The Middle East’s start-up ecosystem experienced a record year of funding in 2017 with US$560 million invested in 260 start-ups, Magnitt’s annual State of Mena Funding report revealed on Tuesday.
“We are continuing to see growth and maturity of the Mena start-up ecosystem,” said Philip Bahoshy, the founder of the online start-up community Magnitt, of the record year, which saw more investment transactions undertaken than any previous year. “We are seeing many of the existing venture capital firms (VCs) in the region deploy more capital from new funds into their portfolio companies as well as new investments.”
The $560m figure includes the $150m invested in Careem last year by regional VCs including Kingdom Holding. Amazon's acquisition of Souq.com last March year is not included, as traditional M&A transactions are not included in Magnitt's data.
“Careem and Souq are great examples for others to follow, however, given their success, their funding figures skew the underlying data and creates a misrepresentation of the growth of the ecosystem,” said Mr Bahoshy.
But 2017 was still a record funding year for the region even when Careem's investments are not taken into account, with remaining investments up 65 per cent on 2016 levels.
Mr Bahoshy says such growth can be attributed to the growing maturity of the region's start-up ecosystem.
Magnitt's Mena Founders report noted that 60 per cent of the top 200 funded start-ups in the region were founded between 2012 and 2015, and that it takes on average three, four and five years to raise Series A, B and C funding respectively.
"So the natural progression is that many of the successful start-ups founded during that period will continue to seek larger follow on rounds as they mature," said Mr Bahoshy.
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UAE-based ventures continue to secure the majority of funding activity, accounting for 70 per cent of investments last year, according to the report, something Mr Bahoshy attributes to the government's focus on innovation in its strategic agenda as well as the high proportion of expats in consulting and banking roles who take the plunge into entrepreneurship.
Sanjay Narang, president of the Entrepreneurs’ Organisation, says three key factors drive the UAE's dominance in the start-up sector. The first is the country's tech savvy and affluent customer base that has accepted eCommerce at a faster rate than its surrounding countries, while the second is the increase in outsourcing options for last mile delivery. "This has enabled a larger pool of SMEs to sell and deliver online without the heavy capex investment," said Mr Narang. The final factor, he said, is the UAE government's support of SME companies through the provision of funding and incubators.
Saudi Arabia saw the largest increase in deal transactions last year, up by 4 per cent on 2016.
Meanwhile, fintech and eCommerce start-ups secured the most investment with 11.9 per cent of total funding. Fintech start-ups accounted for three of the 10 largest investments in 2017: payment processing start-up Paytabs secured $20m in a Series A round from undisclosed private investors; price comparison website Souqalmal gained $10m in Series B funding (with UK firm GoCompare joining the funding round), while Wahed Invest, the automated investment adviser, secured $7m.
The top three investments overall though were the $150m in Careem announced in June, $125m invested into the on-demand video streamer StarzPlay Arabia, and $41m gained by the delivery app Fetchr in May.
Mr Bahoshy said the emergence of new regional VCs interested in the start-up space is helping to fuel the growth of start-ups. These include family offices and individual angels and corporates that have a growing appetite for innovation as an alternative asset class.
“Governments across the region continue to encourage innovation as a source of diversification and to assist with unemployment and empowering youth,” Mr Bahoshy said.
While 2017 set the benchmark for the region, Mr Bahoshy expects to see a continuation of this trend in 2018. "Our prediction is that 2018 will be another record year for Mena investment. Deal flow continues to grow across the region. More entrepreneurs continue to get into the start-up space which will fuel the bottom of the start-up pyramid," he added.
Company: Instabug
Founded: 2013
Based: Egypt, Cairo
Sector: IT
Employees: 100
Stage: Series A
Investors: Flat6Labs, Accel, Y Combinator and angel investors
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
WISH
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Bio
Born in Dubai in 1994
Her father is a retired Emirati police officer and her mother is originally from Kuwait
She Graduated from the American University of Sharjah in 2015 and is currently working on her Masters in Communication from the University of Sharjah.
Her favourite film is Pacific Rim, directed by Guillermo del Toro
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
