Investments in Middle East and North Africa (Mena)-based startups rose by 31 per cent in 2018 to $893 million with 366 deals according to data from UAE-based Magnitt.
The UAE alone accounted for a 70 per cent of the amount invested as 30 per cent of the transactions were made into UAE-headquartered startups. Egypt ranked second with 22 per cent of the number of deals, an increase of 7 per cent compared to 2017, making it the fastest growing ecosystem in the region. Lebanon, which ranked third with 10 per cent of transactions, saw the highest fall in deal flow compared to 2017 with a four per cent drop.
“We see a strong push from governments to support the innovation space along with asignificant rise in the quality and speed of growth of startups from the region,” said Issa Aghabi, venture capital investment officer at the International Finance Corporation (IFC).
While Careem raised the highest amount of funding by a single startup with $200 million in October, it was the financial technology (fintech) sector that was the most active in terms of the numbers of the deals made with a total of 18 per cent, replacing e-commerce which came second with 11 per cent of the deals. Transport and delivery ranked third with a 10 per cent share of the deals.
“Regulators are taking a more forward-looking approach to fintech startups and are promoting their own initiatives to foster entrepreneurship,” said Amir Farha, managing partner at BECO Capital and one of the investors in Wahed Invest.
There is also growing interest from international investors in the region. More than 155 institutions invested in Mena-based startups in 2018, 30 per cent of which were from outside the region and 47 per cent who had not previously invested in Mena. Notable international investments were Gobi Partners’ $16 million investment in HolidayMe and General Atlantic’s $120 million investment in Property Finder.
In terms of exits, 2018 saw 14 startup exits take place across Mena, a decrease of 5 compared to 2017.
“As startups mature and grow, 2018 has seen more later stage investment deals at Series B and beyond than ever before and we expect this trend to continue into 2019 as startups scale to get closer to exits,” said Philip Bahoshy, founder and chief executive officer at Magnitt.