The H1 2023 MENA Venture Investment Report examines the continued impact of the economic challenges on the venture capital ecosystem of the region.
Stay updated with the VC world in the Emerging Venture Markets with our monthly webinars. Sign up for our waitlist here!
The Gulf Cooperation Council (GCC) witnessed remarkable GDP growth in 2022, as per the World Bank. This was driven by a strong increase in oil production for most of that year. However, the growth is expected to slow down in 2023 owing to the global economic downturn. The inflation, triggered by the downturn, has impacted the MENA countries, however, the impact is not uniform. There is a stark difference in the economic landscape of the non-oil and oil-based economies of the region. For the latter, the impact of inflation has stayed relatively low while for non-oil economies, rapid currency depreciation has led to soaring inflation. All these events transpired to bring about a tough scenario for the venture capital landscape in the MENA region.
The ecosystem accumulated $1075M across 193 deals in the first half of the year signifying a decline of 41% in funding and 64% in terms of deals. The three MEGA deals closed by KSA-based Floward, Nana, and Egypt-based Halan kept the funding levels relatively elevated capturing over 50% of the total funding aggregated in H1. Looking at the quarterly breakdown, The second quarter had a more pronounced impact of the slowdown as it paired with the impact of a lull in activity brought about by Ramadan and two Eids. With $168M invested across 73 deals, Q2 became the lowest quarter for funding since Q3’20, the pandemic summer, while deals dropped to a level not seen since Q2 of 2017. April saw the lowest funding and deal activity as capital deployed during the month retreated by over 90% on a year-on-year basis while deals saw a decline of almost 70% compared to April last year.
Armed by the two MEGA rounds, Saudi Arabia ended up at the top of the funding ranking table followed by Egypt and the UAE. The Kingdom has been making efforts to move away from its oil dependency and focusing on the advancement of the technology sector in line with its Vision 2030. However, the market cooldown remained somewhat uniform for MENA’s top three geographies with an average decline of 31%, barring the impact of the three MEGA ($100M+) rounds. A similar story was seen in the case of deals too, with some of the top five countries witnessing a decline of as much as 50%.
We are expecting to see the slower pace of the VC landscape spillover to the third quarter as valuations continue to normalize and more interest rate hikes likely being in the pipeline. After valuations being sky-high in 2022 riding the post-pandemic flare wave, they were expected to normalize this year. New valuation data available on the MAGNiTT platform suggests that the decline in valuations can be seen across the board. The most significant hit was taken at the later stage, in some cases, valuations returning to their pre-pandemic level. Moving ahead, it remains to be seen whether venture capital activity will pick up toward the end of the year with increasing attention from international investors, particularly GPs looking to raise funds from LPs in the MENA region.
What is in the report?
The latest half-yearly report offers strategic insights into the performance of the MENA VC ecosystem. This report covers a 5-year analysis of MENA's venture funding evolution, with a specific focus on the country comparison and industry performance in 2023. You will get access to precious information such as:
MENA Venture Funding Evolution: Get a detailed analysis of the past five years, highlighting the growth and development of venture funding in MENA with a focus on performance in H1 2023.
Key rankings such as the Top 20 investors, Top 20 funding rounds, Top 10 last exits, and 5-Year exit evolution of MENA.
Who is it for?
Whether you’re a private investor, a VC, an investment company, a CVC, or working in corporate, this report gives an overview of the ecosystem and caters to a diverse audience including any curious minds who want to use the yearly, quarterly and monthly charts in this report to track investment activity.
You can also see in which country and industry the investment activity focused in terms of deals and capital deployed, allowing you to leverage insights and make wise choices.
The report can also be used by consultants looking to identify technology innovation trends and who will find it valuable to look at the evolution of M&A activity and concentration of acquirers/acquired startups.
Last but not least, government entities searching for investment opportunities will also find valuable information to make informed decisions.
Where is this information from?
The report was 100% created using data from MAGNiTT. MAGNiTT is the leading VC verified data platform and offers a comprehensive directory of technology innovation trends. Our unique SaaS solution includes investment directories listing startup venture funding across the Middle East, Africa, Pakistan, and Turkey, and now Singapore. By using MAGNiTT, you will also get access to market sizing tools to visualize investment growth and trends across various industries, geographies, and stages, as well as comparison tools for benchmarking geographies, industries, and investor performance. Furthermore, MAGNiTT offers exit comparisons by examining mergers and acquisitions.
Learn more about MAGNiTT's Data Methodology.