Mena turns hotbed for global VC investments

The UAE’s vibrant startup ecosystem continues to attract investments and the trend will only pick up further as regional recovery sets the tone. The UAE Venture Report indicates as of Q1 2021, around 40 per cent of investors in UAE-based startups came from investors from outside of the Mena region according to Magnitt.

Philip Bahoshy, CEO of Magnitt, said: “As startups continue to mature and reach scale they have become more interesting for international investors who have shown continued interest in the Mena region. Success stories like Souq, Careem, and Instashop have highlighted the exit opportunities and increased opportunities in the region and we expect this trend to continue into 2021.”

Endorsing similar sentiment, Gopa Kumar, managing director, and senior executive officer of Amicorp Capital, said: “Despite the pandemic, Middle East attracted over $1 billion of VC investments, of which UAE accounts for a lion’s share of 56 per cent. 33 of the 50 highest funded startups in the Middle East region are in the UAE. The VCs in UAE and the Middle East region have been active investors over the years. However, the trend of global VCs making big bets can be seen in the eye-popping investments into Pure Harvest and Kitopi at the top end, all the way to smaller bets in Eat, Mamopay, etc. by the likes of Wafra, Lumia, Global Founders Capital and 500 startups. There is a slight pause due to Covid in Q2 2021, the floodgates will open later this year and in Q1 2022, driven by the UAE’s forward-looking investor-friendly policies that are aimed at attracting capital, and a respite from the pandemic in various parts of the world.”

Daniel Seal, founder, and executive chairman, Deltaworks — who is also an innovator, angel investor, and entrepreneur —  is an expert in creating startup ecosystems and advising governments on how to develop digital economies. Seal an active angel investor with investments in HealthTech (Voyagers Health Fund), AR (Ripple), Acoustagram, and others, founded Unbound in 2012, and in June 2018, he sold a controlling stake of Unbound to SingEx, a wholly-owned subsidiary of Temasek Holdings, the investment company of the Singapore Government. As of March 2021, it is reported that Temasek has over $250 billion of assets under management. Unbound is a global leader in curating innovation festivals that take place in Singapore, London, and Abu Dhabi.

Seal said: “There has been a significant shift for global VCs to invest in Mena and the UAE.  Traditionally there has been limited traction from non-Mena-based VCs/investors making investments at the Seed and Series A stage.  This has been for a variety of factors but recent developments in the region have changed this.  We have recently witnessed Egyptian-based startup Telda receiving a $5 million investment from a consortium led by Sequoia and now that this has happened more will take place. Sequoia is one of the most prominent investors in the world, so others will follow suit.  Our expansion plan is to launch in the UAE at least two new fintech companies via our DeltaWorks platform before the end of 2021. DeltaWorks is a venture builder focusing on emerging markets and creating companies in the UAE to scale across Mena, Africa, and other high growth markets.”

Despite a challenging year in 2020, the startup space has kept maturing at an unprecedented pace. Nuwa Capital will be aggressively investing across the UAE, Saudi Arabia, Egypt among other markets. “The UAE and Saudi Arabia are two very strong markets where a number of our companies will need to either grow in or expand into, and we will be working on bridging the gap between both markets,” said Stephanie Nour Prince, Partner, Network and Operations, Nuwa Capital. “We’re seeing an increase in appetite from global VCs. It may still be early days, but we are bound to see more global firms coming in, driven by the type of opportunities that are being created in the UAE and Mena more widely. The dynamics of the market have greatly evolved, we’re seeing founders with very unique track records (Valeo, Flexxpay, eyewa, Homzmart among others) launching businesses that are growing at an incredible pace and becoming strong contenders to their more-traditional counterparts. On the other hand, we are also likely to see new sources of capital looking to both invest in the space and find synergies with startups.”

The region certainly witnessed a surge of investments in sectors like fintech, edutech and ecommerce. Swethal Kumar, CEO of Startupscale360 and co-founder of The Crossroads said: "The Mena region is presently showing a lot more maturity than the pre-pandemic era. Some of the investments are inching toward Series C rounds, which could become an interesting playground for international funds. Number of YCombinator’s participation is also growing from this region, with the inclusion of startups such as Ziina, Flextock, Dayra, and NowPay in its portfolio."

Kumar added: "The US-based global investment arm Sequoia Capital marked their first investment in the region by leading $5 million pre-seed investment in Neo-Bank Telda. The round has also seen participation from Berlin-based Global Founders Capital, who also made their first investment in the region, followed by participating in a $3 million seed investment in Valeo. California-headquartered Rocketship.vc that invested 10 out of 44 investments in India, took a bet on Sary, a KSA-based B2B marketplace, where it joined the Series B round of approximately $31 million, led by Venture Souq. Another example was an investment made by California-based AgFunder in KSA-based Retailo’s nearly $7 million seed round with Shorooq Partners. On the contrary, the regional fund is also going international for e.g., Global Venture recently led nearly $11 million Pre-Series A round in the US-based Nexford University.”

Hub71, Abu Dhabi’s global tech ecosystem, has joined forces with New York-born Modus Capital, a venture capital and venture builder firm to launch Ventures Lab. The venture builder will enable early-stage founders from around the world to develop successful and scalable startups from Abu Dhabi. Ventures Lab at Hub71 is the first venture builder programme in the UAE launched by Modus.

Kareem Elsirafy, managing partner at Modus Capital, said: “We see more and more international investors showing interest in the region, specifically the UAE, and realising that there is incredible talent creating a lot of value both regionally, and exporting it to other markets. We have the first-hand experience of originally being based outside of the region (in the US) and shifting our focus to Mena, providing the region’s ecosystem with a full-circle operational building and investment approach. The secret is starting to get out. We plan to double down on ‘Ventures Lab’ with Hub71 and carry on our expansion by continuing to provide our venture builder expertise to corporates as a new and effective innovation mechanism for their organisations. For the remainder of the year, we would like to push at least another $5 million.”

— sandhya@khaleejtimes.com