Venture funding in MENA increased by 32% in Q3 2023, according to MAGNiTT

In Q3 2023, the Middle East and North Africa (MENA) region secured $250 million across 78 venture deals. This indicates a 32% growth compared to Q2 2023, as unveiled in MAGNiTT's Q3 2023 MENA Venture Investment Overview.

This overview sheds light on the progression of investment patterns in the MENA region throughout the initial three quarters of 2023. As a result, by September end, investments reached $1.4 billion, showcasing a drop of 44% compared to the same period in 2022. This was achieved via 286 deals, marking a 46% decrease from the previous year. These figures are consistent with global data showing a 42% year-over-year decline in venture funding.

A significant revelation in the report is the resurgence of Early-Stage investments (below $1 million), catching the investors' eye. In 2023, nearly 44% of all deals were allocated to investments ranging from $0 to $1 million. For context, in 2019, 80% of assets were within this bracket, but this dwindled to 36% in 2022. This resurgence in 2023 is attributed to investors gravitating towards more conservative investments in smaller deals during this year's initial quarters.

Moreover, valuation trends echo this sentiment. 2023 saw MENA's early-stage SEED rounds experiencing a 28% surge in average valuations. Interestingly, this is the sole stage where both mean and median valuations have grown steadily, mirroring global tendencies that favor low-risk early-stage investments over their late-stage counterparts.

MAGNiTT's CEO, Philip Bahoshy, remarked, "The 32% quarter-on-quarter rise in funding is set against a low in Q2 that hasn't been seen since 2019. Investments are largely stagnant, with a pronounced emphasis on early-stage ventures. However, the silver lining lies in multiple fund announcements. For instance, in the MENA region, UAE-based Chimera Capital and Aliph Capital have initiated new funds, while in KSA, IMPACT46 and KAUST are gathering funds for local startups. Our eyes are set on the speed with which these funds will be invested. Q4 2023 will potentially dictate the robustness of 2024's venture capital scene."

Diving into regional specifics, Saudi Arabia led the pack in capital deployment with a staggering 172% quarter-on-quarter growth, while the UAE followed with a 55% surge. Regarding deal numbers, the UAE dominated, accounting for one-third of all MENA deals in the first three quarters of 2023, even with a 30% YoY decrease. Among the top five nations in deal volume, only Morocco exhibited a 27% YoY growth. Conversely, Egypt faced the steepest decline, with transaction numbers plummeting by 70% from the previous year.

While current indicators hint at a brighter capital investment outlook, Bahoshy emphasized that predicting an exact recovery timeline remains challenging. He added, "Traditionally, summer investments in MENA have been slower. It's the second consecutive quarter without mega-deal investments – a crucial metric for late-stage activity and funding acceleration. Nonetheless, MAGNiTT remains dedicated to tracking investment trends, offering insights against global and regional economic fluctuations."