Fintech remains top choice of investors as it attracts 362% more investment in Q1

Fintech also ranked as the most transacted industry in January-March 2025 quarter, accounting for 30% of all Mena deals by registering 21% growth — the largest year-on-year increase in deal count.. Photos by metamorworks

Fintech remained a funding powerhouse in the Middle East and North Africa (Mena) during the first quarter of 2025 as it recorded 362% year-on-year growth by attracting $384 million investment, the latest data shows.

Magnitt, the leading data and intelligence platform tracking venture capital and private equity across emerging venture markets, said Tabby led the fintech investment with $160 million mega deal during the January-March 2025 quarter.

In its first quarter 2025 Mena Venture Capital report, Magnitt said fintech retained top position with non-mega funding surged 170% year-on-year basis to $224 million — its second-best quarter ever and fourth consecutive quarterly increase — driven by strong demand for scalable digital finance solutions. Fintech captured 57% of total funding across the Mena region in first quarter and remained top choice of the investors.

Enterprise software rose to the second most funded sector with a 112% year-on-year increase, fuelled by Merit Incentives ($28 million) and Qeen.ai ($10 million), which made up 62% of its funding. Led by Ula.me’s $28 million deal, edtech funding also increased by 150% year-on-year basis.

On the other side, e-commerce funding dropped 62% year-on-year basis to $60 million due to a lack of mega deals while non-mega funding in the sector soared 136% during the quarter. Transport & Logistics also recorded 1% decline in funding to $19 million during the quarter.

Most Transacted Industry

Fintech also ranked as the most transacted industry in January-March 2025 quarter, accounting for 30% of all Mena deals by registering 21% growth — the largest year-on-year increase in deal count, according to the report.

“Payment Solutions and Lending were among the fintech sub-industries to see the biggest year-on-year growth of 44% and 200% in deals, respectively. Notably, 35% of fintech deals were in the $5 million ticket size, marking a 24% increase from the first quarter of 2024 — indicating the strong maturity and scale in the region’s fintech pipeline.

Enterprise software held its position as Mena’s second most active sector, driven mainly by the UAE and Saudi Arabia that made up 49% and 26% of total deals, respectively. Productivity apps led the sub-sector, recording six deals — its highest ever in both volume and funding — highlighting rising demand for scalable SaaS and automation tools aligned with regional digital transformation agendas.

“While first quarter of 2025 was a positive start to the year, as predicted at Magnitt, that momentum is now under threat,” according to Philip Bahoshy, CEO of Magnitt.

He said 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.

Philip Bahoshy, CEO of Magnitt. Philip Bahoshy, CEO of Magnitt.

“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,” Bahoshy said.

Tech experts and analysts said fintech and local investors led capital deployment across the Mena region in first quarter of 2025, reflecting a positive growth trend at the beginning of the year. They highlighted that top 10 deals made up 57% of Mena funding in January-March 2025 quarter, signalling a late-stage momentum. “Fintech remained the dominant sector, securing three of Mena’s top 10 largest deals in first quarter of 2025 as it continues to attract capital by solving foundational financial access challenges, a trend also seen across Southeast Asia and Africa despite global macroeconomic pressures,” according to experts.

Magnitt report said Mena’s venture capital ecosystem defied the trend seen in emerging venture market, which reported their lowest level since fourth quarter of 2017.

“Total venture funding in Mena reached $678 million in first quarter of 2025, rising 57% year-on-year basis and surpassing all quarters of 2024 despite a 21% drop in deal count to 133 transactions. This rebound was underpinned by late 2024 interest rate cuts across the GCC, which helped improve investor sentiment and liquidity heading into 2025, alongside continued sovereign fund activity and first quarter ecosystem catalyst like LEAP 2025. These tailwinds fuelled a sustained rise in non-mega deal (<$100 million) funding, which grew for the fourth consecutive quarter (19% quarter-on-quarter basis) and a slight mega deal funding growth led by Tabby’s $160 million Series E, the region’s sole mega deal,” according to the report.

Konstantin Vladimirovich Tserazov, a financial expert and former Senior Vice-President at Otkritie Bank, said there are also some unique things happening specifically in the UAE’s fintech scene: Fintech that follows shariah, digital IDs that work, and it being a crypto hotspot.

“Forget just finding black gold in the Arabian desert. A new kind of treasure is bubbling up here: A real, honest-to-goodness fintech scene. So, what’s making this desert bloom with fintech cash? There are many things, but one stands out: they’re helping innovation with regularly updated rules,” Tserazov said.

Konstantin Vladimirovich Tserazov, a financial expert and former Senior Vice-President at Otkritie Bank. Konstantin Vladimirovich Tserazov, a financial expert and former Senior Vice-President at Otkritie Bank.

With improving macro signals, easing inflation and renewed investor confidence, Mena region was poised for continued growth. However, trade tensions and high global interest rates remain potential obstacles.

“The reality is Mena’s performance will be highly skewed towards how Saudi Arabia and the UAE are impacted by the US tariff and indirect macroeconomic challenges that come off the back of them. The region’s record merger and acquisition activity (163% year-on-year growth) and rising IPO pipeline are setting the stage for improved exit strategy, a key enabler for future fundraising cycles, assuming that uncertainty doesn’t hinder this growth,” according to Magnitt.

It further mentioned that strategic venture capital activity during the first quarter of 2025 was buoyed by over a dozen ecosystem events, such as LEAP and Step Dubai where billions in venture capital and tech investments were announced.

The rise of regional funds such as Suhail Ventures, 500 Mena L.P., and Foundation Ventures ll alongside sovereign-backed commitments from Jada, SVC, and QIA, continue to strengthen local capital markets and bridge funding gaps across growth stages.

Despite global headwinds, Bahoshy said 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,” he said.

“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,” he said.

Capital Deployment Shift

In another research conducted by a data intelligence platform Tracxn noticed that the UAE technology startups raised a total of $872 million in first quarter of 2025, marking a 194% increase from the $297 million raised in the fourth quarter of 2024. It is a dramatic 865% surge from the $90.5 million raised in first quarter of 2024, reflecting a significant shift in capital deployment patterns within the UAE’s tech sector.

“The UAE witnessed a significant rebound in venture funding during the January-March 2025 quarter, marked by an influx of late-stage capital and an uptick in $100 million plus mega deals. With key sectors such as fintech, enterprise applications, and retail driving investment momentum, the ecosystem appears to be entering a phase of renewed investor confidence,” according to Tracxn that tracks four plus million entities through 2,900+ feeds categorised across industries, sub-sectors, geographies, and networks globally.

The Tracxn report noticed that ennterprise applications emerged as the leading sector in first quarter of 2025, securing a total of $688.1 million in funding. This represents a 664% increase compared to the $90.1 million raised in fourth quarter of 2024 and a 1,111% surge over the $56.8 million raised in first quarter of 2024.

“The fintech sector followed with $215.6 million in funding, a 73 per cent increase from $124.6 million in fourth quarter of 2024 and a 574 per cent jump from $32 million in first quarter of 2024,” according to the report..

The report also mentioned retail sector, which saw $171.5 million in funding in first quarter of 2025, reflecting a 134 per cent rise from $127.6 million in fourth quarter of 2024 and a staggering 13,092% increase compared to $1.3 million in first quarter of 2024.

Tech Acquisitions in Q1

Tech companies in the UAE recorded six acquisitions in first quarter of 2025, maintaining the same level as first quarter of 2024. Cartlow was acquired by Basatne in what became the highest valued acquisition of January-March 2025 quarter followed by the acquisition of HotCold Studio by Grandstores.

The UAE technology startups raised a total of $872 million in first quarter of 2025, marking a 194% increase from the $297 million raised in the fourth quarter of 2024. The UAE technology startups raised a total of $872 million in first quarter of 2025, marking a 194% increase from the $297 million raised in the fourth quarter of 2024.

Dubai-based tech firms accounted for 96% of all funding seen by tech companies across the UAE in first quarter this year, establishing the city as the undisputed leader in attracting venture capital. Abu Dhabi followed at a distant second.

“500 Global, Wamda Capital, and Middle East Venture Partners were the overall top investors in the UAE tech ecosystem. Oraseya Capital, Plus VC, and Endeavor were the top seed-stage investors in January-March 2025 quarter while QED Investors and Tech Invest Com led early-stage investments in the country during the same period.

The UAE tech ecosystem experienced a sharp surge in funding in Q1 2025, primarily driven by significant late-stage investments and multiple $100 million plus deals in enterprise applications, fintech, and retail. While seed-stage investments declined, the dominance of Dubai in attracting capital, along with a strong uptick in acquisitions, highlights the growing maturity of the region’s tech sector.