2023: Bullish Expectations for the Global South

Will on

February 23, 2023

It is no understatement to say the world is spinning faster – 1.59 seconds milliseconds in 24hrs one day last year. It sure feels faster. In the last two years, we saw record VC inflows and crazy valuations in 2021, the first need for inflation control in 40 years, the first fully autonomous farming vehicle, unexpectedly strong teams from unexpected places, fraudsters ruining crypto markets, and last but not least, Generative AI taking the world by storm faster than TikTok. We are blessed to live in interesting times.

In Q4 2022 I wrote about Venture Valuations in the Global South and conveyed a generally optimistic outlook. In a nutshell, I stand by that view, although from recent conversations it’s more clear that even strong companies are going to have to take longer to grow into their inflated valuations of 2021. As long as they have 18-24 months or more to do that growth without raising capital, they’ll be fine. Those with short runways are in trouble.

My partners and I continuously benefit from conversations with deeply-knowledgeable individuals across vastly different cultures, countries and industry sectors supporting the world’s fastest-growing economies. Below are some recent highlights I hope you find helpful as we get to business in 2023.

Emerging Markets: Opportunity & Revised Growth Forecasts

The market is large with 1.4B aspiring middle-income people. The fundamental trends driving technology adoption and growth remain untouched and if anything are likely to improve due to the proliferation of low-cost smartphones and data and the continued influx of well-trained global-quality talent. In the macro context:

  • Relative Size Matters:
    • Emerging Market GDP: Emerging Markets’ GDP has now reached 77% of Advanced Economies GDP. (USD 44.2T vs. USD 57.3T)
  • Updated IMF Growth Forecasts:
    • Emerging Markets: Increased from 3.7% to 4.2%.
    • Advanced Economies: Increased from 1.1% to 1.4%, highlighting a somewhat less pessimistic but still anemic growth outlook.
  • Noteworthy Market Growth:
    • MENA & SSA: Kenya, Nigeria and Egypt are forecast to record 5.1%, 3.2% and 4% increases over the year.
    • SEA: Vietnam and Indonesia are forecast to record 6.2% and 4.8%.
    • India: India is expected to achieve a 6.1% jump over 2022.

These are not small figures. Emerging markets will add USD 1.9 trillion to their respective economies over this year alone or 2.3x the USD 802 billion added by advanced economies.

We believe in the opportunity.

Macro & US Venture Capital: What we’re seeing

The U.S. economy has undergone a variety of shocks since the beginning of the millennium. The pandemic has been the most recent,14 years of Quantitative Easing in combination with federal stimulus packages have put new pressures on the economy. Interests Rates are likely to continue to go up for the first half of this year as the Fed navigates the balance between inflation targets and full employment. Raising rates and flight to safety is no secret and that’s stressing riskier VC valuations. In an economy where equity portfolios have experienced the worst year since 2008; as an alternative asset class, Venture Capital is not immune.

  • Historic Highs: 2021 was a historic high in the U.S. and globally in terms of VC funding and deal count. As with all historic highs, there must be a normalization period (the great normalization) thereafter. Despite a c. 50% drop in VC funding in Q4 ‘22 relative to same period last year, VC funding remains near pre historic-peak highs.
  • Valuations & Rounds: Valuations in the U.S. and across stages began looking stately mid-’20 and in ‘21 many would argue over the top. Remarkably, despite a normalization in 2022, the number of uprounds increased in ‘22 to 90% of all transactions while the number of down or flat rounds decreased for the remainder. In terms of valuations, all series with the exception of Series C and D+ retained their achieved peaks in ‘22, although Series B saw a drop over Q4 ‘22.

Emerging Markets: Here or there?

Emerging Markets have always held a combination of fascination and fear of risk. Recent headlines couldn’t highlight this behavior better:

In August of 2022:

Less than six months later in January of this year:

Can you spell volatility?

We don’t get too bothered by short-term volatility and focus on the long-term, maintaining our conviction via a combination of macro data and on-the-ground network insight.

Emerging Markets: What Are the Locals Saying?

This is an unusual moment in the Venture Capital industry where investment managers across the Global South are experiencing similar conditions and are aligned across key principles. How do we know? We asked our 18 investing partners with an aggregate AUM of c. USD 1.2B, across a variety of investment strategies (mostly early or early growth) in the 9 tech hotspots of the Global South. They confirmed:

  • Fundraising: The second half of 2022 saw a clear correction globally both in the number and value of deals transacted – a 53% drop from USD 681Bn in ‘21 to USD 445.2Bn in ‘22. Companies are avoiding raising rounds in the current environment and those that are required to are facing a drier landscape as investors become more disciplined, looking for fundamentals and down-turn management experience. The great adjustment also means fewer late-stage transactions while potential ‘winner’ companies are becoming more competitive to access.
  • Path to Profitability: Fund Managers are becoming more demanding about founders generating a plan or better yet demonstrating execution towards profitability. Companies will have to demonstrate their ability to find new ways of operating, manage their teams through the challenge and not lose track of growth. Growth at all costs is gone, and sustainable growth has become the guidepost.

The results of the survey not only support the incoming data streams from various sources [VenturePulse, Crunchbase, Pitchbook, CBInsights] but also add additional perspective relative to valuations, timing, and challenges each is seeing. Net net: valuation challenges in the Global South are similar, but much less pronounced, as there are many fewer formerly-high-flying late-stage over-valued companies and many more early to early-growth stage companies where valuations were (and are) more reasonable.

A few additional data streams for your consumption:

We are clearly well into a post-peak-unicorn world. But not a zero-unicorn world.

We can see despite a post ‘21 peak adjustment, global Venture Capital remains in-line with historic levels. It is worth noting the largest adjustment took place in Late Stage which explains why we are seeing less new $1Bn+ valuations in support of the chart above.

We look at what is happening across our investing regions next.


The great adjustment is universal across the global south. What drives noise vs. industry is data, and the concern in the region is a consistent drop in funding visible across 2022. The expectations for 2023 continue to be uncertain however it is clear going forward investors will be more selective.

Similar to the global data presented above, the largest changes in VC activity have taken place across Late Stage. Investors such as SoftBank Latin America Ventures and Tiger pulled back from the market and recorded no new investments in the second half of 2022. Regional investors such as Kazsek and Monashees were also less active. With fewer late-stage investors providing exit opportunities the market is cautious and reading market conditions for new opportunities.


Venture Capital Median Deal Sizes (USD M)

Venture Capital Median Deal Sizes (USD M)

SE Asia and India echo trends seen around the globe in Venture Capital activity in addition to what was highlighted in LatAm; despite it happening at a larger scale. High peaks in ‘21 were followed by an adjustment over 2022, however, the adjustment across India and SE Asia remains above historic highs.

It is worth noting the median deal size across investment stages has remained the same with the exception of Late Stage (Series D) which saw a dramatic drop and Series B which also saw a drop over the year. Similar challenges of navigating a company towards an exit seen in alternate regions also apply to this environment.

When thinking about SE Asia, it is difficult not to consider what is happening in the region as a whole. At the regional level venture capital activity appears more stable and historic highs in 2021 (USD 177.2Bn), resemble highs achieved in 2018. Yes, the great normalization applies, however, deal volumes remain significant and as with SE Asia the most significant changes (reductions) are happening in Late Stage investing.


Venture Capital Median Deal Sizes (USD M)

Total Equity Investments / Quarter (USDm)

The Venture Capital landscape in the African continent has demonstrated resilience over 2022. Africa achieved historic investment highs in 2021 (USD 5.2Bn) similar to other geographies around the world, however, the difference becomes apparent with other markets as Africa has maintained achieved historic highs in 2022. The continent recorded USD 4.9Bn in investment flows which is only a 6% drop over 2021 levels relative to a global drop of 53% in funding.

Despite this accomplishment, it is worth understanding that Africa is not isolated from global market conditions nor is it immune to the great adjustment seen elsewhere. Taking a closer look at the quarterly investment flows for the continent reveals a slowdown in the last two quarters of 2022 as African investors become more selective amidst challenging headlines.

The Hard Part: What to Believe, What to Expect?

Noise. Adjustments. Retreat. Growth. Moving Expectations. Changing Data. Understanding the current environment is not easy. What to believe requires knowledge of history and a decent crystal ball.

Below are a few things we are certain of:

  • The Market: The Global South opportunity remains unchanged as the fundamentals driving the opportunity remain strong and are only likely to get stronger (Data access/speed/penetration, mobile usage).
  • Macro Matters: Local market conditions are essential for investment success, however understanding the role of U.S., EU and China macro conditions is relevant. Not only do LPs track these markets but they have a real impact on portfolio and allocation decision-making.
  • The Great Adjustment: The industry saw historic peaks in 2021 and a normalization is to be expected post-peak, both in terms of deal value and volume. Investors will be more selective in 2023; companies are furiously reviewing their operational structures, cash management is being prioritized and challenges will materialize towards raising rounds at expected mark-ups.
  • Fundamentals: The fundamentals driving good investment opportunities remain unchanged and the conversations to be had as a guide to portfolio management remain the same; manage cash balances carefully, don’t assume the next round is around the corner, understand operational cost structures and unit economics, focus on growth but not at the expense of your business. The old applies to the new.
  • Horizon: There are changes in time that disrupt portfolios. Current fundraising expectations is one change, new tech in the space of GAI is likely to be another. Preparing companies to understand the implications of this new technology will be essential.

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