The estimated $815m collective investment that start-up businesses across the Middle East and North Africa (Mena) region received in 2016 is expected to further increase in 2017 as global companies seek to establish a presence in the region.
The largest of these investments went to Dubai-based ride-hailing service Careem, which closed $350m in funding from Japans Rakuten Incorporated and Saudi Telecom Company (STC) in December last year.
According to Dubai-based Propertyfinder Group, buying up established businesses, rather than starting operations from scratch, now appears to be the preferred means of entry into the Middle Easts rapidly expanding digital economy because these deals also provide access to local expertise.
The firm itself received $20m in stake purchase from Swedens Vostok New Ventures in 2016.
In 2015, Germanys Delivery Hero also acquired Kuwaits Talabat.com, which operates in all six GCC markets and has a network of 1,300 partner restaurants including Burger King, KFC and Subway.
Earlier this year, US-based Amazon acquired Dubai-based online retailer Souq.com.
The Amazon-Souq.com deal illustrates the potential for business opportunities for the regions young, wealthy and tech-savvy population, according to Dany Farha, CEO of Dubai venture capital firm Beco Capital, which is among Careems investors.
Farha said the arrival of Amazon to Mena will spur the digitalisation of the regions economies and will prove the strong correlation between digitalisation and the regions non-oil gross domestic product (GDP).
Even local and traditional business organisations are now moving into the online retail space in order to secure a share in the $20bn market expected by 2020, based on forecast made by US-based consultancy AT Kearney.
UAE-based Emaar Malls bought a controlling stake in online fashion retailer Namshi in May, following its failed bid to take over Souq.com.
While its launch has been significantly delayed, Noon.com, the $1 billion e-commerce site created by UAE investors led by Emaar Properties chairman Mohamed Alabbar and Saudi Arabias state-owned Public Investment Fund (PIF), is expected to create competition and facilitate further growth in the regions online retail industry.
It is understood that a mere 8 per cent of businesses in the Mena region have an online presence compared with 80 per cent in the US. Only 1.5 per cent of total retail sales in the region are also transacted over the internet compared with an estimated 16 per cent in the UK, according to Beco estimates.
If you plot the graph, its a steep increasing curve from left to right, imagine how much value there is to come from the digital economy here, said Farha.