TLDR:
– The number of investments in MENA-based startups dropped in 2023, but the sector remains resilient.
– Investors shifted focus to late-stage funding in a more subdued market.
According to a report from Tenet Consulting, the total number of deals closed in the MENA region in 2023 decreased to 654 from 864 the previous year. Despite this dip, 2023 and 2022 were record years for startups and scale-ups in the region seeking funding.
Investors sought security in their investments in 2023, moving away from riskier pre-seed and early-stage funding and focusing more on late-stage funding with established players. This trend was not unique to the MENA region, as a similar decline in venture capital investments was seen worldwide.
The Middle East proved to be more resilient than other regions, attributed to its robust economy, resilient labor market, and significant investments made by government bodies that are less susceptible to short-term shocks.
Looking ahead to 2024, Tenet Consulting anticipates a rebound in transactions, driven by brighter dealmaking fundamentals. Factors such as lower interest rates are expected to incentivize businesses to pursue expansionary strategies like mergers and acquisitions.
The research also predicts that startups in Saudi Arabia and the UAE will continue to be at the forefront of regional investments. Similar conclusions were drawn by Bain & Company for the mid-cap and large-cap segments of the M&A market in the Middle East.
An EY report also painted a similar picture for the IPO market, indicating a positive outlook for the region’s investment landscape in the coming year.
