MENA startups' funding deals hit record high in first half of 2019

Total funding in H1 2019 rose 66 percent year-on-year and the number of deals was up 28 percent

Digital logistics firm Trukkin' Middle East raised $3.5 million in May this year - one of hundreds of firms to raise venture capital during the first half of 2019.

Digital logistics firm Trukkin' Middle East raised $3.5 million in May this year - one of hundreds of firms to raise venture capital during the first half of 2019.

The number of funding deals for startups in the Middle East North Africa (MENA) region during the first half of this year reached the highest number on record for a first half of a year, according to startups platform Magnitt.

The number of deals increased by 28% year-on-year in the first half of 2019 to 238, while the total funding increased by 66% to $471 million.

“Q2 2019 saw the highest amount of investment deals in any quarter for everything that we recorded historically,” Philip Bahoshy, Magnitt’s founder said during a live webinar held on Monday.

“Interestingly when you start looking at the stages of funding, you see that the ecosystem is really maturing. We’re seeing more Series A and Series B investments than any other previous quarters,” he added.

Of the sectors receiving investment, FinTech was the most active in terms of the number of deals, accounting for 17% of all deals in the first half of 2019. This was followed by e-commerce, which accounted for 12% of all deals, and then delivery & transport and food & beverage, with both sectors accounting for 8% of total deals. IT solutions accounted for 7% of deals, while both the education and consumer services sectorseach accounted for 5% of deals and healthcare accounted for 4%.

As for the geographies, the United Arab Emirates was the largest recipient of funding for startups in terms of the number of deals in the first half of 2019, recording 26% of the total number of deals. This was followed by Egypt, which accounted for 21% of deals, and Lebanon at 13%. Saudi Arabia was the fourth-most popular market, accounting for 11% of deals, followed by Tunisia and Jordan which received 8% and 5% of total deals respectively.

“There is an increase in the number of investments for instance in Saudi Arabia and Tunisia where there has been renewed initiatives and policies to try to boost entrepreneurship,” Bahoshy told journalists during the webinar.

He said that in relative terms,Egypt, Saudi Arabia and Jordan have witnessed the greatest funding growth, while Lebanon and Kuwait have witnessed the biggest declines compared to the first halves of previous years.

“This is due in part to the initiatives being put into effect. Egypt is coming online in a large way. The UAE still puts itself as the major hub in the ecosystem for the time being in terms of the amount of funding and that continues to grow in part due to the maturing nature of many of the start-ups in its ecosystem,” he said.

“We’ve started seeing Saudi Arabia gaining more amounts of dollar funding, and in Jordan we see the maturity of many of the startups that were there historically,” he said.

“These are positive signs that the many of the government initiatives that have been put into practice are coming to fruition,” he added.

While most MENA countries witnessed a slight decline in the number of dealsdone in the first half of this year when compared to the same period last year, this was offset by a rise in Saudi Arabia by 1%, and an increase by 3% in both Tunisia and Bahrain.

Attracting more investors

“In the first six months of 2019, 130 funding institutions - and by that I mean either corporate, family office, VC, angel group, accelerator programmes - have made investments in startups in the MENA region,” Bahoshy said, adding that this was a 30 percent increase from the first half of last year.

Interestingly, close to 50 percent of these are investors that are new to the MENA region, he said.

“That shows an increased appetite by the likes of family offices, corporates and international players in that space. And still 30 percent of those investors come from outside the region, which is extremely healthy,” he added.

Bahoshy said that he expects that the 130 figure will reach 180 by the end of the year, as most startups draw Series A and Series B funding from international players, while more family offices and corporates continue to move into this space.

“We are beginning to see notable new investors coming from specifically Asia. One of the trends that we noted is that Asian VCs, institutions, and startups have shown a distinct interest in MENA-based startups,” he said.

“They see many of the same challenges or opportunities that lie in Southeast Asia that could be mimicked in the Middle East. I think that they are capitalising on this opportunity, either to invest directly, or to invest on behalf of portfolio companies to build a geographical presence in the MENA region,” he added.

During the first half of this year, there were 15 startup exits in MENA region. These included the region’s first ‘unicorn’ exit as global ride-hailing firm Uber announced the acquisition of Dubai-based Careem for $3.1 billion. (Read more here).

Magnitt expects an acceleration in the number of exits, with 2019 set to be a record year in that aspect.

(Reporting by Nada Al Rifai; Editing by Michael Fahy)


© ZAWYA 2019

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