The UAE's start-up ecosystem showcased resilience by recording an 11 per cent year-on-year (YoY) increase in deal flow during the first half of 2024, according to the latest data. MAGNiTT, the leading venture capital data platform for Emerging Venture Markets (EVMs), highlighted in its recent report that the UAE closed 83 transactions in the January-June 2024 period, maintaining its third position behind Singapore (120 deals) and Turkiye (86 deals), which saw declines of 27 per cent and 45 per cent, respectively. Saudi Arabia (63 deals) moved up to fourth place, while Indonesia (44 deals) held steady at fifth, both experiencing YoY declines.
Farah el Nahlawi, Research Team Lead at MAGNiTT, noted that the first quarter of 2024 was relatively slow in terms of funding, marking the lowest quarter for the UAE since Q3 2019. However, activity picked up in the second quarter, with funding doubling despite the occurrence of two Eids and Ramadan. El Nahlawi anticipates further growth in the UAE's ecosystem in both deals and funding if the quarter-on-quarter increases seen in the second half of last year are replicated.
Sectors likely to attract investment include fintech, real estate, construction, and infrastructure, which gained momentum in the first half of 2024. While fintech remains popular, the UAE has also seen activity in sectors like enterprise software, food and beverages, and real estate. In terms of value, Saudi Arabia and the UAE attracted $412 million and $225 million, respectively, climbing one position each.
The EVMs, encompassing the Middle East, Africa, Pakistan, Turkiye, and Southeast Asia, experienced a 34 per cent YoY drop in both total funding and deals. The reduction in funding is attributed to a slowdown in mega-rounds, prompting investors to focus on early-stage opportunities. Fintech emerged as the leading sector, securing $1.097 billion in funding across 128 deals, with Singapore leading the region.
The Mena region saw a notable contraction in the first half of 2024, with total funding dropping by 34 per cent and deal count decreasing by 18 per cent. Despite the decline, the number of investors increased by 33 per cent, indicating sustained interest. The focus on early-stage investments and the rise in the number of funds launching in the region, including Golden Gate Ventures and Shorooq Partners, suggest continued growth in the Mena startup ecosystem.
El Nahlawi noted that the UAE saw a 19 per cent YoY decline in total funding, less than the Mena region's 34 per cent drop, indicating a more resilient funding environment. The UAE's 11 per cent increase in deal flow positions it as a leading market in the region, expected to retain its growth momentum in the second half of 2024.
