Pioneers Investors – Investments in startups in the Middle East are set to break a new record this year, crossing the $2 billion barrier for the first time, powered by Fintech and FoodTech, which are at the forefront of investor interest.
A new report from RedSeer, a strategic research and advisory firm, predicts that total investment flowing into start-ups and expansion will double from last year to $2.1 billion, after three consecutive years of funding hovering around the $1 billion mark. Quoted from consultancy-me website.
The report indicated that the increase is driven by the increasing demand for acquiring or securing assets in the digital economy, at a time when early stage financing continues to dominate the number of deals concluded over the past three or four years.
In 2021, the shares of large investment deals increased in the second rounds of phase B funding, illustrating the fact that many promising start-ups in the region were able to expand to compete regionally and globally.
Across funding stages, average deal value has seen a strong jump this year, significantly raising average deal volumes. According to RedSeer, this reflects on the one hand the increased confidence of investors in the upcoming players, and on the other hand a result of the maturity of the startup scene in the Middle East.
Despite the market uncertainty, private equity and venture capital firms are accelerating their average time between funding rounds, as this metric has been decreasing consistently over the years, and 2021 is expected to end below the one-year level.
Two reasons are driving this trend. On the downside, startups facing headwinds from the pandemic need more funding to stay afloat, as investors reinvest in companies to provide them with enough avenue to emerge stronger. On the upside, there are many examples of expansions that used the pandemic to accelerate their growth, boosting investors faster than previously expected to fuel the expansion.
The FinTech sector was at the forefront of investor interest with the largest number of deals, followed by FoodTech, a sector that saw a huge rise in interest due to the impact of the Corona epidemic.
According to RedSeer forecasts, the SaaS, medical technology, education technology, EdTech, and e-commerce sectors show strong growth potential in the medium to long term.
Financing in the region
A 2020 report by the MIT Entrepreneurship 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 its advanced infrastructure, high levels of funding, and extended government support for businesses. .
Qatar and Saudi Arabia ranked second and third, while Yemen came at the bottom of the index. The methodology used in the analysis, called the Arab Entrepreneurship Maturity Index, looked at six dimensions, including the availability of human capital and knowledge of startups.