Is MENA the New Hotspot for Early-Stage Investment?

MAGNiTT, the leading venture capital data platform for Emerging Venture Markets, just released its Q3 reports, which provide an in-depth look at VC investments across several regions like the Middle East, Africa, Southeast Asia, Pakistan, and Turkey for the first nine months of 2024.

Interestingly, the data shows that these regions have seen a significant contraction in funding, with a total of US$4.9 billion raised in 9M 2024, which is a 45 percent decline compared to last year. Southeast Asia and Africa were hit hardest, but the MENA stood out for being more resilient, with just a 13 percent drop in funding.

In the MENA region, startups raised US$1.3 billion by the end of Q3 2024, and the number of transactions only dropped by 6 percent compared to the same time last year. What’s really interesting is that both Q2 and Q3 of this year saw more funding than in the same quarters last year, which shows MENA's stability even when global markets are slowing down.

Philip Bahoshy, MAGNiTT’s CEO, pointed out that MENA’s performance shows how attractive the region is becoming for global investors, especially in early-stage funding. Investor participation grew by 34 percent, with international investors increasing by a massive 69 percent. He also mentioned that Q4 is typically MENA’s strongest quarter for VC funding. With major events like Expand North Star and the Future Investment Initiative Forum attracting global investors to the region, he’s optimistic about a strong finish to 2024.

If we focus on individual countries, the UAE, Saudi Arabia (KSA), and Egypt performed well. The UAE led with 38 percent of all MENA deals, and there was a 12 percent year-on-year growth in transactions. This growth was largely driven by a 40 percent increase in seed and Pre-Series A rounds. KSA saw a 7 percent increase in deal count, mainly thanks to a 46 percent rise in seed funding for startups like Moyasar, SiFi, and ANABOLIC. Egypt also saw a 45 percent rise in seed and Series A deals, although pre-seed deals dropped by 17 percent, indicating a shift toward funding more mature startups.

On the other hand, things were tougher in Africa and Southeast Asia. African startups raised US$839 million, a 38 percent drop compared to last year, with deal volumes shrinking by 42 percent. This decline was largely due to an 81 percent drop in accelerator investments. SEA was hit hardest, with a 51 percent YoY decline, raising US$2.77 billion—mostly due to fewer MEGA deals (those over US$100 million).

Looking ahead, Philip Bahoshy noted that Q4 2023 set a high bar with two major deals in Saudi Arabia, making it the year’s strongest quarter for MENA. With global trends suggesting lower interest rates and an increase in investment activity, Q4 2024 could be crucial in determining whether MENA can outperform last year’s numbers.