Start-ups in the Middle East receive little investment

Start-ups and start-ups (new companies dedicated to ICT) in the Middle East face a scenario of fairly low venture capital investment. In other words, they do not receive funding from investors or sovereign wealth funds, i.e. the government.

In February 2025, the Wamda and Digital Digest platforms analysed that startups in both the Middle East and North Africa received almost $500 million in funding. However, it seems that the situation has not improved.

The reason for this problem is the lack of action aimed at advanced Series B or later production projects. This makes it difficult for companies to subsequently list on the stock market through Initial Public Offerings (IPOs).

This means that there will not be many private companies issuing shares to the public in order to become publicly traded companies, in other words, listing on the stock market and selling shares to the public.

The Asharq media outlet explained that, according to the MAGNiTT platform, ‘less than 6.5% of startups financed in the region have gone public in the last decade.’ This demonstrates the dominance of those entities that have already consolidated their place in the market.

It went on to say that the CEO of the platform, Philip Bahoshy, explained that although investments have been directed towards fund allocation companies such as Sanabil Investments and Jada Fund of Funds, this money is still small compared to global investments.

For this reason, companies are seeking financing abroad. Saudi Arabia, for example, according to Asharq, has seen a 44% increase in foreign direct investment this year as part of its ‘Vision 2030’ to reduce its dependence on oil exports.

The General Authority for Statistics concluded that the country received approximately $6.4 billion in foreign investment in the first quarter of the year.

So they are seeking financing abroad, such as Property Finder, which raised millions of dollars from the Swedish company VNV Global and General Atlantic. Even the private lender Francisco Partners granted it a $90 million loan.

Najla Al Midfa, vice president and CEO of the Emirates Growth Fund, warned of the situation: ‘When companies based in the United Arab Emirates raise funds abroad, we risk losing not only funds, but also intellectual property, jobs and, ultimately, IPOs.’

Michel Lahyani, CEO and founder of Property Finder, does not believe that receiving shares from abroad prevents companies from listing on the Middle East Stock Exchange. But the issue is that they do not receive aid in advanced stages.

The company Tabby is an exception to the rule because it has received international funding and intends to launch an initial public offering.

Lahyani would like to see more capital from sovereign wealth funds directed towards venture capital for companies in Series B or later stages to help locally, as Tala Aljabri, founder of Wyld VC, said that many investors do not do so for fear that the money will be spent on failed projects, thus avoiding any risk of loss.

And even if more foreign funding is received, international investors have been pulling out since 2022 due to global instability and uncertainty. Instead, they have focused on strengthening their own regions.

What's more, according to private bank JP Morgan, the current tensions are undermining international investor confidence as they fear a greater impact on the market and the stock exchange. 

However, as La Razón has explained, history has shown that the best strategy is to pursue a long-term investment strategy.

Asharq has indicated that the scenario of international financial uncertainty towards the Middle East is changing, with examples such as BECO Capital, Riyad Capital and the Emirates Growth Fund. These organisations help small and medium-sized enterprises (SMEs) as well as start-ups.

However, Alexander Lazaro, founder of venture capital firm Fluent Ventures, said that capital is now being directed more towards companies engaged in artificial intelligence in Silicon Valley because ‘if you are geographically further away, it is much more difficult.’