If you are currently raising a seed round in Dubai with a pitch deck that says "We use AI to optimize X," you might need to rewrite it.
A critical shift has just occurred in the venture capital landscape, and the latest MAGNiTT FY2025 AI Report puts a number on it: 69%.
The Death of the "Wrapper"
For the last two years, investors were happy to fund "AI-Enabled" companies—startups that used existing models (like GPT-4) to improve a standard business process.
The Shift: In 2025, the market flipped. "AI-Native" startups (companies where AI is the product, not just a feature) captured $589 Million of the total investment pie.
The Drop: "AI-Enabled" startups saw their share shrink to just 31% ($269M).
What Investors Are Hunting
The message from VCs in Dubai and Riyadh is clear: We want Moats.
A simple "wrapper" around ChatGPT has no defensibility. If OpenAI releases an update, your business model dies.
Investors are now deploying their biggest checks into Deep Tech and Proprietary Infrastructure. The massive $250M Series A for XPANCEO (Smart Contact Lenses) is the perfect example—they aren't just using AI; they are building the hardware and the neural networks from scratch.
The Advice for Founders
If you want to raise in 2026, stop highlighting which API you use. Start highlighting your proprietary data.
Source: Data from the MAGNiTT FY2025 MENA AI Venture Capital Report.