UAE tech investment targets most promising industries of post-Covid 19 'new normal'

As a hub for entrepreneurship and venture capital in the region, the Emirates is showing signs of optimism and opportunity amidst the turbulence of this year

ABU DHABI, UNITED ARAB EMIRATES. 10 JANUARY 2019. Masdar Farm smart farming initiative, ahead of Abu Dhabi sustainability week. Kyle Wagner, Head of Operations at Madar Farms shows the inside of the Smart Farming retrofitted shipping container that grows 4 tons of leavy  greens per year. (Photo: Antonie Robertson/The National) Journalist: Nick Webster. Section: National.
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In the wake of the Covid-19 pandemic, a wave of uncertainty swept over the Mena business landscape. With a future cloudier than it is clear, typical investor and founder dynamics dramatically shifted to navigate and accommodate these choppy and unchartered waters. For founders, starting and leading a company is an already challenging endeavor in times of economic prosperity. Its difficulty is magnified many times over in times of crisis. For investors, the current pandemic has pushed for a reassessment of both direction and strategy, as well as an overall reluctance to invest in such an ambiguous economic climate.

Or so we thought.

A recently published report by Magnitt paints a different, and remarkably more optimistic, picture. In the first half of 2020, $659 million was invested in Mena-based start-ups. For reference, this amounts to 95 per cent of total venture investments in 2019 alone. According to the report, while many start-ups have witnessed a 25 per cent drop in revenues in the first months of the outbreak, others, especially those in the tech space, have been able to leverage the catalysing effect of Covid-19 on digital transformation and technological adoption in the region. These numbers are demonstrating that while investors are indeed re-evaluating the direction of deals, the expected averseness to investments in the region is not holding true.

Record levels of growth for AgriTech

As with all crises, it is common for specific industries to encounter disruptive shifts in their operations. These disruptions can take the form of slower business activity, reduced investment flows, supply chain discontinuity, and standstills in expansion plans and growth levels.

Noor Sweid, founder of Global Ventures, a Dubai-based venture capital fund.

However, disruption is not always bad as some sectors stand to largely benefit from the crisis and the sudden changes in consumer behavior and business sentiment. Despite the circumstances, industries such as e-Commerce, digital health, the future of work, AgriTech, FinTech or EdTech are presently witnessing record levels of growth, and are predicted to continue on this trajectory for the foreseeable future. Amidst the uncertainty, one thing is abundantly clear: digital-first businesses are set to experience unprecedented levels of demand for their services.

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Despite the circumstances, industries such as e-Commerce, digital health, the future of work, AgriTech, FinTech or EdTech are presently witnessing record levels of growth, and are predicted to continue on this trajectory for the foreseeable future

The new, post-Covid, world is an exciting place. For founders, it is presenting tremendous opportunities to solve some of the most pressing issues of our times. For investors, it is generating a new appetite for start-ups that are directly addressing these gaps in the industries that have been most ‘positively impacted’ by the pandemic.

The UAE is a case in point as it has amassed the largest share of total venture funding in the first half of the year, at 59 per cent. As we examine the direction of these new deals, it becomes evident that local VC investment is focusing on the most promising industries of the new normal. For example, as the pandemic raised a number of questions and fears about food security in the UAE, investments in sustainable AgriTech businesses have become a matter of national necessity. In a country where 90 per cent of food is imported and agriculture makes up a mere 0.75 per cent of national GDP, a minor disruption in trade can trigger a food crisis of epic proportions. This explains why there has already been 4 investments in agriculture in the first half of 2020, while none were made in the previous year.

Unprecedented demand for e-commerce

Dubai’s 2021 Health Strategy aims to transform the city into a leading, world-class, healthcare destination in the region by fostering and offering innovative and integrated care models. This mission is brought to life with technology and digital health solutions, and is set to unleash a wave of investments in this space in the upcoming year. As customers were already shifting their demands to more accessible, affordable and higher quality care, the pandemic is accelerating an already-nascent process of digital disruption in the industry.

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Overall, sustaining its position as a hub for entrepreneurship and venture capital in the region, the UAE is showing signs of optimism and opportunity amidst the turbulence of this year so far

E-commerce and online delivery services are also witnessing unprecedented demands for their services as customer preferences and government regulations continuously lean towards social distancing practices. The e-Commerce industry came second in terms of venture funding at over $97 million, and the UAE’s F&B industry saw one of the largest-ticket deal with Kitopi this year. Overall, sustaining its position as a hub for entrepreneurship and venture capital in the region, the UAE is showing signs of optimism and opportunity amidst the turbulence of this year so far.

While the effects of Covid-19 are being felt contrastingly across geographies, industries, economies and demographics, one truth is becoming increasingly commonplace. As we come to terms with the fact that it will take a significant amount of time before we can say that the virus has been completely contained, we are learning to co-exist with it as part of our daily lives. Globally, this truth is slowly but surely settling into the minds of people, business owners, founders and investors. The world, as we once knew it, is radically changing.

Noor Sweid is the founder and general partner of Global Ventures

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