MENA’s Investor Surge: Insights from MAGNiTT

The Middle East and North Africa (MENA) region saw a 28 percent year-on-year (YoY) jump in unique investors during the first nine months of 2024, primarily driven by a 60 percent rise in international participation, according to the latest MAGNiTT report. In an interview with Inc. Arabia, Philip Bahoshy, CEO of MAGNiTT, outlined the factors behind this growth and highlighted the role of local investors in fostering international capital inflows. 

Bahoshy attributes the recent increase to support from limited partners (LPs) for foreign investment, the sustained appeal of the regional startup ecosystem, and sector-specific opportunities.  

"The UAE and Saudi Arabia have been pivotal in driving this trend, accounting for 70 percent of the region's international investor base. These countries benefit from a relatively stable political environment, clear economic roadmaps like Saudi Arabia's Vision 2030 and the UAE's diversification plan, and high-profile Fund of Fund structures including the Jada Fund, Saudi Venture Capital Company, and Dubai Future District which highlight their commitment to innovation and long-term growth," Bahoshy said in an emailed interview.  

"Investor interest has also been bolstered by business-friendly policies, including streamlined regulations, tax incentives, and opportunities for full foreign ownership, alongside tax-free zones that lower barriers to entry. The region’s young, dynamic population with strong consumer spending power further enhances its attractiveness," he added. 

Investors from the US and UK have significantly contributed to the growth of international investment in the region, with their numbers rising by 70 percent and 257 percent respectively. This increase led to international investors accounting for 37 percent of total capital deployed in MENA in the first nine months of 2024, up from 17 percent in 2023. 

"As companies look to scale they require new markets for expansion. At a geopolitical level, both the US and UK have strong ties with GCC geographies. This creates attractive opportunities for Investors who are raising funds from LPs regionally as well as startups who are looking to scale into new markets to gain international expansion. We anticipate this trend to continue to strengthen over the coming years," Bahoshy explained. 

The report also found that Egypt experienced the highest growth in unique investors within the region, rising by 32 percent, driven by a 79 percent increase in local investors and notable interest from UK-based investors. 

With regard to Egypt’s growth, Bahoshy highlighted the complementary roles of local and international investors. "Local investors have paved the way for international investors by focusing on SEED stage investments to create a pipeline for international investors, lobbying governments for policy change for tech companies, and creating winners like CAREEM and Souq that has had a multiplier effect for the region.," Bahoshy said. “Their deep understanding of regional markets, cultural nuances, and regulations helps international investors navigate the complexities of the region. Collaborative efforts between local and international investors, including shared risks and pooled resources, enable larger funding rounds and stronger support for startups. Local investors have tended to focus on early-stage investments and international investors have historically filled the gap at later stages.”  

The report found that, between 2020 to 2024, international investors comprised 61 percent of the total investor base across emerging venture markets (EVMs). MENA saw the most significant growth in international participation, rising from 33 percent in 2020 to 51 percent in 2024. Southeast Asia maintained the highest proportion of foreign investors, consistently holding a 66 percent share. In Africa, international capital deployment declined by 14 percentage points in 2024, reflecting a shift toward local investment strategies. 

A key trend in MENA’s venture landscape is the distinction between international and local investors in terms of their focus and investment sizes. "International players deploy larger amounts at the Series B level, while both contribute equally at Series A," Bahoshy explains. International investors have traditionally filled the gap where local investors have had less capital, particularly at later stages. 

Series A deals also saw an increase in international contributions, growing from 15 percent to 50 percent in 2024. Local investors continue to dominate early-stage funding, with over 65 percent of capital allocated below Series A. 

Early-Stage Investments On The Rise 

While megadeals played a significant role in 2023, Bahoshy notes a shift towards early-stage investments in 2024. He acknowledges that international investors have shown caution but remains optimistic about prospects for the final quarter of 2024 and 2025. "The recent optimism in public markets, supported by the US elections, lower interest rates, and declining inflation, along with the influx of international investors, could signal the end of this year’s downward trend. This sets the stage for a potential uptick in venture activity as 2024 progresses," he says. 

Looking ahead, Bahoshy anticipates continued collaboration between local and international investors. "We’re hopeful that the collaboration between local and international investors will deepen, providing startups with both expertise and access to global markets. Additionally, mergers and acquisitions may gain momentum as the ecosystem matures," he stated. In the long term, more exits and IPOs are expected to foster a reinvestment cycle and strengthen MENA’s venture ecosystem. 

For 2025, Bahoshy predicts a year of consolidation and growth. "Funding will become more balanced across stages, with increasing sectoral and geographical diversity. Q4 2024 has already shown early signs of late-stage funding growing with international investors participating in deals like Eyewa and Ziina’s latest investments," he says. Bahoshy also forecasts late-stage funding to recover, supported by improving macroeconomic conditions and alignment with positive global market trends.