MENA Late-Stage Venture Funding Surges Despite Global Downtrend
MAGNiTT's recent analysis on late-stage venture funding in MENA has unveiled significant regional trends. While there's been a 49 percent global YoY decrease in such funding, the MENA region boasts a 20 percent annualized growth since 2018. Late-stage is defined in this report as investments made into post-Series A deals, spanning both disclosed and undisclosed deals from the last 4-5 years.
Major contributors to this growth are MEGA deals (worth $100M+). Remarkably, 85 percent of the total late-stage funding in H1 2023 was attributed to these deals, involving key players like Egypt’s Halan, and KSA’s Nana and Floward.
Contrastingly, the participation of international investors in the MENA region has seen a dramatic fall. From 2019-2022, international investors contributed to 57 percent of late-stage investments. Fast forward to H1 2023, and their contribution has plummeted to just 13 percent. This shift compels regional investors to fill the void.
Philip Bahoshy, the CEO of MAGNiTT commented, “This year's market volatility resulted in a global investor retreat in both absolute dollar terms as well as relative participation by international investors. We are observing more regional investors stepping in to bridge the gap, with nine of the top 10 investors by transactions from 2019 to H1 2023 headquartered in MENA. This is not to say that MENA has not been attracting global players into the region. In fact, since the start of the year, we’ve seen an increased interest from international investors, however, this has been largely driven by GPs of global funds looking to raise capital from sovereign LPs locally.”
Ajay Bhandoola, Managing Partner at 360 Impact Capital, pointed out, "while there has been an increase in MENA investments in 1H2023, this pertains to a few mega deals that tends to skew statistics. Overall the funding situation does remain quite tight as MENA is now part of a global ecosystem." According to Bhandoola, political uncertainties, high interest rates, inflationary pressures and higher equity prices makes for more caution with investments. As a company that focuses on transforming double-bottom line companies, Bhandoola’s 360 Impact Capital is focused on supporting businesses that definitely bring in social impact while making sure their numbers are right.
Additionally, there's been an evolving shift in who's investing. Venture Capital firms' participation has reduced from 64 percent in 2019 to 41 percent this year. Replacing them, investment companies and Corporate VCs are demonstrating increased involvement, providing not only capital but also industry expertise and strategic advantages.
Lastly, while the global benchmark for late-stage investment deal sizes has been declining since 2021, MENA's median deal size for such investments has grown steadily, witnessing a 43 percent CAGR growth over the past 4.5 years.