VC Investments in Emerging Markets: A Snapshot of 2024
Venture capital (VC) investments in emerging markets like the Middle East and North Africa (MENA) have taken a significant hit, plunging by over 40% compared to last year. This trend aligns with the global pattern of reduced VC funding, particularly impacting non-AI sectors. According to the latest report by MAGNiTT, VC funding across several surveyed markets was $9.1 billion in 2024, marking a 41% year-on-year decline.
Deal activity also saw a contraction, with the number of deals dropping by 20% to 1,527. Despite this downturn, there might be a silver lining as global interest rates are declining, potentially easing inflationary pressures. MAGNiTT’s 2024 Venture Investment Report highlights these trends across regions including the Middle East, Africa, Southeast Asia, Türkiye, and Pakistan.
MENA’s Funding Landscape: Gains Amidst Decline
In the MENA region, startups secured $1.9 billion in 2024, reflecting a 29% annual decline. However, this dip is relatively modest compared to Southeast Asia’s 45% and Africa’s 44% declines. Interestingly, funding levels in 2024 still surpassed those from 2020, indicating a growing venture interest despite recent setbacks during the boom years of 2021 and 2022.
- A 7% increase in deal count to 571.
- An 18% rise in investor numbers to 475.
- 47% of investments ranged between $1 million to $5 million, highlighting a shift towards early-stage investments.
Nonetheless, MENA saw a notable reduction in late-stage deals. Across all surveyed regions, fintech emerged as a robust sector with $3.9 billion raised in funding for 2024, underscoring its potential in markets where mature financial services are scarce.
The Role of International Investors
The report reveals a distinct division in investment focus. International investors predominantly targeted late-stage deals such as Insider’s $500 million round and Tyme’s $250 million Series D. They comprised 53% of the total investors backing startups in these regions. Conversely, local investors were more inclined towards early-stage ventures.
“We anticipate rate cuts to begin boosting capital availability within the next 6-9 months, paving the way for a stronger funding environment in 2025,” said Philip Bahoshy, CEO at MAGNiTT.
{Philip Bahoshy}
Looking Ahead
While global exits dropped by 32% to just 94 in 2024 and late-stage capital remains scarce due to closed public markets, there is optimism for recovery. The UAE, Saudi Arabia, and Qatar experienced increased deal activity despite an overall slowdown in capital deployment. The rise in investor numbers indicates growing confidence among both local and international investors in the region’s startup ecosystem.
As we look forward to potential rate cuts boosting capital flow and nurturing a more vibrant funding landscape in 2025, it seems that while 2024 may represent “the bottom of the curve,” it also lays the groundwork for future growth and opportunity.
