The H1 2023 UAE Venture Investment Report examines the continued impact of the economic challenges on the venture capital ecosystem of the region.
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The UAE's economy has been navigating the impact of oil price volatility, coupled with inflation and rising interest rates. Despite these challenges, the UAE's economy has not been impacted as drastically as its peer global markets, partially due to its pegged currency, the US dollar, and the steady growth of its non-oil sector. However, the World Bank predicts a slowdown in economic growth due to various factors like declining global economic activity, stagnant oil production, and tightening financial conditions.
The venture capital landscape in the UAE has witnessed the impact of the global economic downturn. Notably, the first half of this year saw the lowest half-yearly funding with $239M across 60 deals since H2'20 when the COVID-19 pandemic struck. The slowdown in activity was partly attributed to the Ramadan and Eid holidays. Q3 is likely to continue along the same lines and any chance of recovery is expected to be seen towards Q4 as we enter the tech conference season.
When compared with its peer MENA markets, the UAE saw a decline of 33% in the first half of the year. Egypt, in particular, reported a substantial decline of 75%. On the funding front, the UAE was overtaken by KSA and Egypt due to their respective MEGA rounds. Nonetheless, the UAE remained the most funded economy in terms of non-MEGA deal funding. Despite this, the economic downturn did take a toll, with cautious investor sentiment leading to a nearly 70% reduction in the value of deployed capital in H1 compared to the previous year excluding one $100M+ deal.
FinTech, the leading industry in the UAE, also experienced a significant decline in activity, with funding down by over 50% year-on-year. Startups in the sector raised a mere $3M in Q2 across 5 deals. However, the future for sectors like E-commerce/Retail and FinTech in the UAE remains promising despite current challenges. Investor backing for UAE-based startups also dipped significantly, with more than half the number of investors compared to H1 of the previous year. MENA-based investors now dominate the investment landscape, which previously had a more even distribution between international and local investors. To encourage investor activity, the UAE recently announced a corporate tax exemption framework for investment funds.
In the mergers and acquisitions (M&A) market, the UAE stood out with a 38% increase in transactions in the first half of the year compared to the same period last year. However, this level of M&A activity was not mirrored in other MENA markets.
The UAE's venture capital landscape faces challenges due to the ongoing economic downturn and global uncertainty. As the region adapts to changing economic conditions, investors and startups alike will need to navigate carefully to seize opportunities and drive growth in the UAE's dynamic and evolving business landscape.
What is in the report?
The latest half-yearly report offers strategic insights into the performance of the UAE VC ecosystem. This report covers a 5-year analysis of the UAE'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:
UAE Venture Funding Evolution: Get a detailed analysis of the past five years, highlighting the growth and development of venture funding in the UAE 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.