Capital Investments in Beauty and Cosmetics: Market Overview

Capital Investments in Beauty and Cosmetics: Market Overview

The global cosmetic and beauty market is anticipated to grow to $416 billion in 2028 with a CAGR of 7%. Although the COVID-19 pandemic had a significant negative impact during 2019 and 2020 on the market, the rise in CAGR is attributable to a strong rebound in consumer demand. The market exhibited lower growth of -11% and contracted in 2020, but grew to $254 billion in 2021. This shows that the market has constant demand and is returning to the pre-pandemic level as the effects of the pandemic decrease.

In this report, J&A will analyze the international capital market activity conducted within the beauty and cosmetics market between 2020 and 2022.

Market Overview

The beauty and cosmetics industry are segmented into three major categories: skin care, hair care, and makeup.

  • Skin care forms the largest segment of the cosmetics market with 34%. According to research, the average spend on skin care per person per year is over $1,200 USD in the USA.
  • Hair care maintained a market position of 23%, mostly due to younger consumers. The hair care segment is expected to grow with a CAGR of 6%.
  • The other segments of beauty and cosmetics include hygiene, oral care, and fragrance products with a combined 34% market share.
  • In 2020, a focus on beauty and cosmetics (due to the global COVID-19 pandemic) led to a spike in deal flow in the sector, especially in the Q4 time period with $26 billion in capital investments and 390 deals. The total average deal size in 2020 was $174 million.
  • In 2021 Q4 the largest deal was $29 billion, and a total of 430 deals were recorded.
  • In 2021 the average deal size was recorded at $201 million, which shows that the average deal size has increased significantly compared to 2020 when it was recorded at $173 million.
  • Between 2020 and 2022 Q2, 3,348 total deals deployed capital into the beauty and cosmetics market with $154 billion of capital deployed. The average deal size in the sector was $16 billion within that time frame.
  • The periods with the largest amount of capital invested were 2021 Q4 and 2022 Q1, due to the significant market growth with the global COVID-19 pandemic.
  • Jahani and Associates (J&A) anticipate that trend will continue to grow with notable increases in 2022 and forward.
  • Europe is leading the capital invested with 37% of the total raise. The beauty and cosmetics market is growing in the European market mostly. The scalability of the e-commerce market combined with the global pandemic effect on social media directly affected beauty and cosmetics products.
  • Asia has the second-largest capital investment with 33%. Additionally, China and Japan have the largest market size with $52 billion and $38 billion respectively. The technological research and developments in the specific market have grown respectively in the Asian region.
  • Due to their high-end quality of the products, the Korean market has an important place in the global market. In 2019, the market size was estimated at $10 billion. Korea is one of the top 10 beauty markets in the world and has 3% of the global market.
  • The USA holds 22% of the capital investments. The USA currently is the world’s largest beauty market, with about 20% share, followed by China at 13% and Japan at 8%.
  • South America has 3% of the capital investments and the market holds significant growth.
There is considerable growth in the beauty and cosmetics sector and also in the capital market between 2020 Q4 and 2021 Q4. The development of new technologies in the beauty and cosmetics industry has disrupted the existing ecosystem, and technological innovations are projected to significantly impact market growth in the USA and Korean regions in the beauty and cosmetic sectors. The 14% growth in the global e-commerce market makes beauty and cosmetics products more attractive, and the market more scalable for investments. J&A predicts a continued increase in capital market activity within the beauty and cosmetics sector in Southeast Asia and North America as economies become more interconnected and companies expand into new international markets.

Sources: Pitchbook Data, Inc.


How Will the US Economic Downturn Affect M&A Activity?

How Will the US Economic Downturn Affect M&A Activity?

Real GDP in the USA decreased by 0.9% in Q2 of 2022 according to the Bureau of Economic Analysis. This follows a 1.6% decrease in 2022 Q1, resulting in the USA economy falling into recession. The USA is not alone, with developed nations like Germany, Japan, and an array of others experiencing similar contractions according to Reuters.com. The global economy has been impacted by numerous exogenous shocks over the past 30 months, including lockdowns, supply chain crises, stimulus packages, and oil price hikes among others.

The economic conditions will undoubtedly affect capital markets, but the outcome remains uncertain. The reduction in liquidity could shrink capital market activity. Alternatively, a slowing business cycle could result in a buyer’s market, allowing for aggressive consolidation and roll-up strategies. This article will investigate the difference in capital market activity between 2021 H1 and 2022 H2 to determine the effects of the downturn in Western markets.

Why the USA Remains Critical to Capital Markets

  • The USA has contributed 64% of capital deployed in M&A deals since 2020, with a total spend of $4.33 trillion. Businesses in the UK, France, and Japan conducted significant M&A deals within the period with 10%, 5%, and 3% of capital deployed, respectively.
  • Over the same period, 22,178 announced deals have been conducted by companies from the USA.
  • The economic downturn in the USA and major Western economies will impact capital markets in 2022 and beyond.
  • Capital deployed in M&A deals globally increased by 67% from 2021 H1 ($1.15 trillion) to 2022 H2 ($1.91 trillion). Deal count within the period has remained stagnant with a 3%decrease between 2021 H1 (12,692 M&A transactions) and 2022 H1 (12,302 M&A transactions).
  • Median deal size increased from $19 million and $24 million in 2021 Q1 and Q2, respectively, to $31 million and $43 million in 2022 Q1 and Q2, respectively.
  • The highlights an increased appetite for acquisition despite economic downturns, as role-up strategics become increasingly aggressive leading to larger deal sizes. Challenging business conditions would drive the supply side demand while lower valuation would lead to an increase in demand for acquisitions.
  • Capital deployed in cross-border M&A deals by USA-based companies increased by 59% from 2021 H1 ($69 billion) to 2022 H2 ($169 billion). Deal count grew consistently by a 13% increase between 2021 H1 (706 M&A transactions) and 2022 H1 (813 M&A transactions).
  • Median deal size increased from $53 million and $46 million in 2021 Q1 and Q2, respectively, to $70 million and $150 million in 2022 Q1 and Q2, respectively.
  • The data suggest significant growth in cross-border M&A activity by USA-based companies. The degree of competition in domestic markets as well as more affordable valuations in international markets will continue to drive future cross-border transactions.
M&A in the first half of 2022 has grown significantly, with a 67% increase on 2021 capital deployment in the sector over the same time period. The true effects of a recession remain unknown. The data suggest that firms have capitalized on lower valuation multiples and challenging economic conditions to execute inorganic growth strategies. Retained profits achieved in 2021 are likely to be used to execute acquisitions. Liquidity within the market will continue to shrink as global monetary policies tighten, so it is uncertain whether the surge in M&A activity will continue. Current economic conditions present the ideal buyer’s M&A market.

Sources: www.bea.gov/data/gdp/gross-domestic-product, reuters.com/markets/europe/global-markets-recession-risk-2022-07-28, Pitchbook Data.


Global Vertical Farming Market

Global Vertical Farming Market

Vertical farming is an agricultural method to grow crops in vertically stacked layers. It incorporates controlled environment agriculture using soilless farming techniques, which provides better food quality with higher crop yields.

The COVID-19 pandemic and global geopolitical factors have impacted the food and agriculture sector, from supply chain disruption to shortage of food supplies. This has led many to adopt vertical farming technologies, to improve food security and increase farming capacity in urban and local environments. These major factors are contributing to the growth of this market, with a remarkable interest among investors to invest in vertical farms.

Overview of the Vertical Farming Industry

The global vertical farming industry is expected to grow from $3 billion in 2021 to $4 billion in 2022. Further, the market is forecast to grow at a compound annual growth rate (CAGR) of 26% to $21 billion by 2029. With the increase in population and the rise in demand for healthy and safe food, farmers are tending to use new methods and technologies in the agriculture industry, known as vertical farming. This report outlines announced investments made globally in vertical farm deals between 2017 and 2022.

 

Key Subsectors of the Vertical Farming Industry

Key Subsectors of the Vertical Farming Industry

1 – The Methodologies Of Vertical Farming

Vertical farming methodologies can be divided into hydroponics, aeroponics, and aquaponics based on the use of soil and water in the agricultural process. Farmers can have total control over a hydroponic system by using water more efficiently and improving the quality and taste of the produce. These and many other reasons are driving hydroponics to grow as a vertical farming methodology. Aeroponics leverages air to grow crops. Aquaponics is a method of growing plants and raising fish in water. Fish will feed the plants with their waste that converts into nitrates, and the plants will clean and filter the water before it returns to the fish tank.

2 – Structure Analysis

New and abandoned buildings are being used to deploy and develop vertical farms. Building-based vertical farms are growing across cities. For example, the NYC farming company Bowery Farming developed urban farms inside abandoned warehouses that provide fresh produce to local retailers and restaurants. The shipping container-based structure of vertical farming is projected to gain traction and growth in the coming years. These structures are used for developing indoor farms by controlling and monitoring all systems remotely from a computer or smartphone.

3 – Component Analysis

Various manufacturing components are used within vertical farming processes. LED lighting is becoming ideal for farms for its low operational cost and power consumption. This component, along with climate control, sensors, irrigations, and fertigation components, are driving the segment to grow rapidly and steadily.

Global Capital Market Activity Overview

  • Between 2017 and 2022, $14 billion was deployed across a total of 1,520 vertical farming deals in the analyzed period with an average deal size of $9 million during this period.
  • More than $660 million was deployed into 221 deals within the vertical farm sector in 2017, with an average deal size of $3 million.
  • The COVID-19 pandemic boosted investments in the vertical farms market between 2020 and 2021. The most active year for vertical farming has been 2021, with $6 billion deployed across a total of 332 deal counts and an average deal size of $17 million.

Announced Vertical Farming Deal Counts

  • Approximately 72% of deal counts were attributed to small deal sizes up to $5 million. This indicates the availability of a remarkable number of different start-ups and innovative technologies.
  • The deal sizes ranging from $5 million to $25 million own 18% of the total deal count. Compared to small deal sizes, these growth-stage companies indicate that there are many start-ups doing well in the market and gaining traction.
  • The lowest share of deal count goes to over $25 million deal sizes. This shows that the market is still fragmented with relatively few mature players.
  • The USA is leading the majority of deal counts in the vertical farming market with a 48% share of the global deal counts. This indicates the high presence of many vertical farms across the USA and the adoption of new technologies. The legalization of cannabis in the USA has also helped in the growth of the vertical farming market.
  • Europe holds second place for the highest deal count with 29% of the global count. This region is projected to drive the development of vertical farms in the upcoming years.
  • The Asia Pacific region, with 17% of the deal count, will continue to grow due to the scarcity of water and increased food demand for the vast population like in China and India. Climate change and the financial challenges that the farmers in this region face will drive the need for the adoption of vertical farming techniques.
  • The Middle East and Africa showcase the lowest count of deals with 6%. This region is expected to have remarkable growth in the future due to the rise of water scarcity and the growing research and development activities by market players to boost the development of advanced farming techniques.
With the increase in population and the shift in the global food market to healthier and safer products, farmers are adopting new technologies and farming methods. In contrast to the traditional agriculture methods, these new methods known as vertical farming are a game-changer for the agriculture technology industry. The rise of this global trend is leading to a continuous spike in interest among investors like venture capitalist firms to invest in vertical farms and drive the markets’ growth in the upcoming years.

Sources: Pitchbook Data.


International Investments in Health and Wellness

International Investments in Health and Wellness

Capital market activity within the health and wellness market has expanded by 633% from 2020 Q1 to 2022 Q1. The health and wellness industry includes all activities that promote physical and mental wellbeing, from yoga to healthy eating, personal care and beauty, nutrition and weight loss, meditation, spa retreats, workplace wellness, and wellness tourism. The market has experienced rapid growth since the global COVID-19 pandemic in 2020, highlighting the importance of mental, spiritual, and physical well-being.

The pandemic also highlighted the significance of good living behaviors like improved nutrition, going to the gym, practicing yoga, and stress reduction. The healthy eating, nutrition, and weight reduction market is the second largest, accounting for almost 20% of total revenue. Furthermore, the health and wellness industry have the greatest worldwide expansion potential. Given these considerations, the health and wellness industry appear to be the most promising investment opportunity throughout the forecasted period.
In this report, J&A analyzes the international capital market activity conducted within the health and wellness market between 2011 and 2022.

Overview of the Health and Wellness Market

  • The medical technology sector experienced the greatest capital deployment within the health and wellness sector of over $13 billion in the period. This shows the importance of the industry and raises the demand for tailored industries in the health sector.
  • The applications software development sector received the second-largest capital deployment, with $9 billion.
  • Care services had a significant percentage of capital raised during this period, with $7 billion. This indicates the constant growth of the mental health sector in the forecasted time.

 

Health and Wellness Industry Market Trends

1 – Clean and Healthy Eating

Consumers are more concerned with living longer and better lives. Consumer preferences have evolved toward eating more natural, organic food that is free of additives and preservatives. Today, eating clean is directly related to a gluten-free, dairy-free, non-refined carbohydrate, and sugar-free diet. The global gluten-free retail sector is expected to increase at a 9% annual rate from 2017 to $12 billion by 2024.

2 – Increasing Demand for Wellness Tourism

Wellness vacations account for 17% of total tourism spending. Increasingly travelers are visiting the Asia-Pacific region, Latin America and the Caribbean, the Middle East, and Africa to get in shape and return home calm and collected. The wellness tourism market is worth $639 billion and growing at a 7% annual rate from 2015 to 2017. Wellness travel is expanding twice as fast as the total tourism growth rate of 3%.

3 – Personalized Technology of Health and Wellness

Smart watches, health and fitness trackers, heart rate monitors, apps that help users’ emotional and mental health, and virtual assistants have all seen an increase in popularity. Wearable technologies are expected to help people live 70% longer, maintain a 63% more healthy life, and pay 62% less in insurance premiums. By 2022, the wearables market is estimated to reach $27 billion.

Announced Health and Wellness Investments Since 2020

  • Between 2020 and 2022, 3,000 investors deployed capital into the health and wellness market. In that time frame, 4,000 deals were deployed by 4,206 investors in the health and wellness sector.
  • In 2020, a focus on health and wellness (due to the global COVID-19 pandemic) led to a spike in deal flow in the sector. The largest deal was calculated at $17 billion, with a total of $146 billion in capital invested.
  • Jahani and Associates (J&A) anticipate that trend will continue to grow with notable increases in 2022 and forward.

Announced Health and Wellness Capital Markets Deals

  • The USA is leading the capital raising with 72% of the total raise. Additionally, the USA has the largest market size in the health and wellness industry at $53 billion in value.
  • Brazil has the second-largest capital raise share, with 8% and Sweden holds the third-largest capital raise share, with 3%. In general, Southeast Asia, the Middle East, Europe, the Gulf Cooperation Council, and Australia are experiencing increasing volume in their capital markets.
  • 48% of capital raised within the sector was deployed into privately held entities, which shows the growth potential of the market and the emergence of new competitors in the sector.
  • An additional 13% of deals done within the health and wellness industry were PIPE, private placements into publicly enterprises, and transactions.
  • In the health and wellness sector, 33% of capital deployed was put into mergers and acquisitions. This indicates that there are large firms that are interested in market consolidation.
  • Less than 1% of capital deployed in the sector was done through IPOs, which shows a lack of maturity within the sector.

Investor Spotlight: Shore Capital Partners

The Company

Shore Capital Partners is a private equity firm based in Chicago, Illinois, founded in 2009. The firm prefers to invest in growth-stage companies through buyouts and seeks to invest in business products, business services, consumer products, consumer services, materials, resources, healthcare, life sciences, oncology, manufacturing, and technology-based sectors in North America.

Website: www.shorecp.com

The health and wellness industry globally has moved its portfolio towards mindfulness and personal care health and well-being. Health and fitness companies in North America dominate capital markets and have raised significantly more capital than the Middle East, Southeast Asian, and European competitors. J&A predicts a continued increase in capital market activity within the sportswear sector as economies become more interconnected and companies expand into new international markets.

Sources: PitchBook, UL, Forbes, CbInsights, Medium, PolicyAdvice, McKinsey.


Sportswear Investments in the Middle East

Sportswear Investments in the Middle East

The Middle Eastern sportswear market was valued at $5 billion in 2020 and is expected to grow with a compound annual growth rate (CAGR) of more than 6% from 2021 to 2025. The sportswear market gained rapid growth during the global COVID-19 pandemic in 2020 as a result of an increased focus on health and wellness. Manufacturers and retailers have expanded their business in production and categories in sportswear as a result.

Sportswear or activewear is clothing, including footwear, worn for sport or physical exercise. Sports clothing is divided into 3 main sectors which are women’s wear, men’s wear, and children’s wear. Women’s sportswear is the top sector in terms of growth, and it is projected to continue to grow up to 7% by 2025. The sportswear market is projected to grow to over $17 billion by 2028. In this article, J&A will analyze the capital market activity conducted within the sportswear market in the Middle East between 2011 and 2022.

 

Overview of the Middle East Sportswear Market

Key Segments of the Industry

  • Sportswear in the Middle East maintained a market size of $5 billion in 2020 with more than 6% CAGR; it is projected to reach more than $17 billion by 2028.
  • Puma led the overall sportswear market in 2020 with market share followed by Nike and Adidas.
  • Women’s sports clothing is one of the crucial categories of sportswear that has growth potential. The sector is forecast to expand at a CAGR of 7% between 2021 and 2025.
  • The COVID-19 pandemic in 2020 affected the wealth and wellness market, which drove sportswear manufacturers to expand into new verticals and product offerings.
  • Strategic partnerships and the technology in the textile industry will grow the market.

The Middle East’s Sportswear Market by Key Categories

The sportswear market is categorized into sports clothing, sports footwear, and sports accessories. Sports clothing accounted for the largest share in 2020, followed by sports footwear and sports accessories. Sports clothing share has been increasing and it is expected to grow at a slow pace during the forecast period.

  • The Middle East’s sports clothing includes women’s wear, men’s wear, and children’s wear, with a 57% market share. Women’s wear is expected to show the highest growth rate during the forecast period. In 2020, activewear was the dominating sportswear type, followed by sports-inspired cTasual wear and technical sportswear types.
  • The Middle East’s sports footwear includes women’s footwear, men’s footwear, and children’s footwear, with a 32% market share. Women’s footwear is expected to show the highest growth rate during the forecast period, while children’s footwear showed the lowest growth rate.
  • The Middle East’s sports accessories include bags, sunglasses, hats, scarves, gloves, belts, and other accessories. Sports accessories have 11% of the market share. In 2020, sports-inspired casual wear was the dominating sports accessories type, followed by technical and active sports accessory types.
  • Global capital deployed in the sportswear sector increased by 262% between 2012 and 2022.
  • In the sector, $10.432 billion was deployed across 178 deals, with an average deal size of $586 million. Significant acquisitions in 2012, 2019, and 2020 drove the fluctuations within the amount of deployed capital.
  • The 2020 focus on health and wellness, due to the global pandemic, led to a spike in deal flow in the sector. In that year 14 deals were done in the space and over $5 billion was invested in the sector.
  • There was a notable decrease in 2021, but in the first five months of 2022 over $2 billion has been invested into the sector, a trend that J&A anticipates will continue.
  • So far in 2022, eight IPO deals were announced in the sportswear sector in the Middle East.
  • Over 80 deals occurred within the private equity sector showing the growing maturity of the market. Venture and pre-venture capital represented 45% of capital deployed in the sector (113 deals). This trend highlights the potential in the sportswear sector as new entrances into the market receive notable capital deployment.
  • There were 48 mergers and acquisitions announced within the sportswear sector. This indicates that there are large firms that are interested in mergers and acquisitions deals.

Deal Spotlight: The Giving Movement


THE COMPANY

Dominic Nowell-Barnes made the UAE his home in 2017, where he found his purpose for making a change. Seeing the fashion industry’s impact on climate changes and in some areas unethical practices he made it his mission to create a vehicle of positive change that everyone can be a part of. The Giving Movement launched in April 2020, created as a way to alter the way fashion is consumed and to shed light on conscious consumerism. The goal was to create a new model where sustainability is curated for youth, a disruptive brand that creates meaningful apparel — making an impact with every purchase.

RECENT FUNDRAISING

The Giving Movement, a sustainable sportswear company, raised $15 million of Series A venture funding in a deal led by Knuru Capital on March 13, 2022. Other undisclosed investors also participated in the round. The funds will be used to further its category growth to include children’s wear, and the recently announced baby wear lines, as it eyes expansion into new markets.

Global trends towards health and wellness will continue to drive demand for sportswear products. J&A predicts a continued increase in capital market activity within the sportswear sector in the Middle East as economies become more interconnected and companies expand into new international markets.
Sources: PitchBook Data, Data Bridge, Global Data.


Cross Border Investments: The Middle East and China

The Middle East and China

This report investigates cross-border investments made between the Middle East and China since 2020. The Middle East serves as a strategic economic hub due to the strength of the energy sector and geographic positioning. Countries like the United Arab Emirates and the Kingdom of Saudi Arabia have held strong historic ties to the West, but are experiencing increased levels of economic relations with China. With current oil and gas shortages and rapidly increasing prices, the Middle East will continue to be a valuable economic battleground.

Capital deployed by Chinese-based investors in the Middle East focused on early-stage companies, with 81% of deals in the sector occurring in venture capital transactions. This highlights the desire to invest in the future growth of the region.
Many deals in the sector are unannounced, so this data may under-represent actual deal volume and size. This report outlines the type, deal count, dollar volume, and industries of Chinese investments in Middle Eastern companies. 

Chinese Investors Capital Market Activity: Middle Eastern Companies

Since 2020, 132 cross-border deals were announced between Chinese investors and Middle Eastern-based companies, in which a total of $9.7 billion was deployed. The chart below shows the deal count and capital raised in this cross-border category.

  • Deal count within the sector remained consistently ranged between 10 and 20 deals per quarter, with a mean value of $7.35 million. Chinese investors’ mean value of deals with Middle Eastern companies has increased over time, showing an increased appetite to invest in the Middle East.
  • The graph excludes the $4.31 billion secondary investment into Saudi Aramco (pipeline business) conducted by China Merchant Capital and Silk Round Fund, as well as a syndicate of other institutional investors including BlackRock, which skews the data.
  • Capital deployment peaked in Q1 2021 with a total of $4.74 billion, including the secondary transaction into Saudi Aramco (pipeline business), and over 14 investments. In 2020, Q1, which largely occurred before the pandemic, was the next most active period.
  • Information technology was a leading sector for deal counts conducted by Chinese investors in Middle Eastern companies. Over 45% of transactions in the categories were in the information technology sector, though it received less than 13% of capital deployment.
  • The energy sector received the most significant capital deployment of over 44%, mostly due to the Saudi Aramco transaction.
  • The health care sector received significant capital, 27%, through 27% of deals conducted by Chinese investors. This shows the high level of interest that Chinese investors have in the Middle Eastern health care sector.
  • Chinese investors deployed $3.37 billion into venture capital deals in the Middle East since 2020 in over 107 transactions. Of the total deal flow, 36% went into later-stage venture capital deals while early-stage venture capital and seed investments received 34% and 11% of the deal count, respectively.
  • The secondary deals sector received the most significant capital deployment of over 45%, mostly due to the Saudi Aramco transaction, but contributed to less than 5% of the total deal count.

Investor Spotlight: MSA Capital


The Company

MSA Capital, formally known as Magic Stone Alternative Investments, was founded in 2014 and has made 127 investments. MSA Capital is headquartered in Beijing, China, and invests in global companies from seed to early growth phases.

  • MSA Capital completed 10 deals since 2020 with Middle Eastern companies.
  • MSA Capital has an industry focus on apparel and accessories, commercial services, healthcare technology, pharmaceutical and biotechnology, retail, and software.
  • The firm’s median capital invested is $15.6 million and has deployed capital into 53 companies in the last 12 months.
The expansion of capital market activity between the Middle East and China is something that firms in both regions will help drive growth in global markets. Large energy deals dominated total capital deployment by Chinese investors into Middle Eastern companies since 2020. However, over 80% of deals in the sector were in venture capital deals, demonstrating the demand to invest in the future of the region. J&A expects the capital market activity between China and the Middle East to increase over time as these emerging markets continue to develop.


Fintech Capital Market Activity in the Middle East and Southeast Asia

Fintech Capital Market Activity in the Middle East and Southeast Asia

The fintech industry in the Middle East and Southeast Asia is poised for strong growth. Innovative payment processors, financial services companies, and digital transaction management platforms are already disrupting the traditional finance sector and are gaining traction in domestic and international financial markets.

Blockchain companies and investments dominated Southeast Asian fintech capital market activity while Middle Eastern investors preferred later-stage investments within the sector. Jahani and Associates (J&A) forecast the continued expansion of Middle Eastern and Southeast Asian fintech companies and capital market activity.
J&A is an international investment bank headquartered in New York City with offices and operations across the Middle East, Southeast Asia, and Central America. J&A specialized in cross-border capital market activity between the regions in which we operate.

  • USA-based fintech companies conducted significantly more capital market activity than their Middle Eastern and Southeast Asian counterparts in 2021. The abundance of capital has accelerated the growth of USA-based fintech companies, but a burgeoning set of growth companies in these emerging markets will drive global fintech capital market activity in 2022 and beyond.
  • USA-based fintech companies conducted 2,978 deals in 2021 with a total of $178 billion and a median deal size of $60 million. Middle Eastern and Southeast Asian fintech companies conducted 244 and 411 deals respectively and raised a combined total of $21 billion in 2021.
  • USA-based investors have been more active in the fintech sector than Middle Eastern and Southeast Asian investors in 2021 in absolute terms. However, Middle Eastern and Southeast Asian investors conducted significantly higher deal counts in proportion to the number of fintech company deal counts in their domestic markets, demonstrating an appetite for investments.
  • Average check size deployed by Middle Eastern and Southeast Asian investors in fintech deals in 2021 was significantly lower than USA-based investors. Early-stage companies in the emerging markets are receiving significant deal flow showing the growth potential of these regions.
  • Community management platforms, which include several key blockchain companies, experienced the largest capital deployment in the Middle Eastern and Southeast Asian fintech markets in 2021. Grab dominated deal size with a $5 billion PIPE conducted in December 2021.
  • Payment processing services and financial services are growing sectors in both emerging markets and received approximately $5 billion and $2.6 billion respectively. Vietnam Payment Solution conducted a $250 million round in July 2021, the largest transaction in the payment processing sector.

2021 ASEAN Fintech Deals by Month

Fintech companies headquartered in Southeast Asia conducted significant capital market activity in Q4 of 2021. The sector has produced consistent deal flow despite strict economic lockdowns and travel restrictions. Blockchain transaction dominated deal count among the Southeast Asian fintech market. The growth of early-stage venture capital deals in the sector highlights the emergence of new companies in the market and the growth potential of the Southeast Asian fintech sector.

  • $17.28 billion was deployed into Southeast Asian fintech companies across 411 deals in 2021 with a median deal size of $5.3 million. December 2021 saw the largest capital deployment of over $5 billion representing approximately 29% of capital deployed over the period.
  • The largest deal in the sector was the $750 million acquisition of OVO, a developer and operator of payment and financial services platforms Grab, which was announced on October 4, 2021.
  • Cryptocurrency dominated deal count among the Southeast Asian fintech market with 351 deals, or approximately 80%, in the sector where cryptocurrency-related deals focused on seed and early-stage venture capital funding.
  • Approximately 34% of capital raised by Southeast Asian fintech companies was deployed into early-stage companies. This showcases the emergence of new companies, an increase in competition, and the growth potential of the sector.
  • Mergers and acquisitions, including the acquisition of OVO, raised 21% of capital invested into Southeast Asia despite only seven deals being conducted.
  • Sixteen Southeast Asia fintech companies raised late-stage venture capital funding, demonstrating the emergence of mature companies and a well-balanced funding ecosystem.

2021 ASEAN Deal Spotlight: Alami – Sharia Compliant Financing for SMEs

The Company

Alami is an Indonesia-based fintech platform designed to serve small to mid-sized businesses with access to sharia-compliant financing organizations. Alami’s platform provides in-depth data analytics to businesses regarding financing from various institutions allowing them to make informed and up-to-date transactions.

Recent Fundraising

  • Alami completed a Series A round of $17.5 million on August 13, 2021, at an undisclosed valuation.
  • Quona Capital and EV Growth led the round with Dubai International Financial Center and other undisclosed investors participating.
  • Alami had previously raised $24.7 million through three rounds of seed funding.

2021 Middle East Fintech Deals by Month

Fintech companies headquartered in the Middle East have conducted notable capital market activity over 2021 with peaks in April and December. The sector has produced consistent deal flow despite strict economic lockdowns and travel restrictions that have eased and resurged over the year. J&A forecasts continued growth in 2021 Q4 activity into 2022 and beyond.

  • In 2021, $4.66 billion was deployed into Middle Eastern companies across 251 deals, with a median deal size of $3.1 million.
  • November 2021 saw the largest deal count with 25, but low capital deployment of $400 million representing approximately 8% of capital deployed over the period.
  • Notable deals in the sector include the PIPE, private investment into a public company, and subsequent reverse merger of Pagaya, an online lending platform provider, on September 15, 2021.
  • Approximately 30% of capital raised by Middle Eastern fintech companies was deployed into early-stage companies.
  • Middle Eastern Fintech companies conducted notable IPOs in 2021. The largest IPO was that of the Saudi Stock Exchange (SAU: 1111), on December 8, 2021, in which over $1 billion was raised.
  • Mergers and acquisitions, as well as reverse mergers, accounted for 18% of capital market activity in the space. The acquisition of Simplex, the Israeli bitcoin payment processing company, by Nuvei, was one of the largest Middle Eastern fintech acquisitions in 2021.

2021 Middle East Deal Spotlight: Tarabut Gateway Dubai Banking Regtech

The Company

Tarabut Gateway is a Dubai-based financial technology and software development company that has created a platform to regulate the banking sector. The platform is designed to connect a regional network of banks and other fintech companies through a universal applications programming interface (API). Tarabut’s platform utilizes the API to assist in the transfer of data and to create a greater level of integration within the finance sector in the region.

Recent Fundraising

  • Tarabut Gateway completed a pre-Series A round of $12 million on November 2, 2021, at an undisclosed valuation.
  • Tiger Global Management led the round with Dubai International Financial Centre and other undisclosed investors participating.
  • Tarabut Gateway had previously raised $13 million through seed funding in February 2021, which was also led by Tiger Global Management.

2022: What to expect this year

Southeast Asia and the Middle East are two of the world’s best-performing emerging markets. Financial markets are becoming increasingly sophisticated in these regions and the disruption of the traditional financial sector is a trend that will continue and accelerate in 2022.
The cryptocurrency sector experienced a high level of deal flow in Southeast Asia in 2021. Later-stage Middle Eastern fintech companies saw significantly larger capital deployment than early-stage competitors.
Fintech companies should be mindful of the commercial and financial opportunities available in these regions and the appetite that investors in the markets possess for early-stage deals. Companies operating within these markets will continue to grow and become attractive acquisition targets for strategic acquirers looking to enter the market.
J&A forecasts the continued expansion of capital market activity within the Southeast Asian and Middle Eastern fintech markets.


E-Commerce

E-Commerce

E-commerce has experienced a surge in capital market activity driven by an increase in demand due to the COVID-19 pandemic. From 2019 to 2020, e-commerce capital transactions increased from $42 billion to $57 billion. The expansion has escalated in 2021, with capital raised already increasing by 28.6%, surpassing $73 billion by the end of Q3 and expected to increase substantially before the end of the year.

J&A has tracked the activities of the market to find e-commerce trends relevant for retailers, brands, and potential investors seeking opportunities. This report analyses historical data and explores upcoming trends in the post-pandemic e-commerce world.

Why Companies Have Opted for E-Commerce

Traditional retail required updates to meet the needs of the current globalized and tech-savvy world, especially in 2020 due to the effects of the COVID-19 pandemic. Retail trends are moving towards e-commerce in developed nations, and the effects of economic lockdowns accelerated the process. Established retailers use cross-border e-commerce as a strategy to broaden their business presence, enlarge their customer base, strengthen brand awareness, and tap into new markets.

Digital connectivity enabled marketplaces and online shopping platforms to thrive. Globally, 48% of people own a smartphone, and 60% have regular internet access. That access has empowered 80% of consumers to make purchases online. With B2B purchases also on the rise, J&A expects the revenue generated from businesses to hold a larger revenue share than B2C sales.

  • The global e-commerce market is expected to generate close to $5 trillion in 2021.
  • Pre-pandemic expectations for e-commerce sales in 2021 will be exceeded by over $147 billion.
  • In 2021, an estimated 19.5% of all sales revenue will be generated from online sales, increasing by 45.8% in just two years.
  • In 2024, 21.8% of all retail sales are forecasted to be from online sales.

E-Commerce Capital Market Activity

Capital markets transitioned in 2019 and 2020 to sustain the changes generated from the COVID-19 pandemic.

  • Private equity and venture capital-funded deals saw a decrease from 2017 through 2020.
  • In 2021, private equity and venture capital activity increased by 130% due to the sector’s increased customer engagement and thus, revenue increases per company.
  • Mergers and acquisitions transactions yielded over $8 billion more capital in 2020.
  • IPO activity increased by 390% and reached $12 billion in 2020.
  • All capital raised by every transaction type increased post-pandemic, while the overall deal count plateaued.
  • Mergers and acquisitions activity increased by almost 75% in 2021 as e-commerce platforms increased their customer base through the COVID-19 pandemic.

E-Commerce Segments

Segments that raised capital from private equity and venture capital in the e-commerce industry vary in trends. Non-essential online shopping and e-commerce platforms acquired more financing than traditional staple online sales. The low interest in food products from investors reflects this trend. J&A expects this trend to amplify the overlap between non-essentials and day-to-day products.

E-Commerce-Related Industries

  • As catalogs are often showcased in marketplaces and websites, catalog retail is the most common industry related to e-commerce.
  • Platform software includes large firms like Shopify, WooCommerce, BigCommerce, Ecwid, FastSpring, and others. Capital raised and M&A deals for online marketplaces are close to 10% of all e-commerce deals, and J&A expects this trend to hold for the upcoming years.
  • Clothing, along with application software services, comprises over 13% of the e-commerce capital market activities.

The Future of the E-Commerce Sector

The e-commerce market changed visibly throughout the COVID-19 pandemic. Most trends, such as the interest and capital deployed from investors, allowed the market to get more visibility and exposure to new deals. J&A expects e-commerce platforms and marketplaces for non-essential products will continue overshadowing the online shopping trends for consumer staples.


Middle Eastern Investors and USA Startups

Middle Eastern Investors and USA Startups

Fintech as a sector increased its cross-border capital market activity in 2021. The first 10 months of 2021 saw a 300% increase in capital deployed by Middle Eastern investors into USA startups at 2020 levels. (In this report, startups are classified as private organizations that raise capital through venture capital or growth-stage private equity rounds.) Middle Eastern investors have an appetite to invest in USA-based early-stage fintech companies. Stripe and Square may be grabbing the headlines, but smaller companies have been successful in raising early-stage funding internationally.

Capital Market Activity

Middle Eastern investors have deployed approximately $6.5 billion into early-stage fintech companies based in the USA since 2020. Within the segment, 164 announced deals have been conducted. Middle Eastern investors’ desire to diversify their portfolios away from oil and natural gases and into high-growth private companies drives the increase in market activity.

  • Deals between USA-based fintech companies and Middle Eastern investors increased significantly between 2020 and 2021. In 2020, a total of $1.45 billion was deployed across 67 deals. In the first 10 months of 2021, $5.1 billion has been deployed across 97 deals.
  • Between Q2 of 2020 and Q2 of 2021, capital deployment increased 10-fold while deal count more than doubled. In 2020, Q2 was the least active quarter of the year due to the economic effects of the global lockdowns. Deal count and capital deployment has increased steadily over the remainder of 2020 and 2021.
  • The largest deal in the sector was SpotOn’s $300 million Series E round. Mubadala Investment Company participated in the round, alongside Andreessen Horowitz and a consortium of other investors. The Series E saw SpotOn’s valuation increase from $1.875 billion to $3.15 billion, and the funds will be allocated towards acquisition financing.

Active Type of Transactions and Company Sizes

 

Active Investors and Their Latest Deals

Israeli venture capital funds lead the region with respect to deal count in the sector. Connections between the USA and Israeli capital markets remain strong with significant activity across software and technology sectors. Investors from the United Arab Emirates and other Gulf states are also increasing investments in USA-based fintech companies.

  • AltaIR Capital, a Tel Aviv–based venture capital firm with $600 million in assets under management, has conducted 14 deals with USA-based fintech companies since 2020.
  • Mubadala Investment Company, Abu Dhabi’s sovereign wealth fund, invested in eight USA-based fintech startups. The group maintains a median check size of $200 million across sectors.
  • VentureSouq is the only investor on the most active list whose most recent deal in the sector was a seed-stage investment. The Dubai-based venture capital fund has made 141 investments since its inception in 2013 and has a median check size of $4 million.
  • Later-stage venture capital deals dominated capital deployed by Middle Eastern investors into USA-based fintech companies. Later-stage venture capital accounted for 69% of capital deployment and 34% of the deal count within the sector.
  • Growth and early-stage venture capital deals saw the largest percentage of deals with 36%, while accounting for 20% of capital deployed.
  • Incubators, pre-seed, seed, and angle rounds were not a significant contributor in the sector. This highlights the need for a proven business model, established products and services, and small yet stable income streams before raising capital from international sources.
Overall, the fintech sector is progressively increasing its capital market activity. Despite the pandemic slowing down other businesses’ activities, fintech deals from the USA received over $5 billion in capital in the first three quarters of 2021 from the Middle East alone. As the need for strong technology increases in the Middle East, J&A expects deal size and deal count to increase over the upcoming years. As the early-stage companies develop and establish new technology trends, funding for acquisitions will increase for the entities with a longer presence in the international markets.

USA Investors and Middle Eastern Startups

USA Investors and Middle Eastern Startups

Middle Eastern fintech companies have experienced a boom in capital market activity since the start of 2021 and the reopening of the global economy. The fintech industry is rapidly developing and disrupting traditional banking and financial institutions. Fintech startups in the United Arab Emirates, Egypt, and Saudi Arabia have conducted significant capital market activity since the start of 2020. Notably, groups in the segment have attracted investments from USA-based venture capital sources.

This report explores the investments made by USA investors into Middle Eastern fintech startups since 2020. Only announced deals are analyzed. This report will outline the type, volume, and industry of deals conducted by USA investors into Middle Eastern companies.

  • USA investor activity in the Middle East slowed down in 2020, as it did for most other cross-border investments. After the normalization of the global capital markets, fintech startups in the Middle East capitalized on the USA investor appetite. Transactions grew steadily in 2021, leading to over 20 investments in four quarters, from Q3 of 2020 to Q3 of 2021.
  • In Q4 of 2021, the average capital invested per deal more than doubled. Due to this, the overall capital deployed increased by 1,750% in 2021 compared to 2020.

Cross-Border Fintech Venture Capital Investments: USA Investors and Middle Eastern Companies

  • Significant deal count (37%) and capital deployment (39%) by USA-based investors into Middle Eastern fintech startups occurred within seed-stage investments. This shows the development of new companies designed to serve an underserved market and the strong potential for growth in the space.
  • Incubator funding made up 39% of the total sector deal count but less than 1% of capital raised. This suggests that most deals in the incubation phase were conducted without capital being injected into the business.
  • Early-stage venture capital accounted for 22% of deal count and 69% of capital deployment. The growth and funding of Middle Eastern fintech startups will lead to a boom in the sector as traditional banking and financial institutions are disrupted.

Deal Spotlight: Tarabut Gateway

The Company

Tarabut Gateway is a financial technology and software development company that has created a platform to regulate the banking sector. The platform is designed to connect a regional network of banks and other fintech companies through a universal applications programming interface (API). Tarabut’s platform utilizes the API to assist in the transfer of data and to create a greater level of integration within the finance sector in the region.

Recent Fundraising

  • Tarabut Gateway completed a pre-Series A round of $12 million on November 2, 2021, at an undisclosed valuation.
  • Tiger Global Management led the round with Dubai International Finance Center and other undisclosed investors participating.
  • Tarabut Gateway had previously raised $13 million through seed funding in February 2021, which was also led by Tiger Global Management.
The fintech sector is rapidly developing in the Middle East, and early-stage companies will drive transformation within the banking and financial sectors. International investors should be mindful of the growth potential of the sector and the opportunities that well-funded startups can capitalize on. J&A forecasts the continued expansion of capital market activity between USA-based venture capital funds and Middle Eastern fintech startups.

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