Investments in Industrials, Energy, and Resources by Investors in the GCC

Investments in Industrials, Energy, and Resources by Investors in the GCC

Gulf Cooperation Council (GCC) investors deployed over $800 billion into the industrial, energy, and resource sectors between 2020 and Q3 2023.
The GCC is strategically pivoting away from oil and gas dependence, driven by the goal to promote long-term economic resilience, counteract fluctuating oil prices, and embrace sustainable development. Initiatives such as Saudi Arabia’s Vision 2030 is one example of the region’s commitment to diversification, fostering innovation and sustainability while building robust, knowledge-based economies.
  • Between Q1 2020 and Q3 2023, approximately $390 billion was invested into industrial companies by GCC investors over 1,660 deals. The average deal size in the sector was nearly $250 million.
  • There was a significant spike in capital invested in Q2 2020, reaching $93 billion. This period coincides with the early stages of the COVID-19 pandemic, where there was heightened economic uncertainty, and investors were likely seeking to capitalize on distressed assets and critical infrastructure projects that required substantial capital but involved fewer transactions.
  • Deal count for the period peaked in Q1 2022, reaching 178 deals, despite a relatively lower capital investment of $11 billion. In spite of active deal-making, the industrial sector saw smaller-scale investments by GCC investors, leading to the relatively low total capital deployed. This trend reflects investors’ strategic shift towards smaller deals amid the geopolitical uncertainty, high inflation, and looming interest rate rises, whereby companies focused on mid-market deals to leverage their healthy balance sheets for strategic acquisitions, avoiding the risks associated with larger transactions.
  • There was a notable decline in capital investment from Q1 2022 to Q3 2022. This drop could be related to macro-economic reasons like tightening of global monetary policies, including the rapid increase in interest rates by the US Federal Reserve, which affected market liquidity and investor sentiment.
  • The first two quarters of 2023 saw a resurgence in both capital investment and deal count, with a notable peak in Q2 2023 at $248 billion and 138 deals. This resurgence can be linked to the continued high oil prices, fiscal surpluses, and active government initiatives that the region leveraged to support economic diversification and industrial development in the GCC through increased investment in the industrial sector.
  • Between Q1 2020 and Q3 2023, approximately $128 billion was invested into the energy sector by GCC investors. The average deal size was approximately $177 million.
  • The capital investment peaked at $21 billion in Q2 2020, despite a relatively low deal count of 31. This significant investment amount can be attributed to large-scale strategic acquisitions and projects initiated in response to the early stages of the COVID-19 pandemic. The energy sector likely saw substantial government interventions aimed at securing and stabilizing energy supplies during uncertainty.
  • Another notable peak occurred in Q2 2021, with capital investment reaching $18 billion across 55 deals. This spike aligns with the global recovery phase from the pandemic, where oil prices began to stabilize and increase, leading to renewed confidence and investment in the energy sector.
  • Between Q1 2020 and Q3 2023, approximately $132 billion was invested into material and mining companies by GCC investors in 322 deals.
  • In Q2 2020, there was a major spike in capital invested, reaching $89 billion with only 16 deals. This likely reflects large-scale, strategic acquisitions in response to the early COVID-19 pandemic disruptions.
  • The third quarter of 2023 experienced another significant increase in capital investment, reaching $23 billion across 18 deals. Investment in material and mining sectors is critical as the GCC countries continue to push towards economic diversification away from oil dependence, capitalizing on the global shift towards sustainable and renewable energy sources​.
  • GCC investors favored mergers and acquisitions (M&A), which contributed to 58% of the total capital invested. The significant emphasis on M&A reflects the strategic approach to acquiring established businesses and assets within the industrials, energy, and resources sectors, likely driven by diversification efforts and market expansion.
  • Between 2020 and Q3 2023 the industries leading the deal count were financials, industrials, and information technology sectors. Financials were driven by sovereign wealth funds like PIF and ADIA, while industrials benefitted from regional industrial growth plans. The IT sector surged due to digital transformation initiatives.
  • Private investment in public equity (PIPE) deals accounted for 22% of the total capital, totaling $135 billion. PIPE deals are attractive because they provide liquidity and capital to public companies without the need for a public offering, which can be advantageous in uncertain market conditions​.
  • Private equity investments constituted 11% of the total capital, amounting to $68 billion. These investments involve direct funding into private companies, underscoring GCC investors’ interest in supporting and partaking in the growth and development of private businesses within the specified sectors.
  • A significant contributing factor to the data skew is that valuations for companies are generally lower at earlier stages, whereas PIPEs and M&As typically correspond with more mature businesses. Thus, although the venture capital proportion is low, there may be a high deal count but lower valuations.
  • A substantial proportion of GCC investors’ capital (29%) was deployed in the United States, totaling $141 billion. This significant investment reflects the attractiveness of the US market due to its stability, diverse opportunities, and strong legal framework.
  • Saudi Arabia, Bahrain, and the United Arab Emirates (UAE) received substantial investments, accounting for 19% ($91 billion), 3% ($14 billion), and 10% ($47 billion) of the total capital deployed, respectively. These countries likely benefited from regional investors’ preferences, capitalizing on the GCC’s proximity and familiarity with the local market dynamics as well as participating in these regions’ efforts to diversify away from oil dependency.
  • Other noteworthy countries, including Germany (9%), the United Kingdom (5%), China (5%), and India (4%), also attracted notable investments from GCC investors. These investments are driven by the search for strategic opportunities in diverse markets, enhancing global reach, and securing assets in high-growth sectors​.
The data highlights a dynamic investment landscape by GCC investors across industrial (construction, engineering, defense, and machinery, etc.), energy (oil, gas, renewables, and utilities, etc.), and mining sectors (precious metals, forestry, and agriculture, etc.). Industrial investments showed volatility, with significant peaks in Q2 2020 and Q3 2021. The energy sector witnessed substantial investments in Q2 2020 and Q1 2022. Material and mining sectors experienced varying capital injections, reflecting changing market dynamics.
Mergers and acquisitions dominated deal types, accounting for 58% of total capital, emphasizing a strategic focus on consolidation. Geographically, the United States attracted the most significant share (29%), indicating its appeal to GCC investors. The data clearly highlights how the GCC is making a significant effort to diversify away from oil dependency into other core sectors like industrials, energy, and resources, through diversified investment vehicles.

SOURCES


Discusses the significant foreign direct investment
(FDI) in GCC countries, particularly highlighting the
investments in Saudi Arabia and the UAE in 2022.


Provides insights on global investment trends,
including greenfield investments and the SDG
investment gap in developing countries.


Examines the investment sentiment in the GCC,
highlighting factors driving investment decisions and
the outlook for 2025.


Offers a detailed analysis of the healthcare and
pharmaceutical sector in the GCC, including
investment trends and opportunities.


Provides data on capital investments by GCC
investors in various sectors and countries, including
detailed breakdowns by deal type and recipient
country.


Reports on capital market activities in the GCC,
including IPOs and M&A trends.


Discusses infrastructure investments in the
GCC and the importance of public investment
management frameworks.


Highlights strong market performance, driven by
increased IPO activity in Saudi Arabia, and anticipates
continued growth in capital markets across the GCC.


Spotlight on Industrial IoT and Logistic Technology Investments in the GCC

Spotlight on Industrial IoT and Logistic Technology Investments in the GCC

Investors from the Gulf Cooperation Council (GCC) have invested $11 billion in the industrial Internet of Things (IoT) sector, and $16 billion in the logistics technology sector since 2020. The Middle East region has traditionally been known for oil and gas extraction and production but is now actively pursuing a reduction in its dependency on oil and gas and diversifying into new sectors. The development of manufacturing and industrial sectors is a key investment focus of many sovereign wealth funds and politically connected investors across the region. Investors in the GCC are looking into industrial IoT and logistics technology companies abroad and striving to develop these sectors within the region.


This report provides a comprehensive analysis of investment activity in the industrial IoT and logistic technology by GCC-based investors. The dataset analyzed focuses on capital deployment, transaction types, geographical distribution, and investor preferences within the industry. By analyzing the data and trends from 2020 to Q1 2023, this report reviews the dynamic landscape of industrial IoT and logistic technology, offering insights into market dynamics and growth opportunities.

Industrial IoT Between 2020 and Q1 2023: Capital Market Analysis

  • Throughout the period from 2020 to Q1 2023, approximately $11 billion was invested into industrial IoT companies by GCC investors in 71 deals. The average deal size was approximately $149 million.
  • The overall chart shows that in most quarters, four or more deals were done with two outliers in Q3 2020 and Q4 2021. The amount invested was relatively static at less than $1 billion, excluding the outliers.
  • The major deal in this time frame was in Q4 2021 in a US company, Medallia, in which Mubadala Investment Company injected $6.4 billion. 
  • Medallia is a software company. Its SaaS platform, the Medallia Experience Cloud, captures experience data from signal fields emitted by customers and employees. It utilizes AI technology to analyze structured and unstructured data from these signal fields across human, digital, and IoT interactions.
  • Of the transactions in industrial IoT, 55% were mergers and acquisitions. This could be due to markets and valuation uncertainty, making buy-side mandates more attractive. 
  • There were notable investments made by venture capital (VC) of approximately $2 billion.
  • Only 2% of the capital deployed was in early stage VCs due to uncertainty around the companies making the investments that were perceived as high risk.
  • GCC investors deployed 72% of their capital into US-based industrial IoT companies. The industrial IoT market in the US was $44 billion in 2021, with a projected market value of $66 billion in 2023, with this significant market potential attracting investments from GCC investors.
  • Of the capital deployed, 19% was in Asia. This is because it is the second-largest industrial IoT market with a market value of $23 billion in 2021.
  • The remaining 9% of the capital was deployed into Europe, the Middle East, and other regions.

Logistics Technology Between 2020 and Q1 2023 – Capital Market Analysis

  • Throughout the period of Q1 2020 to Q1 2023, approximately $16 billion was invested in logistics technology companies in 70 deals.
  • In June 2022, Abu Dhabi Investment Authority executed a buyout transaction with VTG AG, a logistics company based in Germany, for $7 billion.
  • In December 2021, Mubadala Investment and other investors transacted a private investment in GRAB, a publicly traded company for $4 billion. 
  • Of the deals 51% were in mergers and acquisitions, followed by PIPE deals, which represent 25% of the deals. 
  • PIPE deals are generally safer, especially in uncertain markets, and offer faster liquidity to investors. 
  • M&A deals were attractive during this period due to lower valuations stimulated by the slowdown in the markets.
  • Europe represents 54% of the total capital because of the significant deals in Germany, which leads in the ranking of industrial transportation companies in Europe.
  • This is followed by Asia, representing 31%. Asia’s e-commerce logistics market is anticipated to account for more than 57% of total market growth between 2020 and 2025. 
  • Singapore is the world’s busiest trans-shipment hub, which makes it an attractive market to GCC investors interested in logistics technology companies.
The Middle East region is expected to pursue sector diversification through investments within the region and abroad. The manufacturing industry is expected to grow steadily in the coming years as the government initiates and encourages industrial growth and reinforces reduced dependency on the oil and gas sector. It is expected that GCC investors will play an important role in the capital markets after the economic slowdown.

References: Fortune Business Insights, Statista, PWC, McKinsey, Brink


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.


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.

Global Trade Analysis: The Role of the GCC in Long-Term MENA Development (5/5)

Global Trade Analysis: The Role of the GCC in Long-Term MENA Development

Part 5 of 5

Global Trade Analysis: The Role of the GCC in Long Term MENA Development (5 of 5)

The Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The GCC was formally established on May 25, 1981. The council’s purpose is to unify the countries’ currency, trade markets, and other economic markets. There have been discussions to turn the council into a union with closer unity through a single currency and other economic integrations.

The GCC has made several changes to its policies that support its continued openness to trade. These policy changes include generating unified technical standards, harmonized customs administration procedures, and reduced clearance requirements to lower non-tariff barriers within the GCC. There are a number of special agencies in charge of creating and implementing technical standards, undertaking commercial arbitration, and registering patents: the Standardization and Metrology Organization for GCC in Saudi Arabia, the Technical Telecommunications Bureau in Bahrain, and the Regional Committee for Electrical Energy Systems in Qatar. These organizations have focused on making trade organizations more efficient.

The GCC Will Continue to Play a Crucial Role in International Trade

The following chart shows the trade openness of the GCC. This index is calculated by adding imports and exports in goods and services and dividing by the total GDP. The larger the ratio, the more the country is open to international trade.

  • All GCC countries are more open to trade than the world average.
  • The UAE has significantly increased its trade openness since 2006 and is currently the most open GCC country.
  • This openness to trade remains a significant strength of the region to attract new companies to offer products and services in and around the region.
  • Bahrain has maintained a historical and current openness to trade in excess of its GCC counterparts; this is likely due to the country’s limited oil reserves.

The GCC’s Greatest Long-Term Sustainability Risk Is Lack of Diversification

  • GCC countries remain wealthy due to their dominance of the global fuel market.
  • As global economies move towards renewable energies, the GCC can expect a reduction in oil revenue.
  • Therefore, for GCC countries to continue growing, they must diversify into non-fuel areas such as technology and services.
  • Factoring the oil industry into the GCC’s GDP increases its real GDP by 50%.

The UAE Has Implemented a Successful Path to Diversification and KSA Is Set to Follow

  • As evidenced in this series, the UAE has diversified its economy and will continue to do so as a hub for global trade, technology, and services—particularly in the MENA region.
  • The UAE’s investment in free zones and open economic policies have attracted businesses. These free zones include Abu Dhabi Global Markets (ADGM), Dubai International Financial Centre (DIFC), Dubai Multi-Commodities Centre (DMCC), and many more with specific industry focuses.
  • KSA will be a rising force in the GCC. The Kingdom’s Crown Prince, Mohammed Bin Salman Al Saud, has made a commitment to the country’s Vision 2030, which includes significant steps to diversify the economy.
  • Saudi Arabia’s debt as a percentage of GDP remains very favorable: in 2019 the kingdom’s debt was only 20% of the GDP, whereas countries like the USA and UK have over 100% debt-to-GDP ratios.

This completes J&A’s series on global trade in the MENA region. The series covered major categories of imports and exports in the region such as raw materials, fuels, transportation and machinery, textile, and other product categories. The region represents approximately half the volume of imports and exports compared to the USA and China, but produces nearly 40% of the world’s fuel supply. The general volatility of fuel has pushed leaders to diversify the economy. Food independence is a major objective of MENA leaders. The GCC’s trade openness as measured by the World Economic Forum has significantly increased over the last 10 years. J&A anticipates trade openness to continuously increase in the region, particularly with the anticipated expansion of the Kingdom of Saudi Arabia and its Vision 2030 program.

Source: IAGS | The World Bank | IMF GCC Banking | IMF GCC Markets | IMF Trade and Foreign Investment | Saudi Arabia Vision 2030 | UAE Ministry of Finance


Global Trade Analysis: Food Independence in the MENA Region (Part 4 of 5)

Global Trade Analysis: Food Independence in the MENA Region (Part 4 of 5)

Global Trade Analysis: Food Independence in the MENA Region (4 of 5)

So far this series has covered the MENA region’s global import and export position, the dynamics between KSA and the UAE, and the region’s general dependence on fuel, which drives the need for diversification.

As part of their effort to diversify, MENA countries are seeking food and agriculture independence. The UAE and KSA are minor contributors to MENA’s food and agriculture export totals. Food and agriculture imports and exports make up a relatively small portion of total MENA numbers, but they are essential to the long-term stability of the region.

The following data indicate the current state of food imports and exports in the MENA region, the UAE, and KSA as well as key steps being taken to improve food production capability through technology.

The UAE and KSA Are Minor Players in MENA’s Total Food and Agriculture Exports and Imports

UAE, KSA, and MENA Agriculture and Food Imports and Exports from 2015-2018
  • The UAE and KSA export less food and agriculture products than the average MENA country.
  • Food and agriculture account for approximately 4.5% and 3.5% of MENA’s imports and exports respectively; these percentages are expected to grow over the next five years.
  • The UAE’s food and agriculture exports are growing; imports have remained stable.
  • KSA’s food and agriculture exports have remained stable; imports have slowly decreased.

KSA Imports More Agriculture and Food Products Than Other MENA Countries

UAE, KSA, and MENA Agriculture and Food Imports as a Percentage of Total Imports
  • KSA imports approximately 2% more food and agriculture products compared to other MENA countries.
  • The UAE imports 50% less food and agriculture than other MENA countries.
  • This stark contrast between the two countries highlights the UAE’s investment in food production capacity and technology.

The UAE and KSA Export Fewer Food and Agriculture Products Compared to Other MENA Countries as a Percentage of Total Exports

UAE, KSA, and MENA Agriculture and Food Exports as a Percentage of Total Exports
  • The UAE and KSA both export less food on average than other MENA countries as a percentage of total exports.
  • This is less significant than import disparities since food independence is a major economic driver, while food production and distribution are not.
  • KSA and the UAE are expected to continue producing less food and agriculture products than MENA countries in the near future.

The UAE’s Commitment to Food and Agriculture Leadership Is Evidenced in Its Tech Investments

As shown in the previous J&A series, tech investments are on the rise in the MENA region. The UAE has recently made 10 major food-tech investments as part of its continued commitment to food independence and leadership. These food-tech investments include smart farms, food delivery, curated menus, and more. Below are three examples of these investments from different categories.

KSA & Middle East Food-tech investments
In the final part of our series, we will investigate the Gulf Cooperation Council’s (GCC) role in global trade for the MENA region, as well as steps the council is taking to increase its cooperation and cumulative strength.

Source: IAGS | The World Bank | IMF GCC Banking | IMF GCC Markets | IMF Trade and Foreign Investment | Saudi Arabia Vision 2030 | UAE Ministry of Finance


Global Trade Analysis: Fuel Dependency in the MENA Region (Part 3 of 5)

Global Trade Analysis: Fuel Dependency in the MENA Region (Part 3 of 5)

Global Trade Analysis: Fuel Dependency in the MENA Region (3 of 5)

Fuel has been, is, and will continue to be the MENA region’s most dominant export category. MENA countries export nearly 40% of the world’s fuel supply, and fuel makes up approximately 50% of the region’s exports. Global consumption of fuel has allowed the MENA region to grow in power over the last 50 years. However, these opportunities bring risk; fuel volatility can affect the region disproportionately to other more diversified economies. Therefore, MENA countries are seeking immediate diversification.

Today, the MENA Region Is Dependent on Fuel Exports

MENA Fuel Exports compared to All Other Export Categories
  • Fuel is consistently just over 50% of the entire MENA region’s exports.
  • There are major government initiatives within all MENA countries to continue diversifying their economies away from fuel dependence.
  • In 2020, fuel remains the region’s top export.

KSA Is More Dependent on Fuel Exports Compared to Other MENA Countries, Including the UAE

KSA Fuel Exports compared to All Other Export Categories
  • Fuel makes up approximately 80% of KSA’s yearly exports.
  • Saudi Arabia’s Vision 2030 is to reduce the kingdom’s dependence on oil and diversify its economy, and to develop public service sectors such as healthcare, education, infrastructure, recreation, and tourism.
  • Saudi Arabia’s economic evolution will also come with political considerations, as the kingdom continues to enhance its global positioning.

The UAE Is Least Dependent on Fuel as Its Major Export Compared to Other MENA Countries

UAE Fuel Exports compared to All Other Export Categories
  • Fuel makes up approximately 20% of the UAE’s yearly exports.
  • This is a result of the UAE’s ability to diversify its economy and increase its services, technology, and trading value.
  • The UAE’s investment in free zones and open economic policies have attracted businesses to the region. These free zones include Abu Dhabi Global Markets (ADGM), Dubai International Financial Centre (DIFC), Dubai Multi-Commodities Centre (DMCC), and many more with specific industry focuses.

KSA Is Expected to Follow the UAE’s Diversification Strategy Through Its Vision 2030

KSA’s Vision 2030 is a framework to reduce Saudi Arabia’s dependence on oil and diversify its economy. This will be accomplished through investments in health, education, infrastructure, recreation, and tourism. The Vision 2030’s goals include reinforcing economic and investment activities, increasing non-oil international trade, increasing government spending on the military, and promoting a more secular image of the kingdom.
The Crown Prince Mohammed bin Salman Al Saud announced Vision 2030 on April 25, 2016.
The next part of our series will review the importance of food independence for the MENA region as well as steps governments are taking to develop agricultural capabilities.

Source: IAGS | The World Bank | IMF GCC Banking | IMF GCC Markets | IMF Trade and Foreign Investment | Saudi Arabia Vision 2030 | UAE Ministry of Finance


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