Mena start-ups raise $1bn venture capital investment

MANAMA: Start-ups in the Mena region recorded venture capital investment of more than $1 billion last year, despite global uncertainty stemming from the pandemic.

This is as per MAGNiTT, the UAE-based largest online community for start-ups across the region.

Bahrain saw a tripling of capital deployment in start-ups during 2020, shows analysis, further adding weight to the inclination of market sentiments towards venture capital funding drifting away from conventional funding preferences.

Last year, UAE accounted for the maximum share in terms of total funding and number of deals, occupying the top spot in Mena followed by Egypt and Saudi Arabia.

Over the course of 10 years from 2009 to 2019, the total venture capital funding has witnessed a compounded annual growth rate (CAGR) of 47pc, however, the number of deals increased with the CAGR of 60pc.

Record venture funding in H1-2020 was somewhat overshadowed by the delayed impact of Covid-19 in H2-2020, with VC activity coming in 58pc lower than the previous six months.

According to Grant Thornton Bahrain advisory service director Mohammad Nomaan, region-based investors are trpically risk-averse, hence they opt for later-stage investment with lesser risk and higher value.

“This has resulted in the number of deals reducing by 13pc to 496 transactions in 2020,” he added.

Fintech and E-commerce rank highest in terms of share in the number of deals followed by delivery and transport, IT solutions, and food and beverage.

“Growing confidence in the sector will ensure early-stage deal flow in the long run,” said Mr Nomaan.

Owing to lower oil prices and depressed local capital market, the need for new asset class and diversification of portfolios is at an all-time high in the region.

Meanwhile, the Pulse of Fintech H2-2020, a bi-annual report on global fintech investment trends published by KPMG, found overall global fintech funding across M&A, PE and VC was $105 billion across 2,861 deals in 2020: the third highest level of investment in fintech ever.

Following a short Covid-19 driven pause in H1-2020, fintech investment bounced back strongly in H2-2020, more than doubling from H1-2020 ($33.4bn) to H2-2020 ($71.9bn).

Despite global uncertainty, VC investment was strong in all regions of the world.

Global fintech-focused VC investment reached $42bn in 2020, including $20.5bn in H2.

KPMG in Bahrain financial services partner Mahesh Balasubramanian commented: “Bahrain offers an excellent ecosystem for Fintech players to establish their regional base and we are witnessing increasing interest from Fintech’s wanting to expand their presence in the region. With the introduction of the Open Banking regulations and use cases, we believe this space will see more innovation and collaboration in the immediate future.”




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