Mena Region Sees Rise in Venture Capital Funding Despite Challenges

In the first half of the year, startups in the UAE, Saudi Arabia, and Egypt received the highest funding in the Mena region, where the venture capital investor count rose by 33 percent, showcasing a robust entrepreneurial ecosystem. The UAE led in deal volume with 83 transactions, marking an 11 percent annual rise. Saudi Arabia recorded 63 deals, a slight 3 percent decrease, while Egypt saw a 15 percent decline with 28 deals. Morocco and Bahrain completed 10 and 7 deals respectively.

Saudi Arabian startups secured the most venture capital at $412 million, followed by the UAE with $225 million and Egypt with $86 million. However, these markets experienced declines of 7, 19, and 75 percent respectively, according to MAGNiTT. Morocco and Kuwait also featured in the top five with $17 million and $14 million respectively.

The Saudi venture market started the year mirroring its H1 2023 performance, with non-mega deals comprising 68 percent of venture investment value in H1 2024, up from 35 percent in H1 2023. MAGNiTT data showed that despite the rise in investors, regional startups received $768 million in funding, a 34 percent year-on-year drop. E-commerce attracted the most funding at $244 million, while fintech dominated in deal volume.

Sanabil Investments, backed by the Public Investment Fund, was the most active investor in the region, deploying $57 million. Philip Bahoshy, CEO of MAGNiTT, anticipates increased VC activity in the second half of the year. He noted that the UAE and Egypt are poised for a strong fourth quarter, while the third quarter may be quieter. Bahoshy emphasized the importance of political stability and interest rate reductions to boost liquidity and highlight the Middle East's opportunities.

Despite the slowdown in venture and macroeconomic conditions, both the UAE and Saudi Arabia are expected to maintain strong ecosystems. The UAE's growth in transactions is particularly positive, positioning it as a leading ecosystem for early-stage investment to attract international companies across the Mena region, according to Bahoshy.