January 8th 9:30am Dubai
VC investment in emerging markets such as the Middle East and North Africa (MENA) has plummeted by more than 40% compared to 2023, according to a new report. This data reflects a broader global trend of declining VC funding, particularly in non-AI companies, over the past two years.
Total funding across surveyed markets in 2024 was $9.1 billion, down 41% year-over-year (YoY). Furthermore, trading activity decreased by 20% year-over-year, with the number of transactions falling to 1,527. However, while early-stage investments are showing resilience, lower interest rates globally and the associated fall in inflation could soon lead to signs of recovery.
This trend is outlined in MENA-based research group MAGNiTT's 2024 Venture Investment Report. This report examines venture capital investments in the Middle East, Africa, Southeast Asia, Turkiye, and Pakistan, covering the comprehensive emerging venture market (EVM).
In the MENA region, startups raised $1.9 billion in 2024, a 29% annual decline, but this is a small decline compared to what was seen in Southeast Asia (45%) and Africa (44%). Ta.
Additionally, funding levels in 2024 remain higher than 2020 levels prior to the boom years of 2021 and 2022, meaning the region continues to grow in the venture space.
The number of deals increased by 7% year-on-year (571 deals) and the number of investors increased by 18% (475 deals).
Additionally, 47% of all investments were in the $1 million to $5 million range, indicating a shift toward early-stage investments. However, MENA saw a significant decline in late-stage deals.
Across MENA, Africa, Southeast Asia, Turkiye, and Pakistan, fintech continues to do well, attracting $3.9 billion in funding in 2024. This reflects the strength of fintech in emerging markets where more developed financial services are scarce. .
The report noted that this provides opportunities for cross-regional M&A activity within the region.
There was a predictable split, with international investors focusing more on later-stage deals, such as Insider's $500 million round and Tyme's $250 million Series D. These investors accounted for 53% of the 475 investors who backed startups in the region. On the other hand, local investors tended to focus on early stage investments.
All this comes as the number of global exits declines by 32% year-on-year to just 94 in 2024, making it difficult to raise late-stage capital as public markets remain closed. It's in the background.
Philip Bahosi, CEO of MAGNiTT, commented in a statement: “We expect rate cuts to begin in the next six to nine months, increasing capital availability and paving the way for a stronger financing environment in 2025. It's probably going to be a tough situation.” We are at the “bottom of the curve” in terms of low funding.
He added that despite a slowdown in gross capital deployment, “deal activity is increasing year-on-year” in the UAE, Saudi Arabia and Qatar. The total number of investors has also increased significantly in MENA, indicating that investors, especially international investors, may have increased confidence in startups in the region.