In June 2023, startups in the MENA region secured a total of $35.6 million through 45 transactions contributing to a cumulative funding amount of $1.6 billion for the first half of 2023, reveals a report by Wamda.
#Web3 accounted for just 1.7% of all investments in the Middle East & North Africa (MENA) region in H1 2023.
Egypt🇪🇬 was the leading investment destination in North Africa. pic.twitter.com/JImcyRNskE
— BitKE (@BitcoinKE) July 14, 2023
In the realm of funding value, Saudi Arabia emerged as the leader, securing $25 million across 12 funding rounds. The United Arab Emirates (UAE) followed at a considerable distance, with its startups raising $6 million through 20 rounds.
Egyptian startups claimed the third spot in terms of capital received, primarily due to the $3.5 million funding round for Egypt’s trucking marketplace, Trella.
In June 2023, 20 UAE startups raised, compared to 12 in Saudi Arabia, 5 in Egypt, 4 in Tunisia and 2 in Morocco.
Similar with the rest of Africa, the fintech sector emerged as the front-runner, capturing the highest number of deals with seven startups raising a total of $3 million. However, it was the foodtech industry that garnered the largest funding amount surpassing $20 million across four startups. This accounted for approximately 56% of the total funds raised.
Other sectors that garnered significant investor attention included logistics, e-sports, and mobility:
- Investment in the first half of 2023, including debt, has experienced a decline of over 21%, dropping from $2 billion in 2022 to slightly under $1.6 billion in 2023. Excluding debt, the drop in investment becomes even more significant at 46%. This decline highlights a notable slowdown in equity investing within the MENA region.
- The impact of investor hesitancy, influenced by various factors such as the Ukrainian war, rising interest rates, and global economic growth decline, became more evident in the second quarter, according to Wamda’s research. The investment activity during this period experienced a significant decline.
- Quarter-on-quarter, investments were down by 56%, and the number of deals also decreased by 30%. When comparing the second quarter of 2023 to the same period in 2022, investments plummeted by a staggering 83%.
- During the first half of 2023, there was a significant decrease of over 50% in the number of deals, with Egypt experiencing the largest drop of 70%. Despite this decline, the value of investments in Egypt remained relatively stable, with a 9% decrease.
However, it is worth noting that Egypt’s investment landscape was largely supported by a single startup, MNT-Halan, which raised $150 million in debt in 2022 and an additional $400 million through securitization bonds and equity in 2023.
Excluding MNT-Halan’s funding rounds, Egypt witnessed a substantial 90% decline in funding. Comparing the first half of 2022, where Egypt managed to raise $324 million, to the same period in 2023, the funding amount dropped significantly to just $31.8 million.
According to the report, Egypt has been severely impacted by the global economic contraction leading to a substantial increase in its debt which now stands at 92% of its gross domestic product (GDP).
Additionally, the country is grappling with a high inflation rate of 30.7%. The Egyptian currency has also depreciated significantly, experiencing a 40% drop against the US dollar. As a result, an increasing number of startups founded in Egypt are actively seeking better opportunities in countries like Saudi Arabia and elsewhere.
In a bid to help improve the climate for startups, the government recently announced a five year tax exemption plan.
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