FinTech and e-commerce start-ups dominated venture capital financing in the Middle East and North Africa during the first half of this year as investors continued to bet on resilient sectors, despite global economic headwinds, a new report has found.
Mega financing deals in both sectors propelled their weighting in the overall venture financing ecosystem, accounting for almost 80 per cent of the total funding in the region during the first six months of the year, data platform Magnitt said in its 1H 2023 MENA Venture Capital Report.
However, the number of deals as well as the value of financing for Mena start-ups fell amid continued global economic uncertainty and geopolitical headwinds, it said.
“Cautious investor sentiment at a time of economic uncertainty saw funding [value] and deals decline by almost 50 per cent in the region on a year-on-year basis,” Magnitt said.
“Almost half of the total capital aggregated by the Mena region in the first half came from the three mega deals.”
In February, Saudi Arabia-based grocery shopping and delivery platform Nana raised 500 million Saudi riyals ($133 million) in a new funding round to expand its services across the region.
Led by Kingdom Holding – the investment company controlled by Saudi Arabia's Prince Alwaleed bin Talal – and Uni-Ventures, the mega funding round was also participated in by Sultan Holding, Al-Jasser Holding, Red Diamond, Dallah Al-Baraka Group, Al-Jammaz Holding Company and a number of other investors.
Floward, a start-up delivering gifts and flowers in the Mena region and the UK, secured $156 million in funding in February as well to expand operations before a planned initial public offering.
The pre-IPO series C funding round was led by Aljazira Capital, Rainwater Partners and STV, Floward said at the time.
Egypt-based FinTech MNT-Halan raised $260 million in equity in its latest financing round in February. The deal was also accompanied by $140 million in the debt financing, making the funding round one of the biggest in the region.
Abu Dhabi’s Chimera was the largest investor in the equity financing round, ploughing in $200 million in exchange for a stake of more than 20 per cent in the Cairo-based company, said a statement at the time.
Overall, Mena start-ups raised more than $1 billion through 193 deals, with the region’s venture capital ecosystem seeing a 42 per cent retreat in the funding levels and a 49 per cent decline in the number of transactions closed to 193, Magnitt said.
Excluding the three large financing deals, total funding saw a 62 per cent drop on an annual basis. The second quarter of the year was the lowest funded quarter since the third quarter of 2020 at the height of the pandemic.
In terms of the quarterly number of transactions, the second quarter this year was the lowest since the second quarter of 2017, according to Magnitt data.
Fears of a looming recession and inflation that drove the equities and oil markets volatility have forced venture capital investors to stay on the sidelines this year. A continued rise in interest rates to curb consumer prices as well as rising geopolitical uncertainties have also added to global economic headwinds.
Start-ups in the broader Middle East, Africa, Pakistan and Turkey region raised $7.2 billion through 1,473 deals last year. Funding for Mena start-ups crossed the $3 billion-mark in 2022, an annual increase of 8.3 per cent, according to Magnitt data.
“With the increased probability of further interest rate hikes and subsequent economic challenges, any chance of a recovery is likely to appear after September in Q4, when deals closed in the summer are announced and high-profile tech summits are organised,” Magnitt said in a separate statement on Monday.
Individual governments in the Mena region have also taken steps in recent quarters to promote “activity in the VC ecosystem through policies and initiatives”, it said.
The UAE has launched the Dubai Economic Agenda D3, which looks to prioritise the growth of start-ups, while Egypt has announced a five-year tax exemption for start-ups.
Saudi Venture Capital has also recently launched an $80 million Saudi FinTech fund to encourage funding activity in the FinTech industry of the kingdom, Magnitt said.
The three large financing rounds made FinTech and e-commerce/retail the top two Mena sectors by investments, followed by transport and logistics, software and media and entertainment sectors.
However, the number of deals in the top five sectors during the first half of the year halved on an annual basis amid slowing investment activity.
Globally, the e-commerce market is expected to hit $55.6 trillion by 2027 at a compound annual growth rate of about 27.4 per cent, from an estimated $13 trillion in 2021, data from US-based research firm Imarc Group showed.
Overall, venture capital investors remained focused on early-stage venture, investing in the lower-risk $1 million to $5 million bracket, which recorded a slight increase in first half of this year, the Magnitt report said.
MATCH INFO
Champions League quarter-final, first leg
Ajax v Juventus, Wednesday, 11pm (UAE)
Match on BeIN Sports
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'C'mon C'mon'
Director:Mike Mills
Stars:Joaquin Phoenix, Gaby Hoffmann, Woody Norman
Rating: 4/5
Key products and UAE prices
iPhone XS
With a 5.8-inch screen, it will be an advance version of the iPhone X. It will be dual sim and comes with better battery life, a faster processor and better camera. A new gold colour will be available.
Price: Dh4,229
iPhone XS Max
It is expected to be a grander version of the iPhone X with a 6.5-inch screen; an inch bigger than the screen of the iPhone 8 Plus.
Price: Dh4,649
iPhone XR
A low-cost version of the iPhone X with a 6.1-inch screen, it is expected to attract mass attention. According to industry experts, it is likely to have aluminium edges instead of stainless steel.
Price: Dh3,179
Apple Watch Series 4
More comprehensive health device with edge-to-edge displays that are more than 30 per cent bigger than displays on current models.
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
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RESULTS
5pm: Maiden (PA) Dh80,000 1,600m
Winner: Omania, Saif Al Balushi (jockey), Ibrahim Al Hadhrami (trainer)
5.30pm: Conditions (PA) Dh85,000 1,600m
Winner: Brehaan, Richard Mullen, Ana Mendez
6pm: Handicap (TB) Dh100,000 1,600m
Winner: Craving, Connor Beasley, Simon Crisford
6.30pm: The President’s Cup Prep (PA) Dh100,000 2,200m
Winner: Rmmas, Tadhg O’Shea, Jean de Roualle
7pm: Wathba Stallions Cup (PA) Dh70,000 1,200m
Winner: Dahess D’Arabie, Connor Beasley, Helal Al Alawi
7.30pm: Handicap (PA) Dh80,000 1,400m
Winner: Fertile De Croate, Sam Hitchcott, Ibrahim Aseel
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
Killing of Qassem Suleimani
MATCH INFO
AC Milan v Inter, Sunday, 6pm (UAE), match live on BeIN Sports
Quick facts on cancer
- Cancer is the second-leading cause of death worldwide, after cardiovascular diseases
- About one in five men and one in six women will develop cancer in their lifetime
- By 2040, global cancer cases are on track to reach 30 million
- 70 per cent of cancer deaths occur in low and middle-income countries
- This rate is expected to increase to 75 per cent by 2030
- At least one third of common cancers are preventable
- Genetic mutations play a role in 5 per cent to 10 per cent of cancers
- Up to 3.7 million lives could be saved annually by implementing the right health
strategies
- The total annual economic cost of cancer is $1.16 trillion
UAE currency: the story behind the money in your pockets
EXPATS
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'Brazen'
Director: Monika Mitchell
Starring: Alyssa Milano, Sam Page, Colleen Wheeler
Rating: 3/5
FA CUP FINAL
Manchester City 6
(D Silva 26', Sterling 38', 81', 87', De Bruyne 61', Jesus 68')
Watford 0
Man of the match: Bernardo Silva (Manchester City)
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
More from Rashmee Roshan Lall
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Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
Profile of RentSher
Started: October 2015 in India, November 2016 in UAE
Founders: Harsh Dhand; Vaibhav and Purvashi Doshi
Based: Bangalore, India and Dubai, UAE
Sector: Online rental marketplace
Size: 40 employees
Investment: $2 million
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
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The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
