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MENA Watch: Saudi now region’s top market for venture capital funding

Magnitt's CEO Philip Bahoshy stated in research that Saudi Arabia and the UAE emerged with resilience

According to a recent estimate, Saudi Arabia has surpassed all other markets in the Middle East and North Africa for venture capital investments, drawing in over USD 1.38 billion by 2023.

The largest economy in the Arab world reached a billion-dollar mark for the second year in a row, according to start-up platform Magnitt’s Mena Venture Investment Summary for 2023, as venture capital investments increased by a third year over year.

According to the report, four megadeals—investments totalling at least USD 100 million—in the financial technology and e-commerce industries were the driving forces behind this.

Based on Magnitt, funding in the UAE, which was formerly the top in Mena, fell by 45% yearly to USD 691 million.

Still, with 158 deals, a 9% year-over-year reduction, the second-largest economy in the Arab world continued to be the region’s most sought-after location for business, as opposed to the kingdom’s 125 deals, a roughly 20% yearly decline.

With the massive rounds of FinTech Tamara and Saudi Arabia-based buy-now-pay-later platform Tabby, both of which helped secure unicorn status—that is, start-ups with a valuation of USD 1 billion or more—the fourth quarter of 2023 also turned out to be the strongest quarter ever.

Saudi Arabia has grown for the past five years. Magnitt stated in the research that “all signs point to a continued growth as the leader in the region, including the government, appetite for investment, and startup migration to the kingdom.”

Over the past few years, start-ups have played an increasingly important role in driving the acceptance and growth of digital technology and providing convenient service access for consumers.

To be ready for the economy of the future, Saudi Arabia and the United Arab Emirates are both actively promoting and growing their technological ecosystems, which are the main tenets of their agendas centred around digitalization.

Both nations have taken a variety of steps to forward this agenda to foster the expansion of the startup network.

These include offering them access to global investors and the market, serving as a mentor, and enabling them to use the strong technology infrastructure that both public and private businesses have to offer.

As stated in the research by Magnitt’s CEO Philip Bahoshy, “Saudi Arabia and the UAE emerged with resilience.”

The actions stated above propelled the kingdom, and the emergence of early-stage enterprises and serial entrepreneurs using the Emirates as a regional launchpad supported the UAE’s momentum, he said.

With USD 378 million, down 30%, Egypt maintained its third-place position in terms of investments. Bahrain dropped one rank to fifth as investments dropped 82% to $44 million, while Morocco rose four spots to fourth as funding nearly tripled to USD 81 million.

Egypt, the most populous country in the Arab world, ranked third in terms of transactions, but it dropped one position—moving from first to second place with Saudi Arabia—as 59% of transactions decreased year over year to 69.

Morocco moved up three ranks to rank fourth in deals, with 28, a 3% decrease from the previous year. Qatar, which dropped one position as transactions dropped 42% to 26, completed the top five.

Magnitt stated that the top five industries accounted for over 75% of the capital deployed.

In terms of capital (1.28 billion and USD 502 million, respectively) and number of deals (101 and 60, respectively), FinTech and e-commerce ranked top and second. Funding for IT solutions, healthcare, and education came next.

Healthcare, transportation and logistics, and enterprise software completed the top five in terms of transactions. According to the analysis, the top five sectors experienced a combined 40% drop in 2023.

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