UAE's startup finance party gets hotter
Published: Mon 29 Jan 2018, 7:00 PM
Last updated: Mon 29 Jan 2018, 10:02 PM
The UAE has amazing ability to constantly challenge to bring out the best in entrepreneurial sphere and the activity in the startup industry is all set to record another booming phase in 2018.
The UAE startup industry is benefitting from the macro trends and is banking on Expo 2020 Dubai. Introduction of value-added tax (VAT) from January 1 is also among other key factors. In addition, the startups from the US and Europe are not only planning to open shops here but are open to joint ventures and tie-ups in order to get the best from the UAE's startup industry.
Talal Bayaa, CEO and co-founder of Bayzat, said: "I am very optimistic about the 2018 as we will see the surge in more investments and opportunities in Series A and Series B for most startups. The seed round and angel funding is also bullish of the ever-growing and expanding UAE startup industry."
2017 proved to be a record year for the Mena startup ecosystem, continuing its signs of maturity and growth, according to Magnitt's annual state of Mena funding, which looks at Mena specific investments. The report highlighted that $560 million of investment made in 260 Mena startups.
"2017 was a great year for Mena startups, founders and investors across the board. Investment continues to grow at all stages across the funding cycle. With regards to overall trends 2017 broke the record for number of deals and amount invested, when removing investments in Careem and Souq. This is positive news and should provide confidence across the market heading into 2018. We expect to see a continuation of this trend throughout the year," said Magnitt's founder, Philip Bahoshy.
Bayaa explains, that among the key economic sectors there may be a surge in activities in tech sector such as e-commerce, financial consultancy, audit, payrolls as these companies and startups are currently benefitting from the rise in VAT registrations and related activities.
The UAE continues to be the dominant market with 70 per cent of all investment amounts and 37 per cent of transaction (excluding Careem's investment of $150 million). In 2017 e-commerce and fintech maintained their positions at the top of the investment deal flow, both accounting for 11.9 per cent of all deals, followed by food and beverage which saw the largest increase of 3 per cent in deal flow across 2017. The fintech startups also make up 3 of the 10 largest investments in 2017 - Paytabs ($20 million), Souqalmal ($10 million) and Wahed ($7 million). Logistics and Transport also proved big winners with Careem ($150 million), Fetchr ($45 million) and Wego (12 million).
The Saudi Arabia observed the largest increase in investments, up 4 per cent from 2016, despite a 3 per cent fall in the number of deals, followed by Lebanese startups which saw the biggest drop in investment amount, down 12 per cent from 2016. Similarly Kuwait saw the biggest increase in deal transactions, up 3 per cent from 2016.
VCs score card
The 500 Startups, following the launch of their Mena Falcon Fund, was the most active Venture Capitalist, (VC) by number of deals in 2017, deploying investments in over 30 startups across the region. This was followed by Middle East Venture Partners with 14 deals, who also announced the launch of their new $250 million MEVF III fund in 2017. This was followed by Saudi Arabia funding institutions came to the forefront with RAED Ventures (8), Saudi Aramco Ventures (WA'ED) (8), Riyad Taqnia Fund (5) and Vision Ventures (3) actively investing across the Mena landscape. According to Magnitt among the top 10 investments, established VCs made notable participations with BECO Capital investing in 4 of the largest deals followed by Middle East Venture Partners in 3. There was no slowing down in exits in 2017 which saw 20 plus deals including the landmark acquisition of Souq.com by Amazon, the 51 per cent acquisition of Namshi by Emaar Malls, as well as Delivery Hero's acquisition of Carriage.
Bahoshy added: "It has been great to see the emergence of new investors both regional and international into the startup arena, providing much needed capital injection to the region. We have even seen greater participation by family offices, individual angels and corporates, many of whom look to launch accelerators and incubators in 2017 as well as make corporate venture investments."
2017 sets the benchmark for the region, and Bahoshy is confident that in 2018, we will continue to see many of these records broken. "We anticipate existing VC's to deploy new capital from freshly raised funds, we anticipate the continued emergence of new institutional players across the region and we foresee government and regulators continue to actively facilitate and promote innovation initiatives across the region," he added.
Just a few examples
Mohammad Abdul Ghani, founder, Genius Factory - startup in education from Phoenix Arizona - said Arizona is the 5th largest metro area in the US, the fastest growing city populations in the USA, and is one of the top 10 fastest growing economies. Arizona has a booming startup community and is predicted to be the next Silicon Valley with some of the top tech startups in the world. "We are interested in building a bridge between US and Dubai. I know Dubai is investing so much in education and how passionate the nation is in promoting education. I am truly so amazed. I am so excited to bring my education company to Dubai. Our company uses technology to connect parents to much needed resources, tutors and parents. We use artificial intelligence (AI) to match parents to tutors that can personalise education to ensure life long enduring success."
Similarly UK-based Think Ahoy is planning to launch its Dubai operations. The startup aims to democratise the concept of building companies by breaking down barriers such as geographical differences and helps establish effective business partnerships to solve problems. Think Ahoy is one platform that bridges the divide between mentors, investors, business service providers and entrepreneurs across the globe.
"Setting up or growing businesses has been daunting for many years. ThinkAhoy is an online and offline ecosystem that fosters a support system for an entrepreneur and brings mentors, investors and business service providers onto one single platform. We also help by providing office spaces, market insights, and current accounts. So, when entrepreneurs "Think Ahoy", we believe that. we can help them establish and nurture businesses and solve real problems and craft fascinating stories. We believe that through UAE's conducive environment for startups and innovation we can impact small and medium businesses to grow in the already thriving middle east region," said Anvesh Gopalam, co-founder and director, Technology.