Saudi Arabia tops emerging markets' venture capital funding, overtakes Singapore

Arab News

22-04-2025

RIYADH: Saudi Arabia has overtaken Singapore as the premier destination for venture capital funds across emerging markets after it secured $391 million in the first quarter of 2025.
The 53 percent year-on-year rise helped propel the Kingdom to becoming the highest-performing country across the Middle East, Africa, Pakistan, Turkiye, and Southeast Asia in terms of total funding during the three-month period, as revealed in the latest analysis by venture data platform MAGNiTT.
While the standout $160 million series E round by fintech unicorn Tabby contributed significantly to the overall figure, the broader investment ecosystem showed resilience with non-MEGA deal funding, which are transactions below $100 million, rising 9 percent quarter-on-quarter.
'This consistency signals a strengthening pipeline backed by sovereign LPs (limited partners) like SVC (Saudi Venture Capital), a growing cohort of accelerators, and successful exits like Rasan's IPO (initial public offering),' according to MAGNiTT's report.
Saudi Arabia leads MENA funding and deal activity
Saudi Arabia led the EVMs and continued its dominance in the Middle East and North Africa region.
The Kingdom captured 58 percent of all MENA venture funding and accounted for 41 percent of transactions, far outpacing regional peers.
According to MAGNiTT, the Kingdom achieved an 87 percent year-on-year increase in non-mega deal funding and a 437 percent rise in series A and B rounds, supported by sizable transactions such as those by Ula.me and Merit Incentives, each raising $28 million.
The rise in Saudi venture capital investment comes amid a broader rebound in the MENA region.
Total funding across MENA reached $678 million in the first quarter of 2025, a 58 percent increase year on year, despite a 21 percent decline in deal count to 133 transactions.
The surge was supported by improved investor sentiment following late 2024 interest rate cuts across the Gulf, along with sustained sovereign fund activity and flagship ecosystem initiatives such as LEAP 2025.
In terms of historical share, Saudi Arabia's ascent has been significant. It expanded its share of MENA venture funding to 58 percent in the first quarter of the year, up from 39 percent in 2024 and 51 percent in 2023.
This upward trajectory has positioned the Kingdom as the central engine of regional VC activity, reversing a period during which the UAE held the lead.
The ecosystem shift also reflects a structural change in capital allocation. The first quarter saw non-mega deals rise for the fourth consecutive quarter, and early-stage investments in series A and B rounds increased by 50 percent quarter-on-quarter.
In contrast, Southeast Asia reported its weakest early-stage quarter in seven years, with Singapore's funding falling by 61 percent year on year to $377 million.
The gap signals a shift in global investor preference as capital increasingly flows toward markets like Saudi Arabia, where macroeconomic stability, proactive policy, and institutional backing provide a conducive environment for venture growth.
With 54 deals completed, the Kingdom reported the smallest year-on-year decline in deal count among the region's top three markets, supported by a robust early-stage pipeline.
Fintech dominates sector activity
Fintech remained the most active and well-funded sector across MENA, particularly in Saudi Arabia, contributing 30 percent of all deals and capturing 57 percent of total regional funding.
The sector saw a 362 percent year-on-year increase in funding, totaling $384 million, driven by Tabby's $160 million MEGA round and strong underlying demand for digital finance solutions.
Notably, 35 percent of all fintech deals in the first quarter of 2025 were in the $5 million to $20 million range, up 24 percentage points from the same period last year, demonstrating increasing maturity and scalability across the sector.
Enterprise Software was the second most transacted and funded vertical, propelled by activity in Saudi Arabia and the UAE, accounting for 75 percent of all sector deals.
Within this segment, the productivity apps sub-sector achieved record performance with six deals, including Merit Incentives' $28 million and Qeen.ai's $10 million rounds. The enterprise category posted a 112 percent annual growth in funding to reach $61 million.
Saudi Arabia drives top-tier transactions and investor participation
While deal volume across MENA dropped 21 percent year on year to just 133 transactions — one of the lowest quarterly figures in five years — Saudi Arabia defied the trend, maintaining strong early-stage momentum.
MAGNiTT noted that deal activity in the up to $1 million bracket declined 8 percentage points year on year to just 31 percent, while deals in the $5 million to $20 million and over $20 million brackets saw increases of 4 percentage points and 3 percentage points, respectively.
This reallocation of capital reflects investors' growing appetite for scale-ready startups in more advanced funding stages.
Pre-seed to pre-series A activity in the Kingdom saw a 14 percent increase, highlighting the nation's strengthening foundation for long-term growth.
The shift in capital allocation patterns also reinforced Saudi Arabia's strategic focus.
The share of deals in the $1 million to $5 million range rose to 46 percent, the highest proportion in five years, mirroring a broader pivot across MENA toward larger, more scalable investment opportunities.
Simultaneously, the lowest-value ticket size, $0 to $1 million, fell to 31 percent of deals, down 8 percentage points from the previous year.
Five of the region's 10 largest deals originated from the Kingdom, including Tabby's round, the sole mega deal of the quarter, alongside significant rounds by Zension, with $30 million and Merit Incentives.
According to MAGNiTT, this concentration of large-ticket transactions underscores the depth of investor confidence in the Saudi startup ecosystem.
Investor engagement in the Kingdom was also evident in the breakdown of top deals. The nation hosted more top-10 deals than any other MENA country, with fintech leading as the most represented industry.
Blue Pool Capital and Hassana Investment Co. emerged as the most prominent backers, jointly deploying an estimated $53.3 million across key transactions, with fintech accounting for four of the top 10 deals.
Exit environment strengthens on record M&A activity
Saudi Arabia's momentum was further underscored by a robust exit environment, with the MENA region recording 21 exits, up 163 percent year on year, marking the strongest quarter for mergers and acquisitions since MAGNiTT began tracking.
The Kingdom's IPO pipeline also improved, adding another layer of attractiveness to its startup ecosystem.
While the regional rebound was attributed to easing inflation, improved liquidity, and pre-US tariff optimism, MAGNiTT emphasized that: 'Saudi Arabia's IPO and M&A momentum are now integral to the region's exit environment.'
Despite this surge, the median time to exit via M&A lengthened to six years, up from five in 2024, reflecting continued challenges for early-stage startup liquidity.
Geopolitical risks introduce uncertainty to venture outlook
Despite strong regional performance, MAGNiTT highlighted emerging risks that could disrupt momentum.
'While Q1 2025 was a positive start to the year … that momentum is now under threat,' said Philip Bahoshy, CEO of MAGNiTT.
He added that the new US tariff policies have created uncertainty in both the public and private markets over the last couple of weeks, which can create a challenge for decision-makers who are likely to be in a risk-off mindset.
'In venture capital, this uncertainty is likely to impact three areas: the deployment of capital from LPs to VCs, VCs' willingness to make decisions in uncertain times, and finally, startups' ability to raise funds,' said Bahoshy.
He noted that while global volatility persists, long-term fundamentals in EVMs remain strong.
'Despite global headwinds, emerging venture markets continue to present compelling long-term opportunities. MENA, in particular, is uniquely positioned for sustained growth thanks to deep pools of local capital, pro-entrepreneurship policy, and active sovereign support,' Bahoshy added.
'As global investors diversify beyond traditional markets, regions like MENA and Southeast Asia are poised to attract fresh capital — particularly in tech-led sectors that are strategically positioned and less exposed to tariff volatility,' the CEO said.