Pathfounders interview: Philip Bahoshy, CEO of Magnitt, on the AI investment boom in MENA

0:00Hello and welcome to Path Founders with me, Mike Butcher. If you think Lovable was good at leveraging AI to become one of Europe's largest startups, wait until you see what's about to happen in emerging economies like Egypt. My friends, AI tools that small startup teams can leverage in Stockholm, Sweden, are just as easily leveraged in Suez, Egypt. Indeed, new research from the Magnet Data Company based in the UAE and covering the MENA region shows AI funding into AI boomed across MENA in 2025, with funding reaching a record$858 million and accounting for 22 % of all VC deployed in the region.

0:45So how handy is it that I'm actually coming to you from yet another hotel room in Cairo, where I've been attending the startup oriented Rise Up Egypt conference as well as the massive AI Everything Egypt which is the newest trade show here in the region and here to unpack that research which I've just quoted to you and it was just released is Philip Bohoshi who's the CEO of Magnet which did the research. Welcome to Path Founders Philip. Thank you very much for having me. So in your report you You described 2025 as the year AI became a quote, core pillar, unquote, of MENA venture capital. So what actually changed last year that suggested that to you?

1:31Philip Bahoshy:Yeah, great question. Kind of welcome to the region. I'm sure I believe you are recently in Qatar and you're seeing a lot of activity in the wider region with regards to venture capital. We released at the end of the year our end of year venture capital report and kind of the staple statement was that the GCC has become a magnet for capital. A lot of this venture investment, in fact, the total capital, before I dive into AI, 86 % of all capital and 71 % of all funding was between Saudi Arabia and the UAE. Now, at a political level, if you go way above my pay grade, you see that they're trying to position themselves across the whole of the AI infrastructure relationships with China, relationships with the US, trying to create the warehousing software development, the cloud services.

2:23Philip Bahoshy:And that's really setting the foundation to kind of build the infrastructure. Here in the UAE, you have a minister of AI that is spearheading a lot of this kind of infrastructure development. And that's now beginning to translate into venture capital dollars into the software. One of the interesting stats is if you look at CB Insights, a international publication, close to 50 % of total global venture funding went into AI. And yet here in the region, it's still at 20%. But I'd like to tell a small story that a very good friend of mine, a founder here in the region, Eli Habib, who started Anrami, which is the equivalent of a Spotify, says, we can predict the future here in the region, because whatever the trends are in the US, they tend to happen here 12 to 18 months later.

3:14Philip Bahoshy:So I think we're beginning to see this development of an AI boom that is basically catching up with what's happening at a global level. Okay, right. So just like in Europe, MENA is tracking these big trends, as you say, in the US, and that's happening across the world. And obviously, we can all see into the future whenever we talk about silicon valley but um there's quite clearly been a real jump and what i'm very interested to hear about and what your opinion is is whether or not you guys here in the mina region will be able to kind of almost leapfrog in some way because of the switch to ai native companies ai native startups that uh will mean that you know you won't hang around and kind of like the legacy era of SaaS companies, which are obviously starting to be affected, greatly affected, non-native SaaS companies being affected by AI.

4:10Do you think that's maybe on the cards or what's your general view?

4:14Philip Bahoshy:I think a couple of things, obviously, to kind of the path that I was mentioning, the seeds of investment happened in the last two to three years, and you're beginning to see the bigger rounds of investment applied. AI is a good example. Humane in Saudi are sort of big companies that are trying to focus on this. I do think that the history of the region, and I'm sure you know the stories of Souk and Kareem, the localization of these products is a key differentiating factor. So many of the companies that are raising considerable rounds are localizing solutions, models that are built internationally, but kind of localized to the local economy.

4:55Philip Bahoshy:The differentiating factor is historically MENA companies have always focused on MENA markets. I think many of these companies are looking to try and go global with what their propositions are and trying to solve a much bigger market albeit some of them are localized in their solution. When you look at the Middle Eastern Arabic world population it transcends many geographies and being able to create solutions that are global from that perspective is a key differentiating factor to years gone by. But I think, yes, very much it's not the pure SaaS AI solution. It's the native solutions that are being created and developed.

5:37Philip Bahoshy:But I think with a slightly different mindset of global solutions built out from the region that localize a problem that can then go global. Very interesting. So do you see some of the companies and the entrepreneurs thinking much more internationally rather than regionally now? I think they've had to. I mean, AI aside, I was talking at a conference earlier this week, one that we hosted for the first time, and we were talking about if you went back to the Kareem and Soup days, all of these companies wanted to operate across the whole of the MENA region. When venture capital was reaching its peak of 2020-2021, scale-out costs was on every VC's lips.

6:18Philip Bahoshy:Now we've gone through a corrective period, And unit economics, profitability have been key. And the reality is for the region, for right or wrong, is that certain geographies don't make unit economic sense to operate in. And therefore, the number one challenge for any MENA company is size of market. And to be able to increase the size of market, people have to look at other emerging markets, other geographies, if not global opportunities that can be built from the region. as opposed to becoming the biggest meaner market, meaner startup for X or Y. They have to think differently, either globally and or we advocate for an emerging market perspective, rather than competing with US or European based companies.

7:06I see. So also in your research, you talked about how governments kind of loom large in some of these sectors. They're talking about the PIF, the Saudi Investment Fund. They have a project called Humane. You've got hyperscale data centers, announcements across the region in those kinds of areas. OpenAI famously has been doing some large projects here. How much of this AI surge is market led versus state orchestrated, in your opinion?

7:42Philip Bahoshy:I think with much of the region, it's initiated through state driven initiatives. As I mentioned, there's an AI minister here that's trying to develop the UAE into becoming, and that's a federal position, into an AI hub. His Excellency Minister Swaha, the head of MCIT in Saudi Arabia, is on several trade delegation visits to the US, Europe, if not Southeast Asia as well, to build relationships across those. But I think that the private sector, specifically when you look at venture capital, begins to kick in once it comes down to the software solutions. And so the hardware infrastructure relationship building that is done with the big tech companies, the likes of NVIDIA, OpenAI, that's currently raising funds from the region, if you were to read Bloomberg or financial publications internationally, the sovereign entities are really seeding the infrastructure, but the private sector is fueling the technology space and the companies that are being built at the seed series A and series B investment spaces.

8:43Philip Bahoshy:is my take of what's currently happening. And there's still room to grow, as I mentioned, relative to what you see in the US or even the global AI landscape. Right, yeah, and that's definitely the case. Certainly in the region, it's at this governmental level that so much of the market gets moved. But also the UAE and the Saudi Arabia are quite clearly like the big dogs in the market and they're absorbing a lot of the investment and the capital. Do you think that there's going to be an equal rise in other countries in the region like Egypt and others that will be able to kind of grab on the coattails of this investment or perhaps copy paste some of the strategies going on?

9:32Philip Bahoshy:Absolutely. I mean, it's a little bit unfair because obviously Magnet tracks the venture capital investment. And it's key or it's obvious that the sovereign wealth funds have been the big funders and the capital pool here. When you come to the talent base, there are huge talent bases in Egypt, the Levant, Jordan, Lebanon, even within the GCC, many universities. And when it comes to AI, I mean, this is a very tech-driven solution. If you look at e-commerce, transport and logistics, others, tech is part of what is a wider servicing solution. When it comes to many of the AI solution, it is the tech that is the core bread and butter before you go to the sales and marketing.

10:10Philip Bahoshy:So what I would anticipate is similar to many of the other industries, is that the early stage companies may be formed in the likes of Egypt, Lebanon, Jordan, the Levant, the GCC. But when it comes to the capital raising and the headquarters of those companies, as they look to scale beyond their original seed MVP solution, given the capital availability in the GCC, naturally, they'll end up levitating. But I do think what has become a phenomena for Egypt, for Jordan, for instance, is your back office kitchen is being built to arbitrage the cost and the opportunity of talent in those geographies with the headquarter and the sales and the government relationship solutions being built in the other geographies as the investment, which is already taking place at a university level, is beginning to kind of come to fruition.

11:01Philip Bahoshy:But I think therein lies the massive opportunity in the region is the talent base acquisition from many of the other geographies. Right, I see. So you've got this talent base. And I think that we saw the same kind of phenomenon happen many years ago when Eastern Europe was seen as an outsourcing hub. And then as the Web 2.0 of the old days kind of took off, you started to get entrepreneurs building apps, building platforms in their own right. And BC flooded into the market on that basis. Do you see similar kinds of trends where you said that you mentioned that talent pool that you'll start to get from out of that, you know, that base, you'll start to get those breakout entrepreneur hits?

11:48And do any kind of startups and tech companies, you know, come to mind that you can see that are kind of riding that horse right now?

11:55Philip Bahoshy:Yeah, I mean, interestingly, Mike, you're from the UK, I'm from the UK, I think, again, without getting into all the geopolitics of it all, but you're even seeing tech talent move to places like the UAE and Saudi that may have already started companies outside of the region to relocate to places of sunny acclimbs, different fiscal environments to build businesses that can potentially then operate globally. I think it goes back to what I was saying. You can create global companies with AI and therefore where the talent hub can be based can actually be transient and move to other locations. So I do think that absolutely even Eastern European geographies have started to see migration towards the Middle East in terms of the tech talent to then operate companies that go global.

12:41Philip Bahoshy:Specific names, I don't necessarily go into the micro. I always look at the macro trends as opposed to some of the companies. But I'm based here in the DIFC, and there's many companies that are looking to headquarter on the AI campus. DIFC is doubling down on its campus to kind of attract international companies. So I think it's homegrown companies as well as international companies coming up and setting up here that then attract this capital that is available here in the region that will be one of the trends that will kickstart the numbers to another level in the next two to three years. Yeah, that's a really good point.

13:13And there's been a huge debate in the UK and other European countries about the ability for countries like the UAE to be able to attract talents, but either because of a tax base or because of the rising talent base there, and also clearly the investment base. And there's plenty of VCs I know who get on a plane to Dubai and other cities in the region looking for LPs, as we both know.

13:42Philip Bahoshy:And I mean, just on that point, Mike, I was in Saudi last week and one of the head of the Funds of Funds and literally said it publicly so I can quote him, if you are coming to the region to raise funds, we expect you to deploy here. I mean, for the last couple of years, that was said off the record, it was had in conversations. It's not pretty much explicitly said, if you are looking to come and raise funds from the region, we're expecting you to deploy that capital here locally. And therefore, for many of the companies, even at the startup level that may be looking to raise funds from some of those GPs, there is an expectation that they should be having some type of presence here in the region as well.

14:16Very much so. Very interesting that you should light on that. That's a very interesting trend. What about the kind of the cliffs? Because obviously companies can raise and get past the Series A, perhaps almost a Series B. In Europe, we find that there's a valley of death between A and B. And we've seen some new funds launch as well to try and address that problem. Are you seeing the same issues in the MENA region or are they being addressed? What's going on? Absolutely.

14:53Philip Bahoshy:In fact, at our conference that we host or event that we hosted earlier this week, I shared a couple of interesting stats. At the exit level, if you take 10 years worth of companies that have raised funds, only 6.5 % of any of those companies have seen a liquidity event that comes from an M &A or an IPO. So secondaries is a big challenge that we're trying to capture, and there's a lot of interest in the secondary space. But if you look at it from a pure liquidity event of M &A and IPO, that is a very low percentage compared to U.S. figures. In fact, we did a funnel analysis where we took seed companies that then go to Series A and Series B.

15:31Philip Bahoshy:7.5 % of companies that raise a seed round go on to raise a Series A. In Singapore, that equivalent figure, and we look at Singapore because it's probably six to seven years more mature than kind of the market here, which is around 10 years of maturity, is about 15 to 16%. And if you look at the US and take Carter's data, which is relatively public, you can see that in the peak years, it's around 25 % conversion from seed to Series A. So we are definitely behind international benchmarks. What's being done? I mean, with the capital that's available, many of the early stage VCs are moving to later stage to try and equip.

16:11Philip Bahoshy:International companies, as I mentioned, that are being attracted are being told that they need to deploy at the later stages. So we did see a pickup in our annual report of Series B and Series C investment. But again, let's not forget the last two, three years, globally, venture was coming down. Interest rates were high. Liquidity was tight. So the question is really for the next two to three years. And one of the challenges that I kind of highlighted relatively publicly is if a typical company takes, for the sake of argument, seven to eight years to exit, many of these startups that were raising their first rounds of capital, thanks to the BCO, WAMDA, MEVP, which were the front runners here in the region, for those that are familiar with the region, would have coincided their exit window with what we've just experienced.

16:56Philip Bahoshy:So patience is a little bit of a virtue at the moment, and we're trying to see if that liquidity flywheel kicks in. And one kind of orange flag that we saw from Southeast Asia, given that we cover it, is the absence of liquidity does heighten the capital that's being deployed by the sovereigns, who are now beginning to look at the Middle East as an opportunity for diversification, as opposed to their home markets. So, yes, it is an actual problem and acute problem for many of our government clients. And I think that they're trying to find solutions, whether it be funds, secondaries, IPOs, roadshows to international markets that can kickstart M &A to kind of develop that flywheel.

17:40I see. And so zooming out from your reports, you know, there's quite clearly been a jump into into AI in the MENA region amongst investors. what's your kind of feeling about the next couple of years as that ramps up well you do you think we're going to see these sort of exponential effects that we've seen in other markets

18:01Philip Bahoshy:around the switch to ai happening 100 i think that at a government level this is probably part of the cornerstone of all of the vision 2030 and and the economy diversification of the economy away from petrochemicals has always been a big driver. And this is one point of differentiation that they can potentially compete at a global level. But from that perspective, I think that from the hardware and infrastructure perspective, it's likely to continue. That will then translate into the software solutions. The investment into research talent will be a key part of that. And many of these geographies are looking to try and address the talent and opportunity around research and development and investment from defense because i think the second segment globally that's seen investment has come in defense many of which are ai solutions that are put together with that so yes i can only see that this will continue by an unexpected black swan economic crisis and or ai bubble burst which may potentially happen in a 12 to 18 month period or at least a correction in the valuations of many of those companies that are raising grounds.

19:12Philip Bahoshy:I anticipate that this momentum will likely continue in the region as it does globally and catch up with the global trends. Great. Well, that's a brilliant deep dive into what's going on in the MENA region. And I certainly look forward to stepping down onto the ground in Dubai and other parts of the region in the next few months. but here from a rather slightly noisy hotel room. Certainly, I'm not sure if you picked up the background noise right there, but I'm in Cairo. But it's been great to talk to you. Philip Bahoshi, CEO of Magnet. Thanks for joining us on Pathounders.