MENA-based start-ups have raised $659 million in the first six months of 2020, with the UAE receiving the largest share of the total funding, a recent report showed.

The report by startup data platform MAGNiTT, titled “H1 2020 MENA Venture Investment Report”, revealed a 35 percent increase in total funding from H1 2019 to H1 2020, with the funding for H1 2020 already reaching 95 percent of the full year funding in 2019.

The UAE received 59 percent of the total funding in H1 2020, the largest share, while Egypt maintained its first rank in number of deals (25 percent).

A couple of start-ups raised sizable funding rounds in H1 2020. Before the COVID-19 outbreak, Kitopi raised $60 million, Vezeeta raised $40 million, while during the COVID-19 outbreak, EMPG raised $150 million and Jahez raised $36.5 million.

The number of investment deals dropped however in H1 2020 compared to H1 2019 by 8 percent. March and April saw the largest drops of 66 percent and 35 percent respectively, compared to the same months in 2019.

"We are seeing a shift in investor appetite when it comes to startup development stages. There are two key factors at play,” Philip Bahoshy, MAGNiTT’s founder & CEO said.

“First, the full impact of COVID-19 is likely to hit later in the year. As we know, it takes an average of 6 months to fundraise. Many deals in Q1 2020 will have already been in the works for a period of time,” Bahoshy said.

“Second, what we see is that more later-stage investments with larger round sizes have been taking place. This highlights an approach of larger bets on more established companies, which can provide them a longer runway to weather the challenging times ahead," he added.

COVID-19 impact

According to the report E-commerce, FinTech, EdTech and HealthTech are seeing increased demand with many investors choosing to invest in these industries.

A joint MAGNiTT & INSEAD start-up and investor sentiment report showed that 27 percent of investors shifted their focus to industries “positively impacted” by COVID-19.

Fintech accounted for 16 percent of all deals in MENA in H1 2020 and ranked first by the number of deals for the third consecutive year.

Seventy-five percent of investors expect the MENA region to be heading towards an economic recession.

(Reporting by Gerard Aoun; Editing by Seban Scaria)



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