According to a new report from Magnitt, the full impact of the Covid-19 pandemic has yet to be felt
There has been a 35 percent increase in total startup funding from H1 2019 to H1 2020, with companies in the United Arab Emirates raising the bulk of the funding, according to a report by online technology platform Magnitt.
The report said MENA-based start-ups raised $659 million in the first six months of 2020, which is already at 95 percent of the full-year 2019 funding.
The report attributes the increase to a small number of startups raising sizable funding rounds, including Kitopi ($60m) and Vezeeta ($40m) before the Covid-19 outbreak, as well as several high-profile funding rounds during the pandemic, including EPMG ($150m) and Jahez ($36.5m).
The number of investment deals, however, saw an 8 percent decrease compared to 2019. The biggest drops were recorded in March (-66 percent) and April (-35 percent) amid the height of the Covid-19 pandemic.
More recently, however, the impact of the pandemic appears to have abated, with the report noting that June 2020 saw 45 percent more deals than June 2019.
“We are seeing a shift in investor appetite when it comes to startup development stages,” said Philip Bahoshy, Magnitt founder and CEO.
“There are two key factors at play. First, the full impact of Covid-19 is likely to hit later in the year. As we know, it takes an average of 9 to 12 months to fundraise,” he added. “Many deals in Q1 2020 will have already been in the works for a period of time.”
Additionally, Bahoshy said that the region is seeing more later-stage investments with larger round sizes taking place, highlighting an approach of larger bets on more established companies, which in turn can provide them a “longer runway to weather the challenging times ahead.”
The report also found that Egypt had the highest number of deals, while Lebanon dropped out of the top 5 for the first time, with a 78 percent decrease in deals.
The financial technology sector had the highest number of deals, accounting for 16 percent of all deals, followed by e-ecommerce and delivery and transport.