Investments in the MENA region- The State of Digital Investments in MENA Report

Lynn Bizri, Aug 25 2016

 The rise of the digital economy has turned the MENA region into a site of remarkable market opportunity that, once tapped, will take it on an entirely new economic trajectory. With a collective GDP of around $3.5 Trillion, today the Arab world ranks among the top 10 largest economies, even larger than that of India, Russia or Brazil.

More than a third of the total population is youth between the ages of 15-24, the largest age group in MENA, and according to Google, UAE and Saudi Arabia rank in the top 5 countries globally in smartphone penetration rates.

As the levels of connectivity increase drastically, entrepreneurial activity and easy access to technologies are lowering the costs and barriers to starting a business, and the Arab World is positioning itself as a hub for innovation, disruption and growth.

Across the region, interest in technology startups in particular is skyrocketing, with half a dozen tech startups in MENA today valued at over $100M each and more than $750M invested in tech startups between 2013 and 2015.

To highlight the growth and opportunities and encourage more investors to participate, ArabNet collected data about more than 95 funding institutions and 450 deals culminating in a report that is the most comprehensive research on tech startup investments in MENA to date.

The report, which is based on data collected from 48 investors and accelerators in the MENA region, reveals the number of investments that took place between 2013 and 2015 and analyzes them based by market, ticket size, industry, life span, and gender.

As the UAE continues to develop into a global business hub and attract the region’s fastest growing internet businesses, it maintains its position as top investing market with 137 deals between 2013 and 2015 (approximately double the number of deals in the next biggest markets – Jordan, Lebanon, Egypt and Saudi Arabia) and 40% of all deals captured in 2015 among the top 5 countries.

It also lies at the top of the list  in terms of value of investments, having tripled its share of dollars invested in the past 3 years reaching a whopping 2/3 of the value of investments in the top 5 markets in 2015 at $139M. 

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Thanks to Circular 331, which guarantees 75% of the banks’ investments in the knowledge economy through direct startup equity investment or indirect startup support entities, Lebanon has risen steadily in the rankings to second place, with a 15% increase in number of investments from 2013 to 2015, and an increase in value of investments from $6M in 2013 to $31M in 2015.

On the other hand, Egypt has dropped drastically in the rankings (from 31 deals in 2013 to only 6 in 2015) due to political instability and the fact that some of the most active investors had invested their funds and were in the process of fundraising.

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As for ticket sizes, the majority of deals done between 2013 and 2015 were early stage deals (<$500K), and represented 70%-80% of the deals done each year. As the size of the deals increased, the number of deals diminished – which is consistent with the funnel of diminishing startups that graduate from each level of funding to the next. In each of the three years, growth stage deals over $7M captured an enormous portion of total dollars invested, with 2014 being the best year for growth stage investments capturing 80% of dollars invested. 

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In addition to more insights on investments in MENA, the report also includes information and statistics on investors in MENA and gender distribution among startup founders. To read the full report, click on the banner below:

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