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January 2022 Global VC Ecosystems Recap

Global VC Ecosystems Monthly Recap is a newsletter covering relevant stories on venture capital, startups, and technology from select emerging market startup ecosystems. If you’re into learning about the people solving problems and creating the future in developing economies, this newsletter is for you.

Hello! I know it’s been a while since I wrote a newsletter. The last few months, I’ve focused on getting the podcast out on a regular interval while traveling through South America. I still have one remaining episode to publish in the coming weeks; then, I will be taking a break from the interviews until I kick off my next travels. In all, I’ve spent about a year covering Latin America (Covid-19 extended that a bit), but I’m heading to Africa to focus on that ecosystem in a couple of months!

In the meantime, I’m back in the U.S. I will try to keep this new format on a monthly cadence and cover one story from each ecosystem: relevant news, why it’s important, and what it means for that particular ecosystem. I want to keep it brief and straightforward to keep things easily digestible for those interested in the startup world in emerging markets but short on time (a.k.a. me). When my travels start up again, I’ll use this section to update people on each ecosystem I will visit for those who want to follow along. In April, I’ll be heading to Morocco.

Let me know what you think of the new format!

Newsworthy: Y Combinator announced in January that it is increasing its investmentsto $500K for startups that participate in its accelerator programs, offering $135K for 7% equity and an additional $375K in an uncapped SAFE agreement
  • Why it’s important: The top global accelerator has included an increasing amount of startups from emerging markets over the last decade and is seen as a golden ticket for its graduates to find investors. Founders are excited about the prospect of receiving more investment, but emerging market VCs are worried that the bigger checks will push them out of funding rounds.

 

Africa

The numbers are in, and they’re big. African VC investment dollars were over $4B in 2021, a record-breaking year.

  • Takeaway: the numbers are over double what was invested in 2020, as global VC funding has hit record highs and more investors look for yield in emerging markets.

Although VC funding has shattered records, there are still some drawbacks. Women-led startups accounted for less than 1% of funding, four countries were responsible for a vast majority of funds, and only 12 startups accounted for about $2B.

 

Asia-Pacific

Chinese digital assets group, HashKey, has announced plans to raise Asia’s largest crypto fund.

  • Confused? China recently banned all cryptocurrencies but is still pushing forward with NFTs and its digital yuan.

In the region, there is a mixed relationship with cryptocurrencies. It’s booming in Vietnam and the Philippines, but Thailand is looking to regulate them, and it seems that India can’t decide what they want to do. Either way, more global adoption by users in crypto ensures that VCs need to stay involved, regardless of the regulations in their home countries.

 

Europe

Europe is always tough to cover because most news focuses on the already developed markets within the region, but I thought this was cool. Sova VC has announced a $50M secondaries fund for the region. Selling secondary shares on the private market allows early stakeholders, such as company founders, to take some of their chips off the table and get some early liquidity.

  • Why it’s important: Founders typically become ecosystem enablers or VCs themselves. Giving them liquidity brings more private capital to the region and builds up developing startup ecosystems faster.

I won’t be surprised to see some of these early investors and founders with more cash begin to invest in emerging European startup hubs over the coming years.

 

Latin America

Colombian PropTech startup, La Haus, announced its first Bitcoin real estate transaction on the platform, allowing a Peruvian resident to buy property in Mexico with the cryptocurrency.

  • Zooming out: This story is less about La Haus and Bitcoin but is a microcosm of how cryptocurrencies empower LATAM’s citizens.

Not only has the crypto boom given individuals increased access to the middle class, but it helps hedge against high inflation (looking at you, Argentina) and cross-border exchange rates. Cryptocurrencies are allowing more accessible cross-border investment opportunities in LATAM.

 

Middle East

The MENA region raised $2.8B in VC funding in 2021, a 4x increase over 2020’s numbers. This number includes North Africa and overlaps with some of the African continent numbers mentioned above, Egypt being the most significant overlap.

  • Takeaway: UAE is still the top dog in the region, accounting for half of all funding. Top VC funds such as Sequoia Capital and Softbank also made their first investments in the region.

Global funds, such as Sequoia, entering a region is good news for all emerging markets as startups can bridge the funding gap from early to later stages. On the other hand, MENA sees the same constraints as Africa, as funding focuses geographically to only three countries and female founders only made up 1% of invested capital.

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