The MENA startup ecosystem saw a sharp decline in investment in March 2025. Funding fell by 76% to $127.5 million across 28 deals, compared to $530 million in February*, even after excluding debt financing from both months.

The US trade war against its global trade partners has hurtfully impacted the Middle East and North Africa (MENA) region, causing significant economic damage to key countries like Egypt, Jordan, Saudi Arabia, and the United Arab Emirates. The shaking global economy has resulted in a 50% drop in both the value and volume of investments year-on-year.

The UAE is back to the forefront

The startup ecosystem in the United Arab Emirates (UAE) secured a total of $104.4 million across 14 transactions, claiming the position of the most funded ecosystem in the region.

While Egypt's startup scene displayed a relatively subdued performance last month, it still managed to secure a commendable second place in terms of funding. Four Egyptian startups raised a modest $11.6 million; however, Egypt's funding activity surpassed that of Saudi Arabia, which ranked third, with five of its startups raising a combined investment of $8 million.

Fintech led the funding landscape as usual, securing $82.5 million across 10 deals. Healthtech followed in a distant second with $16 million invested in two deals, while AI attracted $14 million through four startups.

Notably, startups providing software-as-a-service (SaaS) have been absent from investors’ radar for the second month in a row, losing the traction they gained last year.

Last month, later-stage startups raised $46 million, accounting for 36% of total investments, with three startups raising funds at Series B. Early-stage startups (pre-seed to Series A) received the majority of funding, with $58 million, representing 70% of total investments. Debt financing saw a sharp decrease, only making up 12.5% of funds raised in March.

The landscape of startup investment reveals a clear tendency towards business-to-business (B2B) ventures, which amassed a total of $97 million across 16 startups. The business-to-consumer (B2C) sector lagged significantly behind, securing a mere $24 million through only six deals. The remaining portion of the investment capital was allocated to startups that adopt a dual mode.

The gender equality in entrepreneurial funding faced a stark setback last month, as female entrepreneurs were entirely excluded from funding opportunities, receiving a disheartening zero dollars in investment. In contrast, male founders received $113 million, and the remainder went to startups co-founded by men and women.

What can we infer about the year's performance based on Q1 results?

Despite the overall slowdown in ecosystem activity across the MENA region, the first quarter of 2025 has shown a remarkable quarter-on-quarter (QoQ) growth in venture capital funding. MENA-based startups raised a substantial $1.5 billion in Q1 2025, marking a significant 244% increase compared to the $442 million raised during the same period in the previous year.

Even when discounting the debt financing from the total amount raised in Q1 2025, the growth remains substantial at 44%, a positive sign for the long-term sustainability of the MENA startup ecosystem.

The Fintech leads once more

With more than $1 billion in investments raised by 36 [fintech] startups in the first quarter, fintech still proves an unwavering appeal to investors since 2021, emerging as the golden sector of all time. Fintech has grown regionally, exploring untapped areas like cryptocurrency and virtual assets. There's no indication that fintech's appeal will diminish anytime soon.

What to expect in Q2

As the MENA startups navigate an increasingly shifting global economic landscape, shaped by geopolitical tensions and the emergence of new trade alliances, the upcoming quarter will require more resilience and adaptability from both startups and venture capitalists. The possibility of reintegrating sanctioned oil into global markets and China's pivot toward new trade partners are not isolated events; they signal a broader reordering of the global economic map. Sectors like logistics, mobility, and e-commerce are particularly vulnerable to these shifts, given their sensitivity to trade routes, supply chains, and fuel prices.

Investors will likely pause and reassess, leaning toward safer bets and focusing on later-stage startups that have already demonstrated resilience and the ability to weather volatility. Early-stage ventures may face a tougher environment due to increased risk aversion. However, amidst disruption lies opportunity. Startups that quickly adapt and align their strategies with the current global landscape could emerge as leaders in the reshaped market.

These monthly reports are a collaboration between Wamda and Digital Digest.

*Disclaimer: The investment figures for February have been revised to reflect ongoing data updates and the inclusion of previously unreported deals.