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An Analytical Outlook on the Venture Capital Landscape in MENA 2025: Market Forces Decoupling and…
- MENA experienced a surge in investment activity in 2024 but is also witnessing a decline in new startup formations, leading to an imbalance between active investors and startups.
- The 2025 market shows a barbell structure in terms of stage distribution, with a notable increase in Seed stage startups and modest growth in Series B startups.
- However, only 20% of companies in MENA labeled as startups are eligible for venture capital investment, indicating a predominance of non-scalable SMEs in deal flow.
- The UAE is home to 44% of all VC-eligible startups in the region, making it a significant base for fundable startups.
- 48% of new founders in MENA demonstrate a clearer understanding of scalable startups versus traditional SMEs, indicating an improvement in startup culture.
- MENA-based AI startups have grown by 30% annually, largely due to legacy tech companies rebranding themselves as AI startups by incorporating generative AI features.
- AI startups are concentrated in the UAE (45%) and Saudi Arabia (34%), with Egypt serving as a net exporter.
- The MENA venture capital market faces a challenge due to the disconnect between tech founders and investors, necessitating a reassessment by sovereign wealth funds and policymakers.
- Encouraging tech entrepreneurship as a career path and leveraging AI to expedite prototype development are seen as crucial for sustaining innovation in the region.
- This shift could potentially blur the lines between Seed and Series A stages, with accelerators and incubators playing a pivotal role in training AI-powered founders.
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