Saudi funds, serial founders and more trends to shake up startups

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Navigating the venture capital landscape in the Middle East and North Africa requires more than just foresight. It demands adaptability in the face of unforeseen challenges. 

The past year has been nothing short of turbulent, with interest rates playing the role of disruptor in markets around the world.

In Mena, we at Magnitt have seen a surge in investor interest over the years and plenty of opportunities for local ecosystems to grow. Here are the five trends we are predicting for the region.

1 Flat investment

Excess investment is a thing of the past. We are likely to see a return to four consistently flat quarters of funding in Mena, excluding mega-deals. Notably, with Ramadan in March and Eid breaks in Q2, we anticipate the quarterly investment trends to remain flat across the Mena region throughout the year. 

• Saudi Aramco doubles funds for venture capital arm
• Dubai startup fund aims to be worth $7bn within 10 years
• Opinion: Investors go lukewarm on startups but Riyadh is red hot

A potential uptick in Q4 is plausible if interest rates are finally cut in anticipation of a soft landing in the US, as hinted by Jerome Powell, the chair of the US Federal Reserve.

2 The rise of corporate VC

Corporations have emerged as active venture capital players in the region, exemplified by entities such as E& Capital, Chalhoub and STV. 

We anticipate an increase in off-balance sheet investment mandates by large corporations from the GCC, driven by the rise of fintech and the imperative to digitise corporate institutions. 

Historically corporates have accounted for 13 percent of investors in Mena startups. We expect this figure to be closer to 20 percent in 2024.

3 Saudi dominance in deals and funding

Saudi Arabia’s growth trajectory continues, with five consecutive years of expansion. 

All indications from the government, investment appetite and startup migration point towards continued growth for the kingdom as the leader in the region, not only by funding but also by transactions. 

It will be interesting to track Saudi Arabia’s growth compared to other emerging venture markets, especially after Turkey’s arrival as a leader in transactions and Singapore in funding, according to our annual report.

4 Exit boom, including IPOs

We are confident there will be an exit boom this year, particularly through initial public offerings in Mena. 

Despite economic challenges, the region looks towards recovery and attracts more international interest – and a slowdown in valuations makes international and corporate acquisitions of Mena startups far more appealing than in years gone by. 

Similarly, in an attempt to stimulate liquidity for investors, founders and employees, we expect to see the start of an IPO window for local listings, especially in Saudi Arabia.

5 Serial entrepreneurs

In the past decade, more than 2,100 funded startups have been born in the region. In total, 15 percent of those startups have exited successfully – taking 6.5 years on average to do so. 

We expect 2024 to mark the rise of serial entrepreneurs raising funds in Mena, as they leverage their experience to set up new ventures.

The region, with its dynamic ventures and adaptable strategies, is poised not just to weather the storms of the global market but to carve a path toward growth.

As we keep a watchful eye on the unfolding trends, we remain optimistic about the resilience and potential of the Mena startup scene. 

Philip Bahoshy is CEO of Magnitt, an emerging markets investment data platform