Top Middle East startup trends for 2025

Investors will continue to be hesitant, but funding activity is likely to pick up after the cut in US interest rates

January 6, 2025, 1:21 PM

Passengers at King Abdullah Financial District station on the Riyadh Metro. The city has emerged as a hub for Middle East startups

It has been a challenging year for the Middle East’s startups, marked by global economic uncertainty, a slowdown in investment and regional conflicts.

We are now at an inflection point, where resilience and profitability will dictate the success of startups.

Wamda, owner of the Middle East investment company Wamda Capital, says the total amount raised in the Middle East in 2024 (including debt) stands at just under $2 billion, down by half year on year.

This is primarily because of a drop in the number of mega-deals, deals worth $100 million or above, while investment in early-stage startups has remained healthy. Investors are likely to continue to be hesitant, but investment activity may pick up after the US Federal Reserve slashed interest rates last month.

Globally, investment has also slowed down. It is only in generative AI where investors have been writing big cheques. This is a sector that is still nascent in our part of the world, where we tend to be consumers of technology rather than pioneers.

Fintech will continue to reign supreme for investors. The latest figures from Wamda showed that last year the sector managed to amass almost $700 million, or more than a third of the total.

Critical gaps in financial inclusion and digitisation, particularly in underbanked markets across Mena, have been driving this boom in financial technology startups. But while the sector will dominate 2025, there is likely to be plenty of consolidation as the market becomes increasingly saturated.

Investors will also look to other sectors such as healthcare and sustainability, driven by a governmental push towards these areas.

Indeed, government incentives will be important drivers of the Middle East’s startup activity. In the past few years, Riyadh has emerged as a lucrative hub for founders, challenging Dubai as the region’s entrepreneurial hotspot.

Saudi Arabia’s government has made big strides in improving regulations and establishing support entities to both encourage its own population to pursue entrepreneurship and attract foreign companies to its soil. Its pull will continue to strengthen, especially for startups based in smaller markets across Mena, including Jordan and Lebanon, where access to finance is limited.

The knock-on effect will be more startups setting up their headquarters in Riyadh, while maintaining back-end offices in their home countries, where the cost of talent is cheaper.

Riyadh is also pushing more startup initial public offerings, and has more than a dozen in the pipeline. While the number of exits has decreased in the past couple of years, IPOs have become a viable option for later-stage startups.

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Most recently, Talabat listed on the Dubai Financial Market with a valuation of $10 billion, making it the biggest tech IPO in the region to date. Listing regionally is a more prudent option for the Middle East’s startups, where they enjoy stronger brand recognition than they do in the US, for example.

What exactly 2025 has in store for the ecosystem remains to be seen. A new Trump administration will have its geopolitical ramifications, particularly in terms of investor appetite.

Triska Hamid is a writer focusing on technology and startups in the Middle East and an angel investor