Regional conflict drags MENA startup funding down 22%

The Middle East and North Africa (MENA) venture ecosystem showed pronounced strain in the first half of 2026, with startup funding falling 22 percent year on year to $1.35 billion and deal count plunging 41 percent to 214 transactions — the lowest half-year total in the available data series. Two mega-rounds worth a combined $480 million cushioned the headline decline, while the 10 largest transactions accounted for 58 percent of all funding during the period.

"The sharper signal is early-stage activity, the truest measure of ecosystem appetite, and it has slowed markedly," said Philip Bahoshy, founder and CEO of MAGNiTT. "This mirrors the 2020 pattern: stability in the first half, followed by a third-quarter adjustment."

Funding was broadly unchanged between Q1 and Q2, at $679 million and $667 million respectively, yet deal volume fell to 90 in the second quarter — the lowest quarterly figure in the available series. The UAE remained the region’s dominant market, attracting $895 million or 66 percent of total MENA funding, despite a 37 percent year-on-year fall in deal count. More than 60 percent of UAE startup funding was concentrated in three BlueFive Capital-backed rounds: CargoX’s $250 million, Mal’s $230 million, and CNTXT AI’s $60 million, which also included participation from ai71.

International investor participation weakened sharply: international investors made up 39 percent of the active investor base, down from 55 percent in 2025, while their share of capital deployed fell to 19 percent from 48 percent. MENA-based investors supplied 81 percent of total funding in H1 2026, the highest share in more than five years.

• Saudi Arabia ranked second by funding with $219 million raised, down 74 percent year on year.
• Egypt raised $142 million, down 29 percent.
• Morocco and Oman recorded increases, raising $32 million and $22 million respectively.
• Fintech remained the most funded sector with $617 million, down 9 percent year on year.

Sector dynamics revealed further concentration. Transport and logistics surged to $273 million, largely driven by CargoX, which accounted for 92 percent of the sector’s funding. Enterprise software raised $115 million, food and beverage startups secured $76 million, and real estate companies attracted $72 million. Early-stage activity — regarded as the clearest indicator of investor appetite — slowed markedly, with earliest-stage deals falling to 82 percent of transactions from 85 percent in 2025, while early-growth rounds rose to 18 percent from 14 percent.

Exit activity deteriorated as well: MENA recorded 16 mergers and acquisitions in H1 2026, down 56 percent year on year and on pace to finish well below the 48 deals recorded in 2025. Publicly listed regional tech companies showed relative resilience; MAGNiTT’s Tech Index tracking 15 major firms rebounded 20.9 percent in Q2 after a 17.4 percent decline in Q1, ending H1 roughly flat at minus 0.2 percent, driven by company-specific momentum at Talabat, Space42 and Elm.

Looking ahead, Bahoshy highlighted clear indicators to watch for a recovery: "The return of international investors, a recovery in early-stage deal flow after the summer and the stabilization of exit activity would be the main indicators to watch in the second half of the year." Those measures, he added, would provide a clearer view of ecosystem resilience than headline funding totals alone.