2020 startup funding amount matches 2019 levels, despite 50% drop in investment deals from Q2 to Q3 in MENA, according to MAGNiTT
MAGNiTT, the startup data platform for emerging venture markets, released its Q3 2020 MENA Venture Investment Report report today, which provides an in-depth analysis of startup investments in Middle Eastern and North African (MENA) startups in Q3.
The Q3 report paints an interesting picture of the evolving impact of COVID-19 on the region’s technology startup & investor landscape. While the summer months of Q3 are typically the quietest months of the year from a transaction perspective, Q3 2020 has seen the lowest number of investments since Q1 2018, highlighting the potential impact of COVID-19 6 months later.
A brief overview of the of the venture funding landscape in MENA, according to MAGNiTT’s data:
- Capital invested in startups in 2020 YTD has matched total FY 2019 funding;
- However, Q3 2020 saw a 50% decline in the number of startup investments compared to Q2 2020; the lowest number of deals of any quarter since Q1 2018;
- 2020 has seen a record H1 for capital deployed driven by an increase in average deal-size at both Series A (up by 34%) and Series B (up by 91%) from 2019;
- The UAE ranked 1st by number of deals (with 26% of all deals), as well as by amount of capital invested;
- E-commerce reclaimed the top-spot by deal-share with 21% of all deals in 2020, overtaking FinTech. Together, the industries made up 40% of all deals in MENA in Q3.
‘In H1, we predicted that there would be a delay in seeing the impact of COVID-19 on the VC industry, because historically, it can take between 6-12 months for a funding round to close,’ explains Philip Bahoshy, MAGNiTT’s CEO. ‘Six months on from the onset of the pandemic, the Q3 data likely reflects the impact of decisions taken by investors in Q1 and Q2.’
One reason for the dip in the number of deals highlighted in the report is that the number of startups securing investments from accelerator programs in the first nine months of 2020 has seen a drop of 54% when compared with the same time period in 2019. Given the challenges of running offline programs in the current environment, the decline in accelerated startups may lead to challenges for deal-flow in the future, while program managers adapt to a new virtual environment in which to operate.
The report also highlighted some positive indicators including evidence of an accelerated evolution of an ecosystem 5+ years in the making. Series A & B deals are significantly larger in 2020 compared to previous year. This is partly a function of investors skewing to favor bigger investments in more established startups against the uncertain backdrop of COVID-19 in a maturing ecosystem.
The data underpinning the report is reflected on the MAGNiTT platform. You can find a full list of all MENA startups and investors included in this report on MAGNiTT’s Directories (Startups, Investors, Funding Rounds, Exits).
The Q3 2020 MENA Venture Investment Report, which highlights the venture capital trends in MENA by industry, country, investors, exits, and more, is available to purchase.