Investors on the hunt for next unicorn as The Luxury Closet, MoveSouq, Compareit4me get fresh financing
UAE-based e-commerce companies have secured more than US$13 million in their latest funding rounds as venture capitalists continue to clamour to invest in businesses that operate online.
The Luxury Closet, MoveSouq.com and compareit4me.com all announced this week that they have successfully concluded investment rounds, raising $7.8m, $3m and $2.4m, respectively.
“It has been a trend for a couple of years now, but larger and larger cheques are being deployed in e-commerce and marketplace companies,” says Fares Ghandour, a partner at Wamda Capital, which co-led The Luxury Closet financing round with Middle East Venture Partners, and also invested in the Compareit4me funding round.
“The reason for that is investors like to chase success stories. They see successful companies like Souq.com, which is a so-called unicorn, which means it is a private company valued over $1 billion. And Souq only scratches the surface in terms of the opportunity at large associated with e-commerce and marketplaces.”
The Luxury Closet, an online marketplace for pre-owned luxury goods, successfully raised funding in two previous rounds before the latest deal was concluded. It will use the money to expand its team and extend reach.
“In the past few years we have been really busy trying to fine-tune the concept, build the technology behind it and fine-tune the model so it is scalable,” says Kunal Kapoor, its founder and chief executive. “Now we can step on the gas and take it to other countries. So for example in Q4 we will expand to Saudi Arabia.”
The company operates in one of the fastest-growing industries in the country. Online retail in the UAE is worth more than Dh6.6bn this year, 89 per cent more than last year, according to Euromonitor International.
“Venture capitalist firms are tending to capitalise on the fast-growing e-commerce channels in the Mena region,” says Rabia Yasmeen, research analyst at Euromonitor International. “These e-commerce ventures are mostly entrepreneurial start-ups that tend to explore non-traditional product mixes and channels, but external financing can help them grow beyond means and tap unexplored markets.”
Bana Shomali, MoveSouq’s chief executive, said the company, the largest online home services marketplace in the UAE, plans to use its investment to expand to different cities regionally and add more services, while Jon Richards, the chief executive of compareit4me.com, said the financial products comparison website will use the finance to publicise its recently launched insurance platform.
All three companies have successfully completed previous rounds, in compareit4me’s case with some of the same investors.
More than half of the $2.4m the company secured came from Wamda Capital, STC Ventures and Dubai Silicon Oasis Authority, which comes less than a year after the trio invested $3m in the company’s first significant round.
“There is a great deal of confidence that new investors take from the investor panel that you have. I think having STC Ventures, Wamda Capital and DSO Authority, when other investors see this they are obviously excited,” says Mr Richards. “They like the fact that big venture capitals are involved. But also the big statement is these guys taking part again, putting more money in. You don’t put good money after bad.”
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