The UAE has led the Middle East’s surge in venture capital activity so far this year, posting a record USD 1.4 bn in funding, up 188% y-o-y in 9M 2025, according to MAGNiTT’s latest Emerging Venture Markets (EVM) report and a separate press release (pdf). The number of transactions also rose, increasing 5% to 164 in total and putting it in third place among emerging markets.

Behind the figures: The UAE saw a rebound in mega transactions — totaling USD 653 mn after none were recorded in 2024 — alongside strong non-mega activity, which rose 57% y-o-y to USD 775 mn during the period. Interest from international investors, robust sovereign wealth support, and large transactions helped the UAE’s venture capital scene defy a general downturn in funding in emerging markets as transaction activity dropped 18% y-o-y.

Megarounds drove growth: The UAE accounted for more than half of the total USD 3 bn in capital deployed across the MENA region, driven by large rounds for XPANCEO, raising USD 250 mn in a Series A round, and Airalo ’s USD 220 mn in a Series C round.

Early-stage funding was also strong, with capital allocations for pre-seed and seed funding rounds up 11% y-o-y across 81 transactions in 9M 2025, pointing to a robust venture capital pipeline. They accounted for the bulk (87%) of investments. Series A and B rounds reached record high of USD 819 mn during the period.

In 3Q 2025, non-mega funding grew 51% y-o-y, supported by a maturing mid-stage pipeline, with Series A up 75% — accounting for 7% of all transactions — and Series B up more than tenfold, accounting for 5%.

Broad-based growth: “While the record-breaking 3Q performance was amplified by large rounds, the sustained quarterly growth in non-MEGA activity since 3Q 2024 shows a deepening pipeline rather than short-term concentration,” MAGNiTT CEO Philip Bahoshy told EnterpriseAM.

Foreign investors are dominating the landscape and fueling investment: The majority of capital deployed in UAE startups in 9M 2025 — around 82% — came from non-UAE investors, while four of the top five investors by deployed capital were foreign, Bahoshy said. US-based funds were among the most active, accounting for 30% of unique investors, while UAE-based investors made up just 19%, he added.

A regional FDI magnet: “This shift shows the government’s role has become catalytic creating the regulatory and infrastructure base while global investors increasingly power late-stage growth, positioning the UAE as a regional magnet for international capital rather than a state-driven market,” Bahoshy said.

This is in-keeping with the regional trend: International investors for the first time in years deployed more capital than local investors in 3Q 2025, accounting for 59% of funding, according to the report. A lot of that was concentrated in late-stage funding rounds, with 64% of capital in USD 20 mn+ transactions coming from international players, and 85% of Series A capital coming from foreign players, highlighting their booming role as anchors for the region’s scaling startups.

The UAE also led the pack in terms of exits from fintech startups with 15 transactions, up from last year’s 11.

THE REGIONAL PICTURE-

A record 9M for the region: MENA startups raised over USD 3 bn across 469 transactions by September’s end — that’s more than double last year’s total and, for the first time, surpasses the longtime emerging market leader Southeast Asia, which trailed with USD 2.5 bn, according to Magnitt’s press release. Southeast Asia was hit hard with a 48% decline in startup funding, logging its weakest quarter in seven years, while emerging venture markets saw a 6% y-o-y decline in funding to USD 6.56 bn.

The third quarter was MENA’s strongest on record, with USD 1.2 bn raised (up 121% y-o-y). This suggests a “potential shift in global capital allocation,” though a longer period is needed to confirm a permanent trend, Bahoshi told us.

Mid-stage funding — Series A and B — led activity, surging 205% y-o-y to USD 1.4 bn in 9M 2025. The early-stage pipeline also remains robust, with pre-seed rounds rising 30% y-o-y, signaling a healthy influx of new founders.

Fintech startups are still taking the lead, attracting USD 965 mn (up 97% y-o-y) and representing over a quarter of all transactions. Growth was supported by open banking frameworks, major regional events, and large Saudi tickets. Enterprise software also gained momentum, rising to USD 320 mn across 52 transactions, up from USD 70 mn across 44 in the same period last year.

Rising exits and liquidity: Merger and acquisition activity doubled to 40 transactions in the first nine months of 2025 — a three-year high and a sign of a “healthier, more liquid ecosystem,” Bahoshy said. Exits were concentrated in the UAE (15) and Egypt (13), due to their mature buyer bases and ecosystems. However, “the exit challenge is more acute in the UAE and Egypt than it is in Saudi Arabia,” as the more mature startups in both countries are on the search for liquidity to survive the global extension of the average 7-year path to an exit, according to Bahoshi.

4Q to keep the momentum going: Magnitt expects the remaining months of 2025 to see “sustained momentum and measured optimism,” bolstered by continued public-private collaboration and institutional capital flowing into emerging markets.

Tags: