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CAIRO: Saudi Arabia maintained its lead in regional venture capital funding for the second consecutive year, securing $412 million in the first half of 2024, according to new data.

The kingdom retained its top position in the Middle East and North Africa region in terms of total venture capital investments for the period, despite a slight 7% year-on-year decline, the platform reported MAGNiTT data.

A significant portion of this funding, 32 percent, was attributed to a single $130 million deal involving Salla, marking the region’s only mega round for 2024 so far.

Deal flow activity saw a slight year-on-year decline of 3%, placing Saudi Arabia as the second most active country in MENA by deal volume. The Kingdom now holds 30% of all transactions, up from 25% in the first half of 2023.

In addition, Saudi Arabia’s contribution to the region’s total financing rose from 38 percent in the first six months of 2023 to 54 percent in the first half of this year, demonstrating the country’s growing influence.

In an interview with Arab News, Philip Bahoshy, CEO of MAGNiTT, highlighted the solid development of the Kingdom’s ecosystem despite the difficult economic environment.

“Saudi Arabia continues to grow its core ecosystem even in the current economic environment. What was notable from the report this time was that while total funding was almost flat, a key driver of its growth was an 84% year-over-year increase in non-mega deal funding,” said Bahoshy.

He also pointed out that while last year’s capital was led by four mega deals, this year’s significant growth with just one such exchange is extremely positive.

In terms of industry trends, fintech remained the most popular sector for investors by transaction volume, while e-commerce led funding, with two of the top five deals in Saudi Arabia coming from this sector.

Investor participation was robust, with 72 entities backing Saudi startups, up from 62 in the same period last year.

The share of international investors increased by 17 percentage points, capturing 28% of all investors in Saudi Arabia’s venture capital space in 2024.

Bahoshy attributed Saudi Arabia’s leading position to strong support from entities such as Saudi Venture Capital Co. and Jada Fund of Fund, along with the Ministry of Communications and Information Technology’s strategic policies to boost investment in the Kingdom.

He noted that 84% of total deals came from early-stage investments, up from 82%, with Series A deals rising to 14% from 10%.

“As a result, accelerator programs and Series A startups are able to capture capital not only from local investors but also from international investors,” Bahoshy said.

M&A deals in Saudi Arabia have been relatively subdued, with just two deals so far in 2024, compared to four in the same period in 2023.

Most of these transactions occurred in the first quarter of 2024, with none in the second quarter. However, Saudi Arabia ranked second in outbound activity in the MENA region after the UAE, reflecting a wider regional trend.

Looking forward to the second half of 2024, Bahoshy indicated that the third quarter of the year tends to be slower for venture capital deployment in MENA due to seasonal factors, but the fourth quarter usually sees an increase in activity with numerous conferences and visits to the region.

“If this coincides with post-US election, potential interest rates falling, we can expect to have a very strong end to the year both in terms of potential IPOs, late-stage investments, and continued development in early stage of the funnel. ” said Bahoshy.

“The second half of the year historically tends to always be stronger than the first, which is positive not only for Saudi Arabia but also for the wider MENA ecosystem,” he added.

Saudi Arabia’s success in the venture capital arena is supported by both domestic initiatives and growing international interest.

Bahoshy emphasized the long-term nature of these investments, stating, “A lot of initiatives are being done in Saudi Arabia to continue to attract not only startups but also investors to the Kingdom.”

“These are long-term investments in venture activity, particularly with many funds looking to set up, as well as highlighting the importance of talent acquisition for the Kingdom,” he said.

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