Part 1: The Rise of Saudi Arabia: Competitive Advantages

The Rise of Saudi Arabia: Competitive Advantages

Part 1 of 1

Saudi Arabia - Competitive Advantages

This is the first part of our series on the rise of Saudi Arabia. This five-part series will review the kingdom’s competitive advantages, its vision to grow and diversify its economy, and outline a framework to create successful business and trade relationships with the country.

The Kingdom of Saudi Arabia (KSA) has the 19th largest GDP in the world and is the 13th largest country by landmass. KSA holds the second-largest amount of oil reserves in the world at 16%, second only to Venezuela’s 18%. In 2018, KSA was ranked the No. 21 exporter in the world; fuel comprises over 62% of those exports.

Saudi Arabia on map

Key Facts About the Kingdom

Economic

  • As of October 2020, KSA was the largest economy in the Middle East and the 19th largest in the world.
  • KSA produces 40% of the world’s oil supply.
  • By landmass alone, Saudi Arabia is the 13th largest country in the world.

Demographic

  • As of 2013, 50% of the population was under 25 years of age.
  • The country is home to more than 34 million people.
  • Over 30% of the country’s inhabitants are from outside the country.

Cultural

  • Home to Makkah, the holy city of Islam.
  • Islam is the state religion of Saudi Arabia.
  • Cultural changes of the 2010s included women’s suffrage and allowing non-religious tourism.

KSA’s Competitive Advantages

Oil Is Not the Only Determinant of KSA’s Economic Power

Saudi Arabia has already started to diversify outside of oil production. The figure below shows resilient growth despite volatility in oil prices. This is a result both of diversification efforts and the high volume of oil available in the state.

Oil Prices and KSA GDP

KSA’s GDP continues to grow despite oil price fluctuations. This is due to the volume of oil the country produces, which makes it less price sensitive. KSA has been steadily diversifying its economy and will continue to do so into 2030. Energy prices are historically volatile; KSA’s ability to grow through these cycles is an indication of the kingdom’s successful economic diversification.

A Low Debt-to-GDP Ratio Creates Liquidity for Government Spending on Growth

KSA’s debt-to-GDP ratio is lower than countries similar in size. It is approximately 20% compared to nearly 100% for economies like the USA and the UK, or 40% for China. This gives the KSA government liquidity to invest in public and private initiatives in the foreseeable future.

Government Debt as Percentage of GDP (Saudi Arabia, USA, China, UAE, Brazil, Singapore, UK, Malaysia)

Brazil, Yemen, and Malaysia all have ratios nearly twice as high as KSA’s. Only the UAE matches KSA’s low debt-to-GDP ratio, though not its size. Based on KSA’s Vision 2030, the following industries are expected to experience the most growth:

  • Travel, tourism, and hospitality
  • Retail and trade
  • Mining and metals
  • Advanced manufacturing
  • Banking and finance
  • Construction
  • Petrochemicals
  • Healthcare

A Vision to Diversify

The Saudi Vision 2030 is a framework to reduce Saudi Arabia’s dependence on oil and diversify its economy. The framework’s goals include reinforcing investment activities, increasing non-oil trade, promoting a more secular image of the kingdom, and increasing military spending. The goals are expected to create alternative sources of revenue for the government, such as taxes, fees, and income for the sovereign wealth fund. Another major component of KSA’s Vision 2030 is to increase private sector participation and provide more employment opportunities.

Several Gulf Cooperation Council (GCC) countries have similar plans, such as the Kuwait Vision 2035, UAE Vision 2030, and the Qatar National Vision 2030. Since KSA has only recently become a more accessible economy, J&A expects it will propel into a boom of economic growth beyond its GCC counterparts.

KSA is uniquely positioned among all Arab countries to become an increasingly dominant player in the geopolitical scene. Its liquidity, GDP size, young population, and commitment to economic diversification are all evidence of this. The next three parts of this series will analyze the country’s Vision 2030 plan and how it will impact its economy and therefore business opportunities.
In the next article of our series on the competitive advantages of the kingdom, J&A will analyze a vision for 2030, reviewing trends and changes in Saudi Arabia’s travel, tourism, and hospitality industries.

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


Cross-Border Capital Markets Report

Cross-Border Capital Markets Report

View our recently published articles in Newsweek, The Independent, CGTN, as well as our Managing Director Joshua Jahani on BBC (11:30).

Mobility technology is changing how we conduct business, travel, and even how we order food. Shared mobility investments increased by approximately 3,000% globally between 2013 and 2016. Shared mobility is limited to ridesharing and cab-hailing; it does not include public transport such as busses, planes, and trains. This report reviews the growth and anticipated future of shared mobility capital markets in the Middle East and across the world.

Sector Overview: Shared Mobility

Ridesharing and cab-hailing mobile applications are disrupting automobiles’ traditional value chain through fractional vehicle ownership. As global urbanization trends continue, J&A expects the shared mobility industry to continue reshaping the automotive sector.

The traditional global taxi industry will have to adapt to remain competitive with mobile aggregators. Taxi companies may attempt to undercut prices, but this reduces operating margins and could lead to inferior service quality. Implementing new technologies, such as mobile applications and customer relationship management systems, would be the best way for traditional taxis to remain competitive.

FIGURE 1


  • Mobile aggregators facilitate the implementation of fractional vehicle ownership by creating on-demand access to transportation services.
  • Most mobile aggregators, such as Uber, do not own the vehicles within their fleet and have been able to scale quickly without significant capital expenditure.
  • Large mobile aggregators are vertically integrated into fleet and data management. Uber’s engineering and data department1 has deployed thousands of microservers to process the requests and data behind the millions of rides globally every day.

The Rise of Shared Mobility

FIGURE 2: Announced Deals 2010 – 2020


Source: PitchBook Data, Inc.
  • Shared mobility capital markets were globally insignificant until 2013 when they experienced substantial investment growth. Capital deployed peaked in 2016 and 2018 with $28.54 billion and $29.78 billion, respectively.
  • From 2010 to 2020, $113.38 billion was deployed across 253 companies within the global shared mobility sector. Over the period, 418 venture capital deals were conducted, with $61.88 billion in capital deployed. The average venture capital deal size was $148 million.
  • System integration, data management, fleet management, and customer relations software are growing segments within shared mobility as traditional taxi operators transition towards mobile applications to remain competitive.

Shared Mobility Capital Markets and MENA-Based Companies

FIGURE 3


Source: Pitchbook Data, Inc.
  • MENA-based companies saw an increase in capital raised in shared mobility capital markets in 2020 despite the global decrease in capital deployment within the sector.
  • The most active company in the MENA shared mobility market is Careem, which raised $774 million over eight rounds before being acquired by Uber on January 2, 2020, for an estimated $3 billion.
  • Turkish companies Bitaksi Mobil Teknoloji and Olev, and Lebanese group Cabbis raised early-stage venture capital rounds between 2013 and 2020.
The traditional global taxi industry will have to adapt to remain competitive with mobile aggregators. Taxi companies may attempt to undercut prices, but this reduces operating margins and could lead to inferior service quality. Implementing new technologies, such as mobile applications and customer relationship management systems, would be the best way for traditional taxis to remain competitive.

J&A Capital Markets Report: Electric Vehicles, Batteries, and the Middle East

J&A Capital Markets Report: Electric Vehicles, Batteries, and the Middle East

Electric Vehicles (EV) have risen to prominence in capital markets since 2010 with a 1,250% increase in capital deployment between 2013 and 2018. Electric vehicles constitute a significant sector within the mobility technology industry and lead capital deployed and deal count. EV deals held a 32% compound annual growth rate between 2017 and 2020. In addition to being environmentally friendly and reducing CO2 emissions, EV motors are designed with limited moving parts, resulting in lower maintenance costs and a longer lifespan than traditional vehicles. The key to future growth in the EV sector is the development of lithium-ion batteries that can compete with a conventional combustion engine’s price and performance1.

Electric Vehicles: Value Chain

FIGURE 1: Announced Electric Vehicle Capital Markets Deals (2010 – 2020)


  • A total of 4,412 deals were conducted globally by 1,802 companies within the EV sector between 2010 and 2020.
  • Over the same period, 388 venture capital deals were conducted, representing $46 billion of capital invested. The average venture capital deal size was $12 million.
  • Electric vehicle battery capital deployment increased by 2,170% between 2010 and 2020.

FIGURE 2: Announced Electric Vehicle Investments: Vertical Breakdown


Source: Pitchbook Data, Inc.
  • The leading vertical within the EV sector was automotive manufacturing, which received a total capital deployment of $185 billion across 1,663 deals.
  • Energy storage saw the second-highest deal count, with a total of $34 billion raised across 884 deals.
  • Tesla, which is vertically integrating into lithium-ion battery production, vehicle manufacturing, utilities, and renewable energy, is the market leader in EVs and has raised a total of $12 billion since the company’s inception in 2003.
  • Chinese EV companies such as NIO, Guangzhou, and BYD have raised $20 billion over the last 10 years, while Rivian Automotive, an American EV manufacturer, has raised $8 billion.

FIGURE 3: The Middle East and Electric Vehicle Capital Markets


Source: Pitchbook Data, Inc.

EVs are becoming increasingly popular in the Middle East despite the region’s established oil and gas industries. Middle Eastern EV companies are not currently competitive with North American and Chinese manufacturers, but J&A expects that customers and investors will continue to influence the sector. The rise in deal count and size since 2018 highlights the growth of investment in EVs by the Middle East.

  • Since 2010, Middle Eastern investors have deployed a total of $12 billion in 27 EV deals with an average deal size of $448 million.
  • Abdul Latif Jameel, a holding company based in Saudi Arabia, participated in Rivian Automotive’s $2 billion Series F round, which closed on February 22, 2021. Rivian Automotive is a manufacturer of autonomous electric vehicles and is headquartered in Michigan, USA.
  • Saudi Arabia’s Public Investment Fund participated in a $2 billion PIPE round conducted by Lucid Motors and a secondary private transaction with Tesla.
  • The Qatar Investment Authority participated in Xpeng’s $1.4 billion PIPE round, which closed on August 27, 2020.
  • Ontrack, a manufacturer of autonomous bicycles, completed a seed round on January 24, 2018, with Diverse Middle East FZE. Middle Eastern investors announced three early-stage venture capital rounds that included TIER Mobility and Marti Electric Scooter.
J&A expects Middle Eastern consumers and investors to continue their EV focus. Nations in the Gulf Cooperation Council have the necessary infrastructure to facilitate EV development with significant investments in renewable technologies and smart cities. Dubai has promoted many public initiatives to benefit EVs, which has led to many cities in the region adopting similar policies.

Cross Border Capital Markets Report: SEA Investors and USA Companies in 2020

Cross Border Capital Markets Report: SEA Investors and USA Companies in 2020

This report highlights investments made by Southeast Asian (SEA) investors into USA companies throughout 2020. Only announced deals are analyzed in this report. This report outlines the type, deal count, dollar volume, and industries of deals conducted by Southeast Asian investors into USA companies. Singtel Innov8 is part of the investor spotlight feature, and Stack Overflow is analyzed as the deal spotlight.

Southeast Asian Investors and USA Deals: Deal Count and Volume

In 2020, 248 institutions and individual investors from Southeast Asia closed 373 transactions in USA companies and invested a total of $32 billion. The following graphs show deal count and deal amounts in 2020.

FIGURE 1: Deals by SEA investors in USA Companies Investments Over Time


Data provided by Pitchbook, accessed March 4, 2021

Number of Deals by SEA investors in USA Companies: 2020

  • Compared with private equity firms and corporations, SEA venture capital firms closed the most deals in USA companies. In 2020, deal counts were 10% lower compared to 2019, largely due to the COVID-19 pandemic.
  • Transaction volume decreased by 30% as a direct result of the pandemic in Q2 of 2020. Transaction volume increased in Q3 and Q4.
  • The number of venture capital deals in Q2 did not significantly decrease as a result of the pandemic. However, M&A and private equity deals did decrease in Q2 2020 as a result of the pandemic.

Dollars Invested by SEA Investors in USA Companies: 2020

  • In 2020, 96 USA companies raised a total of $7 billion from SEA investors, for an average deal size of $73 million in Q1. Despite the decrease of deal counts in Q2, 68 USA companies raised $19 billion from SEA investors for an average deal size of $289 million.
  • Private equity firms from SEA closed major investments into USA companies in Q2 at the height of pandemic tensions at a total of $14 billion.
  • In Q3 and Q4, a total of 177 companies raised approximately $4 billion in each quarter from SEA investors.

SEA Investors and USA Investments: Investments by Industry

SEA investors’ capital infusion in USA companies are predominantly seen in fast-changing and popular verticals like fintech, AI, machine learning, and technology, media, and telecom (TMT). Most of the investments in these verticals are SaaS-based solutions.

FIGURE 2: Capital Breakdown


Data provided by Pitchbook, accessed March 4, 2021
  • Ultimate Kronos Group in the $11 billion leveraged buyout round was the largest deal closed by a North American company in which an SEA investor participated in 2020. Formerly known as Ultimate Software Group, the company was acquired by Kronos through its financial sponsors Hellman & Friedman, Blackstone Group, JMI Equity, and the Government of Singapore Investment Corporation (GIC).
  • The following SEA investors also participated in other well-known USA companies:
    • GIC invested in Affirm, in its $510 million Series G round completed in September.
    • Temasek Holdings, a Sovereign Wealth Fund in Singapore, invested in Impossible Food in its $200 Million Series G round completed in August.

Investor Spotlight: Singtel Innov8, Singapore

Singtel Innov8, a wholly-owned subsidiary of the Singtel Group, is a corporate venture capital fund based in Singapore with offices in San Francisco and Tel Aviv. Singtel Innov8 invests in companies that create next-generation devices and digital content services that enhance customer experiences. Their investments are in all stages of the company’s life cycle.

Figure 3: Singtel Innov8 Investments by Industry: 2018-2020


Data provided by Pitchbook, accessed March 4, 2021
  • Singtel Innov8’s assets under management were $256 million from 2018 to 2020, and they made a total of 128 investments. To date, Singtel Innov8 has done 45 exits and maintains 45 active portfolios.
  • Singtel Innov8’s preferred ticket size is between $100 thousand to $23 million, and their preferred vertical is TMT software. They prefer minority stakes and will lead on a deal.
  • In 2020 Singtel Innov8 made 12 investments with an average deal size of $36 million.

Deal Spotlight: Stack Overflow (Cloud Tech DevOps)

Stack Overflow is a New York-based Series E company that provides an online community created to help developers learn and share their knowledge. The platform is a free and open forum that hosts a collaborative library of coding knowledge, which includes real-time interactive software, advertising opportunities, and services for technology recruiters helping users build their careers in tech.

SEA Investors Feature: Government of Singapore Investment Corporation (GIC)

GIC is a global investment management firm established in 1981 to manage Singapore’s foreign reserves. GIC invests in public and private equity with a focus on healthcare, financials, and business services. Additionally, it focuses on natural resources, real estate, fixed income, and alternative markets including foreign exchange, commodity, and money market sectors across the globe.

  • GIC led Stack Overflow’s $85 million Series E round on July 28, 2020, putting the company’s post-money valuation at $685 million.

Most Southeast Asian investors initially invest in USA-based companies at Series C round and later. Singapore sovereign wealth funds like Temasek Holdings and venture funds such as Wavemaker Group were active investors in USA-based companies’ capital raise during 2020.


Cross Border Capital Markets Report: Middle East Investors and USA Investments in 2020

Cross Border Capital Markets Report: Middle East Investors and USA Investments in 2020

This report examines investments made by Middle Eastern investors into USA companies throughout 2020. Many deals in the region 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 deals conducted by Middle Eastern investors into USA companies. Mubadala Capital Ventures is highlighted, and a recent Series G round conducted by Taulia is analyzed.

Middle Eastern Capital Market Overview: USA Companies

In 2020, 200 cross-border deals were announced between Middle East-based investors and USA-based companies for a total of $85 billion deployed. The charts below show volume and completion in this cross-border category. This data excludes the acquisition of SABIA by Saudi Aramco for approximately $69 billion

FIGURE 1: Investment Made by MENA Investors in USA Companies


Data provided by Pitchbook, accessed March 4, 2021.
  • Deal count ranged between 15 and 75 per quarter.
  • The private equity, venture capital, and corporate buyers proportion of deal flow remained consistent by quarter.
  • Venture capital investors completed the most deals, accounting for approximately 80% of all deals announced in the region.
  • Deal count peaked in Q3, largely driven by a more active private equity and IPO market.
  • The largest deployment of capital occurred in Q2 of 2020, which amounts to 47% of annual spending.
  • The acquisition of SABIA by Saudi Aramco for $69 billion was the largest cross-border transaction. The deal is not included in the charts above.

Middle East Investors and USA Investments: Investments by Industry

Middle Eastern investors continuously seek diversification from their predominantly oil-driven markets, as well as utilization of cutting-edge technologies in their domestic economies. Technology investments in the USA have given these investors access to diversification not readily available in their domestic capital markets. For this reason, J&A expects deal count and volume to steadily rise between Middle East-based investors and USA-based companies. J&A reviewed all deals by industry to determine which technologies were being exposed to the Middle Eastern markets through these investments.

FIGURE 2: Capital Breakdown


Data provided by Pitchbook, accessed March 4, 2021.
  • Middle Eastern investors invested in the mobility industry more than any other industry. A total of $6.72 billion was deployed in 10 deals with a median deal size of $502.5 million. The deals included investments in a $2.16 billion second public offering conducted by Xpeng, which was a participant in the Qatar Investment Authority, and a $700 million growth-equity round conducted by REEF Technology in which Mubadala Investment Company participated.
  • Autonomous cars, manufacturing, and artificial intelligence also saw large capital deployment in a relatively small number of deals. The deals included Waymo’s $3 billion Series A and IonQ’s $62 million Series C, in which Mubadala Capital’s Ventures was actively involved.
  • The industry with the greatest volume of cross-border deals was TMT (technology, media, and telecommunications), although the median deal size was lower at around $20 million.

In general, Middle Eastern investors select a diverse set of industries in which to deploy capital. Investors in the MENA region often have a more flexible mandate than USA or European investors because of the less crowded fund management market in the Middle East. It is common for large Middle Eastern family offices or holding companies to be diversified into multiple industries and verticals.

Investor Spotlight: Mubadala Capital’s Ventures

Mubadala Capital’s Ventures is the venture capital arm of Mubadala, a division of Mubadala Investment Company, a sovereign wealth fund based in Abu Dhabi, United Arab Emirates. Mubadala Investment Company has over $232 billion in assets under management. The venture capital platform is globally focused, with offices in San Francisco, California, London, the United Kingdom, and Abu Dhabi, United Arab Emirates.

FIGURE 3: Mubadala Capital’s Ventures

Investment by Industry in 2016 – 2021 (announced deals)

Data provided by Pitchbook, accessed March 4, 2021.
  • Mubadala Capital’s Ventures completed 24 deals in 2020 and increased assets under management to $1,287 billion.
  • Mubadala Capital’s Ventures has an industry focus on healthcare, logistics, and software.
  • The firm’s median capital invested in 2020 was $70 million, a marginal increase from their five-year average of $66 million.

Deal Spotlight: Taulia

The Company

Taulia is a USA-based financial technology firm and developer of an SaaS financial supply chain platform intended to help companies strengthen supplier relationships. The company’s platform helps businesses turn invoices into revenue opportunities, lower the barriers for e-invoicing participation, and allow suppliers access to self-service and management tools.

Pitchbook. (2021, March 16). Capital Breakdown [Graph]. Data provided by Pitchbook, accessed March 4, 2021.

Most Recent Financing Status

  • Taulia raised $60 million based on a pre-money valuation at $340 million of Series G venture funding in a deal on July 9, 2020.
  • The deal was led by Ping An Insurance Company and Zouk Capital, Harmonic Growth Partners, and Prosperity7 Ventures. J.P. Morgan also participated in the round.
  • Prosperity7 Ventures is a subsidiary of Saudi Aramco and is based in Dhahran, Saudi Arabia. The firm has participated in three investment rounds in 2020 with an average deal size of $91 million.
  • The funds will be used to accelerate growth, as the company sets its sights on further global expansion.
  • Payment software services were the most active vertical with USA-based companies, raising a total of $12.82 billion from Middle Eastern investors in 2020.
The 200 deals and $85 billion of capital deployed by Middle Eastern investors in USA companies showcase the importance of cross-border deals in the region. USA companies provide Middle Eastern investors with access to leading technology deals and bring new innovations to the region. USA companies should be mindful of the opportunities provided by cross-border capital markets, particularly with the Middle East.

Cross Border Capital Markets Report: USA Investors and Middle Eastern Investments in 2020

Cross Border Capital Markets Report: USA Investors and Middle Eastern Investments in 2020

This report investigates the investments made by USA investors into Middle Eastern companies throughout 2020. Only announced deals are analyzed. This report will outline the type, volume, and industries of these deals.

USA Capital Market Overview: Middle Eastern Companies

In 2020, 118 cross-border deals were announced between USA-based investors and Middle Eastern-based companies in which a total of $5.2 billion was deployed. This report lays out the volume, industries, and number of deals completed in this cross-border category.

FIGURE 1: Investments Over Time


Data provided by Pitchbook, accessed March 4, 2021
  • Deal count remained consistent in 2020 but capital rose substantially in Q1 and Q3 due to large strategic acquisitions.
  • Venture capital firms conducted the largest volume of deals and account for 84% of the total count in 2020.
  • Strategic acquisitions made up 8% of the deal count but contributed 98% of capital deployed.
  • Two large acquisitions contributed towards the majority of capital raised. These were the acquisition of Careem by Uber in Q1 and the acquisition of Peak Entertainment Software by Zynga in Q3.
  • A total of 10 strategic acquisitions were conducted with a median of $1.03 billion with large deals in oil and gas companies and mobile technology.
  • Private equity groups were not particularly active in these cross-border deals, and conducted a total of five deals.

2020 Cross Border Investments by Industry: USA Investors and Middle Eastern Investments

USA-based venture capital and private equity groups invest in a wide range of Middle Eastern companies with a particular focus on cutting-edge technology and innovative companies. Strategic acquisitions are industry-specific and designed to grant large corporations in the USA access to Middle Eastern markets.

FIGURE 2: Capital Breakdown


Pitchbook. (2021, March 4). Capital Breakdown [Graph]. Data provided by Pitchbook, accessed March 4, 2021.
  • Several deals span industries, such as the acquisition of Careem by Uber for $3 billion, which is categorized as application software, automotive, and platform software.
  • Application software was the most active industry for cross-border investments by USA investors in 2020 in both deal count and capital raised. A total of 25 deals were conducted and a total of $3.13 billion was raised in the sector.
  • Business productivity software and financial software industries saw a high deal count, particularly with venture capital firms. A total of 20 deals were conducted in each sector with a median deal size of $1.45 million in financial software and $0.84 million in business productivity software.

Investor Spotlight: NGP Capital

NGP Capital, formally known as Nokia Growth Partners, is a subsidiary of Nokia. The firm specializes in providing growth capital to technology businesses and has made more than 90 investments since its inception in 2005. NGP Capital is active in the USA, Europe, and Asia and has conducted deals with companies such as Deliveroo, Xiaomi, Moovit, and UCWeb.

Figure 3: NGP Capital
Investment by Industry in 2012 – 2020 (announced deals)


Data provided by Pitchbook, accessed March 4, 2021
  • NGP Capital completed 20 deals in 2020 and increased assets under management to $1.2 billion.
  • NGP Capital has an industry focus on digital health, intelligent enterprise, and smart mobility sectors.
  • The firm’s median capital invested in 2020 was $25 million, a marginal increase from their five-year average of $24.6 million.

Deal Spotlight: Fetchr

The Company

Fetchr is a provider of automation and digitization solutions for shipping and logistics companies. The company is headquartered in Dubai and operates across the Middle East with offices in Abu Dhabi, Riyadh, and Cairo. Fetchr is expanding its global presence and has offices in London and Beijing.

The Technology

The company utilizes GPS tracking to provide domestic and international courier locations via its positioning, predictive, and machine learning technologies. This facilitates faster and more efficient deliveries and allows clients simpler access to domestic and international shipping.

Most Recent Financing Status

  • Fetchr raised $58.4 million based on a pre-money valuation at $340 million of Series C1 venture funding in a deal on September 5, 2020.
  • The round was led by CMA CGM, CEVA Logistics, and NEA.
  • NGP Capital, BECO Capital, Iliad Partners, Hussein Hachem, Tamer Group, and Majid Al Futtaim also participated in the round.
  • The funds will be used to accelerate growth, as the company sets its sights on further global expansion.
  • NEA is an early-stage venture capital firm based in Maryland, USA. The firm has $24 billion in assets under management and has made 70 investments in the last 12 months.
The 118 deals and $5.2 billion of capital deployed by USA investors in Middle Eastern companies showcase the importance of cross-border deals in the region. Venture capital groups are active in the lower to middle market segments and focus on technology-enabled businesses. Strategic acquisitions are used to grant large USA-based firms access to the region and typically occur with mature and developed Middle Eastern companies. As the Middle East grows in population and income levels, J&A anticipates activity from USA-based investors and strategic acquirers to increase.

Cross Border Capital Markets Report: USA Investors and LATAM Companies in 2020

Cross Border Capital Markets Report: USA Investors and LATAM Companies in 2020

This report outlines the announced investments made by USA investors in Latin American companies in 2020.  Focus is placed on deal count, volume, and industry. Data may be underreported since only announced deals are analyzed. Our investor spotlight includes Valor Capital Group; our deal spotlight includes a growth equity in Nelogica for $100 million.

Latin American Market Overview: USA Companies

In 2020, 124 cross-border deals were announced from USA-based investors in 118 Latin American companies for a total of $3.51 billion. This report outlines the volume, industry, and number of deals completed in this cross-border category.

FIGURE 1: Investments Over Time

Data provided by Pitchbook, accessed March 4, 2021
  • In 2020, 118 Latin American companies received investments from USA investors. Of them, 108 are located in South America and 10 in Central America. The average deal size was $30 million.
  • Of those investments, $2.53 billion, or 80%, was raised from venture capital sources, while only $640 million, or 20%, were deployed by private equity firms into Latin American deals.
  • In Q3 there was a rise in the capital raised, as $800 million, or 59%, of the capital was deployed. Significant deals included Neon, a Brazilian digital banking platform, Rappi, a Colombian delivery platform, and dLocal, an online payments platform from Uruguay. Active investors in this quarter were 10X Capital from New York, 8VC from San Francisco, and Accion from Massachusetts.
  • The largest deal was announced in Q2 for Global Cloud Xchange, an operator of information technology infrastructure, for a total of $400 million.
  • More than 80% of the capital raised was directed into online services, digital solutions, or cloud-based product businesses.

USA Investors and LATAM Investments: Investments by Industries

USA investors deployed capital into Latin American companies operating in technology markets. Active sectors included financial software, financial services, or similar companies in B2B spaces. Finance-related industries saw large capital deployments and deal counts, while most B2C industries were significantly lower.

FIGURE 2: Capital Breakdown

Data provided by Pitchbook, accessed March 4, 2021
  • Finanical software accounted for the majority of deals with over $1.3 billion raised, while the least amount of capital was invested in automotive deals, likely as a result of the pandemic and consumer spending along with the rise of new mobility solutions such as Bird, Uber, and others.
  • IT consulting, telecommunications, and systems management companies had very low deal counts, yet their capital raised was consistently close to $400 million in 2020.
  • Information technology companies were not negatively affected by the COVID-19 pandemic due to their ability to operate regardless of location.

Investor Spotlight: Valor Capital Group

Valor Capital Group is a venture fund headquartered in New York. It was the most active USA cross-border investor in Latin American companies. Valor conducts global investments and has a historical preference for deploying capital in USA and Brazilian companies.

Valor focuses on technology companies, with a special interest in companies in financial services. The firm participated in 12 deals in 2020. They deployed $14 million on average per deal in their 2020 financing activities.

Figure 3: Valor Capital Group Deals Overview

Data provided by Pitchbook, accessed March 4, 2021

Deal Spotlight: Nelogica

The Company

Nelogica is a financial service company from Porto Alegre, Brazil, with Marcos Boschetti serving as its CEO. Nelogica aims to provide information to its clients to train them in auctions, assets, and other trade-related activities in simulated scenarios that take historical results and create a virtual setup for users.

The Product

Nelogica’s main product is called Profit, a platform that provides resources for analytical and operational profiles, along with customization tools to differentiate from other traders. It is divided into four product lines, but optional modules are also available.

  • ProfitTraining: Provides market replays to train subscribed users by monitoring past auctions, identifying how asset movements occurred, and acting in a simulated environment so users interact with the markets in a computer-generated setting.
  • ProfitOne: Platform with analytical resources, charts with regular technical analysis intervals, and the Renko chart. It compiles technical indicators and graphical study tools.
  • ProfitPlus: Delivers resources for different profiles, such as day-trade, tape reading, and technical analysis features, with graphic data features.
  • ProfitPro: Integrates software modules and extra functionalities. The system is designed for scalpers and day-traders. Tools offered to cover flow analysis (tape reading), price action, systematized operations, and other useful features.

Most Recent Financing Status

The last deal to date was a $100 million growth capital raised from private equity sources. The placement was completed on November 26, 2020. This has been the only round the company has made, and only two investors actively funded the firm: Crescera Capital from Brazil and Vulcan Capital from Seattle. Both investors hold a minority stake in the company.


Learn How to Accelerate Through Due Diligence During an M&A or Private Placement

Learn How to Accelerate Through Due Diligence During an M&A or Private Placement

Learn How to Accelerate Through Due Diligence During an M&A or Private Placement

Due diligence commences after a signed letter of intent (LOI) for an M&A or term sheet for a private placement. Due diligence can be the most time-consuming and burdening process of selling a business, buying a business, raising capital, or deploying capital. For this reason, issuers should always have a due diligence package prepared for buyers and investors before the process begins. This gives the issuer control over the conversation while saving time for the buyers and investors. A data room should always be available and well organized prior to the commencement of due diligence.

This will serve as a resource for getting started, but make sure to customize your lists depending on your objectives.

Cross Border Capital Markets Report: LATAM Investors and USA Companies in 2020

Cross Border Capital Markets Report: LATAM Investors and USA Companies in 2020

This report outlines the announced investments made by investors from Brazil, Mexico, Panama, and other Latin American countries in USA companies, with a focus placed on deal count, volume, and industry. Only announced deals are analyzed. We reviewed Mindset Ventures and Mojo Vision as part of our investor and deal spotlight.

Latin American Market Overview: USA Companies

In 2020, 96 cross-border deals were announced between Latin American-based investors and USA-based companies for a total of $5.26 billion deployed. This report shows the volume, industry, and number of deals completed in this cross-border category.

FIGURE 1: Investments Over Time

  • Deal count peaked in Q1 of 2020. Deal count was reduced significantly in Q2 as the economic effects of the COVID-19 pandemic took place, and the volume of deals steadily increased in Q3 and Q4.
  • Venture capital firms accounted for the majority of transactions in the sectors with 98% of deal count and capital deployed, while only 2% came from private equity sources.
  • Deal size average in the whole year was $54.79 million.
  • Deal count rose in Q3 and Q4 of 2020 after pandemic effects were measured and the markets stabilized.

LATAM Investors and USA Investments: Investments by Industry

Latin American investors deployed capital into USA companies operating in markets unique and not present in Latin American countries, such as aerospace, e-commerce, and technology industries, which saw large capital deployments.

FIGURE 2: Capital Breakdown

  • Artfo Holdings, from Mexico, deployed $1.90 billion into SpaceX for their later stage VC raise on August 18.
  • Business and productivity software received the second-highest amount of funding, with $1.79 billion raised. The industry experienced the highest deal flow, with a total count of 38 transactions. Some of the companies that received investments are Netskope, a cloud security platform that raised $340 million; Farmers Business Network, which received $250 million; and the fintech company Tradeshift, which raised $240 million.
  • Financial software and financial services companies received investments from a total of 25 Latin American capital sources, or roughly 13% of all Latin American investments in USA companies.
  • In general, Middle Eastern and North African (MENA) investors select a diverse set of industries in which to deploy capital. Investors in the MENA region often have a more flexible mandate than USA or European investors because of the less crowded fund management market in the Middle East. It is common for large Middle Eastern family offices or holding companies to be diversified into multiple industries and verticals.

Investor Spotlight: Mindset Ventures

Mindset is a venture capital fund headquartered in Sao Paulo, Brazil. Mindset was the most active cross-border investor in USA companies in the LATAM region. Mindset Ventures typically invest in early-stage companies and are industry agnostic. They usually participate in seed funding and Series A deals.

Mindset focuses on IT companies and B2B-based firms, and has an appetite for companies in financial services and healthcare. The firm participates in less than 12 deals per year. They deployed over $10 million for each deal in their 2020 financing activities.

FIGURE 3: Mindset Ventures Deals Overview

Deal Spotlight: Mojo Vision

The Company

Mojo Vision is an international company that develops augmented reality products and platforms for implementation in several industries, though most of their technology and services have been used for medical devices, which was their focus in 2020.

The Product

Mojo Lens is a smart contact lens with a built-in display that can output information without interrupting the focus, all while delivering real-time data analytics without the need for external devices.

Most Recent Financing Status

The company raised $51 million of Series B1 venture funding in a deal led by New Enterprise Associates on April 29, 2020, putting the company’s pre-money valuation at $450 million. Liberty Global Ventures, Intellectus Partners, Numbase Group, WndrCo, Gradient Ventures, Horizon 3 Venture Capital, and 13 other investors also participated in the round. The funds are being used to accelerate the development of the company’s smart contact lens, the Mojo Lens.

Investment Forecasts Moving Forward

2021 will serve as a recovery year for the USA market, with all firms looking to achieve their forecasted expectations with fundraising activities. Latin American investors will continue to invest in USA companies in select technology industries that they do not have access to in domestic markets. J&A forecasts the continued investment in e-commerce and technology sectors, as their market trends have been accelerated by the effects of the COVID‑19 pandemic.

Customer Data: The Intangible Asset You Did Not Realize You Have

Customer Data: The Intangible Asset You Did Not Realize You Have

Customer data is more than just addresses, phone numbers, zip codes, and work phones. In the age of programmatic media buying, customer data is quantified and codified down to screen behavior, social behavior, geo-location, favorite foods, favorite vacation spots, and much more. The evolution of customer data is the major driver behind creating business value and yet one of the most elusive.

Jahani and Associates analyzed over 500 M&A transactions among technology giants. We determined that 100% of the marketing and advertising acquisitions were driven by customer data capabilities. Technology giants use customer data to improve media buying. The acquired customer data capabilities:

  1. Increased the number of customer data interfaces for the acquirer. For example, Alphabet’s acquisition of Famebit.
  2. Increased the processing power of the acquirer’s customer data. For example, Alphabet’s acquisition of DeepMind, which provides deep learning solutions. Ray Kurzweil, director of engineering at Google, said that he wants to build a search engine so advanced that it could act like a “cybernetic friend.”

Companies seeking to maximize their value in the technology space must intimately understand their data and how it can be used to improve both collection and processing to generate insights. Jahani and Associates use our experience in tech M&A and investment banking to understand how our clients will increase their competitive advantage around customer data.

We have developed this expertise from serving large $100 Million technology clients and partnering with large VC firms. Our findings consistently show how successful customer data strategies overlap with either a lucrative business model or the business model of a strategic partner. Our three-step process that identifies, develops, and monetizes intangible assets will measure your competitive advantages, such as customer data monetization. This provides consistent and repeatable results for maximizing value.
You can learn more about our three-step process in the below articles.

Part 1: Identifying Intangibles In Ad Tech M&A Value

Part 2: Developing Intangibles In Ad Tech M&A Value

Part 3: Monetizing Intangibles In Ad Tech M&A Value


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