MENA Venture Funding in Q3 is up by 32 per cent

10x Industry

Mita Srinivasan
10x Industry
Published:

MENA Venture Funding in Q3 is up by 32 per cent

A trend highlighted in this report is early-stage investments of less than $1M saw an increased appetite from investors. While the report indicates a more positive shift in invested capital, it is still early to predict when a recovery will take place.

MAGNiTT’s Q3 2023 MENA Venture Investment Summary report shows that Middle East and North Africa (MENA) venture funding saw US$250M raised across 78 deals. The funding levels have seen an uptick of 32 percent when compared to Q2’23, while the number of deals has largely remained flat.

This report provides an update on how the latest investment trends have evolved across the MENA in the first 9 months of 2023.

This contributed, on aggregate, to the first nine months of 2023 reaching US$1.4BN, raised through 286 transactions, which represented a 46 percent decline from last year. These numbers are in line with the global figures, as global venture funding witnessed a 42 percent YoY decline, according to data sourced from Crunchbase.

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A trend highlighted in this report is, after years of consistent declines, early-stage investments of less than $1M saw an increased appetite from investors. In 2023, 44 percent of all deals were attributed to investments between $0K-$1M round size bracket. This has been driven by the cautious investor sentiment favouring a shift to smaller-sized deals in the first three quarters of this year.

This has also been reflected in valuation trends for the region. Early-stage SEED rounds in the MENA region have seen a 28 percent rise in average valuations in 2023YTD – the only stage to see growth in their mean and median valuations where activity has remained stable. This too is also in line with global trends where investors see a lower risk in early-stage investments versus late-stage counterparts.

Philip Bahoshy, CEO at MAGNiTT, comments: “While we saw a 32 percent QoQ incline in funding levels, this was against the backdrop of a record low figure in Q2 dating back to 2019. Investment activity has remained flat with investors focusing on early-stage bets. What we’ll be keenly tracking is the pace at which this dry powder translates into investments. In fact, investment activity in Q4’23 will be a good indicator of the strength of 2024's VC landscape.”

According to Bahoshy, there have seen multiple fund announcements. In MENA, UAE’s Chimera Capital and Aliph Capital have launched new funds, and in KSA IMPACT46 and KAUST have raised funds to deploy in local startups.

When comparing the funding activities across the countries in the region, Saudi Arabia has seen the most deployed capital, reporting a 172 percent QoQ incline, and UAE ranks second showcasing a 55 percent incline. By the number of transactions, UAE has seen the most activity capturing a third of all deals closed in MENA for the first nine months of 2023, despite a 30 percent YoY drop. Only Morocco, in the top 5 countries by transactions, could boast a YoY incline of 27 percent in the number of transactions closed. And the sharpest decline was observed in Egypt, which saw a 70 percent retreat in the number of transactions compared to last year.

While the report indicates a more positive shift in invested capital, Bahoshy highlights that it is still early to predict when a recovery will take place.