The Middle East and North Africa (MENA) startup ecosystem experienced a significant downturn in investment during March 2025, according to a recent report by Wamda and Digital Digest. Funding plummeted by 76% to $127.5 million across 28 deals, a stark contrast to the $530 million recorded in February. This decline occurred even after excluding debt financing from both months, highlighting the severity of the slowdown.

Several factors contributed to this downturn. The ongoing US trade war against its global trade partners has had a detrimental impact on the MENA region, causing economic damage to key countries such as Egypt, Jordan, Saudi Arabia, and the United Arab Emirates. The global economic uncertainty has also resulted in a 50% year-on-year drop in both the value and volume of investments.

Despite the overall regional decline, the United Arab Emirates (UAE) emerged as the most funded ecosystem in March, securing $104.4 million across 14 transactions. Egypt's startup scene, while relatively subdued, still managed to secure second place with $11.6 million raised by four startups. Saudi Arabia ranked third, with five startups raising a combined $8 million.

Fintech continued to dominate the funding landscape, attracting $82.5 million across 10 deals. Healthtech followed in second place with $16 million invested in two deals, while AI secured $14 million through four startups. Notably, startups providing software-as-a-service (SaaS) have been absent from investors’ radar for the second consecutive month, losing the traction they gained last year.

Later-stage startups raised $46 million, accounting for 36% of total investments, with three startups securing Series B funding. Early-stage startups (pre-seed to Series A) received the majority of funding, with $58 million, representing 70% of total investments. Debt financing saw a sharp decrease, making up only 12.5% of funds raised in March.

Business-to-business (B2B) ventures attracted significant investor interest, amassing $97 million across 16 startups. The business-to-consumer (B2C) sector lagged behind, securing only $24 million through six deals. The remaining investment capital was allocated to startups adopting a dual model.

A concerning trend emerged in March regarding gender equality in entrepreneurial funding. Female entrepreneurs received zero dollars in investment, while male founders received $113 million. The remainder went to startups co-founded by men and women.

Despite the slowdown in March, the first quarter of 2025 showed remarkable quarter-on-quarter (QoQ) growth in venture capital funding. MENA-based startups raised a substantial $1.5 billion in Q1 2025, a significant 244% increase compared to the $442 million raised during the same period in the previous year. Even when discounting debt financing, the growth remains substantial at 44%, indicating long-term sustainability for the MENA startup ecosystem.

Fintech continues to be a leading sector, with more than $1 billion in investments raised by 36 startups in Q1 2025. Its unwavering appeal to investors since 2021 and exploration of untapped areas like cryptocurrency and virtual assets solidify its position as the "golden sector."

Looking ahead to Q2 2025, the MENA startup ecosystem faces an increasingly complex global economic landscape shaped by geopolitical tensions and new trade alliances. Sectors like logistics, mobility, and e-commerce are particularly vulnerable to these shifts. Investors are expected to pause and reassess, leaning toward safer bets and focusing on later-stage startups. Early-stage ventures may face a tougher environment due to increased risk aversion. However, startups that quickly adapt and align their strategies with the current global landscape could emerge as leaders in the reshaped market.