Zest Your Equity | 24-July-2024

This week’s agenda 📜

• Key terms and concepts to know 🧠

• Who’s raising? 💰

• M&A activity 🤝

• What we’re reading 📖

• Our blog ✍️

Let’s dive in 👇

Key terms and concepts

Carried Interest: Compensation paid to a private fund’s general partner based on the fund’s profits. Carried interest is typically 20% of a fund’s profits and is distributed to the general partners in accordance with the fund’s waterfall return structure. 

Management fees: Compensation paid to the private fund’s general partner annually as a percentage of committed capital. Management fees are typically 2% of committed capital annually (for a 10-year fund lifespan, 20% total) and are used by the general partner to pay for operating expenses associated with running the fund. 

TVPI vs DPI: Total Value to Paid-In (TVPI) and Distributions to Paid-In (DPI) are two metrics that are used to evaluate the financial performance of private funds. 

TVPI represents the total value of both unrealized and realized returns of a private fund relative to the amount of capital that has been called. 

TVPI = (Net Asset Value (NAV) + Distributions)/Paid-In Capital

DPI represents only the value of cash distributions that investors have received relative to the amount of capital that has been called. 

DPI = Distributions/Paid-In Capital

TVPI and DPI are both used for different reasons during a fund’s lifespan. TVPI allows fund managers to show positive performance history early on prior to their being distributions. TVPI is commonly used by fund managers for marketing purposes while raising a subsequent fund so that the manager doesn’t have to wait until there is real DPI to show. For investors focused on liquidity, DPI provides a more realistic snapshot of their investment return that has been realized and delivered back to them.

Who’s raising?

• 🇪🇬 Egypt’s MNT-Halan has raised $157.5 million in funding, featuring contributions of $40 million from the International Finance Corporation (IFC), with the remaining funds supplied by Development Partners International (DPI), Lorax Capital Partners, funds managed by Apis Partners LLP, Lunate, and GB Corp.

• 🇦🇪 UAE-based Web3-focused startup Sentient Labs has raised a $85 million Seed investment round, co-led by Pantera Capital, and Framework Ventures, joined by Arrington Capital, Canonical, Dao5, among other investors.

• 🇴🇲 Oman-based climatetech 44.01 has closed a $37 million Series A funding round, led by Equinor Ventures with Shorooq Partners, as well as Air Liquide Venture Capital (ALIAD), Alumni Ventures among other investors.

• 🇪🇬Egypt-headquartered fintech Dopay has closed a $13.5 million Series A extension round, topping up a previous $18 million Series A round raised in 2021.

• 🇸🇦 Saudi Arabia-based logistics platform OTO has raised $8 million in a Series A funding round, led by Sanabil Investments, with participation from Sadu Capital, Iliad Partners, Propeller, and Soma Capital.

M&A activity

• UAE-based Majarra, An Arabic digital content provider, has acquired the UAE-based NLP technology provider, Lableb, for an undisclosed amount. Source.

• MENA based Technology distribution house, Muller & Phipps Middle East Group has acquired The UAE-based gaming and esports agency, Power League Gaming, for an undisclosed value. Source.

Our Blog ✍️

Liquidity in the public markets allows investors to buy into securities that are already at work - ie, stocks of large, operating companies.

But in the private markets, investors don’t receive the same immediate gratification. Instead, investors in private market funds commit capital to a private company or fund manager, which is usually locked up for several years.

It’s not until years 4, 5, or 6+ that an underlying company’s performance may show a positive upward trend, a liquidity event, or a substantial valuation markup.

This down-and-up movement of private market investment performance is referred to as the “J curve” and has meaningful implications for investors.

In our latest blog, we discuss how the J curve works and its potential implications. Read more about this here.

Want to learn more? Schedule a time with our team below!