MAYS IBRAHIM (ABU DHABI)
The UAE’s venture capital landscape has experienced a remarkable surge in investment activity, with a 113% quarter-over-quarter increase in Q2 2024, according to Magnitt’s H1 2024 MENA Investor Ranking.
This growth was fuelled by six of the largest deals in the first half of 2024 occurring in Q2, which together accounted for 60% of the total funding in that quarter.
UAE Leads MENA Region
In the first half of 2024 the MENA region saw a 30% year-on-year (YoY) increase in the total number of investors, reaching 262.
Notably, MENA emerged as the only region among Emerging Venture Markets (EVMs) to witness such a positive shift, which is largely attributed to a 75% increase in international investors, led by a 2.4-fold increase in international investors YoY in the UAE.
Meanwhile, local investor numbers in the MENA region grew by 8%, with the UAE and KSA accounting for 68% of this increase, underscoring a strong regional commitment to nurturing local startups.
The UAE also outshone the broader region when it came to deal making, registering an 11% YoY increase in the number of deals receiving funding during the first half of the year. This growth was a rare bright spot amid an 18% overall decline in deal numbers across MENA.
Among the top 10 leading investors in the region by transaction count, three UAE-based firms made notable appearances. Plus, VC emerged as the most active Emirati investor, ranking fourth regionally with six early-stage investments, followed by AngelSpark with five and the Dubai Future District Fund with four.
Shifts in MENA Region
The report also indicates a shift in investor composition. Investment companies increased their share to 19% of all investors in H1 2024, up from 10% in 2020, while the proportion of corporate investors declined. This shift may suggest a potential funding gap for late-stage startups, as venture capital firms (VCs) continue to dominate with their share rising to 53% of the investor base, up from 47% in 2022.
“This growth in VCs and investment companies indicates a robust and adaptable investment environment focused on early-stage ventures,” the report stated.
Additionally, the report revealed that the MENA startup ecosystem is showing signs of maturing, with a notable decline in the share of accelerator deals. The share of these deals fell to 9% in H1 2024, marking a 6 percentage point drop from H1 2023 and a 15 percentage point decrease from 2020. This trend mirrors declines observed in Southeast Asia and Africa, suggesting a broader move towards more direct investment strategies in EVMs.