The anticipated strengthening of the US dollar, spurred by the return of Donald Trump to the White House, is expected to have a nuanced impact on start-up funding in the Middle East. Analysts suggest that while certain economies may see minimal disruption, others—especially those with floating currencies—could experience more profound consequences.
With Trump’s policies likely to reinforce US manufacturing through proposed tax cuts and tariffs, the dollar has already shown volatility. Earlier this year, it surged to a two-year high. The US Federal Reserve, maintaining a cautious stance on interest rate reductions to counter inflation, is another factor expected to keep the currency strong.
For Middle Eastern start-ups, the effects will vary. In Gulf Cooperation Council (GCC) countries, where currencies are pegged to the dollar, fluctuations will have limited consequences. Investors remain drawn to the region’s stable inflation and economic growth, making it an attractive alternative to more unpredictable markets in the wider MENA region.
Investment adviser Mohamed Hussain explains that economies with a dollar peg, such as those in the GCC, will see relatively little impact. However, in countries with floating exchange rates—like Egypt—the repercussions could be significant.
Egypt’s economic landscape has been turbulent, with the Egyptian pound losing around 70 percent of its value since 2022. Inflation has soared past 25 percent since early 2023. While the lower valuation of the currency could make Egyptian investments appear more cost-effective, the economic instability may deter some investors.
Hussain notes that while cheaper valuations and operational costs may attract investment, many start-ups still rely on local revenue streams. This can be problematic when dealing with volatile currencies, as their earnings remain tied to a depreciating local market. As a result, revenue diversification becomes crucial for long-term stability.
Venture capitalists prioritize sustainable growth and profitability, often measured in US dollar terms. This presents a challenge in economies where currency fluctuations impact costs and revenues unpredictably.
A paradox in Egyptian start-up funding
For some Egyptian start-ups, the affordability of operating in the country presents an unexpected challenge—raising too little capital.
Mohammed Nasser, co-founder of the AgriTech start-up Milkup, highlights a funding paradox in Egypt. Despite seeking investment from GCC-based venture capitalists, many Egyptian start-ups find themselves overlooked because they require smaller investment amounts than what these investors typically commit.
“GCC investors are used to funding rounds of $600,000 to $700,000, often participating alongside other entities,” Nasser explains. “If you approach them for a $50,000 investment, it doesn’t fit within their usual scope. Ironically, because our operating costs are so low, finding the right investor becomes a challenge.”
Despite these hurdles, Egypt remains a key player in the region’s start-up scene, ranking third in MENA for start-up funding last year. In 2024, Egyptian start-ups secured $329 million in funding, trailing behind Saudi Arabia ($750 million) and the UAE ($613 million).
However, not all Middle Eastern markets have fared well. In Lebanon, start-up funding fell by 54 percent last year, with companies raising just $510,000, according to Wamda.
The search for stability pushes start-ups abroad
Given the challenges of securing funding and operating in volatile economies, many start-ups are opting to relocate to more stable environments. The UAE and Saudi Arabia have become preferred destinations, offering both investor confidence and access to stronger markets.
Companies like Swvl, Podeo, Intella, and Sideup have shifted their headquarters to the Gulf while maintaining back-office operations in their home countries to take advantage of lower costs.
Lebanon-based entrepreneur Avo Manjerian, co-founder of Schedex, has taken a similar route. His start-up, which specializes in automated employee management and shift scheduling, is now piloting operations in the UAE, with plans to fully enter the market by the second quarter of this year.
Manjerian says that Lebanon’s hyperinflation, banking restrictions, and the ongoing conflict between Hezbollah and Israel have made fundraising nearly impossible.
“With Lebanon considered a high-risk country, securing investment has been extremely difficult,” he says. “The war changed everything overnight. We were growing at 40 percent month-over-month, but when the conflict escalated, our revenue dropped by 80 percent instantly.”
Manjerian now prioritizes sales and expansion into more stable markets. He plans to revisit fundraising efforts once the UAE operations gain traction later this year.
While a stronger US dollar may create hurdles for start-ups in the Middle East, those able to adapt—whether by diversifying revenue streams, securing funding from the right investors, or expanding into more stable economies—stand the best chance of thriving in an unpredictable financial landscape.