UAE leads Mena peers in start-up funding deals below $100m

The Arab world’s second-largest economy accounted for 10 in 11 exits in the region in the first quarter of this year, according to Magnitt

UAE-based start-ups secured $150m in funding in the first quarter of 2023, according to Magnitt. Reuters

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.