(Bloomberg) -- Venture capital funding in the Middle East slumped in 2024, even as the number of deals increased, as investors shifted toward early-stage investments.
Startups in the region raised $1.5 billion, a decline of 29% compared to the previous year, according to a report from venture capital data platform Magnitt.
Saudi Arabia, which accounted for almost half of that funding, experienced a 44% drop. Still, the kingdom retained its position as the top destination for venture capital funding in the Middle East for the second consecutive year. Meanwhile, the United Arab Emirates saw investments drop 8% in 2024, to $613 million.
The number of venture capital deals rose 10% to 461 transactions, according to the Dubai-based firm. However, the region didn’t see the kind of big-ticket deals that turned Saudi-based fintechs Tabby and Tamara into unicorns in 2023.
Mega-rounds, typically those exceeding $100 million, accounted for less than 20% of total funding last year, down from 30% in 2021, said Philip Bahoshy, the chief executive officer of Magnitt.
This trend reflects a broader shift from large, late-stage rounds toward investments ranging between $1 million and $5 million, as investors grew more cautious in response to the high cost of capital and changing market dynamics, Bahoshy said, in an e-mailed response to questions.
For instance, Singapore secured $3.4 billion in venture capital investments last year, the highest among emerging venture markets covered by Magnitt. Despite this, the South Asian nation saw total funding slump by 53%.
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Overall, startups in the Middle East, Africa, South East Asia, Turkey and Pakistan raised $9.1 billion, a 41% decline from 2023, Magnitt’s data showed.
The number of venture capital exits — a key metric tracked by the industry — declined by 20% in the Middle East, but the tide could turn in 2025.
“The next year should see much needed liquidity in the form of mergers and acquisitions and regional initial public offerings, particularly in Saudi Arabia, where Tabby, Tamara, TruKKer, Floward and Unifonic are all candidates to go public,” Allen Taylor, the managing partner at Endeavor Catalyst, said in the report.
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