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2023 in Review for Startups Across the MENA Region

These are sum of the trends that shaped the MENA region’s startup landscape in 2023.

May El Habachi

2023 in Review for Startups Across the MENA Region

The year 2023 has been nothing short of a whirlwind for startups in the Middle East. Entrepreneurs have been hit hard by a slew of macroeconomic challenges, from tightening monetary policy to high inflation and geopolitical tensions. That’s in addition to the recent outbreak of war in the region, and currency devaluation in key countries like Egypt. 

It therefore comes as no surprise that startups witnessed another year of a decrease in funding. According to a recent report by Magnitt, the region recorded a 44% YoY retreat in funding and a 46% decline in transactions in the first nine months of 2023, in line with global VC trends. 

Despite the funding slowdown, however, the region still witnessed some key developments. Saudi Arabia is emerging as a leading startup ecosystem, ranking first in terms of funding value, raising $536 million, followed by the UAE, securing $371 million, and Egypt recording $334 million so far this year.

Below are some trends that have shaped MENA’s startup landscape in 2023.


Fintech has always been one of the region’s strongest growing sectors. Despite a 47% decrease in capital raised compared to 2022, fintech secured 36% of total funding, according to data by Magnitt. “There are still a large number of people who do not have access to banking and banking services,” says Basil Moftah, General Partner at Nclude.

“This includes access to bank accounts, credit cards, and loans, whether for individuals or SMEs. For example, there are about three million SMEs in Egypt, but we estimate that only about 200,000 to 300,000 of them actually have bank accounts, and are able to access banking products. So, I guess, the opportunity is very large, and it continues to be one of the largest sectors that technology can address.”

Besides fintech, e-commerce has also attracted VC interest, raising $451 million so far this year, up 46% from last year, according to data by Magnitt.


Given the slower pace of the economy, investors have shown preference in smaller and early-stage startups, especially those with a track record of product market fit.

Nuwa Capital, a UAE-based VC firm that invests in startups across the region, decided to shift gears and focus on early-stage startups to minimize risk at a time when the market seemed “frothy.”

“We were concerned with how valuations were set, and the amount of capital being invested at those later stages,” says Khaled Talhouni, Managing Partner at Numa Capital. “So, the way we thought we could minimize market risk was to shift downwards in stages, in case there is a valuation stake or a market correction. The reason is, you could end up in a situation where you invested in great companies, and that company exits, but it exits at a time when the market has gone back to mean or average valuations, and you end up not making a return.”

Later stage startups have still attracted funding this year, but they were few and far between. Investors seem to be writing larger checks for fewer startups, with the average deal size reaching a record high in the first half of the year, growing a 43% CAGR over the past 4.5 years, according to Magnitt.


With valuations decreasing and the funding winter prolonging, investors are becoming more cautious when deploying capital in startups.

“I think across all phases, VCs are being a lot more picky, in terms of choosing their investments and going down different due diligence protocols before deploying the money,” says Ryan Shariff, General Manager, Flat6Labs UAE.

In Shariff’s opinion, this approach is beneficial for the region’s startup ecosystem, giving the market time to recalibrate and founders the opportunity to focus on business fundamentals. “The pace at which some of these values were growing was getting out of control,” he adds. “I think this recalibration of taking things a little bit slower, making better decisions, making founders work harder to get the cash, is actually better.”


Saudi Arabia has always been a key market in the region due to its market size and strong purchasing power. It is only in the last few years, however, that its startup ecosystem has been witnessing exponential growth and garnering significant attention in the region.

“I think Saudi Arabia has one of the most exciting ecosystems for technology going on around the world in fact, not just in the region,” says Moftah. “There is quite a bit of concentration and effort by the government to put money behind entrepreneurs, develop technology, and improve the lives of everybody, including society, people and businesses. And it’s evident when you come to Saudi, you see all the progress that is being made on the technology side.”

With Saudi Arabia’s startup sector booming, many entrepreneurs from across the region are considering expanding their business to the Kingdom. But Moftah cautions that it’s not for the faint hearted. “So, if they’re doing it to simply tap into capital, it’s a bad idea. If they’re doing it because their product or solution has value here, and it is unique and competitive, then they should absolutely do it,” he explains. “It’s a great market, it’s got the best of both worlds. It’s got the purchasing power of the UAE, and the size of Egypt, but it’s not for the faint hearted. And it shouldn’t be done simply to raise capital.”


To keep their businesses afloat, founders are going back to basics. This means that they’re focusing on profitability, unit economics and reducing their cash burn.

“Growth at any cost is out, and it has been out for a very long time,” says Talhouni. “It’s important to make sure that founders are aware of this. They need to go back to basics. Focus on unit economics, profitability, and have the fundamentals in place to create a sustainable business.”

With founders focusing on profitability, he expects that some business models simply won’t survive the downturn, particularly those that have high operating costs and low margins, leading to potentially more consolidations in the market. Talhouni advises founders to focus on business models that are profitable and that don't require much funding.