Startup Wrap – Saudi Arabia captures nearly half of MENA’s Q1 funding

 Saudi startups are making significant strides in the regional venture funding landscape, capturing nearly half of the total funding in the Middle East and North Africa (MENA) region during the first quarter of this year. This underscores the Kingdom's increasing influence in the startup ecosystem across the region.

According to Wamda's monthly report, Saudi startups secured a remarkable $224 million out of the $429 million raised in MENA, showcasing a thriving entrepreneurial environment in the Kingdom. The surge in startup activity, especially notable in March, resulted in MENA startups raising $254 million through 54 deals, indicating a substantial increase compared to previous months and a slight uptick from the previous year.

March witnessed a significant 186 percent growth in regional funding compared to February, reaching $88.7 million, and a 1.17 percent increase compared to the same month last year. This heightened investment activity, notably during the LEAP24 event in Riyadh, has propelled Saudi startups to the forefront, with notable contributions such as Salla's substantial pre-IPO round of $130 million.

While the UAE and Egypt secured $39 million and $7 million respectively, most of the quarter's funding was directed towards software as a service (SaaS) providers, followed by fintech and e-commerce sectors. However, there was a notable absence of larger ticket sizes and later-stage investments compared to the previous year, despite a predominance of seed rounds and series A funding.

The report also highlighted a preference for the business-to-business (B2B) model over business-to-consumer (B2C), with male-led startups dominating the funding landscape. B2C models received $48 million, representing 19 percent of March's total funding, while B2B attracted $188 million, comprising 74 percent of the total amount. Nevertheless, female-led startups and mixed-gender founder teams also made noteworthy contributions, albeit to a lesser extent.

March also witnessed significant mergers and acquisitions, including deals like MBC Group's investment in Anghami and Classera's acquisition of Expert Solutions. Furthermore, substantial investment funds were announced during LEAP24, promising further growth and innovation in the region's entrepreneurial sector.

Investcorp led the initiative with a $500 million fund dedicated to supporting growth-stage ventures in Saudi Arabia, supported by a $35 million investment from Saudi Venture Capital. Concurrently, Oasis Capital introduced a $100 million fund focusing on early-stage international ventures.

In the gaming sector, the Saudi Esports Federation, in collaboration with the Social Development Bank and the National Technology Development Program, announced plans for two funds under its Gaming and Esports Sector Financing Program. Saudi venture capital firms Merak Capital and Impact46 also announced funds of $80 million and $40 million respectively. Plug and Play Tech Center entered the scene with a $50 million fund aimed at nurturing software and tech ventures in Saudi Arabia and the MENA region.

Meanwhile, Takamol Ventures announced a $53 million venture capital fund targeting early-stage tech companies to fuel innovation.

In a related development, UAE's fintech Fortis successfully closed its series A funding round, securing $20 million led by Opportunity Venture. This investment marks a significant milestone for Fortis as it aims to redefine the retail tech and fintech landscape in the MENA region.

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