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Since 2021, Middle East and North Africa start-ups have witnessed a new leap in their growth. Although start-ups in the region have seen growth in the size and number of finance deals since 2013, as of the beginning of last year, there has been an unprecedented rise in start-up growth as the incubating business environment for start-ups in both the Gulf States and Egypt has evolved. In addition, new countries have entered the line of interest in start-ups, most notably Jordan, Morocco and Tunisia.

The first half of 2022 was a new chapter in the great growth of start-ups. The total volume of deals acquired by start-ups in the region was more than $1.7 billion, with growth from the first half of last year of more than 83.7%, and up to 125% compared to total funding for start-ups in 2019-2020 in total! The number of start-up finance deals reached about 341 deals with a growth rate of about 38.6% compared to the first half of 2021 and nearly 94% compared to 2020 in total.

In the following lines, we will take a look at the situation of start-ups in the Middle East and North Africa for the first half of 2022, where funding is distributed geographically and sectorally, along with gender distribution, start-up funding phases, and others.

Distribution of Start-up Finance by Country

UAE start-ups have taken the lead in the Middle East and North Africa over the past decade in recent years, Saudi start-ups have advanced and become strong competitors of Emirati companies as a hub for attracting bold finance. In recent years, Saudi startups have advanced and become a strong competitor to Emirati companies as a center for attracting venture capital, thanks to economic reforms, developing the business environment for startups, and supporting and establishing investment funds to finance them. Egypt has also focused on supporting start-ups by improving the investment environment and supporting the establishment of investment funds, and providing facilities for foreign investors and entrepreneurs, which transformed the focus of corporate transaction finance over the past years.

While most start-up financing is concentrated in the UAE, both Saudi and Egyptian start-ups have a balanced share of the size of these investments. However, UAE start-ups continued to acquire the biggest share of total finance in the first half of last year, UAE companies received approximately 45% of total start-up finance. Start-ups in Saudi Arabia and Egypt received 28% and 9% respectively, but in the first line of 2022, changes emerged in the concentration of funding for start-ups in the region, The percentage of funding received by UAE start-ups was about 37.4% and althought it leads the list of the most attractive countries to fund the region's start-ups, its share shrank by about 7.5% compared to the first half of last year.

The decline was in favor of the expansion of Saudi Arabia and Egypt, with Saudi start-ups' share of total financing reaching about 32.7%, a difference of less than 5% from the UAE. Egyptian start-ups accounted for about 18.5%, up 3.5%  compared to the same period last year. In the fourth place, Bahraini start-ups finished at 6.5%, which is more than 4.5% growth compared to the same period. It is also a significant rise in absolute numbers. According to the data of the first half of this year, Bahrain can be classified as a central country in attracting funding for start-ups in the region.

Sectoral Distribution of Start-up Finance

Since 2013, e-commerce start-ups have accounted for the largest share of total finance, but this has begun to change over the past two years. After e-commerce companies are extensively providing services, new start-ups entering the e-commerce market is difficult especially with the entry and expansion of large players in the Gulf and Egyptian market such as Amazon. At the same time, there was a need to improve and digitize the fintech market, this prompted the emerge of dozens of start-ups in the Middle East and North Africa region. This changed the trends of start-up financing to those companies that accounted for the largest share of funding in the past year by 18%, while the e-commerce share was only 12%. Besides the emerge of fintech companies, start-ups have also emerged in other areas, most notably health, education, food and agricultural technology.

In the first half of this year, fintech start-ups accounted for about 38.4% of total finance, with growth from the first half of last year reaching approximately 6.4%, In second place, agro-technology companies came in at about 21%, but about 50% of the total financing received by agro-technology companies belongs to the UAE company Pure Harvest. Therefore, it cannot be seen as a clear indicator of the growth of the agro-technology sector, as the number of agro-technology companies that received funding during the same period has not exceeded four. On the other hand, start-ups active in logistics, health and education technology and software show increasing and more sustained growth both in terms of the number of deals and the amount of funding received over the past two years.

Start-up Financing Stages

With the increase in the number of business accelerators in the region, particularly in the Arabian Gulf and Egypt, the number of start-ups receiving financing through fast-growing companies or so-called business incubators has risen. The proportion of start-up investment deals funded through business accelerators in the first half of this year reached about 27%, however, seed and pre-seed funding continued to dominate the start-up finance landscape. The proportion of companies that received an initial funding round reached about 22% and nearly 10% of start-ups received pre-establishment funding rounds. While the proportion of companies that obtained financing in the series (A) and (B) stages was limited to 4.8% and 3%, respectively, and the financing in the Series (C) stage was limited to only one company.

Funding Disaggregated by Gender

Data for the first half of 2022 show significant progress in terms of the high proportion of funding obtained by women-run start-ups rising to about 93% compared to the first half of last year. The percentage of funding received by these companies was about 2.7%.

في مؤشر لنمو قوي للشركات الناشئة لهذا العام، حصدت الشركات الناشئة في الشرق الأوسط وشمال إفريقيا على أكثر من 247 مليون دولار عبر 46 صفقة في شهر يناير/كانون الثاني، بنسبة نمو قدرها 20% على أساس شهري، وبنحو 474% مقارنةً بالفترة نفسها من العام الماضي! فيما يلي موجز سريع عن حالة الشركات الناشئة في المنطقة لشهر يناير/كانون الثاني.

التوزع الجغرافي لعدد وحجم صفقات الشركات الناشئة

بخلاف توزع حجم الصفقات السائد، فإن شهر يناير/كانون الثاني حمله الشركات الناشئة البحرينية لصدارة القائمة من حيث توزع حجم الصفقات، إذ حصدت الشركات الناشئة البحرينية على نحو 110 مليون دولار، أي بنسبة 44.5% من إجمالي التمويل الذي حصلت عليه الشركات الناشئة في المنقطة للفترة نفسها، وهي أعلى نسبة تحصدها الشركات البحرينية على الإطلاق، لكن يجب الإشارة أن صدارة البحرين مصدرها صفقة شركة Rain البحرينية التي بلغت فيمتها 110 مليون دولار، وتعد شركة Rain واحدة من أوائل شركات الوساطة في مجال العملات المشفرة.

أما في المرتبة الثانية فجاءت المملكة العربية السعودية بواقع 55 مليون دولار، فيما حلت ثالثاً مصر بنحو 33 مليون دولار، فيما تراجعت الإمارات إلى المركز الرابع بحوالي 24 مليون دولار، تليها العراق في المرتبة الخامسة بواقع 18 مليون دولار.

على صعيد التوزع الجغرافي، نجد تركزاً كبيراً لتوزع الصفقات في ثلاثة دول، هي: السعودية (15 صفقة)، ومصر (11 صفقة)، والإمارات (9 صفقة)، على التوالي، يشكل هذا التوزع نحو 76% من إجمالي عدد الصفقات. ومن الجدير بالذكر أيضاً هو متوسط حجم الصفقة الواحدة الذي بلغ نحو 5.3 مليون دولار، وهو يساوي تقريباً متوسط حجم الصفقة للنصف الثاني لعام 2021، ويزيد عن متوسط حجم الصفقة لعام 2021 بنحو 13%.

التوزع القطاعي لعدد وحجم صفقات الشركات الناشئة

لجهة التوزع القطاعي تصدرت شركات التكنولوجيا المالية لناحية حجم الصفقات وعددها، إذ حصدت الشركات الناشئة الناشطة في هذا القطاع على 6 صفقات، بلغ حجمها الإجمالي أكثر من 166 مليون دولار، وهو ما يمثل أكثر من 67% من إجمالي حجم الصفقات، وهي نسبة تركز مرتفعة للغاية. ويمكن اعتبارها امتداداً للنمو المتواصل لهذا القطاع في السنوات الثلاث الماضية.

أما في المرتبة الثانية فنجد عودت متواضعة لقطاع التجارة الإلكترونية حيث وصل حجم الصفقات في هذا القطاع إلى نحو 27.9 مليون دولار، موزعة على 5 صفقات. فيما جاء في فجاء قطاع التكنولوجيا الغذائية في المرتبة الثالثة بحوالي 15.6 مليون دولار موزعة على 6 صفقات. وفي المرتبة الرابعة اتى قطاع التطبيقات الفائقة "super-app" بإجمالي تمويل بلغ 10.5 مليون دولار من صفقة واحدة، ويلاحظ هنا النمو في حصة قطاع التطبيقات الفائقة وهو نمو يمكن رصده بدءً من العام الفائت.

مراحل الاستثمار في الشركات الناشئة

تركزت صفقات الشركات الناشئة في شهر يناير على المراحل المبكرة، وتحديداً مرحلتي البذرة وما قبل البذرة، حيث مثلت هاتين المرحلتين أكثر من 60% من إجمالي الصفقات في جميع المراحل.

ومن الجدير بالذكر أن متوسط قيمة الصفقة في مرحلة تمويل البذرة قد ارتفع لنحو 1.15 مليون دولار، بحسب مؤسسة ومضة، وهذا مؤشر على النمو العام لمتوسط حجم صفقات متوسط الشركات الناشئة في المنطقة، على اعتبار أن الصفقات في المراحل البذرية تكون عادةً منخفضة، فإذا ما قورنت بالمتوسط العام لحجم الصفقات البالغ نحو 5.3 مليون دولار، فيكون حجم متوسط الصفقة في مرحلة البذرة يساوي نحو 20% من إجمالي متوسط حجم الصفقات لشهر يناير.

التوزع الجندري

جاء توزع صفقات الشركات الناشئة من حيث التوزع الجندري، متواضعاً لجهة الحصة التي استطاعت جمعها الشركات الناشئة التي تديرها النساء، إذ لم تتجاوز حصة هذه الشركات 1%، في حين حصلت الشركات الناشئة التي يديرها رجال على ما نسبته 96% من إجمالي التمويل الموجه للشركات الناشئة في شهر يناير، أما الشركات التي يديرها فريق مشترك من الرجال والنساء فقد بلغت حصة ما حصلوا عليه من التمويل نحو 5.2%.

يمكنك التعرف على حالة الشركات الناشئة في الشرق الأوسط وشمال إفريقيا في عام 2021 بالضغط هنا.

المصدر:

ومضة

2021 can be described as the year of startups par excellence, as it was an exceptional year for startups at all levels. Despite all the difficulties and challenges related to the spread of the Corona virus epidemic, what startups in the Middle East and North Africa achieved in 2021 did not achieve in all previous years!

In this article, we will take a comprehensive look at the state of startups in the region, and tell you everything you need to know about the state of startups in the Middle East and North Africa in 2021.

First: the development of investments in start-ups

During more than a decade, the business environment for emerging companies has developed in the Arab region, especially in the Gulf Cooperation Council countries, specifically the United Arab Emirates and Saudi Arabia, which have worked to develop the business environment to incubate entrepreneurship through a wide range of incubators and accelerators of the business sector and the governmental sector. Egypt has also witnessed a remarkable development in the business environment. The development in the Arab entrepreneurship ecosystem is reflected in improving the legislative and legal environment and in launching a large number of startup incubators, including Flat6Labs, Falak and Injaz Egypt.

The development in the business environment for startups in the region has translated into a huge increase in the number and size of investment deals in startups, as the total volume of deals for start-ups increased by more than 1280% between 2013 and 2021, and with a growth rate of 312% compared to 2020, which witnessed a slowdown in the growth rate due to the direct repercussions of the spread of the Corona epidemic.

In terms of the number of investment deals in startups, it also increased significantly between 2013 and 2021, and while the number of deals for startups in 2013 did not exceed 148 deals, in 2021 it amounted to 561 deals. The following figure shows the development of investment in companies in the region between 2013 and 2021 in terms of the volume and number of investment deals.

As shown in the figure, the volume of investments in 2021 alone is equivalent to the volume of investments in emerging companies in the region during the period 2017 and 2020 combined. This indicates the significant development that occurred in 2021.

Second: Startups in the Middle East and North Africa for 2021

The following chart shows the volume of deals for startups during 2021 and their growth on a monthly basis. The figure shows the upward curve of investment in startups throughout the past year. The quarterly growth of the volume of deals for startups reached 48%, 32% and 104%, respectively, while the growth rate for the last quarter of the same year decreased by 74%. This decline can be explained by the exceptional rise in the third quarter of the year, specifically in July, when the total volume of deals reached more than 632 million dollars. As for the semi-annual growth level, it reached about 91%. In general, the data before us heralds new levels of investment in start-up companies. The number of startup deals in the second half of 2021 also increased by 28% compared to the first half. This rise is accompanied by a growth in the average size of one deal, which rose from about $3.7 million in the first half to more than $5.6 million in the second half.

Third: Distribution startups financing by country for 2021

The Emirati startups continued to dominate the scene in terms of startup financing, as Emirati companies accounted for about 52% of the total investments received by emerging companies during 2021, followed by the Saudi startups, which came in second place with 24% of the total investments, then Egypt with 15%, and in fourth place, came Jordan with 4% of the total investments. Despite the continued dominance of the UAE in the forefront, and then Saudi Arabia and Egypt, in terms of investments in startups in the Arab region, this year witnessed the entry of new countries to the list, which was limited to 7 to 9 countries at best in the past. The list expanded to include 15 Arab countries , the most recent of which was Sudan, which ranked last on the list. In terms of absolute figures, new regions showed remarkable growth, specifically the Maghreb region, the Levant countries, specifically Jordan and Palestine, in addition to Iraq, which is witnessing a growth in the volume and number of deals for startups.

Fourth: Distribution of the number of startup deals by country 2021

In contrast to the distribution of the volume of investments by countries, which shows a strong concentration on the UAE, the distribution of the number of startup deals shows less concentration on the UAE, which despite issuing the largest number of startup financing deals, about 72% of the deals are distributed to emerging companies from outside the UAE, most notably Egypt, which came in the second place with 25% followed by Saudi Arabia with 24%, then Jordan with 7%, Morocco with 4%, and Tunisia and Bahrain with 3% each.

Fifth: The annual average of the volume of deals for startups by countries for the year 2021

The size and number of startups deals is reflected in the average size of a single deal, and while it is a good indicator of the development of investments in startups, it must take into account the anomaly value that may mislead the reader, as we can see from the graph that the highest rate of average one deal size is for Algerian startups at $15 million per deal. However, this number hides the significant decrease in the number of deals for startups in Algeria, which was limited to only two deals! While the average size of one deal in the UAE can be considered more reflective of the development and growth of the volume of investment in emerging companies, in which the size of one deal amounted to more than 8.8 million dollars. The same applies to the case of Saudi startups, whose average transaction size is about $4.8 million.

Sixth: Distribution of startup investments by sector for 2021

2021 was a distinguished year in terms of distributing the investments of emerging companies by sector. The food technology sector appeared for the first time to top the list of investments distribution, with 26% of the total investments, followed by the financial technology sector with 21%, a sector that has witnessed steady growth since the year 2019, while the e-commerce sector ranked third with 16%, this sector is experiencing a relative decline, as we have indicated on more than one occasion. The decline of the e-commerce sector is due to the state of saturation that the main Arab markets have reached, although this does not mean that this sector has completely disappeared. E-commerce in the Arab region still needs more expansion and development, but competition in this sector has become more difficult with the rise of many companies that occupied large sectors of the market, and finally the entry of the e-commerce giant Amazon to the most important Arab markets (Saudi Arabia and the UAE) and last year it entered the Egyptian market.

Seventh: Distribution of the number of startup deals by sector for 2021

In contrast to the distribution of the volume of deals of emerging companies that focus on food technology, the distribution of the number of deals for emerging companies was less concentrated among the main sectors on the one hand, and on the other hand, the large number of sectors in which startups succeeded in obtaining financing rounds are, most notably the agricultural technology sector, artificial intelligence, environmentally friendly technology, and other sectors. This distribution indicates the existence of promising opportunities for emerging companies that are active in areas far from the main sectors that have always reaped the largest share of funding, and perhaps the most evidence of this is the decline of the e-commerce sector in favor of the financial technology sector in the past two years, and the displacement of the food technology sector by the technology sector, which took the lead in 2021. So it will not be surprising that companies operating in different sectors are competing for funding this year.

Eighth: Investment stages for start-up companies during 2021

Investment deals in start-up companies in 2021 focused on the initial funding stage (1), with more than 32%, and in the pre-incorporation stage by about 15%, an increase of 2% over the first half of the same year, while the stage of “accelerated growth companies” came in the third place with 15%, and fourthly, financing of category “A” with approximately 9%, while the pre-financing stage of category “A” (2) accounted for about 7%.

Ninth: Distribution of investments by startup companies for 2021 by gender

The share of funding received by startups founded by females is still small compared to the companies founded by males, as the share of funding received by companies founded by females to the total funded startups did not exceed 1.2%. The year 2021 made significant progress, as a number of distinguished financing deals for women-led companies emerged, perhaps the most important of which were the iMile and BitOasis deals, through which the two companies raised $40 million and $30 million, respectively. It is worth noting that the UAE ranked first in terms of the volume of funding and the number of deals of women-led startups, as Emirati startups received investments worth $187 million through 46 deals. Saudi Arabia ranked second, where startups founded by a team of men and women succeeded in raising about $14 million through 9 deals. Egypt came in third place, with total investments of nearly $12 million through 20 deals.

Explanatory notes:

• Initial financing or financing coming from family and friends, is one of the ways of offering securities, where some parties related to the new startup invest an amount that enables the startup to start its business and continue in the market, until it reaches the stage of being able to finance itself or being able to creating value that makes the startup attractive for investors to invest in. It should be noted that seed funding may be a form of crowdfunding.

• Series A Financing, also known as A Round Financing. It is the first round of financing offered to a startup company in which venture capitalists participate, and it comes after the seed round stage. This is usually done when outside investors are given ownership of the company for the first time. This financing is usually provided in the form of preferred shares, and may include anti-reduction provisions in case of more financing being provided, or in the form of common shares or preferred shares in the future.

Sources:

- Press releases issued by start-up companies.

- Wamda Foundation.

Translation By: Fairouz Alnajem

In August, start-ups in the Middle East and North Africa raised about $160 million through 44 transactions. Here are the top 5 transactions for Start-Ups in the region during August, noting that the following list does not include transactions which financing has not been announced.

First: Tabby Company

Country: UAE

Sector: Fintech

Establishment Date: 2019

Founder: Hossam Arab

Tabby, a fintech company specialized in the service of "Buy Now Pay Later", operating in Saudi Arabia and the United Arab Emirates, has received a Series B investment round worth $50 million, making it the largest investment round for a start-up in the United Arab Emirates, Middle East and North Africa in August. The company aspires to use the new investments to expand the Tabby product portfolio and launch it into new markets in the Arab Gulf states.

Second: Red Sea Farms

Country: Saudi Arabia

Sector: agricultural technology

Establishment Date: 2018

Founders: Ryan Lefers and Mark Tester

Red Sea Farms, an agricultural technology company, has raised an additional $6 million, bringing its pre-first funding round to nearly $16 million, led by a group of major Saudi and Emirati investors. Red Sea Farms' technology makes commercial farming of products using saltwater possible. The investment round obtained by the company will enable the company to accelerate the ability of Red Sea Farms to expand its operations in Saudi Arabia and the Middle East.

Third: Maxab

Country: Egypt

Sector: E-commerce

Establishment Date: 2018

Founder: Bilal Al Maghribi

Maxab e-commerce company obtained additional funding from its first financing round announced last July, and the size of the new financing amounted to about $15 million, bringing the total amount it raised during its first round to about $55 million, and it also announced its acquisition of WaystoCap, an e-commerce platform Based in Morocco, for an undisclosed value. Maxab offers its services to traditional retailing across Egypt, Maxab's services are to provide business intelligence tools that allow suppliers to accurately predict, monitor and control the impact of their strategies in real time.

Fourth: Tharwa

Sector: Fintech

Country: United Arab Emirates

Establishment Date: 2017

Founder: Mark Chahwan, Jad Sayegh and Nadine Mezher

Tharwa Fintech has secured $15 million in Series B funding. Tharwa aims to revolutionize how young professionals grow their fortunes by bringing smart, simple and affordable digital investment to the region. According to the company's press release, the new investment will support Tharwa in its growth and enables it to reach millions of other users.

Fifth: Mabaat

Sector: Real Estate

Country: Saudi Arabia

Establishment Date: 2019

Founders: Talal Bin Saleh Al Sorayai

Mabaat, which specializes in property management and operation in short and medium-term leasing operations, obtained through a seed investment round a total of $2.4 million. According to Mabaat's press release, it will use the new funding to raise awareness of its digital platform and enhance its value, both to property owners and guests