The Wrap Up: Insights from MENA H1 2021

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As we observed a slightly slower 2020 where ecosystems struggled to understand and adapt to the COVID-19 pandemic, the first half of 2021 unleashed the true potential of MENA startups, and the true appetite of investors. 

VC investment in H1 2021 recorded a quarterly, half-yearly, and yearly record high as it surpassed capital raised in full-year 2020  by 12%. This impressive record has surely been boosted with the closing of Kitopi’s $415M Mega deal one of 5 Mega Deals out of Emerging Venture Markets in 2021. Yet even excluding it, VC investment almost tripled between Q3’20 and Q2’21.

As we hone our projections for H2 2021, it is important to analyze and understand where we currently stand. Based on our flagship MENA H1 2021 Venture Investment Report, here are 3 takeaways on the MENA VC ecosystem so far:


 


Overall  Investment Growth 

VC investment in MENA has been on a gradual growth trajectory in the past 5 years, even though a slower activity in 2020 constrained this climb. In H1 2021, VC investment in MENA observed a 63% growth YoY in congruence with investment growth in other Emerging Venture Markets like Turkey’s 858% YoY growth (surpassing total capital raised in H1 2021 Mena by a mere $2Bn), and Pakistan’s 296% YoY. Yet what’s remarkable to note, is that even though overall VC funding in MENA observed a record high amount, the number of transactions dropped by 20% YoY. This could be attributed to the 12pp drop in accelerated deals since FY 2020 or could be a sign of startup ecosystem maturity; more on the latter in this article. 


Top 3 MENA Countries 

In H1 2021 it comes as no surprise that UAE, KSA, and Egypt ranked the top 3 in investment funding in MENA, but what’s more interesting to point out is the common trends and newly closed gaps between these geographies. As the MENA startup ecosystems evolve and mature, the three top-ranked countries have reached close proximities. In the lead was UAE accounting for 26% of MENA transactions in H1 2021, followed by Egypt’s 24%, and KSA’s 21%. It’s also important to note that within this top 3 ranking, Egypt was the only geography to observe a deal count increase YoY, while KSA has almost closed the deal count gap with UAE from 44 deals in 2020 to just an 11-deal difference in H1 2021.

Startup Ecosystem Maturity 

As mentioned before, we’ve seen a drop in the overall number of deals in MENA yet an increase in average round size, signaling investors’ interest in later-stage funding rounds. Over H1 2021 in MENA, we’ve seen more industry-focused investments where almost every other deal was closed by a Fintech startup. We’ve also observed the emergence of the region’s third-ever unicorn Kitopi, putting the Food & Beverage industry in the lead of funds raised. This comes as 1 of 9 Exits in the MENA ecosystem over H1 2021, 3 of which were by EdTech startups. 


Want to know how Emerging Venture Markets are recovering post-pandemic? Get the full breakdown in our 6 H1 2021 Venture Investment Reports