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Saudi Arabia leads MENA region VC fund raising

Overall regional funding drops 23% amid shifting landscape.

Saudi Arabia leads MENA region VC fund raising
[Source photo: Anvita Gupta/Fast Company Middle East]

Saudi Arabia secured more venture capital (VC) investments than its main regional competitor, the UAE, in 2023. The kingdom secured 52% of all regional startup funding during 2023.

Startups in the kingdom went against the declining trend and attracted significant investor interest, raising $1.4 billion and recording a 33% YoY increase, according to MAGNiTT’s Full Year 2023 Venture Investment Report.

On another end, the UAE maintained its lead over deal flow, boasting the highest number of transactions in the region despite a 9% YoY decline. 

The Middle East and North Africa (MENA) region raised $2.6 billion in venture capital, reporting a 23% decline from 2022. The report highlights that MENA’s VC ecosystem saw a 23% YoY funding retreat and a 34% YoY decline in the transactions closed due to macroeconomic headwinds, including rising inflation, curbs on oil production, and global interest rate hikes. 

“Interest rate hikes have proven challenging for the venture capital landscape globally, and the MENA region has not been immune to this. One key characteristic of the region is how certain individual venture markets, such as KSA and the UAE, have weathered the macroeconomic storms,” said Philip Bahoshy, Chief Executive Officer of MAGNiTT.

Bahoshy added that investors are cautiously optimistic, showing renewed interest in technology and venture opportunities. In 2024, with valuations now at more attractive levels for investments and favorable conditions for business development, the outlook appears promising.

After a dry summer, Q4 came in with solid figures, having raised $1.2 billion across 128 transactions, becoming the highest quarter of the year and surpassing Q4 2022 figures. Unlike global venture markets, which saw a 24% QoQ decline, the MENA markets reported a 237% QoQ incline, driven by mega-deals worth more than $100 million recorded by Saudi Arabia-based Tamara and Tabby. 

Meanwhile, only 366 investors invested in MENA-based startups, down by 30% compared to 2022. Despite this, startup exit marked a 38% YoY decline, with only 44 exits, as compared to 2022, owing to decreasing valuations, increasing interest rates, and a limited pool of acquirers. 

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