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The UAE startup industry gained huge momentum in the first half of 2018 and will end the year on a very favourable note with optimism for 2019. The region's most diversified economy continues to account for the lion's share of startup deals at 32 per cent and investments at 59 per cent, with the emergence of the Egyptian and Saudi ecosystems in the region. The surge in deals continues to come from e-commerce which contributed almost 17.8 per cent to the UAE's GDP.
FinTech, software as a service (SaaS), logistics, e-commerce, edtech and healthtech will be the sectors to watch out for in the next couple of years. The emphasis remains on identifying and investing in disruptive technological models that demonstrate significant growth potential, according to MEVP.
"The UAE remains the hub of the venture capitalist [VC] ecosystem in the Mena region. UAE startups continue to dominate the region with 70 per cent of all investment amounts in 2017. We expect this trend to continue throughout H2 2018 and for the next couple of years at least, as the UAE offers a flexible and enticing ecosystem for entrepreneurs seeking to build global companies. H2 2018 will be an exciting time for deals in the region and we are expecting a very healthy deal flow across stages as we saw in 2017," says Walid Hanna, chief executive officer of MEVP.
Magnitt, Mena's largest data provider for startup information, released its H1 2018 Venture Investment report with key findings on the state of the region's emerging ecosystem. The key takeaway from the report highlights continued growth in the Mena startup ecosystem with a record number of transactions in the first six months of the year, despite a drop in disclosed startup funding.
Philip Bahoshy, founder, Magnitt, said: "We anticipate funding to continue to grow across the year. Many of the established VCs are still looking to close their new funds which will lead to further injection. We are also aware of multiple government initiatives to create fund of funds which will lead to new funds being available for investment across the region. This will ensure further growth and development in the ecosystem. We anticipate there to be further Series B and C large announcements like the Luxury Closet and Mawdoo3 as continued signs of growth in the maturing ecosystem."
The first half of 2018 recorded 141 investments, a 12 per cent increase over the corresponding period. Total disclosed funding is down 43 per cent to $112 million compared to the same period in 2017 when stripping out Careem's $150 million investment in H1 2017.
The UAE still maintains its dominance as the most active and largest recipient of startup funding, with other countries beginning to emerge. Egypt saw an increase of 12 per cent and Saudi Arabia a 9 per cent increase in startup funding in H1 2018, emerging into the top three countries across Mena. E-commerce still remains the most active industry with regards to investment in H1 2018, accounting for 12 per cent of all transactions and 16 per cent of disclosed funding.
Among the VCs, 500 Startups remains the most active venture capital investor, especially at the seed and pre-seed stage, accounting for 10 investments, followed by MEVP with eight deals and Arzan Capital with seven. Moreover, accelerator programmes remain a key stakeholder in supporting early-stage startups, with Flat6Labs in Cairo graduating 10 firms, as well as Oasis 500 and Flat6Labs Beirut graduating cohorts of eight startups each. The early stage investment accounted for 84 per cent of all transactions in H1 2018, up six per cent from H1 2017, while accounting for 27 per cent of the total funding amount.
- sandhya@khaleejtimes.com
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