Venture debt funding in MENA crosses $260m in 2022

Venture debt aggregated $260m across 18 deals in the Middle East and North Africa region last year, a new report has revealed.

The first mega-deal for venture debt in the MENA region was closed by UAE-based fintech startup Tabby last year, contributing 39 per cent to total venture debt funding,  a report by UAE-based investment banking platform Shuaa Capital and data platform MAGNiTT. The report maps growth in venture debt funding across MENA over the past five years.

Read: Tabby secures $150m credit facility from Atalaya Capital, Partners for Growth

Venture debt is a type of debt funding that is received by early-stage companies and startups and is used as a complementary method to equity venture financing. According to the 2022 MENA Venture Debt Investment Report, the top five venture debt deals accounted for $275m. Average deal size in 2022 declined to $14.4m from $26.6m in 2021.

? Venture Debt is ? across MENA

? Venture Debt has become a hot new instrument for Startups @MAGNITT

Over $500M+ has been provided in Venture debt to #MENA startups in the last 5 years! ? Access the full report : https://t.co/h4Sxam0jo8#venturedebt #MENA #funding pic.twitter.com/VQF3EHpbnI

— Philip Bahoshy (@pbahoshy) January 23, 2023

Venture debt funding was concentrated in four countries across the MENA region – namely UAE, Saudi, Egypt and Jordan. The UAE was the most funded market through venture debt, constituting over 50 per cent of the number of deals and value reported for the MENA region between 2018 and 2022. Saudi Arabia ranked second in funding, accounting for 29 per cent.

Fintech secured the highest share of venture debt deals between 2018 and 2022, raising 61 per cent of total funding.

Furthermore, fintech, transport and logistics, and e-commerce remain the industries of choice, while agriculture came in the top three, following a $50m venture debt deal closed by Pure Harvest Smart Farms in which SHUAA Capital and Shorooq Partners were investors.

The number of investors also increased to 26, with the share of international (non-MENA) investors growing from 20 per cent in 2021 to 47 per cent in 2022.

“The start-up ecosystem across MENA continues to attract both international and regional investors even in a global climate of high inflation and aggressive interest rate rises,” said Natasha Hannoun, Head of Debt at Shuaa Capital.

“As a result of the ripple effect on valuations, entrepreneurs in the region have increasingly been turning their attention to alternative sources of non-dilutive capital to support growth of their businesses. It has therefore become a crucial part of the startup funding journey and we expect this trend to continue over the foreseeable future.”