The UAE and Saudi Arabia opened 2025 with the most dynamic quarter for private equity since the end of 2023. According to Magnitt, MENA tech startups raised $678 million — a 30% increase from the fourth quarter of last year. The main driver was the expectation of a rate cut cycle in the US, which fueled the appetite of local sovereign funds for early deals. The second driver was record media activity — a series of forums in Riyadh and Dubai brought together the largest LP investors from ADQ to Mubadala and PIF, signaling the region’s readiness to compete with Asia for the status of the “third force” of global venture capital after Silicon Valley and Shenzhen, Bloomberg has reported.
The United Arab Emirates raised ~$190 million, betting on scaling the ADQ-DisruptAD and Dubai Future District Fund portfolios. The average deal size in the UAE jumped to $7.8 million from $5.2 million a year earlier, indicating a market shift from seed checks to B-C rounds. Magnitt identifies five factors that keep the emirate in the top 2 MENA rankings:
- Strong LP sources. ADQ, Mubadala and family office funds provide “long” capital for 8-10 years.
- Tax neutrality. No CGT and easy repatriation of dividends.
- Visa benefits. 10-year Golden Visa for founders and their teams.
- 0% VAT innovation zones. Dubai Internet City, Hub71, DIFC Innovation Hub.
- Flexible Sandbox regulation. VARA and Central Bank FinTech Office simplify product testing.
Where is “smart” capital flowing
In the structure of deals, fintech confidently holds the first place — 57% of the total check ($386 million), as BNPL giant Tabby closed a record round of $160 million. Next — B2B software and edtech, which together took another 25% of flows. E-commerce, on the contrary, cooled down due to market saturation. The most high-profile rounds of the quarter:
- Tabby (KSA) — BNPL • $160 million
- YallaHub (UAE) — SaaS logistics • $62 million
- Classera (KSA) — EdTech • $40 million
At the same time, a historic peak in M&A is observed: 21 closed exits, with Egypt and the UAE sharing the lead — nine transactions each.
Clouds on the horizon
CEO Magnitt Philippe Bahoushi sees three potential brakes:
- LP capital transfer. Geopolitical turbulence and tariff uncertainty may slow down the decisions of funds from Europe and the US.
- Prudence of VC managers. Funds may increase the duration of due diligence and lower valuations, expecting new macro shocks.
- Raw material factor. Brent <$70 reduces the free cash of sovereign investors in the Gulf.
However, the government programs Dubai Economic Agenda D33 and Abu Dhabi Economic Vision 2030 guarantee long-term nourishment of the ecosystem – from state grants for deep-tech to coordinated investments in clouds, semiconductors and AI infrastructure. Even with a more restrained pace of global venture capital, Abu Dhabi and Dubai remain key gateways for international capital seeking to enter the MENASA markets, and the emirates themselves – a reliable “anchor” of private innovative investments in the post-oil economy of the region.