Startups in the Middle East and North Africa (MENA) raised $768 million over the first half of 2024, a year-on-year (YoY) drop of 34% largely due to the lack of megarounds, or funding worth more than $100 million.
In the first six months of this year, according to a report released last Tuesday by Dubai-based financial analysis firm MAGNiTT, there were only megarounds closed: Saudi e-commerce company Salla finalized a $130 million pre-initial public offering (IPO) investment in March. However, the first half of 2023 was more active, with five megarounds closing for MENA startups. MAGNiTT observed that there were fewer megarounds in the first half of 2024, as most of these deals were late-stage investments into startups.
Although funding levels have plateaued globally, MENA reported an increase in early-stage rounds and investor participation. MAGNiTT said it was likely due to the focus from late-stage rounds shifting to early-stage rounds, as more investors try to expand in the region. Early-stage rounds of $1 million to $5 million in MENA tripled from 15% in 2020 to 45% in the first half of 2024.
Despite the drop in startup funding in the first half of the year, the number of investors participating in MENA’s ecosystem grew by 30% YoY in the same time period, MAGNiTT said. The financial analysis firm said that startup valuations in early stages have now returned to pre-COVID pandemic levels.
MAGNiTT CEO Philip Bahoshy said, “While the report reflects the global trend of declining venture investments, it also highlights some positive signals indicating that the MENA region is at an inflection point in VC (venture capital) activity. Our data suggests that this growth will continue, albeit at a moderate pace, in the coming quarters.”
“Valuation adjustments to more moderate levels have made early-stage investments more attractive than in recent years. Furthermore, international interest in the region remains strong, with government support and new fund announcements expected to drive positive growth in H2 2024 and early 2025,” he added.
In the first half of the year, Saudi Arabia was the MENA country with the highest amount of VC funding, with $412 million, 7% less than the corresponding period in 2023, the report said. But it was the United Arab Emirates that emerged as one of the few markets in the MENA region to see a YoY increase in deal flow, reporting an 11% increase in transactions closed (83 deals).
