MENA star­tups break new record in 2018, bag­ging $893m in in­vest­ment

5% in­crease in num­ber of in­sti­tu­tions, an­gel groups in­vest­ing in re­gional star­tups com­pared to 2017

The Daily News Egypt - - Forbes -

The year 2018 proved to be an­other record year for the MENA startup ecosys­tems,with to­tal fund­ing up 31% from 2017, ac­cord­ing to MAGNiTT’s 2018 MENA ven­ture in­vest­ment re­port.

A to­tal of $893m was in­vested across 366 deals in 2018—an in­crease of 31% in to­tal fund­ing and of 3% in the num­ber of deals com­pared to 2017, show­ing con­tin­ued ap­petite in star­tups across the re­gion.

The top 10 deals ac­counted for 65% of to­tal in­vest­ment in 2018, up 2% from 2017, with the av­er­age deal size up 26% year-over-year.

It was a record year in terms of fund­ing,ex­clud­ing the out­lier in­vest­ments in the UAE-based Souq.com and Ca­reem. Fund­ing was also up 31%, with $693m in­vested in MENA-based star­tups— higher than any pre­vi­ous year on record, based on MAGNiTT’s statis­tics. Ca­reem’s $200m fundraise was the high­est by a sin­gle startup in 2018, fol­lowed by Prop­erty Fin­der andWadi.com.

The UAE has main­tained its dom­i­nance,ac­count­ing for 30% of all trans­ac­tions, as well as 70% of to­tal fund­ing. Egypt, with 22% of deals, had the fastest-grow­ing ecosys­tem in 2018, fol­lowed by Le­banon, which is ranked 3rd by the num­ber of trans­ac­tions with 10%. How­ever, it saw the high­est fall in deal flow com­pared to 2017, with a 4% drop.

On the in­dus­try side, fin­tech over­takes e-com­merce as the most ac­tive in­dus­try by the num­ber of deals. Fin­tech ac­counted for 12% of all deals in 2018, with notable deals in­clud­ing $18m in Aqeed, $8m in Wa­hed In­vest and $4.5m in Ex­pen­sya. E-com­merce re­mains preva­lent,ac­count­ing for 11% of all deals, fol­lowed by trans­port and de­liv­ery, ac­count­ing for 10%.

Over 155 in­sti­tu­tions in­vested in MENA star­tups in 2018—30% from out­side the re­gion and 47% that had not pre­vi­ously in­vested in the re­gion. In ad­di­tion, there was a 5% in­crease in the num­ber of in­sti­tu­tions and an­gel groups in­vest­ing in MENA-based star­tups com­pared to 2017.

Some 500 star­tups re­mained the most ac­tive in­vest­ment houses, es­pe­cially at early stage in­vest­ments. How­ever,2018 was notable for the en­trance of ma­jor in­ter­na­tional in­vest­ment firms, such as Gobi Part­ners’ in­vest­ments in Hol­i­dayMe and Gen­eral At­lantic’s in­vest­ments in Prop­erty Fin­der. Fur­ther­more, 30% of all en­ti­ties that in­vested in MENA-based star­tups were in­ter­na­tional in­vestors.

Mean­while, cor­po­rate ven­ture cap­i­tal (VC) con­tin­ues to grow. Ma­jid Al Fut­taim, a key in­vestor in Fetchr, con­tin­ued their ven­ture ex­pan­sion with an in­vest­ment in­Wadi.com and an ac­qui­si­tion in BeamWal­let,while the Chal­houb Group launched their first ac­cel­er­a­tor pro­gramme for the re­gion.

The Al Waha fund in Bahrain an­nounced the launch of the first re­gional Fund of Funds, hav­ing al­ready de­ployed cap­i­tal in three VC in­sti­tu­tions to date. “Our in­vest­ment into VCs helps pro­vide ac­cess to fund­ing for re­gional star­tups,while sup­port­ing re­gional VCs with fuel to con­tinue to do what they are best at, in­vest­ing in lead­ers in the tech­nol­ogy space,” said Areije Al Shakar, fund man­ager at Al Waha Fund of Funds.

In terms of ex­its, 2018 has seen 14 startup ex­its take place across MENA, five fewer than 2017. Four of the ex­its in 2018 were by an in­ter­na­tional ac­quirer. The ma­jor exit of TPay in Egypt saw the first Dragon Startup— a startup whose exit pays back the full fund size of aVC.

“2018 saw more in­ter­na­tional in­vestors en­ter the foray than be­fore, new ac­cel­er­a­tor pro­grams cre­ated, mul­ti­ple gov­ern­ment ini­tia­tives spurring in­no­va­tion, and es­tab­lished re­gional Ven­ture Cap­i­tal firms clos­ing out new funds to de­ploy fur­ther cap­i­tal,”said Philip Ba­hoshy, MAGNiTT founder and CEO.

“These in­sights are pos­i­tive news for the whole startup ecosys­tem in the MENA re­gion. Founders con­tinue to see in­creased in­ter­est from in­vestors for this space, in­vestors are see­ing star­tups ma­ture and see re­turns through in­creased M&A ac­tiv­ity and ex­its, while gov­ern­ments see the fruits of their ini­tia­tives to fur­ther strengthen the ecosys­tem.”

THE TOP 10 DEALS AC­COUNTED FOR 65% OF TO­TAL IN­VEST­MENT IN 2018, UP 2% FROM 2017

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