As global innovation accelerates, startups often outpace the capital and support systems meant to sustain them. Drew Propson, Head of Technology and Innovation in Financial Services at the World Economic Forum, outlines why bridging this gap isn’t just about more funding but is about creating a complete ecosystem. From the rise of venture debt and AI-driven efficiency to the GCC’s visionary innovation hubs, Propson shares how financial institutions, regulators, and founders can collaborate to ensure startups not only survive but thrive on a global scale.
The startup ecosystem is evolving fast, but capital often lags innovation. How can financial systems bridge this gap?
It’s an important question. I would start by reframing it slightly. Startups need the right ecosystem to fully develop. Innovation is moving at a very fast pace, and startups are advancing very quickly. But funding does not always lag innovation. During the pandemic, for example, innovation was funded so rapidly that some business ideas were not fully developed.
We need to look carefully at what stage it makes sense to fund innovation. If we look at the current environment, the latest data we have is Q3 2025. Venture capital funding is actually quite strong. Collectively across Q1, Q2 and Q3, global venture funding reached around $310 billion. The third quarter marked the fourth consecutive quarter with over $90 billion in funding, something we have not seen since early 2022. We are looking at a healthy funding environment.
What we have noticed, however, is that the number of deals has gone down. Funding that was previously spread across many companies is now more concentrated in later-stage startups. That is a concern for the long-term innovation pipeline. At the World Economic Forum, we work closely with both venture capital and innovator communities to understand the challenges they are facing. From both founders and funders, we consistently hear the same message: the need for a strong, full ecosystem that supports both financing and founders.
In a recent publication, we mapped out the key components of a strong entrepreneurship ecosystem. There, we saw that first, there must be engagement from both the public and private sectors. Infrastructure is the key area, particularly digital public infrastructure, as a foundation to build on. Second is the regulatory environment, ensuring there is regulatory clarity so funders are not taking on unknown risk and startups can operate with confidence. Third is talent: attracting, developing, and retaining talent is essential. Fourth, local financing plays an important role, as local funders often understand cultural context best. Finally, founders need to focus on sustainable growth rather than the “growth at all costs” model of the past.
Where does the MENA startup ecosystem stand today?
It is a very strong ecosystem. We have seen real emphasis from both the public and private sectors on building that out. What stands out is the vision for creating innovation hubs. The UAE’s Vision 2031 and Saudi Vision 2030 are clear calls to action that outline not just ambition, but execution.
We have also seen meaningful changes in visa and talent policies to attract and retain talent. These incentives are significant and are increasingly being studied by other regions looking to adopt or adapt similar approaches in their regions.
What trends are reshaping the investor-startup dynamic?
Venture debt is something that we see pretty frequently. While deal volumes are down, deal sizes are larger and more focused on sector leaders. Venture debt provides non-dilutive capital and appeals to founders who are prioritizing financial stability and sustainable growth. Companies with strong cash flows and a proven vision are increasingly turning to this option. If you are a founder, it makes good sense to be looking at venture debt.
Venture debt has grown at around a 14 percent compound annual growth rate since 2018. It is a pretty important piece of the puzzle in terms of making sure that one has funding along the lifecycle of the company.
What will dominate discussions at Davos this year?
There will be a lot of emphasis on AI, particularly around funding levels, valuations, and concerns about it being too high in the AI bubble. One key question will be how to ensure that, as AI absorbs a significant share of investment, other areas of innovation are getting the support and financing they need.
This again comes back to the ecosystem. Funding is only one element. Mentorship, infrastructure, and an enabling regulatory environment are equally important. These issues will feature prominently in discussions in Davos.
Beyond capital, how can institutions support startup talent?
It is about building networks and communities. Tech hubs, whether government-led, private, or hybrid, create spaces for mentorship, shared learning, and collective problem-solving. When founders face similar challenges, having a community amplifies their voice and their ability to drive change. Both public and private institutions have an important role to play in enabling these connections.
What lessons from the GCC could inform global approaches?
Clear, government-led innovation initiatives make a difference. Publicly communicating about the initiatives encourages entrepreneurship and attracts talent. Streamlined licensing and registration processes are also critical. The GCC has done quite a bit of work there: visa reforms, combined with stronger collaboration with universities, help build talent pipeline.
What tangible outcomes followed last year’s Davos discussions on AI?
We conducted a series of roundtables with financial institutions and fintech innovators to identify obstacles and best practices. We are now developing a playbook to guide organizations at every stage of their AI journey, addressing talent, technology, and regulatory challenges. This guidance is expected to be published in Q2 2026, with similar initiatives underway across other industries.
