pattern repeated across the continent, the country failed to beat its 2021 levels of investment from the second quarter onward.
The U.K.’s biggest VC round came courtesy of the online payments firm Checkout.com, which raised $1 billion in January at a $40 billion valuation.
That being said, earlier this month PYMNTS reported that the firm has reduced its internal valuation to around $11 billion to better reflect market conditions.
Middle East: UAE Still Leads but Saudi Arabia Hot in Pursuit
In the Middle East, VC investment has followed a similar pattern to that observed elsewhere — a strong start to the year was followed by a second-quarter slowdown and a drop-off in the third quarter.
Notably, Saudi Arabia has managed to buck the wider regional trend, with the gulf country observing year-over-year (YoY) growth in VC investment in every quarter so far this year.
Saudi Arabia now even rivals United Arab Emirates (UAE) in terms of startup funding, and for the first time in Q2 2022 attracted more VC investment than its Gulf Cooperation Council (GCC) neighbor. The highest-value round of the year went to the restaurant tech firm Foodics, which raised a $170 million Series C in April.
But while Saudi Arabian startups are catching up with their Emirati peers, the UAE is still the only country in the GCC able to consistently pull in $100 million-plus funding rounds.
In 2022, the UAE’s position as a key regional financial center remains critical in helping to attract VC investment.
For example, some of the country’s biggest VC checks written this year have gone to companies that are investors themselves, such as the $150 million raised by the blockchain gaming firm Fenix Games, which will use the fresh capital to acquire, invest in and publish games made by smaller studios.
In what might prove to be the region’s biggest off-market investment deal of the year, on Monday (Dec. 19), the Dubai-based technology development and investment company Astra Tech announced that it has picked up $500 million from G42, a holding company for artificial intelligence (AI) businesses.
Africa Holds Off Slowdown Until Q3
After a record-breaking 2021, in which VC firms invested $5.2 billion in African startups, the continent started out this year equally strong. In the first half of the year, the region was able to sustain YoY growth in total VC funding.
In an interview with PYMNTS in July, Obi Emetarom, co-founder and managing director at Nigerian FinTech AppZone, said that “in spite of the [investment] winter, there is a lot of cash out there,” and that Africa had been the “least hit” as funding dried up.
However, although Africa’s VC ecosystem enjoyed a promising start to the year, Emetarom’s optimism wasn’t shared by everyone.
In August, one VC fund manager, Maurizio Caio, managing partner at TLcom Capital told PYMNTS that “Africa is maybe feeling less of a pinch so far, [but it’s only because] there’s less stuff to pinch.”
By the close of the third quarter, it was apparent that Africa’s initial immunity to investors’ more tightfisted attitude couldn’t last forever.
The exception to the rule is Kenya, which joins Saudi Arabia one of the few countries in EMEA to experience YoY growth in VC funding during the third quarter.
Kenya’s outlier position in the third quarter was helped by a string of FinTech deals that ranked among some of the largest on the continent, including a $10 million Series A round for the InsureTech firm Turaco.
As PYMNTS’ FinTech funding map reveals, Kenya is one of Africa’s preeminent FinTech hot spots, with M-KOPA’s $263.6 million in disclosed funding topping even South Africa’s most successful FinTech startups and beaten only by a handful of heavyweight firms in Nigeria.
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