June 2024 painted a mixed picture for MENA startup funding. While investment activity slowed down compared to May, with 38 tech startups securing a total of $116 million, the first half (H1) of the year closed strong at $882 million. This represents a notable year-over-year increase of 182%, showcasing sustained growth in the region's entrepreneurial ecosystem. However, a significant 59% decline from May's funding highlights a potential short-term slowdown.

Looking geographically, the United Arab Emirates (UAE) maintained its dominance, attracting $82.5 million across 15 deals. This demonstrates the UAE's continued attractiveness for investors and startups. Egypt's startup scene showed encouraging signs with four companies raising a combined $15 million, marking the second-highest total for the month. Saudi Arabia followed with $13.5 million from seven startups. Interestingly, Iraq also witnessed activity, with six startups securing an estimated $1.2 million, suggesting a potential emerging market within the MENA region.

Sector-wise, June saw a shift in leadership. Fintech reclaimed its position as the most funded sector, securing $38 million across 10 deals. This resurgence indicates continued investor confidence in the potential of financial technology solutions in the region. Construction technology (contech) followed closely, largely driven by a significant investment in Tenderd. Proptech, the previous leader in May, saw a cool-down with three startups raising $19.6 million. This month's funding distribution highlights the dynamic nature of investor focus within the MENA tech landscape.

Despite the pre-Series A funding round leading the way with $45 million across four deals, the overall picture points towards a strong focus on early-stage startups. Seed funding remains active with $27.3 million secured by five startups. Notably, even pre-seed ventures continue to attract attention, with eight startups garnering a combined $3 million and another eight receiving $140,000 in grants. This focus on early-stage companies suggests a healthy pipeline of innovative ideas emerging from the region.

The business-to-business (B2B) model dominated funding in June, raising a substantial $66.4 million across 18 deals. This represents a significant 74% of the total investment, showcasing the continued importance of B2B solutions in driving regional economic growth. Business-to-consumer (B2C) startups, although less prominent this month, still secured $49.5 million. However, a concerning gender gap persists. Male-founded startups received a staggering $103.4 million (89%) compared to a mere $200,000 secured by female-led ventures. This highlights the need for continued efforts to promote diversity and inclusion within the MENA startup scene.

Overall, June's funding activity in MENA presents a complex picture. While a short-term slowdown is evident, the H1 total paints a more optimistic picture. The strong performance of specific sectors, the focus on early-stage ventures, and the continued dominance of B2B models all indicate a promising future for MENA startups. However, addressing the gender gap remains a critical challenge for the region's entrepreneurial ecosystem to reach its full potential.

The first half of 2024 (H1) revealed a clear concentration of capital within the MENA startup landscape.

UAE Retains Top Spot, But Growth Slows

The United Arab Emirates (UAE) maintained its position as the region's funding leader. However, growth has slowed. 91 UAE-based startups raised a total of $455.5 million in H1 2024, down from $604 million secured in the same period last year.

Saudi Arabia Sees Similar Decline

Saudi Arabia (KSA) followed the UAE in terms of funding, attracting $300 million in H1 2024. This also represents a decrease compared to the $554 million secured in H1 2023.

Egypt's Ecosystem Feels the Squeeze

Despite significant investments flowing into Egypt's real estate and tourism sectors from Gulf Cooperation Council (GCC) countries, the nation's broader economic struggles have impacted its startup scene. A national debt exceeding 96% of GDP, high inflation (32.5%), and an energy crisis causing power outages have combined to create a challenging environment. Consequently, the Egyptian startup ecosystem witnessed a dramatic decline in H1 2024. Only 33 startups raised a combined $83 million, a staggering 80% drop compared to the same period in 2023.

Morocco Shows Signs of Promise

A bright spot emerges in Morocco, where the startup ecosystem is gaining momentum. Six Moroccan startups secured a total of $12.5 million in H1 2024, hinting at potential growth in the North African nation.

The first half of 2024 saw a fascinating shift in investor focus within the MENA startup landscape. Proptech, the sector concerned with innovating the real estate industry, emerged as the new darling, attracting a staggering $200 million across just 14 deals. This dethroned fintech, the previous leader, which secured a respectable $156 million but spread across 50 deals. This difference in deal count highlights a potential trend – investors might be placing larger bets on fewer, but potentially higher-impact proptech ventures.

Meanwhile, the software-as-a-service (SaaS) sector remained a consistent force, securing $164 million across 23 deals. This suggests a continued focus on cloud-based solutions that improve operational efficiency across various industries. E-commerce, however, experienced a significant decline, raising only $33.6 million in 19 transactions. This drop from $194 million in H1 2023 indicates a potential market correction or a shift in consumer behavior. Foodtech followed a similar downward trajectory, plummeting from $183 million in 2023 to a mere $24 million in H1 2024. This could be due to a number of factors, such as increased competition, saturation in certain food delivery niches, or changing consumer preferences towards dining out or home cooking. It will be interesting to see if these declines are temporary adjustments or represent a more long-term trend within the MENA tech ecosystem.

Early Stages Shine in H1 2024 Funding

The first half of 2024 witnessed a shift towards early-stage funding in the MENA startup ecosystem. Here's a breakdown of the key trends:

Debt Financing Takes a Backseat: Debt financing, which played a significant role in H1 2023 (39% of total funding), saw a noticeable decline this year, dropping to just 17%. This suggests investors might be adopting a more cautious approach or focusing on earlier-stage ventures with higher growth potential.

Series A Still Strong, But Seed Stage Steals the Show: While 17 Series A startups managed to raise a significant sum of $169 million, the real story lies in the Seed funding stage. A whopping 52 Seed rounds secured a total of $131 million. This surge in early-stage funding indicates a focus on nurturing promising startups from the ground up and potentially signals a robust pipeline of innovative ideas emerging from the region.

Pre-Series A Sees Mixed Signals: Pre-Series A startups received $96 million across 17 deals. However, it's important to note that Salla's pre-IPO round, a significant outlier, contributed $130 million on its own. Excluding this anomaly, pre-Series A funding might also be experiencing a slight slowdown.

Overall, the data points towards a clear preference for early-stage funding in H1 2024. Investors seem to be placing their bets on the potential of young startups, while debt financing plays a less prominent role compared to the previous year.

B2B Takes Center Stage, Gender Gap Persists

The first half of 2024 saw a clear shift in investor focus towards the business-to-business (B2B) sector. B2B startups secured a staggering $473 million across investments, marking a 153% increase compared to H1 2023. Conversely, the business-to-consumer (B2C) model witnessed a significant decline, raising only $356 million, down 64% year-over-year. This trend suggests a potential preference for ventures that address business needs and drive regional economic growth.

Funding Disparity for Female-Led Startups

A concerning disparity emerged in funding allocated to female-led startups. These ventures secured a mere $1.8 million across 15 deals in H1 2024, a sharp decline from the $6 million raised by 22 startups in the previous year. This highlights the ongoing challenge of fostering gender diversity within the MENA entrepreneurial ecosystem.

Investment Landscape: A Shift in Geography

Traditionally dominant players like the UAE experienced a shift in VC activity. Saudi Arabia-based VCs emerged as the top regional investors, contributing to a significant 60 deals in H1. They were followed by UAE VCs with 41 deals, and Egyptian VCs with 24 deals. This geographical shift indicates a potential diversification in investment strategies within the region.

Global Investors Take Notice

The MENA tech scene also attracted significant foreign investments. The US led the pack, injecting capital into 31 startups, followed by the UK with 19 rounds. This participation from established players showcases the growing global recognition of the potential within the MENA region.

Active Investors and a Cautiously Optimistic Future

Venture Capital firms like RZM Investment (Saudi Arabia) and Hope Ventures (Bahrain) emerged as the most active investors in H1 2024, participating in seven deals each. Several VC funds were also launched during this period, pledging billions of dollars towards MENA tech companies. While the first half witnessed a slowdown, it could be seen as a period of consolidation and strategic planning. The influx of new funds and potential diversification of investment portfolios based on global economic factors paints a cautiously optimistic picture for Q3 and beyond.