Why the Gulf is building its startup economy on credit, not equity
Private debt has surpassed venture capital as the dominant form of growth financing across the Gulf Cooperation Council, according to a new report from Stride Ventures, which found that debt instruments accounted for 56% of all private growth capital deployed into the region's entrepreneurial ecosystem in 2025.
Of the roughly $7.4 Billion channelled into GCC startups and high-growth businesses over the year, venture debt and growth credit together absorbed $4.1 Billion, outpacing the $3.3 Billion deployed through venture capital, which represented the remaining 44%. In most global markets, that ratio runs the other way, with equity anchoring the financing of young, high-growth companies and credit entering only once cash flows are predictable enough to service it. The inversion is the report's central claim, and the detail beneath it is where the analysis earns its weight.
There is a moment in the maturation of most startup ecosystems when debt arrives to complement equity, typically late, typically cautiously, and typically reserved for companies that have already proven they can scale. The Gulf has skipped that sequence, having arrived at private debt early, at scale, and in a form that looks markedly different from the venture debt and growth credit playbooks established in India, the UK and the United States. Varun Agarwal, Director at Stride Ventures, set out the framing that runs through the report's findings, observing that “the GCC's private debt market is evolving with a logic that is uniquely its own.” Understanding why requires separating the instruments that the headline number bundles together, because the composition of that $4.1 Billion is more revealing than its size.
Venture debt and growth credit are not the same tool at different volumes; they are different markets entirely
The first thing the data clarifies is that venture debt and growth credit occupy entirely different orders of magnitude. Venture debt across the GCC in 2025 stood at approximately $249 Million, a smaller-ticket, earlier-stage tool deployed across 15 transactions. Growth credit, by contrast, reached $3.9 Billion across just 10 deals. To put that gap in its starkest terms, the report observes that the entire volume of venture debt deployed across the region between 2018 and 2025, some $2.82 Billion, was surpassed by growth credit activity in a single year, which the analysis put at $3.89 Billion.
These are not competing alternatives jostling for the same borrowers; they are distinct tiers of a capital stack that the Gulf is assembling in an unusual order. As Agarwal put it, the two instruments “are not competing here; they are occupying distinct and complementary roles,” with venture debt “gaining ground as a selective tool for venture-backed companies navigating early scale, while the latter is asserting itself through larger, structured, asset-backed facilities, particularly within fintech, where platforms are accessing institutional credit well before the traditional private equity leverage stage.”
The distinction matters because it changes what the inversion actually means. Were venture debt the larger of the two instruments, the story would be one of early-stage companies taking on modest, runway-extending loans, a familiar enough pattern in maturing ecosystems. The reality is the reverse. The market is being driven overwhelmingly by large, structured facilities extended to companies that are already scaling rapidly, which tells a different story about where in the life-cycle Gulf businesses are accessing institutional credit, and why they can.
Why fintech absorbed almost everything, and why that concentration is structural rather than speculative
Growth credit in the GCC is not behaving as it does in more established private debt markets, where it typically finances private-equity-sponsored companies through unitranche and corporate leverage structures. In the Gulf it is showing up as structured, asset-backed financing extended to rapidly scaling, venture-backed platforms, overwhelmingly in fintech. Fintech absorbed around 95.5% of all venture debt and growth credit deployment in 2025, representing roughly $3.9 Billion in cumulative deal value, a degree of sector concentration that would look alarming in a diversified market and instead reflects a deliberate financing logic. Buy-now-pay-later platforms alone accounted for 61.6% of fintech deployment, or $2,430 Million, with the balance spread across SME lending at $740 Million, consumer finance at $422 Million, and smaller allocations to embedded and alternative lending models.
The reason fintech dominates is mechanical rather than fashionable. Platforms built around BNPL, SME lending and embedded finance generate predictable streams of receivables, and predictable receivables can be securitised or financed through warehouse lines and asset-backed facilities. That structure allows lenders to deploy large pools of capital against tangible collateral rather than against the equity story of a founder. It also explains why credit has been able to scale so far ahead of the broader startup ecosystem: the instrument is underwritten against loan books and cash flows, not against the speculative trajectory of an early-stage business. Outside fintech, the report found credit activity remained limited and largely opportunistic, with sectors such as agritech, proptech, SaaS and logistics recording only isolated transactions, typically smaller and focused on working-capital support rather than large structured facilities. The concentration, in other words, is not a quirk of a single year's deal flow but a direct consequence of which business models in the region actually generate the collateral that structured credit requires.
The largest deals reveal a market built on receivables, not equity stakes
The report's analysis of the region's five largest transactions makes the mechanics concrete. Tamara's roughly $2.4 Billion facility, an asset-backed credit line secured against its consumer loan book, sits alongside Lendo's $740 Million warehouse financing of SME invoice transactions, Deem's $400 Million, erad's $158 Million and CredibleX's $100 Million. None of these transactions relied on venture-capital equity or minority stakes as collateral, which is precisely why they are structured as ABS or receivables facilities rather than conventional venture debt. The pattern extends backwards, too, with Tabby's $700 Million facility in 2023 having been a securitisation of BNPL receipts, and Lendo's $740 Million a warehouse financing that pre-paid SME invoice transactions.
The Tamara facility is the clearest illustration of the model at scale. Provided by Goldman Sachs, Citi and Apollo funds, it refinanced and upsized a prior $500 Million arrangement, with $1.4 Billion funded upfront and a further $1 Billion available over three years. The structure was explicitly aligned with Saudi Arabia's Financial Sector Development Program, and that alignment is not incidental. It points to the third and most consequential structural driver behind the entire inversion.
Sovereign capital is not backing the market; it is building it
Deployment of venture debt and growth credit was concentrated almost entirely in Saudi Arabia, which absorbed around $3.9 Billion of the regional total, against roughly $211 Million in the UAE and $22 Million in Bahrain. The report attributes this to a capital formation model in which sovereign and policy-led institutions act not merely as passive backers but as active architects of the credit market. Government-linked vehicles including the Public Investment Fund, Jada Fund of Funds, Sanabil Investments, Mubadala and ADQ underpin much of the startup ecosystem, compressing scale-up timelines and deepening later-stage capital pools under Vision 2030.
The causal chain here is what distinguishes the Gulf model from the demand-led emergence of private debt elsewhere. Where sovereign-backed ecosystem building pulls venture-backed companies into scale faster than market forces alone would, demand for structured credit emerges earlier in the company life-cycle than it otherwise might. Agarwal located this directly in the region's policy architecture, noting that “sovereign-backed capital formation, regulatory momentum, and the rapid rise of fintech-led financial infrastructure have created conditions where credit is entering the entrepreneurial capital stack earlier, and in more sophisticated forms, than most global markets have seen at a comparable stage of development.” National strategies such as Saudi Arabia's Financial Sector Development Program and the regulatory sandboxes introduced by regional central banks have actively encouraged the emergence of digital lending platforms focused on consumer credit and SME financing, addressing a longstanding structural gap in access to both. The state, in effect, has been manufacturing the conditions under which asset-backed credit becomes viable at a stage in company life-cycles where it would remain out of reach in a purely market-driven ecosystem.
The institutions deploying that capital see the asset class in the same developmental terms. Dr Nabeel Koshak, CEO and Board Member at Saudi Venture Capital, described private debt as occupying “an essential role in SVC's portfolio construction, enabling us to support high-growth companies while preserving equity upside and improving capital efficiency,” adding that the institution viewed it “as a critical tool to unlock new funding channels and crowd in private investors.” He pointed to SVC's work “supporting emerging local private debt fund managers, while also attracting leading regional and international managers to deploy capital in Saudi Arabia,” and looked ahead to private debt “becoming a structurally key component of institutional portfolios, particularly in emerging markets, where it can bridge financing gaps, enhance diversification, and accelerate ecosystem development.”
Equity has not retreated; it has simply been outpaced
The equity picture provides necessary context rather than contradiction. The GCC venture capital ecosystem itself grew around 14% year-on-year in 2025 to reach approximately $3.3 Billion across some 541 deals, led by Saudi Arabia at $1.72 Billion across 257 deals and the UAE at $1.5 Billion across 231. Over the longer horizon, regional VC funding has grown roughly 2.5 times since 2020, implying a compound annual growth rate of around 20%, a trajectory that reflects genuine ecosystem maturation in Saudi Arabia and sustained institutional depth in the UAE. Exit activity has strengthened in parallel, with Saudi M&A transactions doubling from five in 2021 to 10 in 2025, alongside one VC-backed IPO, and the re-emergence of mega-rounds above $100 Million signalling growing late-stage capital availability.
Equity, then, is not retreating; it is simply being outpaced in total deployed value by a credit market that has scaled faster and larger. The report is careful to note that GCC private equity deal value has hovered higher still, at $8 Billion to $9 Billion annually since 2022, though that capital concentrates in large buyouts and project financing outside the startup and innovation ecosystem, which is why it sits apart from the entrepreneurial financing story the report tells. The inversion the report identifies is specifically about how young, high-growth companies are being financed, and on that narrower and more telling measure, credit has decisively pulled ahead.
Precocious maturity or structural fragility? The data points one way and leaves the other open
The interpretive question the report raises, and largely answers, is whether this inversion represents precocious maturity or structural distortion. The survey underlying the analysis, drawn from 30 founders and CXOs, 24 venture and private equity investors and 10 regulators and policymakers, points toward the former, describing a market that is no longer an emerging concept but not yet fully institutionalised. Omar A. Almajdouie, Founding Partner at Raed Ventures, located the shift in founder behaviour, noting that “founders today have a much clearer understanding of the trade-offs than in previous cycles, with a shift away from FOMO-driven adoption towards more deliberate, strategic use of venture debt and growth credit as part of a broader capital structure.”
That shift from sentiment to strategy is the qualitative counterpart to the quantitative inversion, and it suggests the credit-first model is a considered design rather than an accident of cheap capital. Agarwal drew the same conclusion from the numbers, arguing that “what this data ultimately reflects is a market where scale-up funding is increasingly delivered through structured credit channels rather than sponsor-led growth equity,” something “more deliberate than conventional, and for investors, considerably more interesting.”
For Fariha Ansari Javed, Partner for GCC and Global Capital Formation at Stride Ventures, that deliberation marks a change in how the region is being underwritten. She observed that “capital is no longer arriving here tentatively,” with “global private credit funds, development finance institutions, and regional sovereign platforms” deploying “with structure, rigour, and long-term intent,” such that the GCC was “increasingly being underwritten not as an emerging market experiment, but as a durable node within the global private debt ecosystem.”
The report also locates the Gulf within a wider conversation rather than treating it in isolation, drawing parallels with more mature private debt markets in the UK, Europe and Asia, and particularly with India, where venture debt has developed a more established institutional identity over the past decade. Shared limited-partner bases, overlapping founder networks and increasingly mobile capital are creating corridors through which deal structures and underwriting frameworks travel in both directions. In Javed's words, “the GCC is not developing in isolation; it is developing in conversation with the world.”
What the Gulf is actually building
For investors and operators watching the region, the practical takeaway is that the GCC cannot be read through the financing templates of more established markets. A model in which credit enters the capital stack early, concentrates in asset-backed fintech, and depends on sovereign-led demand generation produces a different risk profile, a different set of winners, and a different relationship between policy and private capital than the equity-led ecosystems elsewhere. The concentration carries obvious questions the data does not resolve: a market where 95.5% of private debt flows to a single sector, and where one country accounts for the overwhelming majority of deployment, has built its early momentum on a narrow base, and the resilience of that base through a credit cycle or a downturn in consumer lending remains untested. What the report establishes, with unusual clarity for a market still defining itself, is that the Gulf is not waiting to import a private debt playbook. It is writing one, and the rest of the world's emerging markets may eventually read from it.
