The UAE continues to lead over its peers in Mena markets in terms of non-mega funding for start-ups, having secured more than $150 million across 30 deals in the first quarter of the year, a report has found.
Mega funding refers to big-ticket deals in excess of $100 million.
More than 60 per cent of the total funding in the UAE came from the top three rounds recorded by FinTech company Tabby, dine-in payment disrupter Qlub and online coffee marketplace Cofe.
The three business secured about $100 million collectively, according to start-up data platform Magnitt’s Q1 2023 UAE Venture Investment report.
Dubai-based buy now, pay later platform Tabby raised $58 million in a series C round in January while Cofe secured $15 million to expand its operations in new markets and Qlub raised $25 million to drive growth.
Metaverse start-up Numi raised $20 million from Venom Ventures Fund while education technology company almentor secured $10 million in a round led by e& capital, alongside existing investors Partech, Sawari Ventures, Egypt Ventures, Sango Capital and Endure Capital.
FinTech companies Alaan and Investsky also secured $10 million and $5 million, respectively, in the first quarter, Magnitt data shows.
“After a record year of exits in 2022, we predicted that given the challenges of raising funds in an environment of higher interest rates, start-ups will likely seek acquisitions or consolidations as an alternative to fund-raising,” the report said.
“This was reflected in the M&A activity in the UAE, as it recorded a 200 per cent increase compared to the quarter before and also reported more exits than in first quarter of last year.
“Cross-pollination remained a popular theme as several Turkey-based ventures acquired start-ups based in the UAE.”
The Arab world’s second largest economy accounted for 10 in 11 exits recorded in the Mena region in the first quarter of this year.
Some of these exits included EdTech platform Knowledge Planet UAE, Healthtech company Smileneo, home services company ServiceMarket, FinTech platform paymennt.com, e-commerce business Namshi and Botim, according to the report.
In January, Astra Tech, the Dubai-based technology-focused investment firm backed by Abu Dhabi's G42, acquired popular Middle East internet calling platform Botim as it prepares to launch an “ultra app” to serve a wide range of consumer needs.
The acquisition will give Astra Tech access to Botim's 90 million registered users – 25 million of which are active – after a revamp of the voice over internet protocol (VoIP) service, it said at the time.
The UAE's Al Dhabi Capital, Venom Ventures and Singapore's Arbor Ventures were among the top start-up investors in the UAE during the first quarter with investments of $25 million, $20 million and $12 million respectively.
The UAE aims to become home to 20 start-ups valued at more than $1 billion by 2031, in its push to become a regional centre for innovation and entrepreneurship.
Last year, the country launched the Entrepreneurial Nation initiative to offer support through a series of public-private partnerships that will help entrepreneurs to set up operations in the Emirates, expand their businesses, export products and tap into online sales.
The UAE’s digital economy is expected to hit $140 billion by 2031, up from about $38 billion currently, a report by the Dubai Chamber of Digital Economy, one of the three chambers operating under Dubai Chambers, said in February.
More from Rashmee Roshan Lall
The bio
Favourite book: Peter Rabbit. I used to read it to my three children and still read it myself. If I am feeling down it brings back good memories.
Best thing about your job: Getting to help people. My mum always told me never to pass up an opportunity to do a good deed.
Best part of life in the UAE: The weather. The constant sunshine is amazing and there is always something to do, you have so many options when it comes to how to spend your day.
Favourite holiday destination: Malaysia. I went there for my honeymoon and ended up volunteering to teach local children for a few hours each day. It is such a special place and I plan to retire there one day.
MATCH INFO
Who: UAE v USA
What: first T20 international
When: Friday, 2pm
Where: ICC Academy in Dubai
UAE currency: the story behind the money in your pockets
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
THE%20SPECS
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Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
Simran
Director Hansal Mehta
Stars: Kangana Ranaut, Soham Shah, Esha Tiwari Pandey
Three stars
