VC in Emerging Markets: the next global frontier
For years, venture capital in emerging markets (EM) was dismissed as niche. Interesting? Perhaps. But peripheral to the real innovation happening in Silicon Valley, London even in Shenzhen. That world no longer exist.
Africa, Latin America, SA, India and the Mid. East are not just catching up. They are leapfrogging legacy infrastructure while building billion dollar companies in sectors still underserved in developed economies. And yes! EM still represent a smaller share of global VC market dollars. Albeit their growth, diversification & momentum unmistakably point in one direction. This is the next frontier and I think that the smartest investors already know it!
Mobile money and neobanks fill (deeply) financial inclusion gaps where traditional banking never penetrated; super apps & quick commerce platforms flourish on the back of widespread smartphone adoption, AI start up build foundational models in local languages (markets ignored by Western AI giants), robotics, hardware & semi conductor ventures emerge because local challenges require physical solutions (not just software, of course).
These aren’t local anomalies. They are scalable models. Here are some of the many examples.
Nigerian fintechs expand across Africa, Indian consumer platforms eye southeast Asia and the Gulf, while LATAM Saas companies gain traction in the US Emerging markets are no longer teaching themselves how Silicon Valley works, they’re teaching Silicon Valley how the future works.
Truth is real risk still exist!
We know that emerging markets offer amazing upside. Not without challenges. Investors who enter « blindly » will suffer. And those who understand the terrain will win. Welcome in the new traditionnal jungle. Question is how?
Latin America recorded only 79 exits in 2024 (its lowest in years). Africa still struggles with late stage capital and has limited IPO pathways. And most EM lack strong public exchanges or a deep pool of acquirers because of extending holding periods and increasing risk.
We also got to mention the unpredictable regulations (no wonder they are) where reforms can unlock innovation but sudden shifts can shut it down really sharply / such as China’s tech crackdown. Fintech sandboxes are helping in Africa but regulatory opacity still deters many (many many) foreign investors.
Let’s not forget the uneven developments as funding concentrates in a few hubs: Nigeria, Kenya, South Africa, Egypt, Brazil & Mexico, Singapore & Indonesia… leaving the remaining capital starving! Multi region deals are falling, reducing the pace of knowledge transfer.
Why are they, then, still the more attractive despite the headwinds & the long term fundamentals which actually are too strong to ignore?
Demographic and digital consumption are indeed unparalleled. Emerging markets are young, urbanising and digital first. Africa leapfrogged traditional banking with mobile money. Southeast Asia’s internet economy is still underpenetrated. India’s digital public infrastructure (UPI, Aadhaar, ONDC) is unrivalled globally. These aren’t slow growth engines. They’re “population scale platforms”.
Although, massive unmet needs = massive opportunities. Billions of consumers still lack access to banking, healthcare, logistics, energy, insurance, and affordable retail. Startups fill structural gaps while bypassing outdated systems: from diesel to solar mini-grids,cash to mobile payments, and from informal commerce to digital marketplaces. In climate adaptation and energy transition alone, EM represent trillions in future value creation.
Keeping in memory that lower entry valuations + higher growth trajectories = stronger potential multiples. The capital scarcity forces discipline (unlike past cycles in rich markets). Investors willing to deploy intelligently now are not just buying companies, they’re buying market leadership in regions that will define the next global consumer middle class.
Then and fortunately, governments are competing to attract founders and capital, for instance: India’s regulatory reforms, MENA’s sovereign fund, southeast Asia’ startup frameworks & Africa’s fintech sandboxes. All signal a generational shift. Countries want innovation and they’re willing to build for it.
Eventually, global investor networks are strengthening. Latin America still attracts strong US participation. Africa & MENA are seeing a rise in family offices and sovereign investors. Also, the increasing number of diaspora founders creates regional hubs, which, hopefully, brings global expertise home.
In my opinion, investors who move early, build local partnerships, and stay the course, will be the ones who (yes I am going to say it) shape the next chapter of global innovation. While those who hesitate will watch it happen from the sidelines.