UAE startups secured USD 353 mn in debt funding last year

UAE-based startups bagged USD 353 mn in venture debt financing in 2023, marking a 222% y-o-y jump, according to venture data platform Magnitt’s FY 2023 Venture Debt report. Despite seeing six transactions, a 25% y-o-y decline, the UAE ranked first in terms of transaction volumes taking place over the year.

Middle East startups attracted a record USD 757 mn in venture debt in the past year, with Saudi startups securing 53% of the region’s total debt, attracting USD 400 mn, a 602% y-o-y jump, the report reads. Meanwhile, Egypt saw venture debt funding slump 86% y-o-y, with USD 4 mn going to Egyptian startups. Egypt saw an annual decline of 75% y-o-y in terms of volume, with only two transactions, while Saudi Arabia saw the number of venture debt transactions double to four in 2023.

The standout sectors: Fintech accounted for 79% of MENA's total VD lending in 2023, owed in large to UAE-based BNPL giant Tabby and KSA-based Tamara, which together raked in USD 600 mn of the total USD 601 mn financing for fintech players. Transport and logistics followed with USD 150 mn, and e-commerce had a seat at the table with USD 3 mn.

A changing financing ecosystem: Venture debt lending to equity financing ratio shifted to 28% in 2023, from just 1.4% in 2020.

More investors got on board: The investor pool expanded in 2023 from one active investor to eight, with US investors leading the participation, while local investors from the UAE and Saudi Arabia also chipped in, SME10 ’s coverage of the report says. Goldman Sachs made its entry into the MENA VD market, leading in both transaction volumes and invested capital.

Investor appetite is on the rise: “Investor interest has grown notably, with new funds established through investment from the Jada Fund of Funds in Partners for Growth, as well as Shorooq Partners’ latest Private Credit Fund, indicating a strong and growing confidence in the venture debt market,” Magnitt CEO Philip Bahoshy said.