UAE startups lure $755m in funding in first half

Startups in the Mena region attracted more than $1.2 billion in funding in the first half with the UAE securing the largest share of transactions, accounting for 26 per cent of total deals in the region valued at $755 million.

Egypt was a close second with 24 per cent of the share and $166 million in investment, followed by Saudi Arabia which stood at 21 per cent and $168 million in investment as venture Capital (VC) investments into the Middle East and North Africa (Mena) region, as well as Pakistan and Turkey, rose to a record level to $3.47 billion in the first-half of 2021, according to data released by MAGNiTT.

The funding attracted by startups in the Mena region during H1 recorded a 64 per cent year-on-year growth and a 12 per cent increase from $1 billion raised during 2020.

Turkey and Pakistan both saw their most active six months in funding to date, with 124 deals closed amounting to $1.4 billion, and 27 deals valued at a total of $87 million, respectively, shows the data released by the leading data platform.

The difference between the UAE and third ranked Saudi Arabia went from 41 deals in 2020, as a whole, to just 11 deals in the first half of 2021, closing the gap between the top three markets.

Philip Bahoshy, founder & CEO of MAGNiTT, said the report seeks to break down barriers between emerging markets that have traditionally operated in silos.

“The idea is to give investors across the globe visibility into opaque, comparable markets, in order to stimulate greater deal flow across the board. An increasing number of venture capital funds, consultants and government entities are seeking more granular data when it comes to individual sectors within these fast-growing markets, which encouraged us to take a deeper look into each ecosystem’s venture space.”

Interest from international investors also appeared to grow in the region, with Mena capturing the attention of a larger number of global VCs. Some 31 per cent of Mena-based transactions were made by investors based outside of the region in H1’21, a 4.0 per cent increase from FY 2020. This was primarily driven by a maturing ecosystem, which has led to a significantly larger number of VC firms setting up regional offices and deploying capital into Mean startups, MAGNiTT said in a report.

“While the overall investment figures have risen, we saw a dip in the number of deals secured by early-stage startups. This is due, in part, to the inactivity caused by Covid-19 restrictions in regional accelerator programmes that proved to be essential in facilitating ecosystem growth and interaction. Without the same level of support from incubators and accelerators over the last year, early-stage startups haven’t been able to gain enough exposure to potential investors, and the majority of capital is now being raised by growth-stage startups,” said Bahoshy.

In terms of industry deal activity, Fintech led the way with $222 million invested into the sector in H1 2021 across Mena, Pakistan and Turkey. Both Turkey and Pakistan saw greater investment in Fintech in the first half of 2021 than in 2020 as a whole. The growth of Fintech in Pakistan has been particularly notable, with no deals closed in the first half of 2020, to seven deals valued at $32 million secured in the first six months of 2021.

The first half of the 2021 also marked the highest amount of Fintech funding raised within a period of six months in the Mena region. The UAE and Saudi Arabia accounted for 60 per cent of total Mena funding into Fintech during this time.

“Fintech was the hero sector in the overall emerging markets, demonstrating the most investment activity to date within the first half of the year,” said Bahoshy.

Investor appetite has shifted towards bigger opportunities in the Financial Services space, which put Fintech ahead of other industries, such as food and beverage, e-commerce and delivery and logistics that thrived in previous years. However, while the sector was poised to take the lead within Mena, Kitopi’s mega deal of $415 million within the food and beverage sector pushed Fintech into second place, said the report.

-- issacjohn@khaleejtimes.com