Regional startups on a ‘growth’ trajectory amid Covid-19 crisis

The year 2020 has been one of tumultuous change so far.

While the Covid-19 virus has tested most business sectors, challenging the resilience of individuals and institutions as they grapple with the changes brought about by the pandemic, the crisis has also accelerated the ubiquity of the digital era, with technology transformation and digitisation redefining our economies.

For the regional startup ecosystem, the coronavirus has acted as an impetus for supporting and backing new ventures which could potentially lead the region’s digital transformation and its evolution in the ‘new normal’.

Startups based in the Middle East and North Africa (MENA) region attracted investments of $659m in the first half of 2020 – equaling 95 per cent of 2019 funding – as investors shifted their focus towards later-stage deals, startup data platform MAGNiTT’s new report revealed.

A total of 251 startup investment deals were recorded in the first half of the year across the MENA region, with the UAE receiving the highest share of funding (59 per cent) and Egypt securing the most number of deals (25 per cent).

Fintech ranked first by number of deals in H1 2020, accounting for 16 per cent, followed by e-commerce (14 per cent) and delivery and transport (10 per cent), the report added.

In the aftermath of the virus outbreak, positively impacted sectors as well as later-stage companies garnered renewed investor interest, as a shift in funding mandate (27 per cent) was witnessed towards industries that benefited from the current climate.

Up to 18 per cent of startups across the MENA region actually accelerated their fundraising in the first half of 2020, led by fintech ventures (20 per cent), followed by education (11 per cent), ICT (11 per cent) and healthcare (9 per cent), a joint report by MAGNiTT and INSEAD revealed.

Locally, in the UAE, Dubai’s in5 startups raked in more than Dhs65m ($17.7m) in direct investments during the first half of 2020.

Regional governments have also ramped up efforts domestically and through cross-border alliances to underpin the startup ecosystem. In July 2020, the Dubai Multi Commodities Centre (DMCC) freezone partnered with China’s Innoway to collaborate on tech projects within the region.

However, businesses and industries in the mobility and consumer touchpoints segments were badly affected by the pandemic and the related protocols that have since been issued.

Traditional retail, transportation and entertainment startups experienced reduced valuations. More so, cash-related issues proved to be the most challenging for tech ventures, the report noted.

Moving Forward 
As individuals and organisations adapt to new ways of operating, a shift to disruptive technologies and ventures is also underway.

Fund masters are stepping away from their original focus areas, driven by behavioural transition and evolving consumer demands.

Given that these trends are here to stay, the future of the regional startup ecosystem stands on firm ground.