Recently, there’s been a rise in startups in the Middle East, where some of these new companies are performing much better than others, with economy pundits predicting a bright future for them.
Interestingly, startups attracted a record-breaking $3.94 billion in funding in 2022, with the heaviest deal concentration in the UAE, Saudi Arabia, and Egypt.
This article explores the current funding trends and identifies the sectors driving the region’s startup growth in 2024.
The Middle East region witnessed explosive growth in the number of startups and the scale of funding opportunities in the last few years.
The United Arab Emirates (UAE) is emerging as a leading hub characterized by substantial investment, a young, tech-savvy population, and strong government support for entrepreneurship, which is driving the development of innovative startups across various sectors.
In May, the Middle East and North Africa (MENA) region saw an unprecedented surge in startup investment, with 40 startups raising $282 million.
This remarkable achievement represents a 413% increase from April’s $55 million.
This significant increase in funding underlines the region's growing importance in the global startup ecosystem and signals strong investor confidence.
While the entire Mena region is experiencing a startup boom, certain countries stand out as major players in attracting venture capital.
The United Arab Emirates (UAE), Saudi Arabia, and Egypt have emerged as the top destinations for startup investment.
With its business-friendly environment and strategic initiatives, the UAE remains a magnet for venture capital.
Saudi Arabia has witnessed a remarkable surge, especially in sectors like fintech and e-commerce.
With its large and youthful population, Egypt has become a hub for innovation, producing some of the region’s most active startups.
Startups in the Middle East and North Africa (MENA) are focusing on a variety of sectors, including fintech, e-commerce, health tech, edtech, and deep tech.
Fintech has always been one of the region’s strongest-growing sectors.
In the Middle Eastern startup scene, the primary sources of funding include:
Venture Capital (VC) involves investment firms that pool money from various investors, focusing on high-growth potential startups.
They invest large sums, often well above $1 million.
VCs usually invest in later stages, such as Series A, B, or later funding rounds, often following in the footsteps of Angel Investors who initially discovered and nurtured the startup.
According to official data, startups in the Middle East and North Africa region (MENA) raised $3.94 billion in 2023 across 795 deals, a rise of 24% in investment value when compared to 2021, and a 22% increase in the number of deals.
Angel investors are usually wealthy individuals who put their personal funds in early-stage startups.
Angels usually invest small amounts compared to Venture Capitalists, usually below $100,000.
They typically invest in a startup's seed or early stages, helping it get off the ground. Angel investment terms are generally more flexible, so the entrepreneur can negotiate with the investor directly.
Government investment creates a public infrastructure that is essential for long-term economic growth and societal well-being.
governments in the MENA region have recognized the importance of supporting startups and have launched various initiatives and programs to foster innovation and entrepreneurship.
Crowdfunding is a way to raise money for an individual or organization by collecting donations through family, friends, friends of friends, strangers, businesses, and more. By using social media, people can reach more potential donors than traditional forms of fundraising.
Crowdfunding has gained popularity in the MENA region as a way for startups to raise capital from a large number of individual investors.
Platforms such as Eureeca and Zoomaal have facilitated the growth of crowdfunding in the region.
These are the sectors that are growing rapidly in the MENA region
The fintech sector is at the forefront of the region's tech revolution, with startups like Fawry and Tabby leading the way in digital payments and buy-now-pay-later solutions.
According to recent reports, fintech revenue in the MENA region and Pakistan was estimated at $1.5 billion in 2022 and is expected to reach $4.5 billion by 2025.
The COVID-19 pandemic accelerated the adoption of digital finance, and regulatory bodies are now more supportive of fintech innovations, paving the way for new entrants in the market.
From digital lending platforms to AI-driven financial advisory services, fintech innovations are streamlining processes, reducing costs, and improving financial services accessibility for businesses and individuals.
The COVID-19 pandemic triggered an extraordinary surge in online shopping, catapulting e-commerce to unprecedented levels of growth.
Central to sustaining and amplifying this expansion has been the favorable business environment, minimal taxation policies, and strategic geographic positioning of the MENA, which places it within seven hours of reach from two-thirds of the global population.
These factors have been pivotal in fostering the growth of the e-commerce sector within the MENA.
The rise of e-commerce in the Middle East has been meteoric, with platforms like Noon and Souq (now Amazon. ae) capitalizing on changing consumer behaviors.
Alongside the fintech boom, the Middle East is undergoing a healthcare transformation. HealthTech startups are at the heart of this change.
The healthcare IT market in the region is getting a boost from increased R&D spending by biotech and pharmaceutical companies, as well as a growing need for better data standardization and more clinical trials.
The Middle East and Africa Healthcare Information Technology market is expected to hit a value of $18 billion by 2030, growing at a rate of 13.0% during the forecast period.
Government initiatives and a surge in clinical trials spur this growth.
The increased adoption of AI is transforming various industries, from finance to agriculture.
Startups like Aqemia and Maven Analytics are leveraging AI for data-driven decision-making, enhancing efficiency and productivity.
Governments are investing heavily in AI research and development, further solidifying the Middle East's position as a leader in this space.
Cleantech startups in the MENA region are helping their countries transition towards a sustainable and low-carbon future.
Cleantech startups refer to organizations that offer solutions and generate financial returns while minimizing negative effects on the environment.
Backed by government-led initiatives, venture capital funds and an entrepreneurial spirit, a new sector for cleantech advancements is growing in the region.
The Middle East and North Africa region still has tremendous upside. Latin American startups, for example, raised more than double the amount seen in the MENA region, totaling $8.28 billion – and it was considered a down year.
With populations of similar size, education, and GDP per capita, MENA’s tech startup funding will likely converge and surpass Latin America within a few years.
As competition heats up between Dubai, Abu Dhabi, and Riyadh to attract the most promising entrepreneurs, smartphone penetration rises across the region, and state-backed investors continue investing strategically in regional tech companies, we may be just in the early stages of a robust cycle of growth for MENA startups.
