The investment landscape in the Middle East and North Africa (MENA) region indicates a notable recovery, with 63 startups securing a total of $282 million in September 2024. This is a substantial 234% increase month-on-month (MoM) and a 607% rise year-on-year (YoY), while debt financing accounted for just 12% of the overall investment.

The biggest ticket size last month was allocated to SHIFT’s round, in which the Saudi mobility startup raised $82.8 million. The second highest investment was registered by Syarah, garnering $60 million in a Series C round, $20 million of which is financed with debt.

Saudi startups shake off dust

After being absent as the top-funded ecosystem in MENA for two consecutive months, Saudi startups made it to the top once again in September, scooping up more than 60% of the total investment in the region, raising $170.8 million stretched over 23 deals. The second spot was secured by the UAE, bagging $73.8 million by 12 startups. In contrast, Egyptian startups lagged significantly, with only 13 of them managing to secure a total of $25 million. 

Fintech dominates investors’ sentiment

Investors are still pinning their bets on the potential of fintech, which has maintained its position as the top-funded sector for the fourth month in a row, amassing an impressive $102.5 million across 14 startups. In the meantime, mobility secured the second position, primarily due to SHIFT's round.

When it comes to deal count, e-commerce and edtech sectors have made significant progress, raising $63 million and $4.35 million, respectively, through nine deals each, while $10 million was invested in eight SaaS providers.

Thanks to Flat6labs demo days in Jordan and Saudi Arabia, the deal count was in favour of accelerator investments, as the accelerator programme has granted 17 startups with a collective value of $2 million. concurrently, investors’ appetite still leans towards investing in early stage startups, injecting $102 million into 15 seed deals and $5 million into seven startups at their pre-seed stage. Two transactions were noted for later-stage startups: Paymob’s $22 million Series B deal and Syarah’s $60 million Series C.

In terms of investment value, the business-to-consumer (B2C) model came top in September, attracting $93.7 million across 24 startups, compared to $84.6 million invested in 28 business-to-business (B2B) startups. Nonetheless, startups working in both domains received the majority of investment value, harvesting $100 million across five deals.

Last month, six female-founded startups raised only $583,000, primarily financed by grants. Male-founded startups continued to overshadow the landscape, with 49 of them raising $260 million from the overall investment pool. However, $21 million was allocated to seven startups co-founded by both men and women.

What happened in the past three months?

In the midst of escalating tensions in the region, particularly following the Iranian missile strike on Tel Aviv, the startup ecosystem in MENA has demonstrated an unexpected resilience in the face of uncertainty and cash flow scarcity. In the third quarter of 2024, a total investment of $727 million was secured by 136 startups, marking an impressive increase of over 192% compared to the same period last year and a 60% rise from the previous quarter.

Top performers in the region

Despite the growth Saudi startups achieved quarter after quarter, the UAE-based startups still outperform all ecosystems in the region when it comes to the investment amount.

In Q3 2024, UAE-based startups came on top of all MENA ecosystems with $233 million raised by 41 startups, a 23% QoQ decline but a 65% YoY increase. Saudi startups have performed well in Q3, collecting nearly $219 million over 40 deals, a 175% YoY increase.

The Egyptian ecosystem was one to admire in Q3. Amid the deteriorated economic conditions due to the ongoing geopolitical turmoil on the country’s eastern and southern borders, plus the drop in Suez Canal revenue, the second largest source of foreign currency in the North African nation, 23 Egyptian startups managed to secure $215 million, a 345% QoQ increase, and a staggering 1076% YoY increase.

It is noteworthy that startups in Oman are beginning to attract the attention of investors, having secured fourth place with nearly $40 million invested across just three startups. Meanwhile, Jordanian startups excelled in terms of deal volume, with 11 of them securing $2.5 million.

Fintech back on top

After witnessing a significant drop in the first half of the year, losing its status as the top-funded sector in MENA to proptech, fintech made a splendid comeback in Q3, cashing in $355 million through 38 transactions, marking a 247% QoQ increase and a 936% YoY increase. The second position was claimed by Web3, which garnered $99 million through five deals, whereas 17 e-commerce startups collectively raised $86 million.

Early stages remain VCs’ favourite

Startups at their seed financing rounds topped other stages in Q3, raising $218 million across 32 deals. The Series A stage followed, with 14 startups closing deals totalling $160 million, while later stages were only noted in September.

The B2B sector stood out as the top-funded business model in Q3, with $477.6 raised by 72 startups, while B2C’s share was only $124 million invested in 40 startups, and $100 million went to eight startups employing both models.

In the third quarter, startups founded by men attracted the highest level of funding, totalling $683 million across 113 deals. In contrast, only nine startups led by women secured $953,000 in investment, while the remaining funds were distributed among 12 startups co-founded by both men and women.

Q4 forecast

The investment activity in the MENA region, against all odds, has seen impressive growth in Q3 2024. While foreign investors maintained their cautious approach to the emerging markets of MENA, local VCs have boldly embraced the challenge and recognised the potential that lies within this region. Furthermore, conflict has propelled oil prices to unprecedented levels, creating advantages for oil-rich GCC nations that are home to prominent venture capitalists and investment funds in the region. Consequently, we expect that Q4 will maintain the current trend, with the tangible impacts becoming evident in 2025.

These monthly reports are a collaboration between Wamda and Digital Digest.