The first quarter of 2023 ended on a high note for startups in the Middle East and North Africa (MENA) region. After a sluggish January and February, March saw a significant surge in investment activity, infusing the ecosystem with much-needed capital.
Data compiled by Wamda, a leading platform for entrepreneurs in MENA, reveals that startups across the region raised a total of $254 million in March 2023. This represents a substantial increase of 186% compared to the $88.7 million secured in February. While the year-on-year growth sits at a modest 1.17% compared to March 2022's $251 million, the upward trend in March reverses a concerning downward trajectory observed in the earlier months of 2023.
This positive development comes amidst a broader economic slowdown and rising global interest rates, factors that have impacted investor sentiment worldwide. However, the MENA region appears to be demonstrating resilience, with its young and tech-savvy population continuing to attract interest from venture capitalists.
Saudi Arabia emerged as a clear leader in attracting investments in March. The kingdom's startups secured a staggering $198 million, buoyed by the LEAP24 tech conference held in Riyadh. This high-profile event provided a platform for showcasing innovative entrepreneurs and fostering connections with potential investors. A notable example is Salla, a leading e-commerce company in Saudi Arabia, which secured a pre-IPO funding round of $130 million during the conference.
The UAE, traditionally a frontrunner in regional startup investment, took second place in March with $39 million raised by 12 startups. While this figure falls short of the UAE's usual dominance, it still signifies continued investor confidence in the country's vibrant startup scene.
While the March surge is a positive sign, it's important to note that the MENA region's startup ecosystem is not yet back to pre-pandemic levels. The total investment activity in Q1 2023 remains 62% lower compared to the same period in 2022. This highlights the ongoing challenges faced by startups, such as securing funding in a more cautious investment environment.
However, the significant increase in investment activity in March provides a much-needed boost to MENA's entrepreneurial landscape. It demonstrates the region's potential for innovation and its ability to attract capital even amidst global economic headwinds. With continued government support and strategic initiatives, the MENA startup ecosystem is poised for further growth in the coming years.