Venture capital investment in the Middle East and North Africa experienced a significant surge in the first quarter of 2025, with startups raising a total of $678 million, marking the strongest quarter since the end of 2023. This growth was attributed to recent interest rate cuts that improved investor sentiment, according to data from the platform Magnitt.

Saudi Arabia emerged as the leading country for venture capital investment in the MENA region, attracting $391 million. The United Arab Emirates followed, raising approximately half that amount. The region’s strong local capital and supportive government policies for startups are seen as key factors for long-term growth, despite ongoing uncertainties related to US tariff policies and declining oil prices.

Magnitt noted that the Middle East outperformed a broader slowdown in fundraising across emerging markets, largely due to active sovereign wealth funds and significant events in Riyadh and Dubai that stimulated investment activity. However, this momentum could be at risk as external factors weigh on investment decisions, particularly those of funds like Saudi Arabia’s Public Investment Fund (PIF).

Philip Bahoshy, the CEO and founder of Magnitt, stated that the current uncertainties could affect several areas in venture capital, including the flow of capital from limited partners to venture capitalists and the ability of startups to secure funding.

Despite these challenges, Bahoshy expressed confidence that the region’s strong local capital and pro-startup government initiatives still position it well for future growth, particularly in technology-led sectors. In the first quarter, fintech funding accounted for 57% of all venture capital raised in the MENA region, exemplified by the notable $160 million funding round for Saudi Arabia-based Tabby. Other sectors, such as enterprise software and education technology, also showed robust growth, while e-commerce and retail faced a slowdown.

Among the most active investors in the region were Blue Pool Capital, Wellington Management, and Saudi Arabia’s STV and Hassana Investment Co. Additionally, the Middle East and Africa recorded a historic number of mergers and acquisitions in the first quarter, with the total deal count more than doubling from the previous year to reach 21, led by Egypt and the UAE with nine deals each.