Last year, the Gulf Cooperation Council (GCC) emerged as a notable hub for venture capital investments, contrasting the global downturn. The region has positioned itself as an ideal environment for venture capital funding in recent years. However, trends vary between countries with the UAE experiencing slowing investment due to market saturation and Saudi Arabia rapidly developing.
Despite receiving only 1 percent of global venture capital funding, the GCC region saw a notable 30 percent growth last year. In its latest GCC venture market report, Pulsar said that this growth came as other major regions, including the MENA region, saw notable declines.
In 2023, overall venture capital funding declined to $248.4 billion, the lowest since 2017, and global deal volume dipped 30 percent annually to a 6-year low.
UAE, Saudi Arabia lead funding growth
The UAE and Saudi Arabia were the main players in the GCC region’s venture capital landscape last year, accounting together for 92 percent of total funding. Notably, Saudi Arabia surpassed the UAE for the first time last year, taking the lead in rankings.
The report also revealed that the top five venture capital deals in the GCC accounted for 74 percent of total venture investment. The $156 million investment in Kuwait-based marketplace Floward marked the largest deal in the country in the last five years.
Meanwhile, unicorn-status rounds for Tamara and Tabby solidified Saudi Arabia’s leadership in fintech and e-commerce with total funding reaching $1.36 billion, the largest GCC deal last year.
Saudi Arabia’s VC funding hits record $2.56 billion
Since 2019, venture capital investment in Saudi Arabia has seen steady growth, surpassing the billion dollar mark for the second year in a row last year and recording a record breaking $2.56 billion. The report attributes this surge from $1.12 billion in 2022 to the four significant investments in the fintech and ecommerce sectors. This includes the two investments in Tabby and Tamara.
Read: UAE driving global leadership in green finance, ESG Sukuk
UAE remains major FDI recipient
In addition to its robust venture capital ecosystem, the UAE is experiencing a notable surge in foreign direct investment (FDI) with a 10 percent growth in 2022 to a record $23 billion. The UAE recieves around 60 percent of the GCC region’s FDI.
In 2023, the UAE experienced a period of adjustment, with venture capital funding declining 61 percent, marking the first year since 2015 without any mega-deals. Despite this setback, the country continued to lead in the number of venture capital deals, maintaining its status as a robust investment ecosystem in the GCC region.
As the GCC region continues to shift away from the oil economy, it will witness a strong pipeline of venture capital opportunities in emerging sectors including AI, green tech, and advanced mobility.
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