MENA's scaleups have a capital stack problem
An article by Sayed A. | Chief Business Officer, Graystone Capital Today, the largest cheques written to MENA scaleups do not buy shares. They are renting balance sheets. Yet most founders still picture their financing journey as a ladder of lettered rounds, each rung purchased with another slice of the cap table. That mental model is now costing them real money. The biggest financing announced…
MENA scaleups are facing a capital stack problem, according to an article by Sayed A. The largest financing deals in the region are not equity rounds, but rather lending facilities. Tamara's Shariah-compliant asset-backed facility of $2.4 billion, for example, refinance and quadruple a previous $500 million package. This shift in financing strategy is costly for founders, as raising $10 million at a $40 million post-money valuation means selling a quarter of the company, costing $125 million in dilution.
Equity is the most expensive capital a growing company will ever raise, and it is priced at a time of maximum uncertainty. Debt, on the other hand, is priced based on predictable cash flows and suits businesses with contracted, recurring revenue. Debt-ready companies with 12 to 18 months of clean performance data can secure facilities, while those using debt to fund losses accelerate failure.
The region's deep liquidity pools and growing private credit market provide MENA scaleups with access to instruments that suit this financing shift. The key is to layer different financing instruments: equity for uncertain bets, debt for the company's machine, and a sophisticated finance function to determine the best approach.
Written by urgent.news from Wamda's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
