Report: VC in emerging markets plummeted by over 40% last year

8th January at 9:30 am Dubai 

VC investments in emerging markets such as the Middle East and North Africa (MENA) plummeted by over 40% compared to 2023, according to a new report. The data mirrors the wider global trend of reduced VC funding in the last two years, especially for non-AI companies.

The total raised across the markets surveyed was $9.1 billion in 2024, a 41% decline year-on-year (YoY). Furthermore, there was a 20% drop in deal activity YoY, with the number of deals falling to 1,527. However, there may soon be signs of recovery as interest rates decline globally, bringing with it lower inflation, while early-stage investing showed resilience.

The trends are outlined in the 2024 Venture Investment Report from MENA-based research group MAGNiTT. The report covers Aggregate Emerging Venture Markets (EVMs), looking at VC investments in the Middle East, Africa, Southeast Asia, Türkiye, and Pakistan.

In the MENA region, startups raised $1.9 billion in 2024, a 29% decline annually, but this was a small decline when set against that seen in Southeast Asia (45%) and Africa (44%).

Plus, funding levels in 2024 were still higher than 2020 levels, prior to the 2021 and 2022 boom years, meaning the region continues to grow in the venture space.

There was a 7% YoY increase in deal count (571) and the number of investors increased by 18% (to 475).

And 47% of all investments were in the $1-5M range, signaling a shift to early-stage investments. However, MENA experienced a significant decline in late-stage deals.

Across MENA, Africa, Southeast Asia, Türkiye, and Pakistan, Fintech continues to put in a strong showing, raking in $3.9 billion in funding in 2024, reflecting that FinTech is doing well in emerging markets where more developed financial services are thin on the ground. 

The report noted that this presents an opportunity for M&A activity across geographies within the region.

There was a predictable split where international investors focused more on late-stage deals, such as Insider’s $500M round and Tyme’s $250M Series D. These kinds of investors made up 53% of the 475 investors that backed startups in the region. Meanwhile, local investors tended to stick to early-stage.

This is all in the context of global exits dipping by 32% YoY to just 94 in 2024, and late-stage capital becoming harder to come by as public markets stayed closed.

Philip Bahoshy, CEO at MAGNiTT, commented in a statement: “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. He said that overall, 2024 was “probably the bottom of the curve” in terms of the funding downturn.

He added that the UAE, Saudi Arabia, and Qatar saw “increased deal activity year on year” despite a slowdown in total capital deployment. The total number of investors also increased significantly in MENA, showing that investors, especially international ones, may have increasing confidence in the region’s startups.