Venture capitalists poured $1 billion into regional start-ups last year, signaling high investor confidence, despite the global coronavirus pandemic, a report published by Magnitt said.
The coronavirus pandemic has wreaked havoc on international markets, leaving start-up markets in some regions hard hit.
However, the start-up scene in the Middle East, while not left untouched by the pandemic, has weathered the storm relatively well.
In the Middle East and North Africa, 256 investors, including international venture capitalists, put money in regional start-ups, according to Magnitt, the start-up data platform for emerging venture markets. A quarter of investors were based outside the region, with 11 percent headquartered in the US.
“Despite Covid-19, we saw continued interest from international investors and new funds investing in MENA based start-ups. As the ecosystem continues to mature, and as Magnitt further expands into Emerging Venture Markets, we expect to see increased cross pollination across markets like Turkey and Pakistan, as well as increased international interest in the MENA region,” said Philip Bahoshy, Magnitt, founder and CEO.
Philip Bahoshy, MAGNiTT, founder and CEO
FinTech was the most popular sector for investors in 2020, with 63 firms investing in mobile and online payment solutions.
In the first half of 2020, 251 start-up investment deals were struck, totaling $659 million, which at the time represented 95 percent of total venture investments from the previous year, a previous Magnitt report said.
Faris AlRashed, founder and chairman of OQAL Angel Investors Network said, “2020 had a noticeable impact on founders’ and investors’ behaviors. We have witnessed an increased number of newly formed startups in strong founder markets and a larger window of opportunity being presented to MENA investors, with growth startups securing funds amidst the pandemic. The MENA market evolution has attracted international investors, with more funds investing and participating, especially at growth stage financing.”
Faris AlRashed Alhumaid, founder and chairman of OQAL Angel Investors Network
Seafood Souq, a Dubai-based tech company creating an ecosystem for global seafood trade that saw 615 percent growth this year, had local and international investors support their growth in 2020.
“As we expanded internationally, local and international investors saw the value proposition that we bring to the global Seafood supply chain and the direct impact we have in the UAE as our home market,” Sean Dennis, CEO and co-founder of Seafood Souq told Arabian Business.
He said that fundraising during the pandemic was no different than in other years as coronavirus highlighted inefficiencies in the supply chain, making the need to digitise supply chains more apparent.
Sean Dennis, CEO and co-founder of Seafood Souq
For another Dubai-based startup Seez, a digital automotive platform, funding during the pandemic has proven challenging, despite regional trends. While the start-up finished raising Series A funding in Feb. 2020 as the pandemic hit, they have had to adapt to the times.
“Since [the pandemic hit] we had massive growth on product and partnerships, especially as we pivoted into the B2B digitalisation and FinTech space, but that hasn’t translated into revenue yet because of the economic situation,” Seez CEO Tarek Kabrit told Arabian Business.
“So now we’re raising funds again, but rather than a Series B round we’ve opted for a smaller bridge round because we’re expecting our valuation to grow sizably in the next six months, and we don’t want to raise a large round at a low valuation. Investors want to see growth, and a bridge round gives us time for these projects to materialize into revenue so that we can get a higher valuation when we do raise our Series B,” Kabrit, who is also a venture partner with Nuwa Capital said.
Seez CEO Tarek Kabrit.
The number of venture capital deals for start-ups in the Gulf declined in the first quarter, but the total value of funding increased slightly. Venture capital deals dropped by 22 percent, Magnitt said in March; in contrast the number of venture capital rounds in the US had been slashed by 44 percent around the same time, according to Crunchbase.
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