MENA startup funding falls 22% as regional conflicts continues
Investment declines to $1.35 billion in first half of 2026 as fewer deals, weaker foreign participation and funding concentration signal a tougher environment for startups
RIYADH, Saudi Arabia (MNTV) — Venture capital investment in Middle East and North Africa startups fell sharply during the first half of 2026 as regional conflicts, cautious investors and weaker cross-border capital flows slowed fundraising across the region, according to a new industry report.
Research platform MAGNiTT said startups across the MENA region secured $1.35 billion in funding during the first six months of the year, a 22 percent decline compared with the same period in 2025.
The number of completed investment deals dropped even more sharply, falling 41 percent to 214 transactions, the lowest first-half total recorded since at least 2022.
The report said the decline in deal activity highlights a weakening investment environment, even though total funding was partly supported by a handful of exceptionally large transactions.
Two mega funding rounds worth a combined $480 million accounted for a significant share of investment, while the 10 largest deals represented 58 percent of all capital raised during the period, reflecting growing concentration of venture funding among a small number of companies.
MAGNiTT founder and Chief Executive Officer Philip Bahoshy said headline investment figures mask a deeper slowdown because many large transactions completed this year had been negotiated months earlier.
He said early-stage investment, widely regarded as the strongest indicator of investor confidence, has slowed considerably and may signal further weakness in the coming months as the full impact of regional instability becomes more apparent.
Funding remained relatively stable between the first and second quarters, totaling $679 million and $667 million respectively. However, only 90 investment deals were completed during the second quarter, marking the lowest quarterly transaction count in the platform’s records.
The report noted that while global venture capital has been driven by record investment in artificial intelligence companies, the MENA region has benefited far less from that trend.
According to Crunchbase, global startup investment reached $510 billion during the first half of 2026, already surpassing the total invested throughout all of 2025. Much of that growth was fueled by major artificial intelligence companies, with OpenAI and Anthropic alone accounting for approximately 43 percent of global funding.
The United Arab Emirates remained the region’s largest startup market, attracting $895 million, or 66 percent of all MENA venture investment, despite a significant decline in the number of deals. More than 60 percent of UAE funding came from three major transactions involving CargoX, Mal and CNTXT AI.
Saudi Arabia ranked second with $219 million in startup investment, representing a 74 percent year-on-year decline, while Egypt attracted $142 million, down 29 percent. Morocco and Oman were among the few markets to record year-on-year funding growth.
Foreign investor participation also weakened considerably. International investors accounted for only 39 percent of active venture capital firms during the first half of the year, down from 55 percent in 2025, while their share of invested capital declined from 48 percent to 19 percent.
Investors based within the MENA region supplied more than four-fifths of total funding, the highest proportion recorded in over five years.
Financial technology remained the region’s largest investment sector, attracting $617 million, followed by transport and logistics, enterprise software, food and beverage, and real estate technology.
The report also showed slowing exit activity, with only 16 mergers and acquisitions completed during the first half of the year, placing the region on track for one of its weakest years for startup exits in recent years.
Despite the slowdown in venture investment, publicly listed technology companies showed greater resilience. MAGNiTT’s regional technology index recovered during the second quarter after earlier losses, supported by gains in companies including Talabat, Space42 and Elm.
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