MENA and Indian Startups Navigate Diverse Funding Landscapes

From the bustling tech hubs of India to the emerging ecosystems in MENA, startups face unique challenges and opportunities in securing investments amid economic fluctuations.

Published July 09, 2024 - 00:07am

4 minutes read
India
Egypt
Saudi Arabia
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Investment activity in the Middle East and North Africa (MENA) region's startup space showed significant variations in the first half of 2024. In June, 38 tech startups managed to raise $116 million, bringing the half-year total to $882 million. This marked a 59 percent decline from the $282 million raised in May but constituted a dramatic 182 percent increase compared to the same period last year.

On the other hand, Indian startups collectively raised around $270.3 million in the same week, albeit with a noticeable 76.73 percent dip from the previous week's $906 million. This fluctuation underscores how volatile the startup funding environment can be, influenced by myriad factors ranging from economic climates to sectoral interests.

UAE-based startups led the MENA region in June, securing $82.5 million across 15 deals. In India, e-commerce giant Purplle topped with a $120 million Series F round, followed by OYO, EV startup Matter, and agritech brand Arya.ag. This comparison highlights the UAE's favorable conditions and India's diversified investment interests.

In MENA, fintech reclaimed its position as the most funded sector in June, with over $38 million spread across 10 deals. Contrarily, mobility startups in Africa, specifically within MENA, attracted approximately 39 percent of all funding, surpassing fintech and leading with $254.5 million. This rise can be attributed to the growing need for innovative transportation solutions as urbanization accelerates.

The startup ecosystems in both regions exhibit stark contrasts. In Saudi Arabia, seven initiatives raised $13.5 million, while in Egypt, only four startups managed $15 million, reflecting the ongoing economic crisis that has severely affected the Egyptian startup scene. In India, the healthtech, proptech, and agritech sectors demonstrated resilience, continuing to attract early-stage funding despite overall market volatility.

The absence of mega deals characterized June in MENA, with the largest being Tenderd's $30 million agreement. Meanwhile, India saw significant mergers and acquisitions, such as Indian crypto exchange CoinDCX acquiring BitOasis and US-Indian HR tech platform Phenom acquiring Tydy. This activity suggests a more mature market in India where consolidation is becoming a trend.

Another angle relates to the funding stage. In MENA, most of June's investments were channeled to the pre-series A stage, amounting to $45 million. Similarly, early-stage investments in India remained strong despite a drop in total funding. This interest signifies investors' focus on nurturing nascent ventures that promise long-term growth.

Gender disparity in funding remains a critical issue across both regions. In MENA, male-founded startups received an overwhelming majority of $103.4 million in June, whereas female-led startups only attracted $200,000. India also faces similar challenges, albeit with sporadic highlights of female founders making waves.

The geopolitical landscape significantly impacts MENA startups, with the ongoing war in Gaza prompting a cautious approach from venture capital firms, resulting in a 46 percent decrease in H1 funding compared to the same period last year. Such political instability can deter investments but also present opportunities for innovative solutions to regional challenges.

In terms of foreign investment, the US and the UK have shown significant interest in the MENA region, whereas Japan's Suzuki has launched a social impact fund in India, aiming to support startups tackling rural and informal economy issues. These investments indicate a diversified interest from global investors, despite regional challenges.

Despite the hurdles, optimism persists. Several venture capital firms have launched new funds, pledging billions to the tech sector in MENA, which is expected to reflect positively in the Q3 investment volumes. Indian startups are also hopeful, with policy changes like the proposed removal of the 'angel tax' on the horizon, potentially boosting startup ecosystems further.

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