• Q2’23 was the lowest quarter of funding in MENA startups since Q3’20 and saw the lowest number of deals since Q2’17
  • With $446M raised in H1’23, Saudi Arabia ranked first by total funding for the first time, with the UAE leading by transactions closing 60 deals
  • FinTech remained the top pick for investors, despite recording a 51% YoY decline in transactions
  • Investor focus has been shifting away from late-stage investments towards startups raising $1M-$5M round, with a focus on companies that have proven product market fit

Dubai, UAE: MAGNiTT, the leading verified data platform for emerging market venture investments, releases its H1 2023 MENA Venture Capital Report. With this report, they analyze and compare VC investments in technology startups headquartered in the Middle East and North Africa (MENA).

According to the report, the region’s startups raised over $1BN through 193 deals. Against the backdrop of macroeconomic headwinds including rising inflation, curbs on oil production, and global interest rate hikes, MENA’s VC ecosystem saw a 42% retreat in the funding levels and a 49% decline in the transactions closed.

The first half of this year, however, did see increased interest from international investors in discovering the region. This was largely driven by GPs of global funds looking to raise capital from sovereign LPs locally. A few of the most notable visits, reported by international publications, have been of Silicon Valley investors including Andreessen Horowitz, Tiger Global, and GPs like Jason Calicanis and Brad Gerstner. Despite this growing international interest, it was interesting to note that international investor participation in regional startup investments, currently at 25% in H1’23, is the lowest contribution dating back to 2019.

In line with the global quarterly trends, Q2 became the lowest funded quarter since Q3 2020 whereas the number of transactions was at the lowest levels since Q2 2017. With the increased probability of further interest rate hikes and subsequent economic challenges, any chance of recovery is likely to appear after September in Q4, when deals closed in the summer are announced and high-profile tech summits are organized. 

When comparing the funding activities across the countries in the region, we see Saudi Arabia leading the race by total funding, driven by the two MEGA deals raised in February by E-commerce startups Floward and Nana. However, the invested capital across the top 3 countries (KSA, Egypt, and UAE) saw a 31% YoY retreat in funding in H1 2023. Only Morocco, in the top 5 countries by funding raised, was able to boast a YoY incline of 32% in funding levels and 25% in the number of transactions closed. The sharpest decline was observed in Egypt, which raised only $7M across 8 deals in Q2.

However, individual Governments in MENA have also made paramount efforts to promote activity in the VC ecosystem through policies and initiatives. For example, the UAE launched the Dubai Economic Agenda D3 which looks to prioritize the growth of startups, Egypt announced a five-year tax exemption for startup companies, and Saudi Venture Capital has recently launched an $80M Saudi FinTech fund to encourage funding activity in the FinTech industry of the Kingdom.

Interestingly, when it comes to industries, the top five industries in MENA saw year-on-year declines of almost -50% in terms of deals in the first half of the year. Despite three MEGA rounds, funding also saw a decline of over 40%. FinTech, the leading industry by both deals and funding, saw invested capital recede by almost 70%.

MAGNiTT’s ‘H1 2023 MENA Venture Investment Summary’ highlights many such figures and leading players from the Middle East and North Africa. The report is now available to download for free here.

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For press inquiries please contact: press@magnitt.com 

About MAGNiTT:

Headquartered in the Dubai International Financial Centre, MAGNiTT is the largest verified investment data platform for investors, entrepreneurs, corporations, governments, and the wider venture capital industry in the Middle East, Africa, Pakistan, and Turkey. Through its dynamic analytics platform delivering real-time information on over 25,000 private companies and 7,000 investment firms across 65 countries – including funding history – MAGNiTT enables investors, corporations, Big Tech companies, and government entities to make informed, data-driven decisions that help deliver real-world impact and better value for all sides of the investment equation.

For more information about MAGNiTT: https://magnitt.com

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