Startups in the Middle East, Africa, Turkey, and Pakistan (MEAPT) region witnessed a decline of 64% in funds raised during the first half of 2023 (1H 2023) compared to the same period last year, according to a report by MAGNiTT, a specialist in venture investment and entrepreneurship research.
MAGNiTT’s report stated that startups raised $1.8bn in the first half of 2023, which is a 64% decline compared to the same period last year. The number of deals reached 530, which is 40% less compared to the same period in 2022.
In terms of quarterly data, the second quarter of 2023 was the lowest funded quarter since the fourth quarter of 2020, while the number of deals fell back to its 2018 level.
The Middle East and North Africa (MENA) region accounted for the majority of funding, making up nearly 60% of the total funding. Startups in Africa accounted for 51% of the total funding in the MEAPT region.
The slowdown in the pace of the economy and the decline in venture capital activity globally was also evident in the MENA region, according to the report.
Large markets in the MENA region recorded a significant drop in the flow of deals, reaching 58% YoY. While funding was able to cross the $1bn mark, nearly half of it came from major funding rounds registered by startups in Saudi Arabia and Egypt.
The report showed a 30% decline in the number of financing deals for financial technology companies, reaching $418m in the first half of this year compared to $595.7m in the same period of 2022. The financing of the e-commerce sector increased by 80%, recording $398.2m in the first half of this year compared to $221.5m last year.
Due to the volatile market conditions, investors kept their focus on smaller investments, the report said. Interest from investors in the MENA region was growing in financing tranches ranging between $1-$5m.
The total number of investors decreased by nearly half compared to the first half of last year, according to MAGNiTT. The share of international investors fell to 33% in the first half despite the attention it received in the MENA region from the international media.
In keeping with the general slowdown trend, exit activity was also slower in the first half of the year, with the total number of M&A transactions down about 30% this year.
