An article by Nour Al Hassan, the CEO of Arabic.AI and Tarjama

The Middle East does not suffer from a capital shortage. It suffers from a deployment problem.

Success stories like Careem, Tabby, Tamara, Jahez, Talabat, Noon, Property Finder, and Aramex prove that world-class companies can be built here. The real insight is that the region’s institutional investors—sovereign wealth funds, government entities, and strategic investors—are not obstacles; they’re the missing partners.

The GCC’s $4 trillion represents the most powerful tool available to build a world-class innovation ecosystem. The question is not why these institutions invest globally; it’s how the region can demonstrate that regional startups and tech companies are strategically important for its future while delivering compelling returns.

We have everything except the right partnership model

The Middle East has $4 trillion in institutional capital. The US had venture capital dry powder of $307.8 billion in 2024 and still struggled with deployment challenges. We don’t have a capital problem; we have an alignment problem.

Institutional investors, government bodies, and sovereign funds deploy $136 billion annually across international markets while allocating approximately 10% regionally. This is not pessimism about local potential; it’s risk management. They back global companies because those companies have proven models, transparent operations, and clear exits.

What’s shifting is why regional startups that scale are now attracting institutional capital. It’s not because founders are asking for support; it’s because the economics work and because these companies solve problems global players cannot.

Companies like Careem, Tabby, Tamara, Property Finder, and Talabat demonstrate that local founders can build billion-dollar solutions. These successes are not anomalies. They show that when regional capital flows to the right companies, it generates strong returns while building local capability. Saudi Arabia’s PIF has already demonstrated this by backing dozens of venture funds through initiatives such as Jada and Sanabil. Other regional markets, including the UAE, now face an opportunity to deploy more capital into an ecosystem that is increasingly ready and willing.

The partnership model needs strengthening not because institutions lack appetite, but because the ecosystem has matured to a point where it warrants deeper institutional participation. A government-backed guarantee structure, where the state co-invests alongside institutional investors in qualified regional startups, could significantly amplify deployment. These are not charitable decisions; they are rational capital moves that also address critical regional challenges.

The valuation gap is real, but it’s shrinking

A startup in Silicon Valley receives a higher pre-seed valuation than a comparable startup in the Middle East, reflecting a long-standing valuation gap. This gap exists because the region has fewer exits, fewer data points, and less pattern recognition.

What matters is the direction of travel. As regional success stories compound, valuations are rising and confidence is improving.

Institutional investors do not need to eliminate this gap on their own; they need to accelerate its collapse. When a government-backed fund invests in a Series C fintech, or when favourable regulatory conditions support a climate-tech scale-up, those companies become templates. They prove that regional startups can compete globally while delivering outsized impact locally. The valuation gap narrows not through charity, but through repeated demonstrations of returns.

Every developed market follows the same mechanism: large institutional capital creates confidence for smaller investors. The institutions already making global bets are the same ones capable of anchoring regional ones; they simply need to see both as strategically aligned.

We’re not comparing apples to apples with the US

The US government does not invest instead of private capital; it invests to enable it. SBIR and STTR grants provide around $2 billion annually in non-dilutive funding, reducing risk for private deployment. Europe’s Startup Nations programme aligned 26 countries around shared policy frameworks. Neither competes with institutional capital; both expand the total pool and reduce friction.

The Middle East holds an advantage neither the US nor Europe possesses: concentrated strategic capital with clear intent. A government commitment to allocate even a small percentage of institutional deployment to regional innovation would create a structural advantage, not just a funding boost.

This is not money scattered across startups. It is capital deployed through structured funds, governed professionally, and expected to deliver financial returns alongside regional impact. When government bodies or strategic institutions co-invest with regional VCs in growth-stage companies, they reduce risk across the ecosystem. Every Series B round becomes proof. Every acquisition becomes a template. Every exit creates capital and confidence for the next wave.

The jobs problem demands local solutions

MENA youth unemployment remains among the highest globally. Saudi Arabia has significantly reduced youth unemployment through policy intervention, but structural unemployment across the region will not be solved by importing technology platforms alone. Global companies optimise for scale and margin, not for employing a generation of regional talent.

Regional startups are fundamentally different. A fintech built in Dubai understands local payment behaviour, regulatory friction, and cultural adoption patterns in ways global platforms cannot replicate at scale. It employs engineers, operations teams, designers, and support staff locally. Every successful startup exit creates dozens, sometimes hundreds, of direct jobs and many more across the supply chain.

Significant capital deployed across regional startups over the next decade can build a base of scaled companies across fintech, logistics, climate tech, and digital government. This addresses unemployment while building regional intellectual property, talent, and market leadership. It also delivers the diversification that governments are explicitly targeting.

When governments and institutional investors back local companies, they are not choosing between financial returns and social impact. They are choosing to do both.

The real opportunity: structural capital anchoring

The breakthrough is not convincing institutional investors to shift from global to local. It is designing a model where they anchor regional growth strategically.

Establish regional growth funds through co-investment structures where government bodies and institutions commit significant tranches, matched by regional VCs and family offices. This creates predictable, scalable capital for Series A and B rounds and removes the cliff between early-stage and growth capital.

Create clear exit frameworks. When founders see credible IPO and M&A pathways—through regional exchanges, government-backed buyers, or cross-border trade sales—valuations normalise and companies remain regional longer. Institutions gain visibility on exit optionality, improving return profiles.

Use government procurement as an anchor customer. Allocating even a small share of public-sector IT and infrastructure procurement to qualified regional startups creates immediate revenue. This is de facto capital—often more powerful than grants—because it accelerates the path to profitability.

Define strategic sectors clearly. The region does not need to back everything. Fintech, climate tech, agritech, digital government, and AI infrastructure are areas where the Middle East can build a durable global advantage. Clarity concentrates capital, builds specialisation, and creates repeatable returns.

Why now is not hype; it’s urgency

AI is compressing economic cycles. Regions that build platforms will own future productivity and sovereignty. Remaining solely an importer of AI tools risks locking in dependence across finance, justice, education, and governance.

Climate and food challenges are existential in MENA. Global climate-tech and agritech companies will never optimise for the region’s specific constraints. Local founders will—and institutions have both financial and strategic reasons to back them.

Fintech has momentum, but without infrastructure, data partnerships, and institutional anchoring, it remains regional. Anchored properly, it becomes exportable.

Youth employment is approaching a critical point. Without scalable job creation now, social pressure will intensify. Startups remain one of the few mechanisms capable of creating knowledge work at scale. This is not optional innovation; it is economic necessity.

The ask is clear and aligned with institutional goals

This is not about redirecting institutions away from global opportunities. It is about architecting regional deployment so it delivers returns while solving critical problems.

• Commit a meaningful share of annual institutional deployment to regional venture and growth funds, with clear governance and accountability.
• Co-design exit pathways with exchanges and regulators to make liquidity visible and capital recyclable.
• Structure government guarantees to limit downside and unlock larger pools of capital.
• Anchor demand through public procurement.
• Signal strategic focus on the sectors where the region can win globally.

The outcome is not aspirational. It is mechanical: capital funds founders, founders scale companies, companies create jobs, exits recycle capital, and the ecosystem compounds.

The Middle East has the capital, the talent, and the urgency. What it needs now is the architecture to connect them. Institutional investors are not obstacles to ecosystem building; they are the load-bearing wall.

The capital wants to work. The companies are ready. The talent is here. The remaining task is to design the structures that allow all three to connect—and to recognise that backing local champions is as financially sound as it is strategically necessary.