Investment in Egyptian startups declined by 17% in 2023 compared to 2022, with debt-free investment experiencing an even more substantial drop of nearly 40%, a new report says.
The report points to the war in Ukraine as precipitating a decline in the economy with currency devaluation ensuing and startups having to shift base to other countries in the Middle East and North Africa (MENA).
“Egypt has for many years been the powerhouse of new startup ideas, but the country has been struggling ever since the outbreak of the war in Ukraine, on which it relies heavily on grain imports,” the report said.
“Since then its currency has been devalued, its economy has slowed and several of its startups have relocated their headquarters to Saudi Arabia.”
According to the report, the number of startups that managed to raise investment in 2023 halved compared to the year prior, with total value dropping from $736.9Â million to $608 million.
“There is unlikely to be an uptick in investment activity in Egypt this year [2024] with investors becoming increasingly wary of the economic situation in the country.”
Out of the $608 million total funding in Egypt for 2023, $530 million went to just 3 super app deals.
2023 was a tough year for startups across all of MENA, with the $4 billion total funding raised representing just a 1.7% growth from 2022. Notably, debt financing has become a more attractive way to invest, with these types of deals increasing 256% YoY, the report said.
Half of the total funding raised came from debt financing, which is said to have tripled last year to $1.77 billion. Discounting this debt, the total raised by startups amounts to $2.25 billion, a drop of almost 35 percent compared to 2022.
The number of transactions also dropped by 27 percent, with the worst affected being Egypt, which saw the number of deals halve year on year.
The most active markets remain Saudi Arabia, the UAE, and Egypt, which together accounted for 98 percent of all the investments and 75.6 percent of all transactions. Egypt was the only other country in MENA to have a mega deal of over $100 million after Saudi Arabia.
Egyptian VC, Flat6Labs, was the most active investor in the MENA region when it came to all disclosed deals.
MIDDLE EAST AND NORTH AFRICA (MENA)
* MENA VCs participated in 70% of the deals while foreign investors took part in 30% of the MENA region deals in 2023
* 🇪🇬 Egyptian VC, Flat6Labs, was the most active investor in the MENA region in 2023 when it came to all disclosed deals… pic.twitter.com/dJ0Q9lqc5s
— BitKE (@BitcoinKE) January 29, 2024
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