Startup Investments Decline to $9.25 Million as AI Leads the Scene

Startup investment activity across the Middle East and Africa slipped sharply in the third week of August, with the volume of new deals falling by $42.25 million versus the prior week as overall reported funding amounted to $7.25 million across four deals (three publicly disclosed). Investment was concentrated in AI, EdTech and fintech, with AI-led transactions — chiefly HeyBreez and XSquare — accounting for roughly 58.62% of the week's total and EdTech represented by Saudi-based AILA capturing a sizable share.

"The volume of new investment deals in startups across the Middle East and Africa declined by $42.25 million during the third week of August compared with the previous week."

The week's activity was highlighted by a $3 million Pre-Seed A round for AILA, a Saudi EdTech startup developing AI-powered educational solutions. The round was led by Rua Growth Fund and included participation from Jo Academ, Bunat VC and Fikr Ventures. AILA alone represented approximately 41.4% of the week's investment total, underscoring strong investor interest in AI-enabled learning platforms.

• AILA (Saudi Arabia) — Closed a $3 million Pre-Seed A round led by Rua Growth Fund; participants: Jo Academ, Bunat VC, Fikr Ventures. Purpose: develop AI-powered educational solutions.
• HeyBreez (UAE & Jordan) — Raised $2.5 million in a Seed round led by Lunara Partners, with participation from Jabbar Group, DASH Ventures and several founders and angel investors. Funding will support the company's expansion plans.
• XSquare (UAE) — Raised an undisclosed Pre-Seed round led by Raed Ventures, with AngelSpark, 500Global and Oraseya Capital participating. The fintech/B2B payments firm said the funding will support regional expansion, particularly entry into the Saudi market.
• Tax Star (UAE) — Secured $1.75 million in a pre-seed round to advance its AI-powered tax software amid the UAE’s move toward e-invoicing and digital tax compliance; plans include product development and Gulf market expansion.

While the publicly reported total for the week stood at $7.25 million, sector breakdowns point to AI as the dominant theme: the combined investments in HeyBreez and XSquare were reported at about $4.25 million, representing 58.62% of the week's disclosed funding. EdTech — led by AILA’s $3 million raise — accounted for roughly 41.4% of the total, highlighting the overlap between education and AI adoption among regional startups.

Investors leading and participating in these rounds span regional growth funds, corporate venture arms and established global networks, including Rua Growth Fund, Lunara Partners, Raed Ventures, Jabbar Group, DASH Ventures, AngelSpark and 500Global. Several rounds noted explicit plans for geographic expansion, with XSquare targeting Saudi market entry and Tax Star eyeing broader Gulf adoption.

Outlook: the near-term momentum appears focused on AI-driven product development and cross-border growth, but the sharp week-on-week decline in reported deal volume signals continued volatility in early-stage funding. Startups that can demonstrate scalable AI utility in regulated verticals such as education, payments and tax compliance are most likely to attract the next tranche of investor capital, while undisclosed rounds and smaller pre-seed checks may continue to mask the true depth of market activity.