Eden Rabbie, August 2020

30-second summary

- UAE startup access to capital has been slowing down significantly for the past 3 years
- Today, UAE has the lowest share of funded startups in the top MENA countries
- Though there has been more capital raised in 2019 than 2018, less UAE startups gained access to capital in 2019

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We analyze 1,562 startups from MENA and 208 UAE startup rounds to quantify the current situation of startup access to capital in UAE and understand its growth trends with scientific reliability.

- Rounds, capital, rounds median, and number of funded UAE startups in 2019 and 2015-2019
- Number of funded UAE startups records negative growth for the first time since 2014
- Deceleration in UAE startups access to capital and comparison with MENA
- UAE has the lowest percentage of funded startups vs elsewhere in MENA
- Final remarks

1. A

Select a year to view YoY growth

**UAE startups raised more than double the capital in 2019 compared to 2018.**Mainly due to increased activity in post-seed stages (+171%),<sup>1</sup> making up a larger share of UAE startup funding (+30%);<sup>2</sup> and a drop in seed rounds both in count (-40%)<sup>3</sup> and size (-43%).<sup>4,†</sup>

**Number of startup rounds in 2019 did not grow.**2019 saw no statistically significant change and remained within the level of 2018.<sup>5</sup>

Technical notes (5 notes, 1-5)

<sup>Note 1:</sup> Activity change as difference of post-seed UAE startup rounds count in 2019 vs 2018 is positive. N<sub>pooled</sub>=26, δ=12, ⌊95% CI⌋ [10, 13] (statistically significant). Count in 2019 and 2018, respectively, o=(19, 7). N=(42, 47), 95% CI ([12.5, 25.5], [1.9, 12.3]).

<sup>Note 2:</sup> Activity change as difference of population percentage of post-seed share out of UAE startup rounds count in 2019 vs 2018 is positive. N<sub>pooled</sub>=26, δ=1.71, 95% CI [1.56, 1.92] (statistically significant). Share in 2019 and 2018, respectively, p=(.45, .15). N=(42, 47), 95% CI ([.30, .61], [.04, .26]).

<sup>Note 3:</sup> Activity change as difference of seed UAE startup rounds count in 2019 vs 2018 is negative. N<sub>pooled</sub>=63, δ=-17, ⌊95% CI⌋ [-22, -12] (statistically significant). Count in 2019 and 2018, respectively, o=(23, 40). N=(42, 47), ⌊95% CI⌋ ([16, 29], [34, 45]).

<sup>Note 4:</sup> Activity change as difference of population percentage of seed share out of UAE disclosed startup rounds size in 2019 vs 2018 is negative. N<sub>pooled</sub>=33, δ=-.40, 95% CI [-.59, -.25] (statistically significant). Share of seed raised capital in 2019 and 2018, respectively, p=(.14, .63). N=(25, 24), 95% CI ([0, .30], [.43, .82]).

<sup>Note 5:</sup> Activity change as difference of UAE startup rounds count in 2019 vs 2018 is not statistically significant. N*=117, 95% CI [-8.4, 0.9]. Count in 2019 and 2018, respectively, o=(42, 47). N*=117, ⌊95% CI⌋ ([30, 53], [35, 58]).

A startup round is a funding round closed with participation from investment in a venture at seed, series A, or series B stage, including pre-series A and bridge rounds.

Post-seed is series A, series B, and bridge rounds after seed and before series B.

Statistical significance and effect size are studied via analysis of confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

† Disclosed rounds count in 2018 for post-seed is not sufficient to test change in post-seed raised capital with statistical reliability. Observations O is deemed sufficient iff. each comparison group n ≥ 5.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. *Startup Report MENA* [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. *Statistics in medicine*, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale

interaction for proportions. *Statistics in medicine*, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. *Journal of Quantitative Linguistics*, 20:3, 178-208. doi:10.1080/09296174.2013.799918

Select a year to view its five number summary

**This resulted in larger rounds**. Median capital per round raised by UAE startups in 2019 has increased from $800k to $2.5M.<sup>6</sup>

Technical notes (1 note, 6)

<sup>Note 6:</sup> Capital change as difference of median capital raised in UAE startup rounds in 2019 vs 2018 is positive. Year<sub>18</sub> (Mdn=800000), Year<sub>19</sub> (Mdn=2500000); Mann–Whitney U(N=33)=37.5, z=-3.24, p=.001 (statistically significant).

N is disclosed rounds only.

Unless explicitly mentioned, alpha = .05.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. *Startup Report MENA* [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Hettmansperger, T. and McKean, J. (2011). *Robust Nonparametric Statistical **Methods*. Boca Raton: CRC Press. doi:10.1201/b10451

**Consequently, fewer number of UAE startups had access to capital in 2019.**Not only fewer startups were funded in 2019, but with more post-seed rounds and larger capital per round, less startups managed to raise their first round in 2019.- This is not unique to 2019…

1. C

**Growth is at decade low**: Annual overall growth in number of funded UAE startups in 2019 is at decade low level (18%),<sup>11</sup> the same level recorded in 2014.<sup>12</sup>- This is half the level recorded in 2018 and 2017 (33%), and a third of the peak of 2016 (54%).<sup>13</sup>
**For the third year in a row, the number of UAE startups gaining access to capital sees no significant change.**The number of newly-funded UAE startups remained at the same level every year since 2016 (25±12).<sup>14</sup>**Growth in funded UAE startup dropped below the level of the rest of MENA in 2019**(18% vs 34%)**for the third year in a row**.<sup>15</sup>**While UAE slows down, MENA picks up the pace**. In a 5-year window (2015-2019), the number of funded UAE startups grew at the same rate of the rest of MENA (26%),<sup>16</sup> despite having reached double MENA’s rate in 2015 and 2016 (44% and 54% vs 22% and 22%).<sup>17</sup>- This indicates significant deceleration of growth in UAE startups access to capital after 2016, while the rest of MENA continue to grow at a higher rate.

Technical notes (7 notes, 11-17)

<sup>Note 11:</sup> Growth in startup access to capital as annual cumulative change in distinct count of UAE startups who raised at least 1 startup round in any year, measured in 2019, is positive. N<sub>pooled</sub>=126, dp=.178, 95% CI [.12, .23] (statistically significant). See Note 12 for comparison with 2012-2018.

<sup>Note 12:</sup>Acceleration in growth of startup access to capital as difference of annual cumulative change of distinct count of UAE startups who raised at least 1 startup round in any year, measured in year 2019 vs 2012, …, 2019 vs 2018, is negative in every case, except vs 2014 where it is not statistically significant. Difference in 2019 vs 2012, …, 2019 vs 2018 (excluding 2019 vs 2014), respectively, δ=(-2.49, -0.91, -0.27, -0.36, -0.16, -0.16). 95% CI ([-4.16, -2.39], [-1.02, -0.80], [-0.39, -0.15], [-0.46, -0.26], [-0.25, -0.06], [-0.25, -0.07]) (all cases are statistically significant). Difference in 2019 vs 2014 δ=0.004, 95% CI [-0.14, 0.14]. Growth in years 2012, …, 2018, respectively: δ=(2.67, 1.10, 0.17, 0.44, 0.54, 0.33, 0.34). N<sub>pooled</sub>=(11, 23, 27, 39, 60, 80, 107), 95% CI ([2.59, 2.74], [0.99, 1.19], [0.05, 0.31], [0.34, 0.55], [0.46, 0.62], [0.26, 0.41], [0.27, 0.40]).

<sup>Note 13:</sup> Growth in startup access to capital as annual cumulative change in distinct count of UAE startups who raised at least 1 startup round in any year, measured in 2016, 2017, 2018 and 2019, respectively, δ=(.54, .33, .34, .18), N<sub>pooled</sub>=(60, 80, 107, 126), 95% CI ([.46, .62], [.26, .41], [.27, .40], [.12, .23]).

<sup>Note 14:</sup> Difference of nominal growth in startup access to capital as count of UAE startups who raise a startup round for the first time in 2019 vs 2016, vs 2017, and vs 2018 is not statistically significant in all year pairs. Difference for 2019 vs 2016, vs 2017, and vs 2018, respectively, ⌊95% CI⌋ ([-10, 10], [-10, 11], [-18, 5]). Count for years 2016, …, 2019, respectively, o=(21, 20, 27, 19). N=(60, 80, 107, 126), ⌊95% CI⌋ ([14, 29], [13, 28], [18, 37], [15, 29]).

<sup>Note 15:</sup> Comparison of growth in startup access to capital as difference of annual cumulative change of distinct count of startups who raised at least 1 startup round in any year, measured in years 2017-2019, for UAE startups vs non-UAE MENA startups, is negative in each year. Years 2017, 2018, 2019, respectively: N<sub>pooled</sub>=(191, 268, 341), δ=(-.19, -.11, -.16), 95% CI ([-.28, -.09], [-.19, -.03], [-.23, -.09]) (all cases are statistically significant). Growth in non-UAE MENA startups in 2017, 2018, 2019, respectively, dp=(.52, .45, .34). N<sub>pooled</sub>=(111, 161, 215), 95% CI ([.46, .58], [.40, .50], [.29, .38]). See Note 11 and Note 13 for UAE data.

<sup>Note 16:</sup> Difference in 5-yr CAGR of funded UAE startups vs non-UAE MENA startups in 2019 is not statistically significant. N<sub>pooled</sub>=265, 95% CI [-.17, .09]. 5-yr CAGR for UAE startups in 2019 = 26%. N=99, 95% CI [.17, .35]. 5-yr CAGR for non-UAE MENA in 2019 = 29%. N=166, 95% CI [.21, .36].

<sup>Note 17:</sup> Growth in startup access to capital as annual cumulative change in distinct count of UAE startups who raised at least 1 startup round in any year, measured in 2015 and 2016, respectively, for UAE startups: δ=(.44, .54). N<sub>pooled</sub>=(39, 60), 95% CI ([.34, .55], [.46, .62]). For non-UAE MENA startups: δ=(.22, .22). N<sub>pooled</sub>=(60, 73), 95% CI ([.14, .31], [.14, .29])

Statistical significance and effect size are studied via analysis of confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

† Data for years 2010 and 2011 is not sufficient to test change in UAE startups who raised a round with statistical reliability.

Source

Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. *Startup Report MENA* [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. *Statistics in medicine*, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale interaction for proportions. *Statistics in medicine*, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. *Journal of Quantitative Linguistics*, 20:3, 178-208. doi:10.1080/09296174.2013.799918

1. D

**Out of every 10 UAE startups aged 2+ years, only 3 are funded.**<sup>18</sup>**Percentage of funded startups in UAE is below MENA average, and the lowest across top MENA countries**. It is 15% below Saudi and 8% below Egypt. Grouped collectively, UAE is 9% below non-UAE MENA startups.<sup>19</sup>

Technical notes (2 notes, 18-19)

<sup>Note 18:</sup> Population proportion of funded UAE startups founded 2008-2017 is below 40%. p=.35, N=700, 95% CI [.31, .39] (statistically significant).

<sup>Note 19:</sup> Difference in population proportion of funded startups founded 2008-2017, for UAE startups vs non-UAE MENA startups, UAE vs Saudi, and UAE vs Egypt is negative in all cases. Respectively, N<sub>pooled</sub>=(1562, 846, 1031), 95% CI ([-.14, -.04], [-.24, -.06], [-.14, -.01]) (each is statistically significant). Population proportion of funded startups for non-UAE MENA, Saudi, Egypt, and other MENA countries excluding UAE, Saudi and Egypt, respectively, p=(.44, .50, .43, .43). N=(862, 146, 331), 95% CI ([.41, .48], [.42, .58], [.37, .48]). See Note 18 for UAE numbers.

Statistical significance and effect size are studied via analysis of confidence interval.

CI is Wilson score interval.

Unless explicitly mentioned, alpha = .05.

N is all startups aged 2+ years, measured as founded on or before 31 Dec 2017 to allow for median age to raise first startup round to take effect.

Source

*Startup Report MENA* [Online]. https://startupreport.me/uae-startup-access-to-capital-2020 (Based on analysis of 1011 equity-only seed, series A, bridge and series B startup rounds, 443 investors, 4730 ventures in MENA 2008-2019; enriched database: Crunchbase, PitchBook and fieldwork. Data last accessed 30 April 2020).

Newcombe, R. G. (1998). Interval estimation for the difference between independent proportions: comparison of eleven methods. *Statistics in medicine*, 17: 873-890. doi:10.1002/(SICI)1097-0258(19980430)17:8<873::AID-SIM779>3.0.CO;2-I

Newcombe, R. G. (2001). Estimating the difference between differences: measurement of additive scale interaction for proportions. *Statistics in medicine*, 20: 2885-2893. doi:10.1002/sim.925

Wallis, S. (2013). Binomial Confidence Intervals and Contingency Tests: Mathematical Fundamentals and the Evaluation of Alternative Methods. *Journal of Quantitative Linguistics*, 20:3, 178-208. doi:10.1080/09296174.2013.799918

Situation By 2020 – Final Remarks

Despite some positive signs, 2019 exposed problematic trends in UAE startups access to capital.

For the third year in a row, the number of newly-funded UAE startups remains the same, while its growth has slowed down significantly to reach the levels of 2014. Meanwhile, elsewhere in MENA, startup access to capital continues to grow at a faster pace. And while the trajectory of 5-yr growth heads south in UAE, it is turning upwards elsewhere in MENA.

As it stands, UAE has hit a limit and is bound to lose its position as the venture space leader in MENA. Has the UAE venture space, with its current dynamics, reached its capacity? Has the UAE venture capital market reached saturation? Is 25 startups (±12) the limit by which the UAE venture space can ever grow every year? Or did investors lose interest in UAE startups?

Any chance for UAE to overcome this limitation requires a boost to the dynamics of its venture space. Historically, UAE achieved this feat before in 2015-2016. Now is time for a new chapter to the story, and this starts by looking for what causes this limitation.

In the next reports in this series, we explore these questions to find out more on the nature of this stagnation and how to solve it: is it caused by investor problems, startup problems, or a market problems.

Data Analytics and Commercialization in MENA

– 12 years of experience working with governments developing their SME sectors.

– Data science background, CIM, Six Sigma. Japanese-trained.

– Featured author on Medium.

Worked 8 years with the Japanese government to help MENA governments develop their SME sectors, followed by 3 years with UAE government to grow its venture space.

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Rabbie, Eden. (2020). UAE Startup Access To Capital 2010-2020. Startup Report MENA [Online]. https://startupreport.me/uae-startup-access-to-capital-2020

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