5 charts on Middle East's record-breaking startup funding scene

23 August 2021 Consultancy-me.com 4 min. read
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Investments into startups in the Middle East is set to break a new record this year, crossing the $2 billion barrier for the first time, with FinTech and FoodTech at the forefront of investor interest.

In a new report by RedSeer, a strategic consultancy and research house to businesses, startups and private equity firms, the researchers look into the state of Middle East and Africa’s startup scene, uncovering all kinds of trends and developments in the landscape. Five charts on the report’s key findings: 

Following three consecutive years of funding hovering around the $1 billion mark, this year total investments flowing into startups and scaleups is expected to double vis a vis last year to $2.1 billion. The surge is driven by heightened demand for acquiring or securing assets in the digital economy

MEA Funding USD Bn, 2018-2021YTD

Early stage and Series A funding continues to dominate the mix in terms of number of deals closed over the past 3-4 years. In 2021, a growing share of deals are large investments in series B+ rounds, illustrating the fact that several promising startups in the region are managing to scale to compete at a regional/global level. 

MEA Funding by Funding Stage

Across all funding stages, average deal value is seeing a strong jump this year, significantly lifting average ticket sizes. According to RedSeer, this is one the one hand reflective of increased confidence investors have in upcoming players, and on the other hand a result of the Middle East’s maturing startup scene.

MEA Average Funding per Deal by Stage, USD Mn, 2020-2021 YTD

Despite the uncertainty in the market, private equity and venture capital firms are speeding up their average time between rounds. This metric has been decreasing consistently over the years, and is expected to end 2021 below the 1-year mark. 

Two reasons are driving this trend. On the downside, startups facing headwinds due to the pandemic are in need of further funding to stay afloat, with investors reinvesting in companies to provide them enough runway to come out stronger. On the upside, there are several examples of scaleups that have used the pandemic to accelerate their growth, bringing in investor backing quicker than previously expected to fuel expansion. 

Timeline Between Rounds - GCC, 2018 - 2021YTD

The FinTech segment has been at the forefront of investor interest with the highest number of deals with sizable tickets, followed by FoodTech – a sector which has enjoyed a massive uptick in interest due to the impact of the Covid-19 pandemic. According to RedSeer’s outlook, the SaaS, HealthTech, EdTech, and E-commerce sectors demonstrate strong growth potential in the medium to long term. 

MEA Funding by Sector, # of Deals x Total Value of investment

A 2020 report by the MIT Enterprise Forum (compiled in collaboration with knowledge partners Roland Berger and Community Jameel) shows that the UAE offers the most mature startup environment for entrepreneurs and investors in the Middle East, thanks to an advanced infrastructure, high funding levels and extended government support for businesses. 

Qatar and Saudi Arabia rank second and third, with Yemen placed at the bottom of the benchmark. The methodology used for the analysis, the so-called Arab Entrepreneurship Maturity Index, looked at six dimensions, including the availability of human capital and startup know-how.