Funding flows will grow between Asia and the Middle East

Philip Bahoshy is the founder and chief executive officer of MAGNiTT, a Dubai-based data analytics platform focused on emerging venture markets. The platform tracks investment activities in Africa, the Middle East, Pakistan, and Turkey and will soon start covering Southeast Asia.

MAGNiTT’s latest report documented a decline in the number of deals and the value of funding in emerging markets in 2022. It predicts more acquisitions in 2023, as startups seek alternatives to fundraising, interest in investments grows from Asia and the Middle East, and more deals abound in seed and series A investment rounds.

This interview has been edited for clarity and brevity.

How is the global investment slowdown playing out in the Middle East?

Because the region comes from a lower base, differences in geography are more acute. Saudi Arabia saw a 75% increase in investments year on year, while countries like Egypt were very heavily affected by the war in Ukraine. The UAE continued to maintain its growth because it has benefited from tech talent coming from Russia, Asia, Africa.

Why do you predict growing investments in the MENA region from Southeast Asia?

The demographics of Southeast Asia are similar to the demographics of the Middle East. Singapore, for example, is a hub for Southeast Asia, much like Dubai is a hub for the Middle East. Indonesia and Malaysia are larger markets in the region but not where capital is held, like Saudi Arabia and Egypt are in the Middle East. In Southeast Asia, companies have to scale to all of their different regions in order to be successful, in the same way that companies in the Middle East need to do so too.

What are the biggest challenges facing startup founders in the Middle East?

It is a very fragmented market. If you look at MENA, it consists of 17 or 18 countries. Each country has a different demographic, population, regulatory environment, and judicial system. The second challenge is access to talent. In places like the UAE, many locals work in government or in their family business. Saudi Arabia is similar. The market is based on wealth management, oil and gas, and construction. Their education systems primarily train for knowledge in these types of industries and not in technology. The third challenge is funding. It is hard to access the funding required to scale companies, especially during late-stage investment.