Mena start-up deals rise to a record in first half of the year

Volume of deals grew 28% year-on-year and investments in start-ups surged 66%, according to Magnitt

The number of investment deals for start-ups in the Middle East and North Africa climbed to a record 238 transactions in the first half of this year, attracting $471 million (Dh1.73 billion) in funding led by investors from Asia.

The volume of deals grew 28 per cent year-on-year, while the amount raised surged 66 per cent in the first six months of 2019, according to start-ups platform Magnitt’s Mena Venture Investment report.

About 130 institutional investors invested in Mena-based start-ups in the first half, 30 per cent of which were headquartered outside that region, it noted.

Financial technology (FinTech) retained its position as the most active industry by number of deals, accounting for 17 per cent, including $8m to Yallacompare, $6m invested in Souqalmal and $4m in Beehive, according to the report.  E-commerce ranked second with 12 per cent of all deals, followed by Delivery & Transport, making up 8 per cent of all deals in Mena.

“The acceleration of funding we saw in the latter half of 2018 has continued into 2019," Philip Bahoshy, the founder of Magnitt said. "There are many signs of an ever-maturing ecosystem. As start-ups grow, we have seen more start-ups raising larger tickets, more exits and a continued interest from international investors in the region, especially from Asia.”

Separately, about 15 start-up exits took place during the first six months of 2019, with Careem’s $3.1 billion acquisition by Uber being the first unicorn exit in the region. The deal follows Amazon’s acquisition of Souq last year and transactions such as these will act as a catalyst to encourage the region’s entrepreneurial environment, Mr Bahoshy said.

The UAE, the second-biggest Arab economy, remained the most active start-up ecosystem, accounting for 26 per cent of all deals and two-thirds of total funding in the region. Egypt ranked second in terms of number of total deals accounting for 21 per cent of the Mena transaction volume, followed by Lebanon at 13 per cent. Saudi Arabia was one of the fastest growing ecosystems in the Arabian Gulf, recording 26 investments in the first half, a 1 per cent year-on-year rise.

Start-ups in the UAE secured $31.36m in funding last year and accounted for 88 per cent of the entire value of deals in the Mena region. Firms in local services, e-commerce and financial services made up nearly half of the deal count (44 per cent), with logistics, software, media, education and transportation comprising the remainder, according to data from Aim Start-up, a platform set up by the UAE’s Ministry of Economy.

Promoting start-ups and helping them go through initial stages of growth is among the top priorities of the UAE. There are several initiatives, incubators and accelerator programmes at the federal and emirate level to help in the development of these companies, especially in financial technology, media, government services and e-commerce sectors.

"As an early adopter of entrepreneurship, the UAE government has embraced initiatives to help foster founders," Mr Bahoshy told The National.

"Scale is the name of the game in 2019 as seen from the acquisitions of Souq and Careem. Creating an environment where start-ups can penetrate cross boarder activities effectively, both entering the UAE and those looking to expand out, will create further interest in the Mena start-up landscape from international investors.”

Silicon Valley’s 500 Startups, which has a Mena investment team, remained the most active venture capital firm, especially in early stage investments, while Flat6Labs in Abu Dhabi was the most active accelerator programme. EMPG pulled in the highest amount by a single start-up, raising $100m in February this year, followed by Yellow Door Energy which secured $65m investment and Swvl at third with $42m in funds raised, according to Magnitt.