Startups have proven their tenacity and their necessity in the digital era and those with money are taking greater notice. Recently, we have seen more family offices take an interest in VC funds, this will continue this year, alongside family businesses and corporates engaging more with startups, whether via direct investments, partnerships, or venture-building. High-net-worth individuals in the region who want to diversify their portfolios and increase their exposure to technology are likely to become “super angels” or establish single LP funds, shunning the traditional VCs to assume greater control of their investments. These individuals will have core areas of focus and provide startups with “smart money” and valuable networks and expertise in their field.

Sovereign wealth funds (SWF) will also turn their attention to the region. Over the past few years, they have become active investors in global VC funds and startups, but this year will see greater interest in the region’s offerings. Leading this charge will be Saudi Arabia’s PIF and Abu Dhabi’s Mubadala, ADQ, and Abu Dhabi Growth Fund (ADG). Both PIF and Mubadala accounted for the largest contributors to Softbank’s first Vision Fund, which was fully deployed without a single investment in the Middle East and North Africa. In fact, several global startups that benefited from this fund eventually expanded to the Middle East, competing with the region’s local players. But the tide has turned somewhat with the Japanese VC’s second fund, which led two mega-rounds in the Middle East last year – Kitopi’s $415 million Series C round and Unifonic’s $125 million Series B. 

This level of investment, larger rounds, and rapid growth of the startup sector will create more unicorns in the region, while some valuations will no doubt be over-inflated, others will be well-deserved. We can expect at least three unicorns to emerge this year, most likely in the UAE and Saudi Arabia, whose governments have made concerted efforts to create unicorns in their own markets. The UAE launched the Entrepreneurial Nation Initiative which seeks to establish 20 unicorns by 2031, while Saudi Arabia’s STV is looking to raise a $1 billion fund to nurture and fuel the creation of more unicorns in the region. 

Source Credit: Wamda