Middle East VC defies global slowdown with record $2.77bn raised in 1st 9 mnths of '25

19/10/2025 02:33 AST

Venture capital funding in the Middle East surged to a record $2.77 billion in the first nine months of 2025, defying a global downturn, according to MAGNiTT.

Funding jumped 152 percent year on year, with the number of deals rising 10 percent to 388, highlighting the region's growing appeal to global investors even as capital flows into Southeast Asia, Africa, and Pakistan weakened.

The surge reflects broader trends in the Middle East venture capital ecosystem, where early-stage and non-mega funding showed robust growth despite global headwinds.

In the third quarter alone, capital surged to $1.2 billion - its highest quarterly total on record - propelled by three mega rounds: XPANCEO's $250 million series A and Airalo's $220 million series C in the UAE, and Hala's $157 million Series B in Saudi Arabia.

Philip Bahoshy, CEO of MAGNiTT, said: "The first nine months of 2025 marked the recovery of the MENA venture capital ecosystem. Not only did the region cross $3 billion in funding by September, but it also outperformed Southeast Asia for the first time for the first nine months of the year."

He added: "The strength of Series A and B pipelines, combined with sovereign-backed support and global investor interest, reinforces MENA's position as one of the fastest-maturing ecosystems in emerging markets."

Within the MENA region, the Gulf states led the gains. The UAE attracted $1.43 billion in the first nine months of 2025, up 188 percent year on year, with strength across both mega rounds with $653 million and non-mega with $775 million.

Saudi Arabia followed at $1.29 billion, up 158 percent year on year, underpinned by $571 million in mega deals and a near-doubling of non-mega funding to $719 million.

Deal momentum also broadened: Saudi Arabia recorded 173 transactions, a 38 percent yearly increase, while the UAE posted 164, a 5 percent rise, with both ecosystems expanding at the early stage. Egypt, by contrast, saw funding contract 37 percent year on year.

Sector trends across MENA were led by fintech and enterprise software. Fintech funding in the Middle East climbed to $880 million, up 248 percent year on year, supported by scale rounds such as Tabby's Series E and Hala's Series B.

Enterprise software accelerated to $320 million across 52 deals, including a $183 million mega round by Cadena, while non-mega activity doubled year on year.

Elsewhere in MENA and across Africa, signals were mixed. Africa's nine-month funding rose 8 percent to $839 million even as deal count fell 14 percent to 228, with pre-seed activity weakening and seed/series A value inching higher.

Mergers and acquisitions activity continued to consolidate across the region, with the Middle East leading nine months of dealmaking with 26 transactions and Egypt posting 13 acquisitions, up from three a year earlier.

Outside MENA, Southeast Asia endured the sharpest pullback. Funding dropped 48 percent year on year to $2.5 billion across 319 deals in the nine-month period of 2025.

The third quarter was the weakest quarter in over seven years, with $541 million across 80 deals and no mega rounds; the share of capital from international investors also fell markedly from the second quarter.

Pakistan and Turkiye proved comparatively resilient in value terms, amassing $450 million in nine months, up 40 percent yearly, despite a 32 percent drop in deals to 121.

Across all EVMs, venture funding reached $6.56 billion in nine months, down 6 percent year on year, with total deals sliding 18 percent to 1,056. The decline was concentrated in mega rounds with a 19 percent yearly drop, while non-mega funding was broadly flat.

International investors drove a larger share of venture capital flows into the Middle East in the third quarter, supplying 59 percent of total funding and 64 percent of all $20 million-plus rounds.

In Saudi Arabia, non-Saudi investors accounted for a record 55 percent of active backers, with the number of unique investors up 44 percent year on year.

Despite the dominance of large deals, non-mega funding in the region rose 14 percent quarter on quarter and 71 percent year on year, signaling broader momentum.

Across the EVMs, early-stage activity hit its lowest level since 2016, though the Middle East again bucked the trend, with pre-seed and seed rounds up 17 percent year on year- led by record deal counts in Saudi Arabia and the UAE.

Series dynamics also shifted. Series A totals were inflated by XPANCEO's $250 million round; excluding it, Series A funding fell 17 percent year on year, while Series B rose to $1.34 billion on stronger non-mega activity.

Africa's mid-stage gap widened, with Series A and B funding down 81 percent quarter on quarter to $39 million.

Turkiye, Vietnam, and South Africa all recorded sharp gains from smaller bases, while Singapore, Egypt, Indonesia, and Kenya posted declines.

M&A softened to 72 deals in the first nine months - down from 78 a year earlier - with the third quarter marking the lowest quarterly total in more than five years.

Arab News