500 Global’s Courtney Powell predicts accelerated M&A activity in 2024

DAVOS, Switzerland – Courtney Powell, COO and managing partner of San Francisco-based venture capital firm 500 Global, came to the World Economic Forum in Davos this year with a message for investors: Watch out for the Middle East and Africa.

Before heading out to meet up with her old pal and OpenAI boss Sam Altman, she shared in an interview with The Circuit how 500 Global navigated a tumultuous 2023, her predictions on exits and deal appetite for 2024 and her best advice to investors looking to make moves in the Gulf. 

Powell, who moved to Riyadh three years ago, is a veteran investor in emerging markets and one of 500’s MENA-focused funds has raised $43 million so far. The parent fund has $2.7 billion in assets under management. This interview on the sidelines of the Davos conference has been condensed and edited for length and clarity.

The Circuit: This is your first trip to Davos. Why did you decide to come this year and are you here for 500 Global or are you wearing your 500 Global Middle East hat? 

Courtney Powell: Always global… We’re really trying to get the message out there with a report that we’ve just released: a look at the top 30 most compelling venture markets. And the message behind that is that entrepreneurs should absolutely be accelerating GDP and economic growth. And so that’s the message that I’m typically talking about these days. 

TC: What are the hotspots? 

CP: The Middle East is going to continue to be an economic powerhouse moving forward. But Africa as well. So we liked what we’re seeing coming out of Senegal, Nigeria. And Rwanda is starting to pick up their support of entrepreneurship. Southeast Asia also. 

We launched our first fund in Southeast Asia, I think, in 2013 and we had six unicorns out of that first fund. So we definitely are seeing a move into the later rounds now, seeing more coming from Vietnam, Cambodia, and some of the newer markets that are taking shape, although we already have two unicorns out of Vietnam. So yeah, you pick a country I can talk about. 

TC: I want to talk more broadly about 2023, a tough year for VC. How did you navigate and how are you feeling about 2024?

CP: I think as an entrepreneur, what we’re hearing from our portfolio and witnessing was the fact that you had three or so years where capital was really abundant and I think decisions were being made pretty quickly. And 2023 was definitely a reckoning in the sense that all of a sudden people started talking about unit economics, people started talking about the exit market. 

So for us, having been investing for over a decade now, we’ve seen the ups and downs. We were fortunate not to be too aggressively affected by that and we’re just really frank with our portfolio in terms of “time to stay disciplined. Now, if you have the cash in the bank, it didn’t matter if you had growth coming from organic growth or you can continue to afford to buy growth for whatever reason and be one of those folks to move ahead. But by and large, it was a little bit of a more austere time. 

And then I think on the venture side, 500 was in a good position because we have a number of funds with a lot of diversification amongst the countries we’re investing, the stages we’re investing in. So we didn’t experience too much of an issue. But I think what we saw in some of the markets, especially where we’re training emerging fund managers, I think emerging countries struggle. Fundraising is really tough. And I think if you haven’t shown [returns to investors] or you just don’t have a track record, it’s a very difficult time. 

TC: And you are currently raising a MENA-specific fund. 

CP: We have a variety of funds right now. We are limited actually, we’re really regulated about what we can say. Suffice it to say that we will continue to raise funds, continue to deploy in the Middle East in particular, we have active seed funds right now to Series A. And even into later stages because we’re able to invest out of our global funds into the region. 

TC: That’s a real issue right now, or it always has been in the region. Seed capital is widely available. And even the big check sizes, of course, are available because you have the sovereign capital. It’s that middle abyss.

CP: That’s music to my ears whenever I hear people articulate that accurately. 

We’ve made almost 400 investments across the MENA region. And we have 14 or 15 companies in our portfolio, that are valued at over $100 million. So we definitely see the need for capital that goes even beyond what the sovereigns are able to provide. I think that is a gap. There are a number of funds that I’m aware of that are coming to market, actively fundraising to be able to make that leap, which I’m really glad to see. I was hoping to see a little bit more international interest. 

TC: So far the exits we’ve seen in the region have been M&A, a couple SPACs. So 2024, are you thinking more of the same?

2024 is actually going to be an even more aggressive M&A market. I’m already catching wind of that. I think there will be a few big deals announced pretty soon. M&A continues to be a really strong exit pathway. However, I will say that there are six or seven companies across our own portfolio that we think have IPO potential. But I think that’s going to be in the next few years, not necessarily imminent. 

I see a lot of people talk about, oh, there’s going to be 1,000 unicorns. We tend to take a much more conservative approach, because we’ve just seen the entire pipeline now since 2018. Unless they’re seeing deals that I’m not,I struggle to see that. However, one other point you’d like to make about the exit markets, that’s Tadawul [Saudi Arabia] and the ADX [Abu Dhabi], I think have a very, very strong chance of becoming even more popular markets to list particularly coming not just the region, but Africa and Southeast Asia, and even Eastern Europe. 

Saudi in particular, I think what they’re making their Tadawul to be able to enable foreign capital to come in, hopefully see some dual listings in the future. You no longer have to simply target the exchange in London or New York. We’re really going to see a shift over the next five to 10 years where the Middle East will be strong. 

TC: Last question, what advice do you have for people thinking about moving to the region? 

CP: My advice for people in our industry moving to the region is it takes a year to form a thesis about the region, a year to figure out why you’re wrong and a year to fix it. It’s really easy to come in and kind of think you know what’s what. And, there’s a lot of expertise among financiers, and venture capitalists in the region, and there’s a lot to learn. So I hope that you come in with really just listening and trying to understand why the region has evolved the way it has and look at themselves as a contributor. They’re not creating anything. There’s already a vibrant, strong community of entrepreneurs and venture capitalists. 

Middle East dominates the Davos conversation

👋 Hello from Davos!

The Middle East is front and center today as the World Economic Forum kicked off its line-up of global leaders answering questions about their toughest economic and geopolitical challenges. Up first was Qatari Prime Minister Sheikh Mohammed bin Abdul Rahman Al-Thani, who talked about the roots of the current Red Sea shipping crisis in the Gaza war and longstanding conflicts with Yemen’s Houthi rebels.

The regional problems have changed “how we view international trade, how we view international shipping, how interconnected we are from east to west,” the prime minister said. “Whenever something is happening in the Middle East, it’s affecting everyone.”

Also on the main stage today at Davos are Chinese Prime Minister Li Qiang, Ukraine President Volodymyr Zelensky, Jordanian Prime Minister Bisher Hani Al Khasawneh and Microsoft CEO Satya Nadella. Israeli President Isaac Herzog is scheduled to appear on Wednesday.

Outside the Davos Congress Center, black cars carrying VIPs were backed up on the snow-lined Promenade where groceries and retail stores have been replaced for this week by pop-up pavilions rented by dozens of businesses, media outlets and national agencies, including BlackRock, DP World, the Financial Times and Saudi Digital.

While diplomats may be dressed in hiking boots because of the icy sidewalks, many in town are carrying skis and snowboards as they head for the slopes, where a daily lift ticket goes for $98. By the numbers, Davos is hosting 60 heads of state and government officials, joined by 800 chief executives, with a total of 2,800 official participants. A couple of thousand more non-registered guests are on the prowl for deals and connections, some seen exchanging LinkedIn profiles and sipping oat milk flat whites in AI House (they’ve gone dairy-free), an old Swiss chalet retrofitted for the occasion. 

The Circuit’s Jonathan Ferziger and Kelsey Warner are on the ground in Davos to bring you the color and perspectives of all the world leaders and dealmakers as the meeting gets underway.