According to the Magnet report, which specialises in analysing venture capital market data, the startup market in the Middle East and North Africa (MENA) region remained stable near the lowest level in Q3 2023.
The report said that funding increased by 32% quarterly, while the number of deals declined for the third consecutive quarter, reaching its lowest level since Q2 2017.
Compared to the same period last year, both deals and funding decreased by more than 40% based on the first nine months of 2023.
The report revealed that Saudi Arabia accounted for the largest share of funding, with 39% of the total. UAE led the number of deals, with 33% of the total 286 deals closed in the first three quarters of this year.
The report attributed the growth in funding in Q3 2023 to two mega-deals (over $100m), which raised $549m out of the total $1.36bn funding in the first nine months of this year. The rest of the funding ($811m) came from regular deals.
The report also said that the challenging economic climate stimulated investor interest in deals worth less than $1m, which contributed to the increase in funding in Q3 2023 compared to Q2 2023.
International investors continued to be cautious about investing in venture capital in the current economic environment, as eight of the top 10 investors in this quarter were regional.
The report showed that startups in Africa raised a similar amount of funding ($1.4bn) as MENA startups but through more deals (313).
The report also indicated that Turkish startups collected $723m through 205 deals, while Pakistani startups raised $39m through 25 deals.