Financing Startups and Impact Investing: Evidence Across MENA Countries

This study empirically investigates the determinants of financial success for startups engaged in impact versus conventional investment, performing a landscape analysis of the MENA region’s financial ecosystem. Using the total equity funding amount (TEFA) as a performance proxy, we analyzed data from Crunchbase on 6772 deals involving 4381 startups and 1771 investors across 23 countries from 2009 to 2023. The sample was categorized into impact (702 firms) and conventional (2431 firms) investment groups. The results reveal a significant negative effect of impact investment on startup funding levels; a nonparametric test confirmed that impact-backed startups exhibit a significantly lower mean TEFA than their conventional counterparts. Other factors, including the number of funding rounds, founders, employees, and investors, positively influenced financial success. The study concludes that, within the MENA context, a discernible trade-off exists, with startups pursuing impact investment receiving less equity funding than those utilizing conventional investment models. Our study provides the first large-scale empirical evidence from the MENA region, revealing a significant funding penalty for impact-aligned startups. This quantifies a structural trade-off between socio-environmental goals and equity capital access. These findings address a critical literature gap and provide actionable insights for investors and policymakers in this emerging ecosystem.