The Middle East startup ecosystem is set to uncover another startup unicorn, according to experts – amid a $659 million investment boom during the COVID-19 crisis. The record-breaking regional funding surge comes despite global startup funding in the first quarter of this year seeing the biggest downturn since the 2008 financial crisis, according to research from Crunchbase.
Across the Middle East there are ongoing efforts to build VC Communities and startup ecosystems from scratch, as part of region-wide economic diversification efforts. One woman at the forefront of driving this movement is Areije Al Shakar, Fund Director of Al Waha Fund of Funds, the Bahraini government fund established to kickstart a VC community across MENA.
Now, experts like Ms Al Shakar are predicting that conditions are “ripe” for a new MENA startup unicorn, adding to previous mega-deals for the founders of shopping site Souq – which was acquired by Amazon for $580 million in 2017 – and ride-hailing app Careem, which was acquired by Uber for $3.1 billion at the start of this year.
Ms Al Shakar said: “To date, the MENA region has only birthed two unicorns, but now the conditions are ripe for the next one. COVID-19 has driven an unprecedented boom in the consumer uptake of FinTech and other technologies across the region, at a time when governments are investing considerable sums in building increasingly dynamic and sophisticated tech ecosystems. There is a wealth of talent in the Middle East, and with their help, COVID-19’s legacy in MENA could well be its third unicorn.
“The pandemic may have had an adverse impact on the startup and investment scene globally, but we’re seeing something exciting and unexpected occurring in the Middle East. The latest Venture Report from MAGNITT indicates that $659M has already been invested in MENA-based startups in the first half of this year alone. That represents a staggering 95% of the total venture investments throughout all of 2019 – already a record-breaking year for startup deals for the region.
“The report correctly attributes this to a shift in investor appetite towards lower-risk, later-stage startups. But this doesn’t have to mean that smaller, newer startups and higher-risk ideas will be left by the wayside. The region’s burgeoning VC community is deploying their capital more strategically and sparingly, but more accurately.”
The report from Magnitt – the MENA region’s leading data platform for the investment and startup community – notes that the $659 million of capital invested during the first half of 2020 represents a year-on-year rise of 35%. The research also suggests a shift of investor focus to industries that have been evolved in the current climate – such as FinTech, EdTech and HealthTech.
As well as the increase in investment, MAGNiTT’s report also highlighted “new opportunities and challenges” for regional entrepreneurs during the pandemic, with COVID-19 acting as a “rapid accelerant of digital transformation and tech adoption in the region”.
Major deals during the first half of 2020 included EMPG ($150M), Kitopi ($60M), and SellAnyCar ($35M). Saudi Arabia saw the largest percentage increase in total funding, with early suggesting potential new startup funding of $1 billion across the region this year.
Bahrain offers an innovative and stable startup ecosystem that enables entrepreneurs to grow their ideas amid an atmosphere of pro-business regulation and strong public-private partnerships. With its unique positioning and connectivity to other Gulf countries, as well as a truly multicultural society that welcomes more than 160 nationalities, the Kingdom is the ideal destination for Eastern and Western businesses to converge.
Al Waha Fund of Funds has so far deployed tens of millions of dollars to a range of venture capitalists, including MSA Capital, Lumia Capital, BECO Capital, Middle East Venture Partners, 500 Startups and European fund manager Finch Capital.
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