Is MENA's VC Market Heading for a Rebound in 2024?
MAGNiTT, the leading venture capital data platform for Emerging Venture Markets, just released its ‘H1 2024 VC Investment Summary’. This report highlights VC investments in technology startups across the Middle East, Pakistan, Turkey, Africa, and Southeast Asia for the first half of 2024.
Overall, VC investments in these markets are showing signs of stabilising, returning to pre-pandemic levels after the highs of 2021-2022. Across these regions, there was US$3.5 billion invested in 618 deals, which is a 34 percent drop from last year in both funding and deal count. The main reason for this decline is the slowdown in mega-rounds, which are investments over US$100 million. Investors are now focusing more on early-stage opportunities.
In the MENA region specifically, startups raised US$768 million, also a 34 percent drop compared to last year. This decline is again due to fewer mega-rounds; only Saudi Arabia’s e-commerce company Salla managed to secure a mega-round of US$130 million in the first half of this year. However, MENA’s funding decline was less severe compared to Southeast Asia and Africa.
Interestingly, early-stage investments in MENA have been on the rise. The percentage of US$1 million to US$5 million round sizes has increased from 15 percent in 2020 to 45 percent in the first half of 2024. Early-stage startup valuations have also adjusted back to pre-pandemic levels.
Despite the overall drop in funding, there’s been a 30 percent increase in the number of investors in MENA startups. This indicates strong interest from both regional and international investors. Additionally, there’s been a 130 percent rise in new funds being launched in the region, including those by Golden Gate Ventures, Shorooq Partners, Investcorp Bahrain, and ADQ.
Philip Bahoshy, the CEO of MAGNiTT, mentioned that while the report shows a global decline in venture investments, there are positive signs for the MENA region. He believes the growth will continue at a moderate pace due to more attractive early-stage valuations and strong international interest. Government support and new fund announcements are expected to drive growth in the second half of 2024 and into early 2025.
In terms of specific countries, Saudi Arabia led MENA VC funding with US$412 million, experiencing only a 7 percent decline. The country saw an 84 percent growth in non-mega deal funding, highlighting increased interest in early-stage deals. The UAE also showed resilience with an 11 percent increase in deal flow, closing 83 transactions and showing year-over-year growth in deals.
However, exits in MENA dropped significantly by 63 percent compared to last year, which is a larger decline than in Africa and Southeast Asia. This is likely because the peak in funding in 2021 and 2022 led to more exits, which have now tapered off. Despite this, the UAE continues to dominate with 60 percent of the region’s exits, up from 29 percent in 2020.
