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UAE ranks top in deal-making as e-commerce regains position

October 20, 2020

The Covid-19 pandemic and its aftermath have changed customer behaviour.

Make way for the top-ranked UAE investment houses in Mena deal-making and ecommerce, which has regained traction. The dynamics in startup ecosystem are showing intresting trends.

It's time every stakeholder in the UAE's vibrant startup ecosystem pat themselves for tiding over the challenges they faced during the last nine months and surviving the pandemic crisis. The proof of this is the capital invested in Mena startups in 2020 year-to-date, which has already peaked at $803 million against $802 million in 2019.

Magnitt's third-quarter Mena Venture Investment Report, released on Monday, paints an interesting picture on the evolving impact of Covid-19 on the region's technology startup and investor landscape.

The summer months of the third quarter are typically the quietest months from a transaction perspective; that period this year has seen the lowest number of investments since the first quarter of 2018, highlighting the potential impact of Covid-19.

The UAE still ranked first by number of deals - with 26 per cent - as well as by amount of capital invested. E-commerce reclaimed the top spot with a deal share of 21 per cent in 2020, overtaking fintech. Together, the industries made up 40 per cent of all Mena deals in the third quarter.

The third quarter also saw a 50 per cent decline in the number of startup investments compared to the second, the lowest number since the first quarter of 2018. The first half of 2020 has seen a record for capital deployed, driven by an increase in average deal sizes at both Series A (up by 34 per cent ) and Series B (91 per cent) from 2019.

'In the first half, we predicted that there would be a delay in seeing the impact of Covid-19 on the venture capital industry, because historically, it can take between 6-12 months for a funding round to close,' said Magnitt CEO Philip Bahoshy.

'Six months on from the onset of the pandemic, the third quarter data likely reflects the impact of decisions taken by investors in the first quarter and second quarter.'

With e-commerce fever engulfing regional economies mainly due to the global health crisis, the UAE is steadily rising to become a hotbed with an estimated growth of about $27.08 billion by 2022, according to global research compiler Statista.

According to research by Ernst & Young, 92 per cent of consumers in the UAE and Saudi Arabia had changed their shopping habits in favour of online shopping. The footfall decline at brick-and-mortar stores also meant that sales got a big hit, forcing most retailers to hurriedly adopt digital strategies to remain in business. Another recent study by Kearney Middle East indicates that up to 40 per cent of respondents are now shopping online more in the UAE and Saudi Arabia before the novel coronavirus outbreak took hold.

Mahmoud Akrin, CEO of GoBazzar, said: 'E-commerce has grown and is rapidly growing every day. The UAE is such a fertile land for e-commerce as the country has always been a forerunner in terms of technology. And almost everyone in the UAE has Internet access.'

The startup plans to expand to Saudi Arabia and onboard all online e-commerce vendors in the UAE to GoBazzar soon, with plans to acquire over one million active users in the UAE alone within the first six months of operation.

The Covid-19 pandemic and its aftermath have changed customer behaviour, paving the way for a greater acceptance of online transactions, as well as using cards to make payments. To a large extent, this was already a transition that was underway for some time; the pandemic has only hastened the process.

Yegertek, a startup that brings to market an evolved customer engagement solution for the global retail, healthcare and education industries, among others, claims to have seen a jump in its business during Covid.

Its CEO Sajid Azmi said: 'Our business has actually grown during the Covid pandemic, and continues to do so. I think our offerings have even more context now, given the changes in behaviour that come with the new normal. Even non-traditional B2B companies are proactively adopting e-commerce and CRM, for instance we are currently helping a B2B ceramics business with their customer engagement. There is a huge transformation underway in the region currently, and along with the UAE, we now see a surge in ecommerce, customer loyalty and online engagement in the Saudi market as well.'


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