UAE STARTUPS TAKE OFF
dubai — The UAE’s vibrant startup industry has now reached levels where investors are exploring verticals in select sectors attractive for investment, paving the way for innovation and growth in the country.
Venture capitalists and investors are funding more startups in e-commerce, fintech, food and beverage, logistics and transport to cash in on the growing popularity of the startup ecosystem.
The UAE has retained the major share (70 per cent) of investments followed by Saudi Arabia and Lebanon with 9 per cent and 7 per cent, respectively, making the emirate the most promising investment hub in the region.
“We have identified several technology verticals that are attractive for investment in the UAE [and generally in Mena]: Content and new media, fintech, ecommerce and marketplaces/on-demand, healthtech and B2B Enterprise SaaS,” Walid Hanna, MEVP founder and CEO, told Khaleej Times. “We have developed a unique understanding of the venture space. The key sectors identified are particularly attractive for multiple reasons. First, these are large Mena technology sectors with market sizes estimated to be in the billions of dollars each. Second, we have built a healthy pipeline and already identified several potential targets for investment across each of those verticals. Third, these are sectors where highly scalable business models can be built with no need for disruptive technologies and where we as MEVP can add tangible value to the companies. Opportunities in these sectors have a clear path to profitability and exit,”
Opportunities in key sectors have a clear path to profitability and exit
Walid Hanna, Founder and CEO of MEVP
Hanna said. According to MAGNiTT’s 2017 State of Mena Funding report, e-commerce and fintech remain the most popular industries accounting for 11.9 per cent each.
The food and beverage sector saw the largest increase of 3 per cent in deal flow in 2017, followed by fintech startups which accounted for 3 of the 10 largest investments in 2017 — Paytabs ($20 million), Souqalmal ($10 million) and Wahed ($7 million). Logistics and transport also proved big winners with Careem ($150 million), Fetchr ($45 million) and Wego (12 million) being examples.
MAGNiTT’s founder, Philip Bahoshy, noted the current year, just like 2017, is poised to sustain the growth trend as investment continues to grow at all stages across the funding cycle.
2017 saw both the continued activity of existing household investment institutions, as well as the emergence of new players in the Mena startup scene. 500 Startups, following the launch of its Mena Falcon Fund, was the most active VC by number of deals, deploying investments in over 30 startups across the region. This was followed by Middle East Venture Partners with 14 deals. It announced the launch of the new $250 million MEVF III fund in 2017.
Looking at the top 10 investments, established VCs made notable participations with BECO
We anticipate existing VCs to deploy new capital from freshly raised funds
Philip Bahoshy, MAGNiTT’s founder
Capital investing in 4 of the largest deals followed by Middle East Venture Partners in 3. There was no slow down in exits in 2017 which saw 20+ deals, including the landmark acquisition of Souq. com by Amazon, the 51 per cent acquisition of Namshi by Emaar Malls, as well as Delivery Hero’s acquisition of Carriage.
“It has been great to see the emergence of new investors, both regional and international, in the startup arena, providing the muchneeded capital injection to the region. We have even seen greater participation by family offices, individual angels and corporates, many of whom look to launch accelerators and incubators in 2017 as well as make corporate venture investments,” Bahoshy said.
“We anticipate existing VCs to deploy new capital from freshly raised funds, the continued emergence of new institutional players across the region and we foresee government and regulators continue to actively facilitate and promote innovation initiatives across the region,” Bahoshy added.
The launch of several startups in the logistics sector also proves that many entrants are now ready to capitalise on opportunities. According to a report by Frost & Sullivan, Saudi Arabia and the UAE are the largest logistics markets in the GCC, with an estimated market size of $55 billion and $30 billion, respectively.
The UAE-based Truxapp, a startup firm, is addressing the inadequate logistics and transportation models. “Currently, the logistics is lagging and this is affecting growth in many other sectors that depend on the efficient movements of goods. The UAE has a growing population with increased consumption and highInternet penetration rates. The nation is witnessing an expanding e-commerce sector, expected to reach $10 billion in the next 2 to 3 years. This is in addition to the overall increase in merchandise trade,” Naseer Ahmed, co-founder and CEO for Truxapp — International, said.
Another firm, Yalla Pickup, the UAE-based mobile application and Web-based logistics services company, has launched the next phase of its mobile application, which will be targeted at commercial requirements. Yalla Pickup has launched this service in partnership with The Box Self Storage Services, a provider of self-storage, mini warehousing and moving services with over 10 years’ experience in the UAE.
“Yalla Pickup currently has services in the UAE only with plans to expand into Saudi Arabia, Oman, Kuwait and Bahrain between 2019 and 2021. The Box operates in Dubai, Abu Dhabi and Beirut currently,” said Elie El Tom, founder and CEO of Yalla Pickup.