2022 Wrapped

2022 Wrapped

Our 2022 Wrapped is certainly more insightful and fun than Spotify & Anghami combined 😛

I guess what we treasure most about 2022 is that it was kind enough to let us attend physical events and gatherings🙏

Let’s unwrap?

 


 

2022 Wrapped

This is how the ride began.

 

 

… and that’s how it’s ending.

 

Region in 5 points:
1. Despite the global funding slowdown, our region outperformed last year. MENA-based startups were injected with 22.01% more funds than in 2021.*
2. BUT. Valuations reset continues. Globally, declines in mid- and late-stage valuations further accelerated in Q3’22. However, seed stage valuations (<$2.5M round size) remain 37% above 2021 levels.
3. Bootstrapping strategies made a comeback.
4. M&A on fire: 74 MENA-based startups got acquired since January’22 (vs. 42 in 2021).**
5. Lessons learned: NO to overhiring.

 

Arzan VC in 5 points:
1. We prepped for the launch of our 3rd fund: Arzan VC Fund III 💰.
2. Our portfolio grew to 46 startups (3 of which are warehoused for AVC III).
3. In total, we invested in 9 startups in 2022 (3 of which were follow-ons).
4. We hit 9 exits since inception (~20% of our portfolio).
5. Team-wise, Captain CFO Adeel Shahid joined us aboard.

 

Ready for the next ride🎢 ? We are.

 


* Data as of 16 December 2022. Source: Racha Ghamlouch’s amazing Digital Digest
** Data as of 22 December 2022. Source: our in-house research

TL;DR (too long; didn’t read)  
We recap the region’s 2022: 22.01% more funds invested in MENA-based startups (YoY) across 556+ rounds. We recap our 2022: portfolio expanded to 46 startups and we hit 9 exits since inception. Take a ride on that rollercoaster above for more details 😛
 

Family Postcard

 

MENA’s top 50

TruKKer, Zid, Lucky, Retailo and Money Fellows were featured in Forbes Middle East as MENA’s 50 Most Funded Startups in 2022.

 

🎁

CB Insights gave us all an early Xmas gift with 120+ maps of tech markets. Featuring Haseel, iKcon (REEF), Lucky, Merit Incentives, Cartlow, Money Fellows, Qoyod, FlexxPay & Onfleet.

 

Best workplace

Qoyod was ranked 18th best place to work at in the Middle East for 2022.

 

Paris in January?

Citron will be exhibiting at MAISON&OBJET in January.

 

+1 photo with Khazenly team at their new office and with a new logo 😉

 

 

Latest Jobs @ ArzanVC Family

 

  • Sales Account Manager at TruKKer (Cairo)
  • Inbound Sales at Zid (Kuwait)
  • Procurement Specialist at Qoyod (Riyadh)
  • Talent Acquisition Specialist at Money Fellows (Cairo)
  • Junior Accountant at Lucky (Giza)
  • Junior Accountant at Cartlow (Dubai)

 

Happy holidays, careful on the ski slopes and see you in ’23,

Hasan

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all about tech at the World Cup

all about tech at the World Cup

This period before we say our Goodbyes to the old year is always a rollercoaster, but this year it’s all another level because every day we have a chance to sit down for a bit (a long bit) and feel *united* with the whole world. No matter who’s playing, there’s always a team to cheer for, and that’s just beautiful.

Today is all about tech associated with the Qatari World Cup – both inside the stadiums and beyond them.

 


 

Unbundling the World Cup… and Qatari tech scene

$300B went into this Cup and that figure includes the tech spending, too. For many reasons, this is the most tech Cup ever. It uses AI to check on all the fans around the 8 stadiums, predict and tackle overcrowding and keep the stadium temperature under control. Plus, there is network of 15,000 cameras with facial recognition tech. This may be on the creepy side… But in general, controlling the crowds is important to prevent chaos, because chaos at a packed football stadium is the last thing anyone wants…

 

AI is also deployed during matches to help match officials make better offside decisions with the help of 12 tracking cameras mounted below the stadium roof as well as 29(!) data points on each player. Oh, and there is a sensor at the centre of each match ball, which submits ball data 500 times per second. Just wow. 😶

 

 

Since the 2018 World Cup, match referees have been relying on VAR system (Video assistant referee) developed by Hawk-Eye Innovations Ltd. It helps them make decisions about goals, penalties, direct red cards and even mistaken identities of players. And when it comes to the players, for the first time ever they can track themselves through the FIFA Player App, which monitors their on-field performance and offers player-tailored insights shortly after a match is over. (So they can keep replaying those goals on repeat :P)

 

 

Outside the stadiums, tech is also thriving. Let’s break down the many ways tech is accompanying the hundreds of thousands of fans in Qatar these days.

 

7 distinct categories, but the list is far from complete. Consider it as a teaser of Qatari tech startup scene. Bear in mind that when compiling the list, I thought of services that World Cup fans would require or need most during their stays.

 

 

Esports – and sportstech in general – have obviously gained on importance and Qatar Sportstech is the country’s leading sports accelerator program supported by QDB, Ministry of Economy and Commerce and others. Its alumni are both local and international startups.

 

When it comes to food, the pockets of F&B businesses in GCC should swell by $6B, most of which will go to Qatari businesses, followed by Dubai (a popular stopover on the way to Qatar). Virtual kitchen operators have felt the most impact in Dubai and their major target are the fans who enjoy watching at home.

 

And for those tired of Airbnb lofts – would you rather spend the night on a cruise ship? No problem, you can choose from 2 floating hotels.

 

What shall I add?

 

Hats off, Qatar.

 

Image credit: FIFA

TL;DR (too long; didn’t read)  
All about tech related to this year’s World Cup in Qatar. I cover tech inside the 8 stadiums as well as tech outside them – in specific, how tech is accompanying fans in Qatar (and not just them). I present an infograph on Unbundling World Cup: 7 distinct areas including esports & gaming, moving around and e-commerce places selling gifts.
 

Family Postcard

 

+ Poland + Kazakhstan

TruKKer expanded its operations to Poland & Kazakhstan, the two key logistics centres in the EU and Commonwealth of Independent States.

 

Fintech PSP of 2022

Paymennt won the Fintech PSP of the Year award at the Gulf Capital SME Awards.

 

Mona Kattan’s closet revealed

The Luxury Closet launched its Celebrity Closets series. The first episode is about Mona Kattan’s closet and the series is featured in PEOPLE Magazine.

 

deliver now

Armada Delivery partnered up with Otter and this integration will help restaurants in KSA and Kuwait automatically request delivery couriers for their D2C needs.

 

10M

Lucky has hit 10 million registered users. Here’s to the next 10M!.

 

Latest Jobs @ ArzanVC Family

 

  • Business Development Manager at TruKKer (Riyadh)
  • Business Development Manager at Cartlow (Riyadh)
  • Business Development Executive at SubsBase (Cairo)
  • Customer Success Executive at Gameball (remote)
  • Senior Quality Assurance Engineer at FlexxPay (Beirut)
  • Quality Assurance Engineer at Classcard (India – remote)

 

KSA : Mexico is on tonight. That should be interesting.

Hasan

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Becoming a regional Shopify

Becoming a regional Shopify

Do you still believe that offline commerce and e-commerce are 2 different worlds? (Not accepting No as an answer.)

Today I’ll talk about modernizing retail and I’ll be zooming on a regional Shopify in the making… guess who.

 


 

Becoming a regional Shopify… and modernizing retailers along the way

We’ve been with this startup from a very early stage; 3 tickets in total, the latest went into their recently announced Series B.

 

They began in 2017 with a traditional SaaS model and later shifted to SaaS+/Marketplace. Being in B2B Saas for SMBs enabled them to reap the rewards from the network effect and aggregate the demand. The growing demand then led them to build their own set of products – ZidShip, ZidPay and ZidApp Market – through which they were able to offer their merchants better prices and offerings, while providing their partners with continuous demand…

 

Now you know who I’m talking about. Zid.

 

Bricks and clicks

 

In the past, there was a misleading assumption that e-commerce shut down the real stores. “People used to believe that you open your online store to close your offline shop,” told me recently Mazen AlDarrab, the founder of Zid.

 

Well, the pandemic did turn online retail into the bread and butter of many offline retailers. In most cases, online was the only way to reach out to their customers. But online was more than that; it helped retailers analyze what their customers actually want and require. And then people returned to the physical stores, and the boundaries of e-commerce and offline commerce became forever blurred.

 

 

Enabling modern retail

 

“I started to disbelieve in e-commerce – unfortunately… or fortunately,” Mazen told me. Zid strongly believes there isn’t just “e-commerce” or “traditional commerce”. It’s modern retail, where all channels can be managed and optimized from one place with one partner. At the centre of modern retail is the customer and the merchant. And their experience.

 

The company’s Series B round signals a very important expansion in Zid’s vision, which is moving from being “an e-commerce enabler” to “a sector enabler”. That means Zid’s role has been extended beyond just offering and unlocking online/digital channels.

 

 

Factors of modern retail

 

Factor A: Active use of data in aiding and making business decisions
Factor B: System integration and/or synchronization within the retail cycle
Factor C: Improved marketing performance through data
Factor D: Omnichannel sales with synergies
Note: These factors are not independent and usually two of them are at force.

 

Examples?

 

Factor A: Active use of data

 

A famous discount shop Riyal Al Barakah (KSA) – a similar concept to Poundland in the UK – was initially strictly offline (11 branches). They launched their online store 2 years ago to serve cities and regions where they didn’t have offline presence. The online sales data they collected ever since has guided them in selecting the right locations for their future branches. In other words, the data enabled them to make their business decisions with more accuracy and confidence.

 

Factor B & C: System integration & Improved marketing

 

A store for bathroom supplies Reefi (KSA) started with Zid 4 years ago. Back then they were just an Instagram account with no offline footprint. Zid helped them reduce their marketing spending by analyzing the customer data and utilizing API conversion integration between Zid and Snapchat. Reefi got a better ROI on their marketing activities and today they’re planning on opening 15 offline stores.

 

 

Factor A & D: Active use of data & Omnichannel sales

 

A leading poultry producer Entaj (KSA) started their D2C during covid. Prior to that, they used to have one business model: selling indirectly to grocery stores. Today they’re not only selling directly to the end-customers through their online store, but they have also acquired insights into their new products (launched exclusively on their online store). Based on that data, they scaled the products on their other channels. What began as a pilot project turned into one of Entaj’s main directions going forward.

 

Here’s to many more such stories. We wish Sultan AlAsmi, Mazen & the Zid team the best of luck! (Although I think you may not need it anymore :P)

TL;DR (too long; didn’t read)  
All about modernizing retail and a Saudi startup who's on that mission. Zid – a regional Shopify in the making – proves there isn’t just “e-commerce” or “traditional commerce”. Zid started as an e-commerce store creator and today they're on the path of becoming a sector enabler. The founder Mazen AlDarrab takes us through the Factors of modern retail and some practical examples of how Zid has been modernizing the local merchants in Saudi and beyond.
 

Family Postcard

 

+2

We’ve made first two investments through our upcoming AVC Fund III: Nearpay and MoneyFellows. Welcome to the family! 🖤.

 

Modernizing NGOs

Zid partnered with Unifonic to enable more than 2,000 NGOs to start and scale up their online stores.

 

Enterprise tech of the Year

FlexxPay won Enterprise Tech Startup of the Year at Gulf Business’ GB Tech Awards 2022. Mabrouk!

 

British fashion

The Luxury Closet joined forces with the British Fashion Council as a new patron to support circular fashion.

 

310% of minimum goal raised

GoPillar’s crowdfunding campaign on Republic is still on. Support them here.

 

Latest Jobs @ ArzanVC Family

 

  • Backend & Frontend Engineers at Classcard
  • Account Manager (Saudi National) at Merit Incentives (Riyadh)
  • BD Specialist at TruKKer (Jubail – KSA)
  • Partnerships Specialist at Qoyod (Riyadh)
  • Project Manager at Carseer (Amman)
  • General Accountant at FlexxPay (Beirut)
  • (multiple positions) at Lucky (Egypt)
  • Pricing Analyst Manager at Cartlow (Cairo)
  • Legal Associate at Retailo (Riyadh)

 

Anyone attending /MONEYtech @Grand Hyatt Kuwait on November 14? See you there…

Hasan

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4 graphs to show you why regional tech valuations remain unrealistic

4 graphs to show you why regional tech valuations remain unrealistic

My team – namely Asia and Noha – did a mighty job reviewing public multiples (EV-to-Revenue) and their recent journeys across different sectors. In the next step, they compared these public multiples to multiples of their private counterparts in the region. The results speak for themselves. And because sharing is caring, here I am serving you the research.

I wrote in the last newsletter that “median tech valuations fell across most stages in Q2’22 vs. Q1’22” and that “the valuations reset is bound to continue”. The graphs presented here reflect on that fall.

 


 

So much room to ungrow


We track a total of 100+ publicly listed companies that match the sectorial make-up of our region. Fintechs, CRMs, F&Bs, e-commerces, transport co’s, etc. We follow their QoQ ups & downs in terms of EV-to-Revenue multiples. Tracking public multiples is a daily bread for a VC like us. It provides us with a clearer idea on whether the valuations of private companies (in the region) are too high or reasonable. Well, you can guess… I must say some valuations we’re seeing these days have already become more realistic, but there is plenty room to grow (or rather… ungrow).

 

I’ll start with public multiples and their trajectories since the end of 2018 until mid-2022 – that is, including pre-covid, covid, post-covid, energy crisis… the full menu. (Small note: these public multiples are based on TTM revenue.)

 

 

Graph 1 – examples of selected public companies in the fintech space. Their trajectories are creating beautiful parallels, except for Square’s peak that happened 6 months ahead of the rest. Note that, as of June’22, only Mastercard and Visa were still above their pre-December’18 levels, while Shift4 Payments, PayPal and Square were already below those levels. We will look out for the numbers as of September’22 to see whether the plunge will continue or finally stabilize…

 

 

Graph 2 – examples of selected public companies in CRM and CX spheres. In contrast with the above fintech graph, the trajectories here are not so parallel. Shopify was on a plateau from June’20 till June’21 before taking a nose-dive. HubSpot followed the curve of fintechs, while Salesforce.com and IBEX Holdings were rather consistent. One thing clear; the reset is on.

 

Next, I present a median public multiple per specific vertical and multiples of startups (labeled A, B, C…) that are active in the given vertical. Note: because definitions may be too wide or overlapping, the presented median doesn’t include all available public multiples for the given sector (e.g. fintech), but it is the median multiple of only those public companies whose activities are the same as of the showcased startups… The selection pool may seem small to you, but that’s because each graph is showing only a specific vertical. Also note: the data on private multiples is limited (of course).

 

The showcased startups (A, B, C…) are homegrown in the MENA region and the graphs below serve to demonstrate the discrepancies between multiples and the available “room to ungrow” when it comes to valuations of MENA startups. Startup multiples are calculated based on revenue (last month annualized) and latest round valuation (LRV).

 

 

Graph 3 – the median public multiple (5.3x) represents multiples of Square, Fawry, PayPal, Visa, Mastercard, Affirm and Zip Co*. Only one startup in the exhibit (startup A) had a revenue multiple lower than the median public multiple (4x). This suggests that at least half of the analyzed fintech startups has valuations that could require corrections in the near future. It should be noted that several fintech startups raising at the moment have minimal or no revenue and we have not included those in the above graph (because then it would look scarier and it’s not Halloween yet).

 

 

Graph 4 – the median public multiple (6.01x) represents multiples of Salesforce.com Inc, IBEX Holdings Ltd and Shopify Inc*. Only one startup in the exhibit (startup A) had a revenue multiple lower than the median public multiple (4.56x). So, we can assume that majority of the region’s CRM/CX startups out there are overvalued. No breaking news here.

 

Next time you’re negotiating a valuation, be mindful of the above. Don’t bandwagon and jump onto deals as this may one day result in a real damage to our regional ecosystem. The valuation reset is likely to continue in the coming quarters if the energy crisis deepened further. Well, winter is coming…

 

* Like I explained earlier, this is a selection of public companies that best matches the vertical of the showcased startups in the given graph.

TL;DR (too long; didn’t read)  
Public multiples are nose-diving and tech valuations are still higher than 2020, but not for long? We analyze 100+ publicly listed companies and track the life of their EV-to-Revenue multiples since December’18 to see where it’s all heading. Down. Then we compare the Q2’22 public multiples with some selected startups in the region (we focus on fintech and CRM/CX). High, high, high, very high revenue multiples. Overvalued. Startups.

 

Family Postcard

 

263% of minimum goal raised

GoPillar launched its crowdfunding campaign on Republic as the startup aims to further revolutionize the architectural design market. Contribute here.

 

Studying Citron

INSEAD published a case study on Citron entitled “Global Expansion of a Consumer Goods Start-up from the Middle East”.

 

e-waste in Saudi

Cartlow partnered with stc pay to boost the circular economy in the Kingdom. Cartlow will empower the KSA consumers to eliminate e-waste by selling their devices on the platform whilst earning stc pay credit.

 

+1 photo

Here’s Laith’s souvenir from his visit to Tunisia, where he attended AfricArena North Africa Summit 2022.

 

 

Latest Jobs @ ArzanVC Family

 

  • (different roles) at Retailo (UAE, KSA)
  • (different roles) at TruKKer (UAE, KSA)
  • Partnerships Marketing Executive at Khazenly (Cairo)
  • Public Relations Manager at Lucky (Cairo)
  • Senior Graphic Designer at Citron (Dubai)
  • Senior Sales Executive – Outdoor at Zid (Riyadh)
  • Marketplace Manager at Cartlow (Riyadh)
  • Software Engineer (ROR) at Qoyod (Cairo)

 

See you at GITEX and RiseUp Riyadh… and possibly elsewhere 😉

Hasan

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To hoard or not to hoard? Hamlet in 2022.

To hoard or not to hoard? Hamlet in 2022.

Hoarding money for worse times? Not trending with everyone. Some startups are burning more cash than ever. VCs keep spending, too. a16z wrote its largest individual check ever ($350M) to a pre-launched residential real estate startup Flow, which was founded by Adam Neumann – the WeWork founder. Fingers crossed that the future of Flow won’t have a similar fallout and Adam will be a nicer boss.

 


 

To hoard or not to hoard? Hamlet in 2022.

 

2 headlines stand out from the last few days. Adam Neumann’s comeback and Saudi’s PIF shopping for US-based stocks worth $7B. The Fund’s portfolio has hit the market value of $40.8B after it bought shares in Zoom, Meta, Starbucks, PayPal…

 

3rd headline out there: Global VC funding is descending the ladder it climbed in 2021. CB Insights projects Q3’22 results to be very similar to Q3’20 because:

 


– growth and late-stage deals are down, early-stage is rising,
– payment startups funding saw its largest drop QoQ since 2020,
– blockchain is down except in Europe (a record of 106 deals last quarter),
– insurtech funding levelled off,
– manufacturing tech shows resiliency,
– healthtech AI and wearables are thriving,
– cybersecurity will keep on attracting funding and
– tight labor market in certain sectors. As companies have less talent to choose from, they must retain the talent they have and pamper the employees with higher compensation levels.

 

 

All the while, deposits at Silicon Valley Bank are going downhill but the lack of VC funding is not the main reason; some startups haven’t put a break on their cash burn. Before they can cut back on spending, startups need to take care of expenses like severance packages for terminated staff… We will only get to see the belt-tightening affecting runway balances in Q3’22.

 

Let’s bring our region under the lens. The drop in global venture funding shown above is the opposite of what happened in the Middle East during H1’22. Up the ladder.
During the first six months of 2022,

 


70% up: $1.7B was invested through 332 deals vs. $1B and 312 deals during the same period last year.
– Majority of the funding went into UAE-based startups (37.2%), followed by Saudi and Egypt (source: Digital Digest #191).
– Three-digit growth: Saudi attracted 245% more funds compared to H1’21. Bahrain 678% more 🤑
– Egypt, too. Egyptian startups attracted 106% more. But layoffs and shutdowns are a common scenario these days – and not only in Egypt (source: H1 2022 UAE Venture Report).

 

Up the ladder go the region’s SWFs, too. PIF for one (see the intro). Mubadala keeps investing opportunistically.

 

Up but for how long? July’22 and its $105M in deals showed a 68% MoM drop in VC funding across the region, which is possibly due to summertime and people finally taking proper time off work after 2 years. And possibly also because of the global trends? We must wait for complete Q3 data to be wiser. However, so far, August’22 balance stands at ~$201M across 25 deals and the month is not over yet. Back-to-school/office season kicks in 2 weeks and that should boost the end of this quarter. P.S. We @ArzanVC are considering 5 deals at the moment.

 

 

Plus, there’s that increased M&A activity around us. Market consolidation is on fire and in daily news. Our in-house research tells us that 53 startups got acquired since January’22 (vs. 42 in the whole of 2021). That includes our Cartlow and its acquisition of Melltoo.

 

On the startup front, founders have been forced to shrink their over-hired teams. Blitzscale strategies are also over. Unit economics 101 is in full swing even before the school started. Founders and their teams are being once again forced to learn how to take control of their runways. (Arzan VC team is here to advise if you need it. First session free of charge :P).

 

Like I hinted above, the region’s VC funding will most probably drop in Q3’22, and that would be the first time since Q4’20. Despite that – valuations everywhere remain high. The recent Tech Valuations Report Q2’22 by CB Insights shows that valuations are still above 2020 levels although median tech valuations fell across most stages in Q2’22 vs. Q1’22. That’s because although we’ve seen some rounds with lower valuations, the best startups out there haven’t done down rounds yet. When they start doing that, we will get closer to 2020 levels – and we certainly will, because the valuations reset is bound to continue. The infograph below reflects global valuation data (source: CB Insights Tech Valuations Report Q2’22).

 

 

Teams are consolidating along with the market. While some companies are forced to resort to layoffs, there’s an upside: influx of high-performing tech talent that is ready to get hired. Some of our portfolio companies are making key hires right now. Check them out below.

TL;DR (too long; didn’t read)  
H1’22 VC funding is down globally. Up regionally.
Q3’22 is projected to drop. Globally for sure, regionally very likely. Yet tech valuations remain higher than in 2020. Further corrections expected.
Overhiring is over.
Blitzscale is over, too.
Upside: the valuable talent out there.

 

Family Postcard

 

Melltoo ➡️ Cartlow

Cartlow acquired Melltoo, a classified platform for second-hand items.

 

$20M for Swvl

Swvl announced $20 million private placement from US-based institutional investors.

 

5% cashback

Khazenly partnered up with Lucky to allow its customers to benefit from the Lucky One card for free. 5% cashback included.

 

Talabat gifts

Merit Incentives partnered with UAE’s talabat to provide customers with digital gift card solutions redeemable on any talabat offerings.

 

Latest Jobs @ ArzanVC Family

 

  • Partnership & Sales Manager at Merit (Kuwait)
  • Business Development Manager – KSA at Cartlow (Riyadh)
  • Product Manager at Zid (Riyadh)
  • (multiple vacancies) at Citron
  • Creative Marketer at Haseel (Riyadh)
  • Senior Backend Engineer at SubsBase (Cairo)
  • Senior Accountant at Armada (Kuwait)

 

 

It’s the school and summits season again… Anyone at Tunisia’s AfricArena Summit this week? Laith is around 😉

Hasan

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