Mena start-up funding more than doubled to $864m in first quarter of 2022

The UAE ranked the top VC market during the period, despite Saudi Arabia closing the gap in number of transactions, Magnitt says

Start-ups in the UAE accounted for 27.3 per cent of all deals closed in the Middle East and North Africa and 34.4 per cent of all funding raised year to date in 2022, according to Magnitt. Photo: DMCC

The total funding secured by start-ups in the Middle East and North Africa more than doubled to about $864 million in the first quarter of the year as economies in the region continue to recover from the coronavirus pandemic and investors allocate more cash to promising start-ups.

Funding for Mena start-ups during the three months to March 31 increased by 161 per cent on an annual basis, while the number of deals was up by 16 per cent, according to a report from data platform Magnitt. First-quarter funding for Mena start-ups surpassed that of the previous quarter by 33.3 per cent.

In the first three months of the year, start-ups in the Middle East, Africa, Pakistan and Turkey raised 48 per cent of all capital invested in 2021, according to Magnitt data.

“VC ecosystems in Mena … seemed to catch the tailwind of last year’s capital investment spree over the first quarter of 2022,” it said in the report.

“The UAE ranked the top VC market in the first quarter, despite Saud Arabia closing the gap in number of transactions.”

Start-ups in Mena registered record VC funding worth $2.6 billion last year through 590 transactions, according to Magnitt. About 35 start-ups announced exits in 2021, indicating a maturity in the region’s start-up landscape.

UAE start-ups accounted for 26 per cent of all deals closed across the region and 45 per cent of all funding raised in 2021, Magnitt said.

Similarly, start-ups in the UAE accounted for 27.3 per cent of all deals closed across Mena and 34.4 per cent of all funding raised year to date in 2022.

Africa and Turkey were the only regions to cross the $1bn mark in the first quarter of 2022, raising more than $1.2bn and $1.3bn respectively, the Magnitt report revealed.

Start-ups in the FinTech industry accounted for 41 per cent of total funding raised in the Mena region in the first quarter of 2022, the report found.

Although there was only one megadeal worth more than $100m closed by cryptocurrency exchange Rain in Q1 of 2022, there was significant growth in Mena’s average round size and proportion of larger-sized deals, Magnitt said.

Rain was founded in 2017 and was the first crypto-asset service provider to be licensed in the Middle East in 2019 by the Central Bank of Bahrain. It secured $110 million in Series B funding earlier this year.

The average fund round size in the Mena region increased by 23 per cent, the data showed.

There was also a high prevalence of smaller investments, in the range of $1m to $5m, which accounted for 38 per cent of all transactions in the UAE, 62 per cent in Saudi Arabia and 38 per cent in Egypt in the first quarter of this year, according to Magnitt.

International investor participation also increased, especially in the larger rounds, it said.