The amount of funding raised by Middle East start-ups in the first nine months is up 30 per cent year-on-year to $517 million (Dh1.9 billion), according to a new report by technology platform Magnitt.
The number of funding deals completed so far this year is also up by a more modest 3 per cent to 354, with companies in the UAE accounting for the biggest share of funding. Of total money raised so far this year, 62 per cent has gone to companies in the Emirates. About 13 per cent of funds went to companies in Egypt and 9 per cent to Saudi Arabia. The number of exits to date this year reached 20, more than the full-year total of 17 last year, and includes the $3.1bn sale of ride hailing firm Careem to Uber.
"These exits have multiple benefits – a positive externality is that we have seen examples of employees of these successfully funded and exited companies such as ex-Careemers receiving funding, including Swvl, MaxAB and Trella. These success stories and their alumni show lucrative opportunities for venture capital as an asset class and aids investors in raising their second, third, and subsequent funds," Magnitt's founder and chief executive Philip Bahoshy said in the report.
Egypt's MaxAb was one of the main funding deals completed during the quarter. The logistics platform specialising in grocery delivery raised $6.2m in seed funding backed by Beco Capital, 4DX Ventures, 500 Startups, Endure Capital and Outlierz Ventures. Ecomz, a Lebanese ecommerce management platform, also secured $4m in a Series A round led by Beirut-based Cedar Mundi Ventures, alongside iSME and BLC Bank.
In total, $40m was raised during the quarter, according to Magnitt figures, which was 65 per cent lower than the $113m raised during the same quarter in 2018.
FinTech companies attracted the most funding in terms of number of deals so far this year, with 13 per cent of the total, but real estate firms received a higher volume of funding, with 19 per cent of the total. The number of investors into regional ventures for the nine-month period increased to 163, up four notches from the total figure of 2018.
Venture capital is growing in prominence in the region as established venture firms launch bigger funds and both sovereign and government-related entities announce their own ventures. Last week, Dubai-based venture firm Beco Capital said it raised $100 million for its Beco Fund II, which is $20m higher than its initial target.
Co-founder and joint managing partner Amir Farha said the ability of companies such as Careem and Propertyfinder to attract later stage funding rounds from global investors is one of the reasons why investors are looking on the asset class favourably.
"We have a lot more experience now in helping our companies get that [late stage] round of funding - not necessarily through us but through our network of investors that we've built over the period. We have relationships with VCs and families that participate in larger rounds," he said.
Six in 10 start-up founders in the region expect an exit within five years, and 59 per cent are "certain" they will create a business with an exit value of $100m, according to a joint survey by Magnitt and venture firm 500 Startups.