A total of 366 investments were made in startups based in the Middle East and North Africa (MENA) region last year to reach $893m of total funding, according to a report from start-up platform MAGNiTT.
The total amount of funding indicated a 31 per cent increase in investment compared to 2017, in which $679m was invested, the report said.
The number of deals was also up 3 per cent year-on-year with the average deal size in the region up 26 per cent year-on-year.
Even when excluding the investments made in UAE-based Souq.com (acquired by Amazon in 2017) and Careem – which amounted to $150m in 2017 and $200m in 2018 – funding was similarly up 31 per cent last year.
“This is higher than any previous year on record, based on MAGNiTT statistics and is another sign of the ever-maturing ecosystem,” the report said.
Maturity in the startup ecosystem has also seen more startups raise later stages of investment, with 14 per cent of all deals at series A, 3 per cent at Series B, and 2 per cent at Series C and higher in 2018.
The report also found that the UAE remains the most active ecosystem, accounting for 30 per cent of all deals and 70 per cent of total funding.
“The UAE has maintained its dominance thanks to continued government support, corporate venture interest and growing investor appetite for startups,” the report stated.
Meanwhile Egypt was the fastest growing ecosystem in 2018 – receiving 22 per cent of all deals, up 7 per cent from 2017.
In total, 156 institutions invested in MENA startups – up 5 per cent from 2017, including 30 per cent from outside the region.
US-based 500 Startups remained the most active investment house, especially at early stage investments.
In terms of sectors, FinTech accounted for 12 per cent of all deals in 2018, overtaking e-commerce as the most active industry.
Notable deals include $18m invested in Aqeed, $8m in Wahed Invest and $4.5m in Expensya.
“We also saw the major exit of TPay in Egypt, which brought about the first Dragon Startup, a startup whose exit pays back the full fund size of a VC,” MAGNiTT reported.
E-commerce accounted for 11 per cent of all deals, followed by transport and delivery, IT solutions, food and beverage, education, healthcare, and travel and tourism.
Dubai-based Careem received the highest amount of funding by a single startup, raising $200m in October 2018. The fundraise was the first tranche of its Series F funding round, and was led by existing investors STV, Saudi Arabia’s Kingdom Holding, Al Tayyar Travel Group Holding, and Japanese E-commerce platform Rakuten. The company expects to raise over $500m in its Series F.
The second biggest deal was raised by Property Finder ($120m), followed by Boutiqaat ($45m), Wadi.com ($30m) and Bayut ($25m).
Overall, the report stated that the top 10 deals in 2018 accounted for 65 per cent of the total investment amount in 2018, up 2 per cent from 2017.
In terms of exits, 2018 saw 14 startup exits take place across MENA, down 26 per cent from 19 in 2017. Four of the exits in 2018 were by an international acquirer.
Philip Bahoshy, MAGNiTT founder and CEO, said: “This is an extremely positive signal. 2018 saw more international investors enter the foray than before, new accelerator programmes created the region, multiple government initiatives spurring innovation and established regional VC firms closing out new funds to deploy further capital.
“Founders continue to see increased interest from investors; investors are seeing startups mature and getting returns through increased M&A activity and exits, while governments see the fruits of their initiatives to further strengthen the ecosystem.”