Saudi Arabia sees 55% surge in tech startup funding

Saudi Arabia sees 55% surge in tech startup funding
Large buildings equipped with the latest technology, King Abdullah Financial District in Riyadh, Saudi Arabia. A study by data research platform Magnitt found that the Kingdom accounted for 18 percent of the 496 investment deals across the Middle East and North Africa last year. (Shutterstock)
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Updated 13 January 2021

Saudi Arabia sees 55% surge in tech startup funding

Saudi Arabia sees 55% surge in tech startup funding
  • Volume of deals also up 35% as Kingdom defies pandemic slowdown

RIYADH: Saudi Arabia recorded a 35 percent year-on-year increase in the number of investment deals in the technology startup sector last year, according to a new industry report.

A study by data research platform Magnitt found that the Kingdom accounted for 18 percent of the 496 investment deals across the Middle East and North Africa last year.

Saudi Arabia, the UAE and Egypt were the largest markets, accounting for 68 percent of total deals. However, while the Kingdom saw the number of investment deals increase by over a third, the UAE and Egypt saw their volume decrease by 17 percent and 10 percent, respectively.

When it comes to the monetary value of the deals, the UAE and Egypt still dominated overall, but Saudi Arabia recorded a surge of 55 percent year-on-year to $152 million. By comparison the value of deals in the UAE rose 5 percent and Egyptian funding increased 31 percent.

Nabeel Koshak, CEO at Saudi Venture Capital Company, said: “Saudi Arabia is witnessing an increase in the quality and quantity in the deal flow of startups. I am thrilled by the distinguished entrepreneurs who are creating fast growth and scalable startups. Despite the slowdown of COVID-19, Saudi Arabia saw a record increase in venture capital funding (55 percent) in 2020 compared with 2019.”

Overall, across the Middle East and North Africa, 2020 saw a record of just over $1 billion invested in start-ups, an increase of 13 percent year-on-year. This is despite the volume of deals decreasing by 13 percent over the same period. 

The impact of the pandemic can be clearly seen in the data. In the first half of the 2020, $725 million of funding was raised, an increase of 29 percent compared with $563 million in the first six months of 2019. In the second half of the year, $306 million was raised, a decrease of 35 percent compared with the last six months of 2019.

Philip Bahoshy, CEO and founder at Magnitt, said: “Exactly one year ago when we published Magnitt’s 2019 annual venture report, I predicted that — barring war or natural disaster — we would see $1billion invested in MENA’s startups in 2020. We saw neither war nor natural disaster. Instead, a global pandemic changed the world.

“It has been a difficult year for all of us  in many ways, and it is likely that the pandemic will continue to affect the global population as well as the macroeconomic outlook for our region long into 2021,” he added.

The report also identified a clear change in the allocation of capital away from early-stage ventures.

Pre-seed investments — deal sizes of less than $100,000 — represented 47 percent of transactions in 2019, while in 2020 it fell to 27 percent. This revealed that last year investors were showing a preference for bigger-ticket Series A investments, or deals of between $100,000 and $3 million.

In terms of sector focus, the impact of COVID-19 can be clearly seen. Funding for the food and beverage and healthcare startups tripled to $122 million and $72 million, respectively.

Courtney Powell, chief operating officer at California-based 500 Startups, said that 2021 would be a turning point for entrepreneurship in the Middle East and North Africa.

“It’s the culmination of years of work by key stakeholders. Deal flow is healthy and getting stronger every day, there is more capital available than ever, and there is an intense hunger to see the region diversify away from historical drivers of gross domestic product and become a leading knowledge economy.”

In its predictions for 2021, Magnitt has forecast that Saudi Arabia will overtake Egypt by total number of investments and total capital deployed and become second only to the UAE in the rankings.


Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades
Updated 16 January 2021

Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades

LONDON: Global shares stumbled on Friday as hopes of a fiscal boost from a $1.9 trillion US stimulus plan were smothered by the prospect of stricter lockdowns in France and Germany and a resurgence of COVID-19 cases in China.
European stocks followed Asian markets lower, with the pan-European STOXX 600 down 0.8 percent and London’s FTSE 100 0.8 percent weaker, with the latter clobbered by data showing Britain’s economy shrank in November for the first time since the initial COVID-19 lockdown last spring.
The MSCI world equity index, which tracks shares in 49 countries, was 0.3 percent lower. S&P 500 e-mini futures shed 0.3 percent to 3,779.
Oil prices, which had risen on a weak dollar and strong Chinese import data, dropped as COVID-19 concerns in China hit sentiment.
Brent was down $1.33, or 2.3 percent, after gaining 0.6 percent on Thursday. US West Texas Intermediate crude was down $1.17, or 2.1 percent at $52.44 a barrel, having risen more than 1 percent the previous session.
Brent and US crude were heading for their first weekly declines in three weeks.
Spot gold rose 0.1 percent to $1,847.00 per ounce.
While oil producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts versus lockdowns, financial contracts have been boosted by strong equities and a weaker dollar, which makes crude cheaper, along with strong Chinese demand.
“The recent resurgence in coronavirus infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major OECD economies has clouded the economic and demand recovery,” said Stephen Brennock of oil broker PVM.
“Simply put, near-term demand expectations aren’t too promising.”
Earlier on Friday, an Asian regional share index had edged near record highs after US President-elect Joe Biden proposed a $1.9 trillion stimulus plan to jump-start the world’s largest economy and accelerate its response to the coronavirus.
In prime time remarks on Thursday, Biden outlined a proposal that includes $415 billion aimed at the COVID-19 response, some $1 trillion in direct relief to households, and roughly $440 billion for small businesses and communities hard hit by the pandemic.
But that initial boost later faded as risk appetite waned, lifting bond prices and the dollar, and hitting equities.
“People are saying it’s a big number but markets are almost acting like its a disappointment,” said James Athey, investment director at Aberdeen Standard Investments.
“I think maybe the market was pricing an additional $2,000 cheque going to the US population, but what’s being proposed is a top-up of $1,400 to take the total to $2,000 because $600 has already been agreed.”
Investors also digested the prospect of rising taxes to pay for the plan.
“The concern is what it’s going to mean from a tax stand point,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don’t often ignore taxes.”
Biden’s comments came after US Federal Reserve Chair Jerome Powell struck a dovish tone in comments at a virtual symposium with Princeton University.
Powell said the US central bank is not raising interest rates anytime soon and rejected suggestions the Fed might start reducing its bond purchases in the near term.
Investor concerns over the prospects for a global economic recovery were raised after France strengthened its border controls and brought forward its night curfew by two hours to 6 p.m. for at least two weeks to try to slow the spread of infections.
German Chancellor Angela Merkel called for “very fast action” to counter the spread of variants of the coronavirus.
Chinese blue chips eased 0.2 percent, snapping a four-week winning streak, after the country on Friday reported the highest number of new COVID-19 cases in more than 10 months.
US earnings season kicked into full swing with results from JPMorgan, Citigroup and Wells Fargo.
JPMorgan Chase reported a much better-than-expected 42 percent jump in fourth-quarter profit on Friday, driven by the release of some of the reserves it had built up against coronavirus-driven loan losses.
Investors will be looking to see if banks are starting to take down credit reserves, resume buybacks, and provide guidance that shows the economy is improving, said Thomas Hayes, chairman of Great Hill Capital in New York.
In the currency market, the US dollar rose.
The dollar index was at 90.407 versus a basket of currencies, up 0.2 percent on the day.
It was on track for a weekly gain of around 0.4 percent, making this its strongest week since November.
Against the stronger dollar, the euro was down 0.2 percent at $1.21325.
US yields stepped back as risk appetite waned. Benchmark 10-year Treasury notes yielded 1.1039 percent, down from a US close of 1.129 percent on Thursday, while the 30-year yield dipped to 1.8451 percent from 1.874 percent.
In Europe, Italy’s bond market was poised to end the week calmer, as 10-year bond yields were down 2 basis points at 0.59 percent.
Italian Prime Minister Giuseppe Conte resisted calls to resign on Thursday after a junior coalition party led by former premier Matteo Renzi pulled out of the government on Wednesday and stripped it of its majority.