Middle Eastern investors are betting big on European startups


Much has been said about a renewed interest in European technology for we and Asian investors, but investors from the Middle East are also involved.

Investments in European startups in the Middle East have more than tripled in one year according to Trading Room.

This influx of capital from the region to its northwest neighbor has helped Europe become the fastest growing large region in terms of venture capital investment – beating Asia and even the United States.

“We actually spoke to many companies across Europe [and] in the UK, ”said Tariq Bin Hendi, Managing Director of the Abu Dhabi Investment Office (ADIO) – a government center focused on investments in the UAE capital.

“I think what Covid-19 has highlighted, again, is that companies not only need to diversify their markets, but they need to diversify the people who help them access those markets.”

In 2020, 1.6 billion euros were invested in European technology in the Middle East region. So far 2021 has seen a huge increase with 5.3 billion euros coming from the region in Europe.

The main destination for these funds is Europe’s largest startup ecosystem, the United Kingdom. By the end of June, Asian and Middle Eastern investors had invested more than 1.7 billion pounds sterling (2 billion euros) in the British tech scene, or 13.2% of the total investments made in the country. These were mostly mega-towers over 250 million euros, which makes sense given the size of many active investors in the Middle East, including sovereign wealth funds.

This compares to 2016, when investors from the Middle East invested just € 179m in UK tech and Japan-based investors like Softbank dominated the scene. While Japanese investments were 72.3% of those in the Middle East and Asia five years ago, that figure has fallen to just under a quarter.

Middle Eastern investors active in Europe

This year, the Qatar Investment Authority participated in Starling’s Series D with Goldman Sachs and Fidelity. In 2020, they led the digital challenger bank Round D series in tandem suggesting that fintech is the industry they are focusing on.

Abu Dhabi Investment Authority (ADIA), based in United Arab Emirates, participated in B2C launch of the automotive market Cinch€ 1.2 billion in May alongside Neuberger Berman Group, Soros Fund and GIC. ADIA is a sovereign fund responsible for managing the emirate’s excess oil reserves.

ADIO announced on Monday that it will partner with non-equity IT startups to provide financial incentives such as discounts on highly skilled payrolls and high-tech capital expenditures, while helping them establish their presence. in the Abu Dhabi hub, as part of its $ 545 million program to encourage innovation.

CEO Bin Hendi told Sifted that while they are interested in industries ranging from healthcare technology to agriculture to finance, he sees IT startups as an anchor for this.

One of the startups that stands to benefit is Callsign, a deeptech startup that provides real-time AI-based identity and authentication solutions.

“The IA component [of Callsign] is a very big fundamental anchor for the way we approach technology, ”said Bin Hendi. “But more importantly, Callsign themselves looked at the region in terms of growth and wanted access to Asia, Africa and the wider Middle East outside of the [Abu Dhabi] hub.”

Callsign, headquartered in London, has already sent a team of 45 to Abu Dhabi, intending to expand it further.

The future of Middle East investing in Europe

Asked what he sees as the future of Middle East investment in European and UK technology, Bin Hendi said they are currently in talks with a number of companies in the region.

He believes there are three reasons why this trend will continue.

First, investors in the Middle East are now willing to take their risk on companies at an early stage to develop their portfolios. Second, they are no longer tied to what they know best about businesses in traditional industries that they can “basically touch and feel”.

Third, what Tariq calls “reverse dynamics”; Institutional investors are only happy to invest if the startups themselves invest in the region in a non-financial way by improving their skills and locating at least part of their operations in Abu Dhabi.

“I think it’s going to continue,” he says. “I think it’s going to grow and I think some of these disruptors, especially when you look at financial services, industry, healthcare, agriculture, etc. they are starting to adjust their technology to serve their markets in Europe and the UK.

“We’ll help them bring them here and fine-tune the model to make it work for this part of the world.”

Tom Matsuda is a writing intern at Sifted. He tweets from @_tommatsuda


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