Empowering Entrepreneurs: Open-Sourcing Our Model Term Sheet for the MENA Region

To support regional fundraising efforts, we are happy to open-source our Model Term Sheet to be launched by the SAVCPEA. Our Term Sheet was inspired by the NVCA’s version and adapted to MENA’s jurisdiction with the assistance of Latham & Watkins and the Law Office of Salman M. Al-Sudairi, for any entrepreneur in the MENA region to use. The document acts as a basis for fundraising negotiations, and includes the most important and commonly used terms applicable to the MENA region. 

Over the past few years, we have been fortunate to work with many world-class entrepreneurs. However, while we deal with term sheets on a day-to-day basis, entrepreneurs are often new to the whole fundraising exercise. 

The fact that there is no Model Term Sheet does not help. Yes, there are international term sheet templates available, but those are rarely tailored to the MENA region. This often makes it unnecessarily challenging to fundraise, and takes time away from entrepreneurs building their core business.

To address this challenge, we are happy to open-source our Model Term Sheet to the Saudi VCPE Association (SAVCPEA) for anyone to use. This Model Term Sheet was initially created for internal purposes with the assistance of Latham & Watkins and the Law Office of Salman M. Al-Sudairi. Most importantly, these trusted legal partners have based the terms on NVCA standards and made them applicable to the MENA region’s legislative environment. 

Of course, in true open source fashion, we encourage founders to modify, add, and remove terms based on their situation and preferences, but we believe that this is a solid and comprehensive starting point for any fundraising exercise in the region. A template of the term sheet can be downloaded for free in PDF and Word format.

We are excited to see what the future holds – happy fundraising!

Doubling Down on Sary: Becoming GCC’s Leading B2B Platform

We are participating in a $75 million USD (~281.25m SAR) Series C round in Sary, a B2B platform that’s reinventing wholesale starting with FMCG retailers and suppliers.

Since our initial investment, each and every interaction we have with Mohammed and Khaled, Sary’s co-founders, gives us more and more conviction on their strong vision, forward thinking, and outstanding ability to execute as one of the best entrepreneurial teams in KSA. We are proud to announce our participation in Sary’s $75m Series C round, making it the first KSA startup to close a Series C round. The round was led by Sanabil investments, with participation from Wafra International Investment Company, Endeavor Catalyst, and a number of existing investors. 

In the past year, Sary has significantly grown its team and has become one of the prime destinations for talent in the local startup scene. The company also successfully built a wide FMCG distribution network, grew in scale by 16x, improved their topline by 14x, and tapped into new verticals. 

As Sary is becoming the go-to B2B FMCG platform, they continue to innovate and integrate native and third party solutions that solve massive pain points across the FMCG supply chain, starting with an embedded financing solution that addresses the multi-billion dollar gap in credit offerings and retailer’s cash flow issues. The company is also expanding into new verticals, as well as leveraging its digital offering and existing supplier network that serves the broader GCC market to expand into those markets. The $90bn USD intra-GCC trade market alone more than doubles Sary’s target addressable market, and puts Sary on the global playing field. 

Our doubling-down on Sary makes this STV’s 8th follow-on investment - so far. We are proud to continue to work with and support our founders on their journey to create the region’s digital champions.

Investing in Opontia: Building the next-generation, digitally-native house of brands

We are leading a $42.0m (SAR 157.6m) Series A round in Opontia, the leading e-commerce roll-up company in the CEEMEA region (Central & Eastern Europe, Middle East, and Africa). Opontia acquires and scales profitable e-commerce brands that sell on marketplaces as well as directly via social and D2C platforms. The company enjoys a first-mover advantage with a model that has witnessed rapid growth internationally.

E-commerce is a $20b+ market in MENA alone, where penetration is still significantly less than developed markets. We have witnessed the meteoric rise of many homegrown D2C brands first-hand, driven by visionary entrepreneurs from the region and products that are specifically tailored to local demand.

While these brands see rapid growth and healthy margins, they often plateau at a certain stage as founders run into challenging roadblocks ranging from capital requirements to operational challenges to logistics. Hindered by this, some brands have difficulty taking the business to the next level and fail to capture the full economic value of their creation. This is where Opontia comes in.

Over the past few years, we have been particularly fascinated with the e-commerce rollup model, where a company uses debt to acquire profitable, growing brands on marketplaces such as Amazon and Noon, as well as D2C brands that sell through social and the likes of Salla. While Opontia is the first mover in the region, the e-commerce roll-up model has gained traction internationally, with comparables like Thrasio (the fastest-ever profitable unicorn), Razor Group, BBG, and Perch raising hundreds of millions in equity and debt.

Simply put, Opontia is best thought of as a leaner, digital-age evolution of traditional house of brands (e.g. P&G, Unilever), owing to its focus on digitally-native brands. Driven by a team of highly-skilled professionals – with extensive experience at top-tier e-commerce companies such as Amazon, Namshi, and Noon – Opontia acquires such brands from founders and uses their industry expertise to supercharge their growth. 

Platformizing roll-ups can bring about significant cost efficiencies, economies of scale, market insights, and acceleration. We are already seeing early signs of this; Opontia’s first acquisition, Novimed, jumped to an average growth of 163% month-over-month in sales after the acquisition. We believe that Philip and Manfred, Opontia’s founders, have the right pedigree, focus, and team to be the winner in this market in the MENA region and beyond. 

The company currently has 50 employees with deep e-commerce expertise across its 4 core markets: Saudi Arabia, United Arab Emirates, Turkey, and Poland. Over the next 6 months, they are looking to double this headcount while also expanding to Egypt, Nigeria, and Pakistan.  

We are thrilled to lead the $42m Series A investment in such a fast-growing company, alongside new investors Partners for Growth (PFG), the USA-based venture debt fund, and Upper90, a fund that was one of the earliest backers of Thrasio, as well as existing investors Raed Ventures, Kingsway Capital, and Presight Capital. The fundraise is a mix of equity and debt, which will help the company continue growing at break-neck speed. This is one to watch out for.

Do you have an e-commerce brand and are looking for an attractive exit? Reach out to Opontia here: https://opontia.com/

Investing in Calo: the Foodtech Startup Making Healthy Easy

We are co-leading a $13.5m (SAR 50.6m) round in Calo, the region's leading direct-to-consumer Foodtech startup. Calo is on a mission to make healthy easy, by making healthy food: better, faster, and cheaper. Based in Bahrain and KSA, the company has helped thousands of people in the region with creating and maintaining healthier lifestyles.

The food market is one of largest regionally and we believe it’s shifting on two fronts: the need for more convenience and healthier options - Calo is providing a solution for both. 

Taking a deeper look at KSA for example, the second highest spending bucket for consumers is food and beverages, which according to GASTAT represent ~16% of monthly expenditure. Demand for convenience can be seen by the recent success of multiple businesses in the foodtech space: from delivery startups to cloud kitchens. Moreover, we expect demand for healthier alternatives to rise too, especially when noting around 30% of the GCC population is considered obese and more than 60% have a weight range higher than normal, as mentioned in recent reports.

With the aforementioned data points, and regional governments acting as a forcing function, we estimate the potential addressable market for direct-to-consumer meal plan brands to be $3bn+ in the GCC. To that end, we are excited to partner with Calo: the regional champion in the space. 

When we met with Ahmed and Moayed, we were not only impressed by their product and commercial expertise; but their obsession with providing a delightful customer experience. Calo is vertically integrated and technology first; giving them a unique ability to regularly improve the end-to-end customer experience. Calo’s users are able to seamlessly sign up on the app by inputting their biometric information (like age, weight, height, etc.) after which they can select meals from a large variety of options available on their menu. The company then sends them a delivery that has their personalized meals which they can heat up and enjoy in 2 minutes. 

We believe this is just the start for the space and we are happy to partner with the Calo team in making health easy in our region. Calo is available in Bahrain and currently soft launched in Riyadh, with thousands on their waitlist. If you would like to try them out you can sign up here.

Doubling down on Unifonic: Creating the Leading Cloud Communication Platform in Emerging Markets

We are doubling down on Unifonic, the region’s leading cloud communications platform, to drive Saudi expansion and international presence. The company raised $125m in Series B funding from SoftBank Vision Fund 2, Sanabil Investments, and others. This marks the first investment of SoftBank in Saudi Arabia, as well as the largest funding round ever raised by a Saudi startup.

Time flies in the VC ecosystem. It seems like just yesterday that we wrote our first check to Unifonic, the burgeoning cloud communications platform from Saudi Arabia. The company had just raised $21 million led by us, resulting in one of the largest Series A funding rounds in the region at the time.

Today, less than three years later, we are excited that Unifonic has raised $125 million in funding, led by SoftBank Vision Fund 2 and Sanabil Investments with our participation, continuing our role as the company’s largest Saudi shareholder. With the investment, the company looks to expand its lead in its home market, Saudi Arabia, as well as expand further internationally. Ultimately, the company looks to become the emerging market champion of the CPaaS market globally, a market that is predicted to hit a size of $26b by 2026.

This investment marks the largest funding round in any Saudi startup to date, as well as the first investment of SoftBank in Saudi Arabia. We have full confidence in the Unifonic team to scale their company beyond the strong core that it has already built, with which they have already transformed the way corporations communicate with their customers. Since the last funding round, they were able to triple in size and now process over 10 billion transactions on their platform annually.

We have worked closely with Unifonic over the past 3 years and look forward to continuing this journey with the Unifonic team, SoftBank, and Sanabil.

Doubling down on tabby: Scaling flexible payments in MENA to the next level

We are co-leading a $50m Series B round in tabby, the leading Buy Now Pay Later provider in MENA. Based in the UAE and KSA, tabby enables more than 2,000 retailers to offer deferred payments, monthly installment plans and cashback to both online and in-store customers, at zero cost to the buyer.

At the end of last year, we announced our participation in tabby’s Series A round. At the time, we were strong believers in the potential of e-commerce and credit digitization in MENA as well as the ability of Hosam and Daniil to enable buyers and merchants across the region. Since our initial investment, the company has been able to unlock spectacular growth, with monthly GMV increasing more than 20x, active customers totalling 400,000 mainly across KSA and the UAE, and the roll out of a differentiated cashback program.

Beyond the demonstrable growth in customers, the company has also seen incredible adoption of its offering by merchants who see in tabby the perfect platform to increase their AOV (+33%), purchase frequency (+40%) and checkout conversion (+18%): customers can now use tabby’s services across more than 2,000 integrated merchants, including global brands such as Adidas, IKEA, SHEIN, VogaCloset as well as blue-chip regional retail groups such as Chalhoub Group, Al Futtaim Group, Landmark Group, and Apparel Group.

tabby’s impressive market adoption demonstrates the BNPL platform’s resonating value proposition in the region, further validating our initial thesis and conviction. We are proud to announce that we are doubling down on our position in tabby by co-leading a Series B round with GFC, and with the participation of new investors notably Delivery Hero, to propel the company’s growth across the wider GCC and enable access to credit for millions across MENA.

As the global BNPL market is expected to grow at ~30% CAGR over the next five years, we estimate that MENA will grow at least twice as fast, further accelerated by a rapid switch to contactless payments, e-commerce growth, and access to credit. Our doubling-down shows our strong belief that tabby is the market leader in MENA and that they will continue to drive BNPL’s growth across the region by enabling buyers and merchants alike.

The round has been joined by existing investors namely Arbor Ventures, Mubadala Capital, Raed Ventures, Global Ventures, MSA Capital, VentureSouq, Outliers VC, Jameel Investment Management Company (JIMCO) and HOF Capital. tabby also secured a $50m venture debt facility, one of the biggest of its kind in the region, from PFG last month to sustain their growth momentum, bringing the total capital raised to $100m.

You can download the tabby app here.

Investing in Intelmatix: Enabling Deep Data Analytics in MENA

We are co-leading the first investment round in Intelmatix, a Saudi deep tech startup focused on data intelligence. Intelmatix provides an extensive suite of cutting-edge analytics platforms that solve critical problems facing a variety of corporations, SMEs, and governments.

Utilizing data intelligence in the right way can be incredibly powerful for businesses and governments, but it is often easier said than done. Implementing the right data analysis strategy can be resource and time consuming, without even discussing the cost. Moreover, existing data platforms, while powerful, are often not suited to a company’s exact needs.

In Saudi Arabia alone, location data intelligence is projected to be a multibillion dollar market over the coming years, showing the large appetite for such solutions, driven by the Kingdom’s Vision 2030 and its focus on digitization and data-driven innovation. While deep tech was historically an area of expertise that was practiced by the select few, Saudi Arabia is increasingly developing this expertise as well.

Given these trends, we are excited to partner with Intelmatix, a company at the forefront of deep tech in Saudi Arabia, with offices in Riyadh, London, and Boston. The company makes data analytics available to a wide range of clients by using hundreds of proprietary and publicly available data sources. Through its product suite, anyone is able to obtain powerful and actionable insights from their own data, which is more applicable and user-friendly than an off-the-shelf solution and more cost-effective than a full-fledged in-house team.

Intelmatix is co-founded by a team of PhDs from world-renowned institutions, such as MIT. They combine decades of industry expertise with a laser-focused vision on execution and go-to-market. This goes in line with a broader trend of Saudi high-caliber talents and scientists switching from public to private sector, and building companies with a global vision - Intelmatix is the perfect example of this trend. We are happy to be partnering with strategic co-lead investor Sultan Holdings in our support for the company and look forward to them taking a global stage in deep tech.
Discover the company’s solutions here.

Investing in Sabbar: Redefining Work and Flexible Staffing

We are happy to announce that we are leading a $4.0m (SAR15m) Pre-Series A round in Sabbar, the leading Saudi-based on-demand staffing marketplace. Through Sabbar, companies can hire gig workers on short notice, taking away the hassle of sourcing, interviewing, training, scheduling, and paying these workers, as well as everything in between. 

The gig worker staffing industry in the region is riddled with challenges, ranging from sourcing quality talent to paying and retaining them. Through traditional manpower agencies, it takes companies an average of 45 to 90 days to hire gig workers. Even after these workers have been hired, they have to be trained by the companies, which takes additional resources and time. Moreover, both companies and workers are often not happy with the quality of work, leading to a staggering 70% yearly turnover rate in the F&B and retail industries.

It is clear that this $11b gig worker industry needs a new approach in MENA, which is where Sabbar comes in.

Sabbar looks to tackle all these challenges by offering a deep job platform that takes care of the front-to-back process of sourcing, hiring, paying, and retaining high-quality gig workers. Instead of 90 days, it just takes an average of 4 hours to get a position filled through Sabbar, with 98% accuracy. Instead of having to vet, on-board, and train these workers themselves, companies can rely on Sabbar to do this entire process for them.

In simple terms, Sabbar does the heavy lifting of the entire recruiting process for its partner companies, helping them save significant resources and time while getting high-quality, pre-vetted workers. Sabbar is able to do this more efficiently due to its digitization of the process, leveraging data to continuously optimize and automate various parts of it.

While the need for such a platform is clear, what really excites us about Sabbar is the relentless optimization and iteration that the team does. By continuously listening to on-the-ground feedback from their partner companies and workers, Mohamed, Afnan, and Abdulrahman have grown their company from a “simple” job platform to a full-fledged, end-to-end marketplace that allows companies and workers to find each other easily, and manages everything in between.

This shift has resulted in significant growth in terms of workers, partners, and more. Since its pivot to a marketplace model, the platform has been able to achieve a monthly growth rate of 40%, fulfilling shifts for over 150 customers such as IKEA, Toys "R" Us, Domino’s Pizza, and Tamimi Markets, while ensuring high-quality workers with an on-time arrival rate of 97%. 

We are sure that this is just the start, and are incredibly happy to partner with Sabbar together with existing investors Derayah Ventures and SEEDRA Ventures. With more than 70,000 workers on their waiting list, we have no doubts that this company will transform the gig worker staffing industry in Saudi Arabia and beyond. If you are interested in applying for high-quality, part-time jobs through Sabbar, check out their website here.

Investing in Wajeez: Digitizing Knowledge through Localized Bite-Sized Content

We are leading a $3.0m (SAR 11.25m) investment round in Wajeez, the leading app-based platform that offers summaries of top global and local non-fiction books in Arabic. Through Wajeez’s app, anyone can read or listen to condensed versions of global non-fiction books in Arabic, with the company’s current library consisting of 3,500+ audio and text summaries.

Despite there being over 400 million Arabic speakers worldwide, there is deceptively little Arabic content available online – only 3% of internet content is in Arabic in comparison to MENA users being 7% of the world’s internet users. More importantly, high-quality short-form content and summaries are more scarce, highlighting a huge gap between demand for, and supply of Arabic quality content.

This is where Wajeez fits in perfectly. Through the company’s library of 3,500+ text and audio summaries, users have quick access to the key insights of the most popular and award-winning non-fiction books. The published summaries, all in Arabic, are based on a carefully curated selection of the most popular non-fiction books, which undergo a rigorous vetting and quality control process before being published onto the platform.

The demand for such a platform is evident by Wajeez’s growth. Since its official launch in December 2020, the company reached an audience of 800,000 users in just 7 months. This has been the result of the hard work of Mohammad Zatara and Rami Abu Jbari, who bring a wide range of content experience to the table as the previous CEO of Faylasof and executive at Skynews and Al Shariq-Bloomberg, respectively.

The things we love about this team is their ambition and execution capabilities. While their current app is growing like wildfire, they are already thinking two steps ahead by expanding into shortened podcasts (“WajeezCast”) and B2B partnerships. Moreover, the company is looking to expand into other languages such as Turkish and Urdu, allowing people in neighboring countries to obtain the benefits of short-form content.

We are happy to partner with a fast-growing startup like Wajeez, which marks our first investment in the Levant. With the largest library of non-fiction summaries in the region, the company has created a flywheel that only gets stronger with more time, content, and listeners. We believe this to be a significant whitespace in the region, and are excited to partner with Mohammad and Rami on their journey, together with our co-investors Shorooq Partners, Mawdoo3, and Wise Ventures. You can download the Wajeez app for free here.

Sources:
Al Arabiya
Statista

STV Request for Startups: KSA’s largest, least digitized sector

We are announcing a request-for-startups (RFS) in the real estate sector – a landscape of whitespaces in KSA.

STV is issuing its first request-for-startups (RFS). We believe PropTech is one of the largest whitespace opportunities in Saudi. The residential real estate market is undergoing a massive transformation and technology could be the catalyst to leapfrog the sector into the future.

Key Drivers of the Opportunity

Saudi residential real estate is benefiting from tail-winds generated by 3 main trends:

• Government commitment: in line with the Vision target of 70% home ownership by 2030, the government is subsidizing financing for home buyers, injecting capital into lending institutions, providing the required digital infrastructure and modernizing regulations (Chart 1).

• Favorable demographics: we estimate demand of at least $260bn for residential real estate in the next 10 years, just accounting for the 1.33mn households set to be first-time home buyers (Chart 2). 

• Strong emerging traction: value of outstanding mortgage grew 3x in the past 5 years, and the pace of origination remained strong even at the peak of the pandemic (Chart 3).

Main Bottlenecks

We mapped out the home-buyer customer journey and we see many opportunities for disruptive technology plays in Saudi, particularly in the following areas:

• Improving home-finding ‘Discovery’: bringing the home offering online to improve visibility, convenience and enabling comparison. Today, people can spend up to a year in property search, due to information scarcity and broken incentives of traditional brokers. 

• Improving home-buying ‘Transaction’: digitizing the buying and selling experience. Today there is a supply/demand mismatch in the market and a speedy and seamless transaction is the largest need for buyers. We see an opportunity to digitally connect discovery, financing and closure.

Request for Startups

We welcome all ambitious and visionary entrepreneurs and any other stakeholders of the residential real estate ecosystem to reach out to us through this form and to share their ideas, proposals, concepts and ventures pitches. We are ready to partner by providing knowledge, support and capital.

Chart 1 - Government initiatives stimulating the residential real estate market

Chart 2 - Shifting age pyramid is expected to add $260bn of additional demand

Chart 3: in the past 5 years, the value of outstanding residential mortgages grew 3x 

Investing in Floward: MENA’s Largest Flowers and Gifting Online Store

We are leading a $27.5 million USD (~103.1 million SAR) investment round in Floward, the region’s leading flowers and gifts eCommerce solution that offers fresh-cut flowers, floral arrangements and bouquets, and gift baskets. Floward’s presence has covered the entire GCC market and has even tapped into the UK market following their recent geo-expansion.

Social gifting is a fundamental part of MENA’s culture, at the center of which blooms the symbol of gifts: flowers. Whether it is for birthdays, weddings, anniversaries, holidays, or other occasions, flowers are a cornerstone in gift giving. In the GCC, we estimate the cut-flower retail market alone to amount to ~3bn USD annually, and it is growing at a faster rate than the global market. Yet online gifting is extremely underpenetrated in the region. That, along with MENA’s socially and digitally connected population make the space ripe for the creation of a regional champion.

We believe that such a champion must master both quality of products and customer experience. That is exactly what we saw with Floward’s team. Today, Floward is a floral gifting platform that offers bouquets, floral arrangements, and gift baskets. The company fully owns their clients’ gifting journey from sourcing quality flowers globally to fulfilling last-mile delivery. The company’s go-to-market strategy of partnering with designers and influencers to design and market their products has accelerated establishing Floward’s unique and customer-loved brand. While the COVID-19 pandemic has accelerated eCommerce penetration in the region across all verticals, Floward’s more than 10x growth during 2020 in comparison to 2019, stands out considerably. The company has also been expanding its geographical footprint both regionally and globally at an impressive pace, as they have started operations in several cities since the start of the year to cover a total of 20 cities across the GCC and UK, with more to come.

Our excitement for Floward is inspired by the company’s potential and understanding of GCC consumer trends. Floward today is tapping into two such trends: The first is social gifting, by focusing on both the gift giver and the recipients’ experience. The second is social commerce, by merging eCommerce operations with social media platforms by having influencers and designers create their own designs and sell them on Floward, establishing an income source for their partners. Moving forward, Floward is primed to be an international champion of social gifting.

Abdulaziz B. Al Loughani, the company’s founder and CEO is a seasoned entrepreneur and investor. Having previously co-founded and led Talabat.com, which exited to Rocket Internet, we believe that Abdulaziz and the impressive Floward team, coupled with their data-driven process and insights into regional consumer behavior, hold the keys to championing this space.

Investing in Tweeq: Elevating Financial Services Across MENA

We are co-leading an investment in Tweeq, an emerging FinTech platform for money management and financial tools based out of Riyadh. With a rapidly developing FinTech regional ecosystem, we are excited about the sector and thrilled to join Tweeq as they reimagine FinTech across MENA with a product-first approach.

As financial regulators open the doors to challengers and innovators, the region is destined to witness the same shift that swept the financial sectors in Europe, China, and India. What happened in South Korea is especially interesting: KaKaoBank, founded in 2016, reached 10m users by the end of 2019, while Toss, founded 2015, achieved 11m users by end of the same year. While that could be considered as a lot of entropy for a country of 51m (roughly the size of GCC), we believe that MENA will witness an even bigger shift, fueled by a younger population and increasingly progressive regulators.

At STV, we closely study the evolution of the FinTech sector in the region and its emerging players. We believe that there is a sizable opportunity to digitize the multi-billion dollar traditional financial services sector by providing hassle-free, intuitive financial products. We first met Tweeq last year and we immediately knew that we were looking at something unique. Tweeq is entering the space with a pan-MENA vision and a product-first mindset. The company recently announced its partnership with MasterCard and Paymentology as it continues to build a technology infrastructure that is on-par with global best practices.

The founders, Saeed AlBuhairi, Mohammed Faheem, Abdulaziz AlMalki, and Abdullah AlOtaibi, bring together a rare combination of domain expertise and deep technical knowledge. We are thrilled to join them in their journey along with Raed Ventures. We invite you to join the waiting list today by downloading Tweeq through the app stores of Apple and Google Play to be among the first to access Tweeq’s services.

Investing in Gathern: Establishing the Vacation Rental Market in Saudi Arabia and beyond.

We are leading a $6m (SAR 22m) Series A investment round in Gathern, Saudi Arabia’s leading and fastest-growing peer-to-peer (P2P) rental marketplace. Through Gathern, anybody can rent a house, loft, villa, cottage, farm, and istraha, among other options, directly from an individual owner – on a daily basis. We look to support Gathern to scale their business, which already saw significant growth during the pandemic.

Domestic and international tourism has been a core focus of Saudi Arabia’s Vision 2030. By 2030, the country aims to welcome 100 million international and domestic visitors, making Saudi Arabia one of the top 5 tourist destinations globally. In order to achieve this goal, the government has set up several entertainment- and travel-focused entities, while also pledging to invest $64bn in tourism projects over the next decade. While Hajj and Umrah already account for nearly 10 million international visitors to the Kingdom yearly, the number of international visitors is only expected to increase, especially given the recent introduction of tourist visas. In 2025, the market is expected to reach $4.3bn, growing at 10%+ a year. We believe that this provides an incredible opportunity, especially with the right value proposition that captures a significant share of the value pool.

With that in mind, we are incredibly excited to partner with Gathern – it is our first investment in the travel space, and the largest ever investment in a female-led Saudi-based startup. We are leading the Series A investment in the company, with participation from existing and new investors.

Through Gathern, anybody can rent a house, loft, villa, cottage, farm, and istraha, among other options, directly from an individual owner. While property owners usually require an individual P2P rental license to rent out their property, Gathern allows them to list their properties for rent on their website without having to obtain this individual license – removing a significant hurdle in the vacation rental market. The company is currently already active in 100+ cities within the Kingdom, and is looking to further expand its presence, supply pool, and value proposition in the country.

Of course, it takes the right team to win in such a massive market. We believe that Latifa Altamimi and the Gathern team have the right engine to tackle this fast-growing market with a fresh approach. They have proven themselves to be incredibly nimble and resilient during COVID-19, where they grew significantly despite the on-going challenges. 

This is certainly one to look out for, so be sure to try it out and book your next trip through Gathern.

Investing in Sary: KSA’s Leading B2B Platform

We are participating in a $30.5 million USD (~114.4m SAR) investment round in Sary, a B2B platform that’s reinventing wholesale starting with FMCG retailers and suppliers

B2B logistics can be significantly improved in Saudi Arabia, especially for the traditional FMCG retailers that make up 50% of the 41bn USD annual grocery GMV. Offline sourcing is fragmented, delivery hours are not flexible, and prices are often volitatie. Transactions are cash-based and there is minimal technology involved in inventory management and accounting specifically for traditional retailers. For that to happen in one of the biggest industries, those inefficiencies get very expensive. Not only that, retailers also do not have the order sizes to unlock quantity discounts, they lack inventory forecasting skills, and they do not have enough space to store products the way larger marts do. This reliance on ad-hoc procurement results in many phone calls, manual account book documentation to do business and massive inefficiencies. Furthermore, the COVID-19 pandemic has shown that this lack of digitization in such an essential and notoriously opaque market has a major effect both on these businesses and on consumers, which included limited SKU availability, prolonged procurement, and increased handling, processing, and delivery costs.

In comes Sary, a B2B marketplace that connects retailers with a large network of FMCG wholesalers, suppliers, and manufacturers through their web and mobile platforms. Sary’s disruptive solution helps digitize the entire supply chain. It also unlocks retailers’ potential to find the best deals, do inventory forecasting, and take advantage of a number of other digital services, as well as gives suppliers and manufacturers accessibility and visibility to retailers.

By digitizing supply and demand along the grocery value chain, Sary is boosting efficiency of one of the most sizable sectors in the economy, delivering benefits to both the business players and the end consumer.

Sary’s performance, achievement, and most importantly, vision gives us confidence in their unique position and potential to redefine retailer-supplier relations. The company has built the necessary infrastructure and network to introduce and integrate further financial and digital solutions that will allow Sary to reinvent and fully own the wholesale supply chain across retail industry verticals.

We are very glad to have met Mohammed AlDossary, the ex-general manager at Careem, and Khaled Alsiari, the co-founders of Sary. Throughout our engagement with the team, we have seen them successfully navigate the COVID-19 pandemic, build a solid product, and grow the company quite impressively to have moved 4 million tons of goods across the country. We are very excited to see this ambitious team take the company forward towards being the go-to platform for both sides of the retail market, and are very pleased to be along for the ride.

Investing in Foodics: digitizing brick-and-mortar in MENA and beyond.

We are co-leading a $20 million USD (~75m SAR) investment round in Foodics, the leading cloud point-of-sale solution in MENA. Foodics is further expanding in Saudi, growing into new geographies, and bringing new capabilities in FinTech.

It’s not only about point-of-sale; it’s about running the business. SMEs, especially in the food & beverage segment but equally true for broader retail, have been shifting from on-premises single-function POS to cloud-based full-stack retail management solutions. Countries are going cashless (card payments are up 34% YoY in Saudi), retail analytics is becoming more relevant, and end-to-end system integrations is now a priority. Point-of-sale systems are in a unique place to enable much of these needs.

At STV, when assessing a sector, we have a bias to look for the “single source of truth”; which are players who fall in a juncture in the value chain enabling them to drive industry-wide growth through data, giving them access to adjacencies, and serve as the gateway for others to plug-in. Foodics is exactly that. 

Foodics started in 2014 by Ahmad AlZaini and Mosab AlOthmani. What began as a two-person shop in Khobar grew to become a 150+ employee company operating from four countries. Their growth story, from a few small restaurants, to landing the first enterprise customer, to becoming a licensed fintech company, is a great playbook for building high-growth §B2B brands. Today, Foodics is critical infrastructure for over 10,000 businesses, helping them delight their customers, access capital, and stay competitive.

We invest in resilient and innovative entrepreneurs who go after bold strategies. Ahmad and Mosab are the best examples of that profile. We’re excited to see them build next generation solutions for MENA retail and we are proud to join Sanabil, Endeavor Catalyst, and RTF in this journey.

Investing in spiderSilk: Strengthening the Region’s Digital Defense Line

We are co-leading an investment round in spiderSilk, a promising cybersecurity venture that is reinventing Attack Surface Management (ASM) and going after global markets.

We need to rethink cybersecurity from first principles. What started in the 1990s as signature-based antivirus and firewalls have proven insufficient against increasingly sophisticated attack vectors; supply-chain attacks, 0-day drive-by exploits, side-channel attacks, etc. This complexity is what’s driving the sector to become a red ocean, and driving more noise to customers than signals. We need to approach these risks from a new angle - we are thrilled to have met SpiderSilk, our first investment in this sector.

spiderSilk enables organizations to gain full visibility on their own digital assets and monitor them for vulnerabilities or misconfigurations. The technology is unique in its precision to attribute hard-to-find assets to their owners, even with minimum data on these assets. Their agentless approach is responsible for uncovering a long list of findings, including MoviePass, Samsung, WeWork, Clearview AI, and EA - to name a few.

Globally, investments into the cybersecurity space amounted to $50bn in 2020, with $2bn being deployed in the Middle East. The largest piece of that pie goes to companies offering network management solutions along the Technology, Media, and Telecommunications (TMT) and SaaS verticals. Internet penetration in the region has surpassed 60%, which has more than tripled in the last decade. This, coupled with regional enterprises becoming more security-conscious, demands more focus on innovation in cyberdefense. We believe that spirderSilk is uniquely positioned and has the potential to provide critical support in every development pipeline and CISO dashboard.

At STV, we have always described ourselves as investors in “bridging the dichotomy between digital supply and digital demand”. Cybersecurity is the perfect sector to demonstrate this division - despite our region being a critical market for cybersecurity vendors, it is the market with the lowest VC cybersecurity funding.

We invest in technology-first thinkers. Rami El Malak and Mossab Hussein are on the cusp of something big and we are privileged to witness them taking their first steps, and excited to join them on their journey to becoming a category-defining company.

Investing in tabby: Enabling Flexible Payments for MENA Retailers

We are happy to announce our investment in the $23m Series A investment round of tabby, the leading Buy Now Pay Later provider in MENA. Based in the UAE and KSA, tabby enables more than 500 retailers to offer deferred payments and monthly installment plans to both online and in-store customers, at zero cost to the buyer.

Adoption of innovative payment solutions in MENA has accelerated tremendously over the past year, driven mainly by the COVID-19 pandemic. The best example is Saudi Arabia that witnessed a 174% surge in contactless transactions, which represents $7.3bn (~SAR 27.5bn) and 91% of total POS transactions in September 2020 –up from 66% a year before. Within contactless transactions, mobile payments increased 6x to represent 25% of total POS transactions, compared to 8% a year before.

E-commerce penetration has been rapidly growing as consumer behaviour shifts from traditional retail to online, with MENA’s e-commerce market growing 25% annually. Moreover, 8% of GCC households have purchased online in 2020, up from 2% in 2015. While penetration in MENA lags behind penetration in developed markets, which ranges between 16% and 25%, we remain enthusiastic about future prospects as there is still much room to grow.

Despite these positive trends, credit card penetration in Saudi Arabia and MENA (33% and 29%, respectively) has significant growth potential compared to developed markets. This under-penetration, coupled with the lack of options for deferred payment and tightened credit policies across banks in the region, makes us strong believers in the potential of better access to financial services for consumers via credit digitization.

We are delighted to contribute in increasing access to credit for millions across MENA as we partner with tabby to tackle the promising  Buy Now Pay Later sector. tabby’s value proposition resonates with both buyers and merchants:

• Buyers: Buyers enjoy flexible payment terms (defer paying for up to 30 days, or pay in 4 equal monthly installments) online and offline, in real time and at zero interest or fees as long as they pay their monthly installment on time.

• Merchants: Through direct integration into checkouts or POS systems, merchants benefit from improved checkout conversion (+20%) and an increase in purchase frequency and higher AOV (+30% to 80%). In exchange, tabby charges them a commission on sales generated via its platform.

So far, the company has seen impressive market adoption of its offering: customers can now use its services across more than 500 integrated merchants, including leading global brands like IKEA, Toys R Us and Ace Hardware, as well as regional retail giants including Al Futtaim Group, Landmark Group, and Apparel Group.

We strongly believe that Co-founders Hosam Arab, who previously co-founded and led Namshi as CEO, and Daniil Barkalov have the perfect combination of  experience, market understanding, vision, approach, and technological aptitude to create the market leader and enable buyers and merchants across MENA.

Our co-investors in this round include a mix of new and existing investors, including Arbor Ventures, Mubadala Capital, Global Founders Capital, Raed Ventures, Jameel Investment Management Company (JIMCO), Global Ventures, VentureSouq, Outliers Ventures, HOF Capital, and Arab Bank.

References:

•  Kearney Middle East Report

•  Bain & Co, Google Report

Investing in Salla: Enabling the Rapidly-Growing E-Commerce Market in MENA

We are leading an $8.5m (~SAR 32m) Series A investment round in Salla, the leading Makkah-based e-commerce enabler. With Salla, anyone can easily set up and manage an Arabic e-commerce store. We look to support Salla to grow and scale their business, which has already achieved SAR 2bn (~$533m) in GMV. The company already has the highest GMV of any such platform in the MENA region, and has seen significant growth from 2019 to 2020.

More and more people are relying on online channels for their day-to-day purchases. In fact, user penetration in the e-commerce market is at 66.1% in Saudi Arabia in 2019. Yet, the market size has not yet caught up. In order to reach the global average, the e-commerce market size in Saudi Arabia stands to grow 4 times, with the wider MENA standing to grow 7 times.

There are already signs that the region is catching up. According to a report by Bain & Company and Google, e-commerce in the region has been growing ahead of the global average with an annual growth rate of 25%. The GCC and Egypt account for 80% of the e-commerce market, and they have been growing at a 30% annual rate, more than twice as fast as the rest of MENA. 

We are delighted to be supporting Salla, a champion of the e-commerce industry in Saudi Arabia and the wider MENA region. Salla allows anyone to easily set up an e-commerce store, among the first to do so in the region. This is critical, as e-commerce markets rely heavily on the infrastructure that they are built on to operate properly. Moreover, with building a local ecosystem at the core of its proposition, we believe that Salla has the right approach to contribute significantly to this market and enable the many players in it. 

Salla’s platform features inventory management and marketing tools, as well as detailed reports on store performance and automatic invoices for orders, which enables e-commerce merchants to set up, maintain, and increase sales through their stores without any fees or commissions. Furthermore, due to a variety of payment and logistic partnerships, store owners do not have to worry about payment or delivery challenges once their store goes live – it is all taken care of. 

The moment we met Salla’s founders Nawaf Hariri and Salman Butt, we knew that Salla is the play needed to catalyze the growth of the e-commerce market in Saudi Arabia and the wider MENA region. More importantly, we also immediately knew that they are the right team to do it. Nawaf and Salman started Salla in 2016, building on their experience and knowledge as founders and IT professionals. 

They have the right mix of knowledge, industry experience, and market understanding to lead the charge. We are excited to invest alongside existing investors Raed Ventures and Vision Ventures to be part of their journey.

Our Journey Thus Far: Emerging Digital Champions, A Unicorn Exit, and a Fast-Growing Ecosystem

We are thrilled to launch our Economic and Social Impact Snapshot, reflecting on the fund's journey and impact on the regional landscape since starting operations in early 2018. Through our investments in rising digital champions, we are proud to have played a part in regional digital transformation and economic diversification.

In recent years, Saudi Arabia, and the MENA region in general, has seen a significant increase in the amount of venture capital funding. In H1 2020, Saudi Arabia saw an increase of 102% in total VC funding compared to H1 2019, making it the fastest growing ecosystem by total funding in the MENA region. Moreover, as highlighted in our previous report, this growth trend is expected to continue with VC funding in Saudi Arabia estimated to reach $500 million by 2025.

Given this anticipated growth, the favourable regional demographics, and Vision 2030’s emphasis on technological advancements, STV continuously looks for opportunities to unlock the potential of the region by backing its emerging digital champions. 

Since starting operations a little under 3 years ago, STV has led 30% of all VC fundraising in Saudi Arabia. It has led and participated in regional funding rounds totaling $333 million, accounting for a sizable 16% of all VC fundraising in MENA. With this contribution, the fund has quickly become one of the largest contributors to VC funding and technology enablement in the region.

Learn more about the economic and social impact of STV and our world-class portfolio companies here.

Doubling Down on Noon Academy: Universalizing Access to Quality Education

We are leading a $13 million (SAR 48.8 million) investment round in Noon Academy, the leading EdTech company in MENA. The investment will strengthen the company’s position in current markets such as Saudi Arabia and Egypt, fuel its geographical expansion into new markets, as well as go toward refining Noon’s social offerings. Since our initial investment, Noon Academy has launched in 4 new markets and reached 6M+ students served.

A little under a year ago, we announced that we co-led a Series A round in Noon Academy. At the time, we were particularly inspired by the founders’ passion for increasing access to quality education and commitment to crafting an intuitive and engaging online classroom experience for students and teachers alike. The team’s unique approach to online education differentiated it from global players, with its social learning platform achieving 4x the global industry average of student engagement at the time of our initial investment. Their dedication to its mission and reliance on data-driven product development has led to tremendous growth that exceeded our expectations. We are proud to announce that we are doubling down on our position in Noon Academy by leading a Pre-B round that serves to bolster the company’s growth.

In order to curb the spread of COVID-19, schools worldwide have been forced to close down, impacting over 90% of the world’s student population in the process according to UNESCO. As a result, we are seeing education transcend the confines of the traditional classroom at an unprecedented scale. While educational institutions have been slow to adopt online education, they have now been forced to rely on fully online solutions. We believe this will significantly accelerate the adoption of online learning, ushering in an era of digital transformation for education that is long overdue.

Even though the measures put in place as a result of the pandemic will be lifted eventually, we anticipate the digitization to last and are excited to see Noon Academy champion the digital transformation. The increasing reliance on EdTech solutions and digital platforms has resulted in increased acceptance and credibility; families and institutions alike are beginning to recognize that such solutions are in many ways better alternatives to traditional learning, especially as they discover the superior cost-effectiveness, scalability, and accessibility they provide. 

As it happens, digital platforms also present a unique opportunity to develop engaging learning experiences by incorporating social and gamification features. This is an area where Noon Academy excels; the company has developed a robust social offering that includes features such as group study, advanced collaboration tools, a social media-like timeline that encourages sharing and interaction, as well as opportunities to participate in live competitions related to course materials. In fact, this is a key driver behind Noon Academy’s success, noting that their social learning platform is achieving 5 times the global industry average of a student’s daily engagement. Since our initial investment, sign-ups have grown by 2.6x, with the total number of students served reaching 6M+ and counting. The company has also launched in 4 new countries and is continuously working on adding new features to further increase engagement and make learning more enjoyable. 

As younger populations become increasingly digital, the need to adopt online learning capabilities to accommodate students’ evolving preferences and learning styles will become essential. Noon Academy is preempting this paradigm shift and capturing the attention of an intuitively digital younger population by tailoring the experience to them. We are strong believers that investment in Education pays the highest dividends, on all levels.