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Fintech and e-commerce sectors lead in VC funding in first half of 2023

A new report indicates that investor interest remained focused at early-stage investments

Fintech and e-commerce sectors lead in VC funding in first half of 2023
[Source photo: Anvita Gupta/Fast Company Middle East]

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According to a recent report, the fintech and e-commerce sectors lead in accumulating venture capital funding in the MENA region during the first half of the year.

Data platform Magnitt’s H1 2023 MENA Venture Investment Summary showcased that mega-financing deals were significant factors in the overall venture financing ecosystem, accounting for almost 80% of the total funding in the region.

Following the fintech and e-commerce/retail sector as having accumulated the most funding in the MENA region, other sectors include fashion & lifestyle ($43 million), healthcare ($29 million), and media & entertainment ($25 million).

The report indicated that investor interest remained focused on early-stage investments, where the $1- $5 million reported a slight increase in the first half of the year.

However, the report indicated that factors such as a liquidity crunch and a slowdown in economic growth slowed down deployed funding. “The MEAPT region brought in $1,880 million across 530 deals in the year’s first half. This signifies a funding decline of 64% compared to last year, while deals retreated by 40%,” the report indicated.

“Cautious investor sentiment at a time of economic uncertainty saw funding and deals decline by almost 50% in the region on a year-on-year basis,” it said.

According to its data, MENA-based startups raised $1 billion in the first half of the year, with funding declining by 42% year-on-year and deals decreasing by 49%.

The report indicated three mega deals significantly impacting the region’s total funding.

Earlier this year, Saudi Arabia-based grocery shopping and delivery platform Nana raised $133 million to expand across the region, while gift delivery platform Floward raised $156 million to expand operations before a planned IPO.

Egypt-based fintech platform MNT Halan’s $260 million mega-round deal represents most of the country’s funding.

Meanwhile, despite a 27% drop in capital deployed compared to H1 2022, Saudi-based startups attracted $446 million in funding (40%) across 54 deals in H1 2023, according to Magnitt’s H1 2023 Saudi Arabia Venture Capital report.

Saudi Arabia surpassed Egypt and UAE in funding in the first half of 2023. It secured 28% of total deals in MENA, with the e-commerce and retail sector accounting for 83% of total funding, with $368 million aggregated across 11 deals, driven by its two mega deals from Nana and Floward.

This is followed by Egypt-based startups, which attracted $305 million in funding across 23 deals, driven by MNT Halan’s mega-deal financing. UAE-based startups attracted $239 million in funding across 60 deals.

As for investors, the top 10 most active investors who deployed the most capital were from Saudi Arabia and the UAE, accounting for over 60% of the total funding across the MENA region. UAE-based Chimera Capital deployed an estimated capital of $260 million, followed by Saudi VC firm STV at $90 million and Saudi-based firm Aljazira Capital at $86 million.

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