CAIRO: The Middle East and North Africa region is on its way to becoming the next Silicon Valley, with venture capital and startup activity rising annually.

Last year, the funding ecosystem saw massive growth compared to previous years, thanks to the region’s inspiring entrepreneurial talent.

It witnessed Saudi Arabia, the UAE and Egypt emerging as the top-performing countries in the venture capital space, amounting to 35 deals.

The MENA region raised $247 million across 46 deals in January last year, marking an epic 474 percent increase compared to the same period last year, according to venture research firm Wamda.

January 2022 also chanced upon Bahrain’s crypto fintech startup Rain raising $110 million in a series B funding round, totaling a record-breaking $15 million.

On the acquisition front, Saudi fintech Foodics bought foodtech startup POSRocket in January, 2022. Other notable deals included UAE’s property tech startup Huspy buying mortgage consultancy Home Matters and Kuwait’s online coffee marketplace COFE App purchasing e-commerce Sippy Beans.

In February 2022, Saudi startups amounted to 58 percent of the overall funding value, raising $219 million in 23 deals mainly thanks to trucking provider TruKKer’s $96 million series B and online grocery store Nana’s $50 million growth round.

The UAE amassed a total of $77.6 million through 20 deals, followed by Egypt, raising $70 million in 18 deals.

TechStars Riyadh was the most active accelerator, investing in over 12 startups across the region, followed by Abu Dhabi-based Flat6Labs, which saw eight of its Tunisia cohort graduate. 

In March 2022, however, the region took a 22 percent dip compared to the earlier month, garnering $229 million.

However, it clocked a 71 percent increase over the same month in 2021.

Saudi investors were the most active during the month, clinching 31 out of 79 deals in the region, followed by Egypt’s 20.

The age of fintech

Fintech companies were the most funded entities in the first quarter of 2022, raising $368.8 million across 43 deals, with Bahrain’s Rain, UAE’s Tabby, and Egypt’s Khazna and Lucky leading the charts.

MENA startups aggregated $297 million in April 2022, $2 million lesser than a month ago. Saudi startups dominated the funding space during the month, raising $195 million thanks to Foodics’s $170 million series C round. The UAE came in second with $61.5 million.

The region experienced a downfall in May, witnessing one of the lowest amounts raised in 2022, with $176 million across 42 deals.

The decline represents a 40 percent decrease compared to April 2022, but yearly growth increased by 62.7 percent.

Although investment value decreased, international investors such as US-based PayPal Ventures and global digital payment company Mastercard ventured into the scene in May 2022, raising the deal count to 21 deals.

Egypt had the most funded startups raising $80 million across 11 deals, with fintech Paymob’s $50 million series B accruing a substantial portion of the monthly value.

While the Kingdom amassed $46 million through nine deals in May 2022, fueled by fintech Hyperpay’s $36.7 million round, the UAE came in third with $45 million via eight deals.

In June 2022, MENA startups raised $323.7 million in 66 deals, an 84 percent increase in value compared to the month before. The UAE was the top performer in June 2022, accumulating $278.8 million through 16 deals.

The first half of 2022 also saw the fintech sector as the leading industry in terms of investment, and a large number of foreign venture capital firms also entered the region, according to regional research firm MAGNiTT.

Regional venture capitalists Flat6Labs and Shorooq Partners were the most active during the first half, participating in 19 and 15 deals, respectively. On the other hand, US-based Y Combinator was the most active international investor, bagging eight deals.

Commenting on the region’s venture capital market, Mohammad Al-Zubi, founder of venture capital firm Nama Ventures, told Arab News that the market is still warming up and will witness even more growth.

“The growth rate in the venture capital asset class on all metrics — the number of deals, the amount invested, the number of funds, incubators, and accelerators — has shown tremendous growth. At Nama, we say the region still has not started; it’s only going to get bigger and better with time,” Al-Zubi told Arab News exclusively.

Realization of venture capital returns in the first half of the year was also at an all-time high, earning almost 75 percent of the total number of exits in the whole year before.

The world’s a stage

The Middle East alone observed the most international and cross-market merger and acquisition activity, with 21 exits announced between January and June 2022.

Notable among them were Pakistan’s marketing platform Walee Technologies acquiring UAE’s artificial intelligence-driven branding solutions company Mirrorr.com for an estimated value of $50 million and Saudi-based Retail Technologies buying UAE’s online marketplace DXBUY.

Al-Zubi also stated that mergers and acquisitions are key factors that indicate a growing ecosystem. He added that “Silicon Valley has figured out the fastest and cheapest path to report return on investment is via M&A. Large conglomerates in MENA need to start viewing M&A as one their key pillars to stay competitive.”

Moreover, food and beverage was the sector of choice during this period for the Saudi ecosystem raising $187 million, followed by fintech with $95 million.

The UAE experienced a 2 percent decline in funding in the first half of 2022 compared to 2021, at $699 million.

The MENA region’s funding fell dramatically in July 2022, raising $105 million across 44 deals, an annual decrease of 84 percent and 68 percent compared to the previous month.

In August 2022, the funding ecosystem rose, with MENA startups raising $378 million across 33 deals.

The UAE and Saudi Arabia raised $232.8 million and $102.8 million across 12 and six deals, respectively.

August 2022 also witnessed Huspy acquire two UAE-based mortgage brokers, Just Mortgages and Finance Labs. In addition, Emirati logistics platform Cartlow purchased the UAE-based trusted classified platform for secondhand items, Melltoo.

Other deals included UAE’s technology and investment group Astratech acquiring Emirati fintech PayBy and Saudi Arabia-based human resources consultancy firm KABI’s acquisition of the UAE’s HR tech startup BLOOVO.

September 2022 funding lessened by 54 percent compared to August as MENA startups raised $173 million across 51 deals. Saudi Arabia’s TruKKer secured one of the biggest rounds this year, raising $100 million in a pre-initial public offering led by Bahrain’s Investcorp.

Coming to the end of 2022, October witnessed the most significant amount this year, with $646 million across 69 deals. Total funding of 2022 till October hit $3 billion across 551 deals. The month saw a 331 percent year-on-year growth.

Emirati startups secured $460 million during the month, with Egypt coming in second with $113 million, followed by Saudi Arabia with $70 million.

In November, the total funding value hit $439 million, up 55 percent compared to the same month last year, with 39 deals. The UAE secured its top position in terms of deal count and value as Emirati startups raised $237 million across 13 deals followed by Algeria thanks to its super app Yassir raising $150 million in a series B funding round.

Regionally, Saudi Arabia-based investors were the most active, investing in 10 deals followed by their counterparts from the UAE with eight deals.

November also witnessed a couple of acquisitions, with Kuwait’s Floward acquiring perfumery brand Mubkhar, also a Kuwait-based company, and Saudi Arabia-based foodtech company Jahez acquiring The Chefz, a Saudi Arabian dessert delivery startup, for $173 million.