The UAE is becoming a regional liquidity hub for venture capital, securing the third-highest VC funding among emerging venture markets (EVMs) in 2025, according to Magnitt’s annual report and a separate press release (pdf). Startups in the country raised USD 1.6 bn across 231 transactions, marking a 67% y-o-y increase. The performance was driven by growth in both later-stage mega-transactions and earlier-stage, non-mega transactions.

The country is shifting from a startup magnet to an exit engine, with some 17 exits taking place through M&A — the highest among EVMs — signaling a transition to more sophisticated liquidity.

UAE investors portfolios now account for 4% of all capital flowing into EVMs, with Abu Dhabi-based firm +VC ranking third globally among VC investors in EMVs by transaction count, deploying USD 6.3 mn across 49 transactions.

The return of mega-rounds and an AI focus defined the year. UAE-based XPanceo’s USD 250 mn Series A round and Airalo’s USD 220 mn Series C ranked third and fourth among the largest EVM transactions by funding in 2025. The country witnessed USD 653 mn in mega-transactions by 9M 2025 after none were recorded in 2024. It was also the MENA region’s biggest market for AI funding in 1H 2025, with USD 125 mn raised across 35 transactions.

Zooming out

The Middle East raised an all-time high of USD 3.4 bn in 2025 and was the only region among emerging venture markets to see an increase in transaction volume — which grew 13% to 581 transactions — surpassing Southeast Asia for the first time.

Saudi Arabia took the lead, securing USD 1.7 bn in investments, trailing only Singapore globally, which raised USD 3.1 bn. The region saw a record USD 1 bn in mega-transactions, supported by the return of late-stage liquidity, stronger diplomatic ties, and rising investor confidence. Overall, the MENA region raised USD 3.8 bn in VC funding.

This came down to both regional strength and weakness in Southeast Asia, where early-stage transactions fell 46% y-o-y to their lowest level in over a decade, Magnitt Research Department Manager Farah El Nahlawi told EnterpriseAM. Early-stage pipelines in the GCC stayed active due to domestic capital and government-backed programs, while late-stage liquidity returned through several very large rounds, El Nahlawi said. Events like Leap, FII, and Abu Dhabi Finance Week also helped attract investors and sustain momentum.

Where did the money go? The fintech sector took the regional lead in 2025, with funding reaching USD 1 bn. E-commerce came in second with USD 494 mn raised, followed by sports and fitness (USD 309 mn), telecommunications (USD 236 mn), and enterprise software (USD 184 mn). Meanwhile, MENA AI-related company funding jumped 204% y-o-y to USD 817 mn.

The region’s capital is becoming selective, with global VCs leading more rounds

MENA venture and broader private capital became more selective in 2025, with due diligence shifting from a focus on momentum to fundamentals, scale, and clear routes to liquidity, Magnitt CEO Philip Bahoshy said. On the M&A front, a recent rise in activity points to a more mature ecosystem and a desire to acquire tech capabilities rather than build them internally, TaylorWessing Partner Abdullah Mutwai said.

Global VCs began leading more rounds in the region, especially from Series A onward, as risk is becoming clearer, El Nahlawi told us. Institutional investors gained confidence in enforcement, shareholder protections, and downside outcomes, particularly in the UAE and Saudi Arabia. Meanwhile, faster-scaling founders, stronger governance, and increasingly tangible exits reduced execution risk. That confidence was reinforced geopolitically by US President Donald Trump’s first visit to Saudi Arabia and the UAE, signaling long-term US commitment and stability.

What’s next

Looking ahead, the outlook for the UAE in 2026 is for consistency rather than dominance, with transaction activity expected to remain stable, El Nahlawi told us. Total funding is expected to fluctuate year to year, reflecting the nature of large growth rounds and broader global risk appetite.

Regionally, the Middle Eastern VC ecosystem is entering a more mature and competitive phase, where the focus shifts from capital availability to where it concentrates, how risk is priced, and whether liquidity pathways begin to open.

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