UAE leads Mena in venture capital funding in first half of year

The Emirates was also the top country by number of deals, with FinTech ranking first

The Pure Harvest smart farms in Abu Dhabi. The start-up scored the biggest funding deal in 2022, a $181 million mega-round in June. Photo: Pure Harvest

Companies in the UAE raised $699 million in the first half of 2022, ranking the Emirates as the leading country for venture capital financing in the Middle East and North Africa, according to data platform Magnitt.

The Emirates was also the leader in terms of deals, which grew 10 per cent in the six-month period from a year ago, Magnitt said in a report on Tuesday.

The UAE also hosted the biggest deal — a $181m convertible note mega-round for Abu Dhabi-based Pure Harvest in June, marking the 10th straight year that the UAE has hosted a mega-round, which is funding worth $100m or more.

The UAE attracted more than $1.47 billion in venture capital in 2021.

Saudi Arabia and Egypt were second and third, respectively, in both funding and deals closed. The kingdom attracted $584m, a more than threefold rise from the first half of 2022, on 79 deals, while Egypt funding more than doubled to $307m on 78 deals.

Investments in Bahrain surged almost eightfold to $116m, placing the country in fourth place, followed by Tunisia which grew a third to $36m. In terms of deals, the countries swapped places to keep their top-five rankings.

Easy access to diverse funding channels and favourable legislative tools in the UAE are “helping build one of the most globally attractive landscapes for start-ups and entrepreneurs”, said Ahmed Al Naqbi, chief executive of Emirates Development Bank, which sponsored the study.

“With the recognition that today’s business landscape is changing at a faster pace in a hyper-connected world, the UAE has, over the past decade, made significant strides in growing a business-friendly ecosystem enabling the immense talent pool across the country to tap into opportunities easier than ever before,” Mr Al Naqbi wrote.

The growth of start-ups has accelerated in tandem with the increase in digitalisation in key sectors such as retail, services, e-commerce and governments.

Globally, the value created by start-ups is about $3 trillion, which is almost at par with the gross domestic product of a G7 economy, according to advisory firm Startup Genome. Funding for these companies broke records in 2021 when it hit $621bn, according to CB Insights.

“Year-on-year, the UAE continues to solidify its position as a leading hub for innovation in the region. We are consistently witnessing the birth and growth of pioneering, UAE-born, solutions for the region and the world across verticals,” Noor Sweid, managing partner at Dubai-based Global Ventures, said in the Magnitt report.

The study showed that the financial technology industry led the funding raised in the first half, moving up from second place a year ago, as investments more than tripled to $234m.

Agriculture jumped four spots to second, with $181m. In third and fourth places, fashion and lifestyle ($50m) and health care ($50m), also grew multifold. Transport and logistics dropped from the top spot to fifth as funding declined 40 per cent to $40m.

In terms of number of deals, FinTech still led the way with 28, a 65 per cent rise on the previous period. E-commerce secured nine deals, and transport and logistics eight, with educational technology and health care each striking five deals. EdTech deals surged by 150 per cent.

More than half of capital deployed in the UAE during the first half was concentrated in the year’s top five deals, compared to 77 per cent in the corresponding period a year ago. Pure Harvest alone drove more than a quarter of the venture capital raised.

Early-stage funding remained the dominant trend in the UAE at 80 per cent, which is at similar levels compared to the previous four years. Series A rounds were next at 11 per cent, followed by Series B with 8 per cent.

The UAE also posted a new half-year record in investment exits, with 10 in the first half of 2022, which is more than a quarter of all exits announced in Mena over the six-month period, Magnitt said.

The figure — which is double that of Saudi Arabia's — keeps the Emirates on pace to break the 11 exits in 2018 and 2021, and 15 in 2019.

FinTech, e-commerce, enterprise software and real estate start-ups were among the most sought after acquisitions in the UAE in the first half of 2022, the report added.