Are AI and FinTech Powering MENA’s VC Boom?

The venture capital landscape across Emerging Venture Markets in 2025 told a mixed story. While several regions struggled with slower deal flow and reduced funding, the MENA quietly moved in the opposite direction.

According to MAGNiTT’s FY 2025 State of Venture Capital in Emerging Venture Markets Report, MENA stood out as the exception in a year marked by rising mergers and acquisitions, growing interest in artificial intelligence, and shifting global capital flows.

MAGNiTT CEO Philip Bahoshy noted that although many emerging markets experienced contraction, MENA expanded its share of total EVM funding. The region increasingly positioned itself as a destination for global private capital, drawing investors from across regions rather than relying solely on local funding pools.

MENA’s steady rise

In 2025, total venture funding in MENA reached US$3.8 billion across 688 deals. This was the highest deal count among all emerging venture markets and marked the first time MENA surpassed Southeast Asia in total transactions.

Funding in the region grew by 74 percent year-on-year, while deal activity increased by 6 percent. One of the more notable trends was the growth in large late-stage investments. MEGA rounds rose by 82 percent, reaching a record US$1.04 billion, pointing to growing confidence in more mature startups.

Several factors helped strengthen the region’s private capital ecosystem. These included expanded sovereign-backed investment programs, stronger diplomatic and trade relationships, and rising interest from international investors. MAGNiTT’s report also highlights how global political and economic ties — including high-level diplomatic engagement with Gulf countries — contributed to increased investor attention.

Saudi Arabia and the UAE lead the way

Within the region, Saudi Arabia and the UAE continued to anchor venture activity. Saudi Arabia raised US$1.72 billion in 2025, more than doubling its funding levels from the previous year. This growth was supported by stronger participation from local venture firms and a sharp increase in international investors, with foreign VC participation rising by 61 percent year-on-year.

The UAE followed closely, raising US$1.58 billion. Capital inflows into the country grew by 67 percent compared to 2024, driven by a mix of later-stage MEGA deals and continued activity at earlier stages.

Together, the two markets reinforced MENA’s role as a key hub for startups looking to scale within the region and beyond.

FinTech holds its ground, AI gains momentum

FinTech remained the backbone of venture capital activity in MENA. It was both the most funded and most active sector in 2025, raising US$1.15 billion across 178 deals. Companies such as Alaan, Nymcard, Tabby, and HALA contributed to the sector’s strong performance.

At the same time, artificial intelligence began to take on a more visible role in the region’s funding story. Startups like The Applied AI Company, which raised US$55 million in a Series A round, and Ula.ME, which secured US$28 million in Series B funding, reflected growing investor interest in AI-driven business models.

While AI has yet to overtake FinTech in scale, its presence in growth-stage funding suggests it may become a more prominent sector in the years ahead.

International investors return in force

One of the clearer signals from 2025 was the return of international investors to the region. Nearly half — 48 percent — of venture capital deployed during the year came from international sources, up from 44 percent in 2024. This marked a record level of cross-border participation.

Investor-focused events such as the Future Investment Initiative, Qatar Web Summit, and the Bloomberg Economic Forum in Qatar also played a role in keeping the region visible to global capital. In parallel, major global asset managers including KKR, Blackstone, BlackRock, and Temasek Seviora either invested in the region, set up offices, or obtained operating licenses during the year.

Liquidity improves as exits pick up

For several years, limited exit opportunities have been a concern for MENA’s venture ecosystem. In 2025, signs of improvement began to emerge. M&A activity increased by 41 percent year-on-year, indicating a gradual shift toward capital recycling and better liquidity options for investors and founders.

Regulatory developments may further support this trend. Saudi Arabia’s Capital Market Authority recently announced plans to expand non-resident investor access to Tadawul, a move expected to make IPOs a more realistic exit option for growth-stage startups.

What lies ahead

Looking forward, MAGNiTT expects 2026 to bring more exits through both M&A and IPOs, alongside continued interest from global startups setting up operations in the region to access new markets.