MENA startup funding in H1 2020 has already reached 95% of full year 2019 as investors shift to later-stage deals
- H1 2020 saw $659M invested in MENA-based startups, already 95% of FY 2019 funding;
- 251 startup investment deals were recorded in H1 2020, down 8% from H1 2019;
- 2020 saw a strong start with a record amount of funding in any first quarter of the year, but Q2 2020 saw a 32% drop in funding compared to Q1 2020 when excluding $100M+ deals;
- Levels of investor dry powder remain high, with a disclosed amount of $560M of dry powder available for an average $25.3M per fund;
- Egypt remains first by number of deals, while the UAE received the highest share of funding. Lebanon dropped out of the top 5 for the first time, with a 78% decrease in deals;
- The top 5 funding rounds account for 49% of all funding in H1 2020, with 3 out of the 5 deals taking place in Q1 2020, prior to the outbreak of COVID-19.
6 JULY, DUBAI – MAGNiTT, MENA’s most comprehensive startup data platform, released its H1 2020 MENA Venture Investment Report report today, which provides an in-depth analysis of venture investments in Middle Eastern and North African (MENA) startups.
The venture report highlights that there has been an increase of 35% in total funding from H1 2019 to H1 2020, with MENA-based startups raising $659M in the first six months of 2020 (already at 95% of FY 2019 funding). This was largely attributed to a few startups raising sizable funding rounds, such as Kitopi ($60M) and Vezeeta ($40M), before the COVID-19 outbreak, as well as several high-profile funding rounds during COVID-19, such as EMPG ($150M) and Jahez ($36.5M).
The number of investment deals, on the other hand, saw a decrease compared to last year. In H1 2020, deals were down 8% compared to H1 2019. March (-66%) and April 2020 (-35%) saw the biggest drops compared to the same months last year. The major economic shocks of COVID-19, however, seem to have abated for now, with June 2020 seeing 45% more deals than June 2019.
"We are seeing a shift in investor appetite when it comes to startup development stages,” explains Philip Bahoshy, MAGNiTT’s founder & CEO. “There are two key factors at play. First, the full impact of COVID-19 is likely to hit later in the year. As we know, it takes an average of 9-12 months to fundraise. Many deals in Q1 2020 will have already been in the works for a period of time. Second, what we see is that more later-stage investments with larger round sizes have been taking place. This highlights an approach of larger bets on more established companies, which can provide them a longer runway to weather the challenging times ahead."
This effect can be seen in the United Arab Emirates (UAE), which received the largest share of total funding (59%) in MENA in H1 2020. Several later stage investments included EMPG ($150M), Kitopi ($60M), and SellAnyCar ($35M) raising sizable funding rounds. Egypt, on the other hand, maintained its first rank by number of deals, accounting for 25% of all deals in the MENA region in H1 2020.
COVID-19’s Impact on MENA’s Startups & Investors
Aside from a change in investment stage, many investors are choosing to invest in industries that are seeing increased demand in the current climate, like E-commerce, FinTech, EdTech, and HealthTech, among others.
In fact, 27% of investors indicated that they had shifted their focus to industries that were ‘positively impacted’ by COVID-19, as reported in a separate joint MAGNiTT & INSEAD Startup & Investor Sentiment Report, which was launched last week.
FinTech, for the third consecutive year, ranked first by number of deals in H1 2020, accounting for 16% of all deals in MENA. The industry is followed by e-commerce (14%) and delivery & transport (10%), which each saw a jump in activity in Q2 2020.
The report also highlights that the levels of dry powder remain high, with a disclosed amount of $560M of dry powder available for an average $25.3M per fund.
Looking forward, 75% of investors expect that the MENA region is heading towards an economic recession. Startups, however, are more pessimistic: 24% expect that the region is heading towards a depression, compared to just 6% of investors. Nonetheless, the majority of startups and investors expect the crisis to be over within 9 months from now, with 61% of founders and 48% of investors expecting that the crisis will end between Q4 2020 & Q1 2021.
Philip Bahoshy, CEO of MAGNiTT, will be sharing his thoughts and insights with Fadi Ghandour, Executive Chairman of Wamda Group and Founder of Aramex, in a webinar on Wednesday 8 July, where they will discuss insights from the report and what needs to happen to maintain momentum for the regional ecosystem.
The H1 2020 MENA Venture Investment Report, which highlights the venture capital trends in MENA by industry, country, investors, exits, and more, is available to download in English.
The webinar – "H1 2020 MENA Venture Report Launch, in conversation with Fadi Ghandour" – will be held on Wednesday, 8th of July, at 4pm GST - registration link.
Want to access the full H1 2020 MENA Venture Investment Report? Discover more by purchasing our full 80+ page data-driven report, including country and industry trends!