Is MENA Venture Capital Set for a 2025 Comeback?
So, MAGNiTT just released their big report on venture capital activity for 2024 across emerging markets like the Middle East, Africa, Southeast Asia, Türkiye, and Pakistan. It looks like 2024 was a tough year, with total funding dropping to US$9.1 billion, which is a pretty sharp 41 percent decline compared to 2023. Even the number of deals took a hit, falling 20 percent year-on-year to 1,527. A big part of the drop came from late-stage deals, especially those MEGA deals – they were down by a whopping 56 percent.
But even with this global slowdown in funding, the report points out some encouraging signs. Interest rates have been going down and inflation is easing in many of these emerging markets, so there’s hope that we might see a recovery soon. Early-stage investments have been surprisingly resilient, which could be a sign that 2025 might see more capital flowing into these markets as the macroeconomic situation improves.
Philip Bahoshy, MAGNiTT’s CEO, mentioned that while 2024 saw less funding across these regions, the drop in interest rates both in the U.S. and emerging markets could open the door for more capital to come in over the next six to nine months. This could mean better conditions for funding in 2025.
Now, if we zoom in on the MENA region, startups there raised about US$1.9 billion in 2024, which is a 29 percent decline from 2023. Interestingly, that’s actually the smallest drop when you compare it to Southeast Asia (which was down 45 percent) and Africa (down 44 percent). Plus, MENA’s funding levels were still higher than what we saw back in 2020, before the boom years of 2021 and 2022, which shows that the venture space in the region is still growing. The real challenge in MENA, though, was late-stage deals – they dropped a lot, which explains the overall decline in funding. But there’s some good news too: the region saw an increase in both the number of deals (up by 7 percent) and the number of investors (up by 18 percent).
What’s also interesting is that 47 percent of all investments in MENA were in the US$1-5 million range, which means there’s a big focus on early-stage startups. That’s a positive sign for future deal activity as early-stage investment can really drive growth down the line.
As for the industries, fintech continues to dominate, both across emerging markets and in MENA specifically. Globally, fintech raised US$3.9 billion in 2024, and in MENA, it accounted for US$629 million, which is 34 percent of the region’s total funding. The reason fintech keeps attracting investors is because these startups are solving big problems, especially in markets where financial services are still underdeveloped. That makes them ripe for scaling and potential mergers and acquisitions (M&A) as the sector grows.
Another key point the report highlights is the role local and international investors played in keeping things moving in 2024, even with the downturn. International investors focused more on late-stage deals, like the US$500 million round for Insider and the US$250 million Series D for Tyme. But in MENA, international investors led the way, making up 53 percent of the 475 investors in the region.
Bahoshy pointed out that while 2024 was likely the bottom of the funding downturn, there were still some bright spots. For example, in countries like the UAE, Saudi Arabia, and Qatar, deal activity actually went up, even though the total capital deployed slowed down. The increase in the number of investors in MENA, especially international ones, shows that there’s still a lot of confidence in the region’s startups, even during tough times.
Exits, on the other hand, continued to decline across emerging markets, dropping by 32 percent in 2024, with only 94 exits. The lack of late-stage funding meant that a lot of startups had to put their IPO plans on hold, and M&A activity slowed down because companies were focused more on preserving their cash for operations rather than making acquisitions. MENA saw a similar trend, with exits down by 31 percent to just 27.
