The UAE's vibrant startup industry has now reached levels where investors are exploring verticals in select sectors attractive for investment, paving the way for innovation and growth in the country.
Venture capitalists and investors are funding more startups in e-commerce, fintech, food and beverage, logistics and transport to cash in on the growing popularity of the startup ecosystem.
The UAE has retained the major share (70 per cent) of investments followed by Saudi Arabia and Lebanon with 9 per cent and 7 per cent, respectively, making the emirate the most promising investment hub in the region.
"We have identified several technology verticals that are attractive for investment in the UAE [and generally in Mena]: Content and new media, fintech, e-commerce and marketplaces/on-demand, healthtech and B2B Enterprise SaaS," Walid Hanna, MEVP founder and CEO, told Khaleej Times.
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"We have developed a unique understanding of the venture space. The key sectors identified are particularly attractive for multiple reasons. First, these are large Mena technology sectors with market sizes estimated to be in the billions of dollars each. Second, we have built a healthy pipeline and already identified several potential targets for investment across each of those verticals. Third, these are sectors where highly scalable business models can be built with no need for disruptive technologies and where we as MEVP can add tangible value to the companies. Opportunities in these sectors have a clear path to profitability and exit," Hanna said.
According to MAGNiTT's 2017 State of Mena Funding report, e-commerce and fintech remain the most popular industries accounting for 11.9 per cent each. The food and beverage saw the largest increase of 3 per cent in deal flow across 2017, followed by fintech startups also make up 3 of the 10 largest investments in 2017 - Paytabs ($20 million), Souqalmal ($10 million) and Wahed ($7 million ). Logistics and transport also proved big winners with Careem ($150 million), Fetchr ($45 million) and Wego (12 million).
MAGNiTT's founder, Philip Bahoshy, noted the current year, just like 2017, is also poised to sustain the growth trend as investment continues to grow at all stages across the funding cycle.
2017 saw both the continued activity of existing household investment institutions, as well as the emergence of new players into the Mena startup scene. 500 Startups, following the launch of their Mena Falcon Fund, was the most active VC by number of deals, deploying investments in over 30 startups across the region. This was followed by Middle East Venture Partners with 14 deals, who also announced the launch of their new $250 million MEVF III fund in 2017
Looking at the top 10 investments, established VCs made notable participations with BECO Capital investing in 4 of the largest deals followed by Middle East Venture Partners in 3. There was no slowing down in exits in 2017 which saw 20+ deals including the landmark acquisition of Souq.com by Amazon, the 51 per cent acquisition of Namshi by Emaar Malls, as well as Delivery Hero's acquisition of Carriage.
"It has been great to see the emergence of new investors both regional and international into the startup arena, providing much needed capital injection to the region. We have even seen greater participation by family offices, individual angels and corporate, many of whom look to launch accelerators and incubators in 2017 as well as make Corporate Venture investments," Bahoshy said.
2017 sets the benchmark for the region, and Bahoshy is confident that "in 2018, we will continue to see many of these records broken."
"We anticipate existing VC's to deploy new capital from freshly raised funds, we anticipate the continued emergence of new institutional players across the region and we foresee government and regulators continue to actively facilitate and promote innovation initiatives across the region," Bahoshy added.
Launch of several startups in logistics sector also prove that many entrants are now ready to capitalise on the opportunities thrown out to the investors. According to a report by Frost & Sullivan, Saudi Arabia and UAE are the largest logistics markets in the GCC, with an estimated market size of $55 billion and $30 billion, respectively. In addition, the addressable road transportation opportunity size across the GCC is $24 billion, and this is where technology in transportation logistics is becoming increasingly relevant.
The UAE- based Truxapp, a startup firm is addressing the inadequate logistics and transportation models to support companies become more agile and responsive toward their customers' needs. "Currently, the logistics is lagging and this is affecting growth in many other sectors that depend on the efficient movements of goods. The UAE has a growing population with increased consumption and high-internet penetration rates, the nation is witnessing an expanding e-commerce sector, expected to reach $10 billion in the next two to three years. This is in addition to the overall increase in merchandise trade," Naseer Ahmed, co-founder and CEO for Truxapp - International, said.
Another firm Yalla Pickup, the UAE-based mobile application and web-based logistics services company, has launched the next phase of its mobile application, which will be targeted towards commercial requirements. Yalla Pickup has launched this service in partnership with The Box Self Storage Services, a provider of self-storage, mini warehousing and moving services with over 10 years' experience in the UAE.
"Yalla Pickup currently has services in the UAE only with plans to expand into Saudi Arabia, Oman, Kuwait and Bahrain between 2019 and 2021. The Box operates in Dubai, Abu Dhabi and Beirut currently," said Elie El Tom, founder and CEO of Yalla Pickup.
By Sandhya D'Mello
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