Venture Capital Landscape in MENA

Recent data suggests that 3,700 fintech companies operate in the MENA region, with 40% located in Turkey, UAE, and Qatar. So, unlike in the past, when almost 85% of MENA fintech emphasised payments, there has been significant diversification. Approximately 2/3rds of fintech's operate in payments, lending, or wealth and investment sectors.?

So, a few days ago, I was going through a report on MENA’s fintech that includes Algeria and the Democratic Republic of the Congo (DRC) in its analysis of significant fintech centres, going beyond the Gulf countries and the ‘Big Four’ in Africa. That being said, McKinsey is betting heavily on the fintech industry due to the surge in investor backing by 36% from 2017 to 2022.?

In May 2024, 40 startups in the MENA region raised over $282 million, a whopping 413% increase from the previous month. Notably, a substantial portion of this influx—$100 million—was secured through debt financing. Now, coming to the country that takes away the most funding, securing an impressive $189 million across 23 deals in UAE. ?

Investors from the region and beyond are still very interested in the UAE because of its well-established reputation as a centre for innovation and entrepreneurship. The UAE attracts entrepreneurs and individuals with big ambitions because of its cutting-edge infrastructure, advantageous location, and benevolent regulatory climate.

Meanwhile, Saudi Arabia raised $56 million through 10 simultaneous sales. The kingdom's determined attempts to promote innovation and diversify its economy are evident in its rising stature in the MENA startup scene. Projects such as Vision 2030 are essential in establishing a favourable growth atmosphere for entrepreneurs.

Egypt also achieved significant progress, obtaining $24.5 million in four transactions. The nation's startup scene has been picking up steam thanks to factors including a younger, tech-savvy populace, increased incubators and accelerators, and rising interest from foreign investors. Egypt could be a significant force in the MENA startup scene.?

Proptech (Property Technology) stole the show, attracting a whopping $167.2 million among all other sectors. The increasing integration of technology in real estate—driven by the need for innovative solutions to meet the demands of a rapidly evolving market—has propelled proptech to move forward.

And guess what??

Fintech regained its charm, securing $38 million—a close second. It’s like fintech and proptech are having a friendly race to the funding finish line.?

B2B vs B2C?

In the first half of this year, there was a noticeable disparity in venture capital funding. The business-to-consumer (B2C) market shrank dramatically, while the business-to-business (B2B) sector saw spectacular growth, with investments rising by 153%, i.e., $186.6 million in H1 2023 to $473 million in 2024. The 64% decline in funding for B2C companies highlights the challenging business environment for projects with a consumer emphasis. ??

Moreover, there was a gender difference in funding. The amount of money invested in startups led by women has decreased to a small portion of what it was the year before, while businesses managed by males have continued to draw the majority of funding. The ongoing disparity in funding between genders draws attention to structural obstacles that female entrepreneurs must overcome to obtain the capital they need to grow their companies.

Who Were These Investors??

The Middle East dominated venture capital activity in the year's first half. Saudi Arabia contributed to 60 deals, securing its position as a regional centre for investment. The UAE came in second with 41 agreements, indicating that it is still a popular destination for investors. Egypt, which came in third place, was also quite active, having helped 24 businesses.?

International funds played a significant role in influencing the investment landscape beyond regional players. With 31 deals, the United States led the way among foreign investors. With 19 investment rounds, the United Kingdom also showed significant involvement.?

A few companies were particularly notable to individual investors due to their high volume of business. With seven acquisitions apiece, RZM Investment from Saudi Arabia and Hope Ventures from Bahrain tied for first place, demonstrating their excellent sense of opportunity. With six and five deals, respectively, Flat6Labs and Disruptech also made noteworthy contributions, highlighting their impact on the startup environment.?

Final Verdict

As I continue to examine the data, I am more optimistic about the MENA startup ecosystem. The UAE leads the world in investment, evidence of its innovative culture. The emergence of fintech and proptech also portends a revolutionary move towards tech-based solutions. ?

However, the stark difference in funding across genders is concerning and needs to be addressed. The region's tremendous potential is reflected in the rise of Saudi Arabia and Egypt as significant actors. The MENA area is seeing rapid growth and innovation, drawing considerable attention and investment worldwide. Something breakthrough is about to happen, and it will be interesting.?