The Impact of the COVID-19 Pandemic on the Venture Capital Sector with a Special Focus on the MENA Region (Riyadh Valley Company)

Summary

• The IMF expects global economic growth to drop by 4.9% due to pandemic-related lockdowns, marking the worst economic downturn since 1930.p.2
• In the MENA region, tech startup funding reached $704 million across 564 deals in 2019, representing a 31% increase in deal number and 12% growth in funding over 2018 (excluding Careem and Souq).p.6
• Saudi Arabia recorded a peak performance in 2019 with 71 deals totaling $67 million in investments.p.7
• France introduced a €4 billion support package for startups, including state-backed loans up to double the 2019 payroll or 25% of annual revenue.p.8
• Saudi Arabia implemented a SAR 50 billion private sector support program, including SAR 30 billion for deferred payments and SAR 13.2 billion for loan funding.p.9

Key insights

1. VC markets are expected to recover more slowly from the pandemic than public equities due to longer valuation reassessment cycles and illiquidity.p.2
2. VC firms shifted their focus toward supporting existing portfolio companies rather than entering new investments.p.4
3. Initial Public Offerings (IPOs) faced high market uncertainty during the pandemic, delaying exits and shifting priority to capital preservation.p.4
4. In MENA, April 2020 funding surged to $188 million primarily due to a single $150 million investment in EMPG led by OLX Group.p.6
5. Accelerators accounted for 32% of all startup investments made in Saudi Arabia in 2019.p.7
6. China's venture capital funding rebounded sharply to over $2.5 billion in March 2020 compared to $410 million in February.p.12