Venture capital is waiting for the room to reopen

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WHAT WE’RE TRACKING TODAY

The Makkah defense pact holds its first committee talks in Istanbul

Good morning, wonderful people. Saudi’s venture capital market may be coming out of its summer lull as major events like Leap kick off today, offering a platform to redeploy dry powder after months of cautious repricing. Meanwhile, construction activity took a breath in July as persistent input costs throttled project awards — a stark reminder of the cost pressures still shaping the Kingdom’s economic momentum.

Happening today

The Leap Tech Conference kicks off in Riyadh today and runs through Thursday, 3 September, at the Riyadh Exhibition and Convention Center. The conference will highlight data center, cloud, and chip investments alongside Agentic AI and Arabic-first tech, while addressing talent shortages as a major topic.

Makkah pact holds first defense talks

Officials from Turkey, Saudi Arabia, and Pakistan meet in Istanbul today for the first committee meeting under the Makkah defense pact, Reuters reports, citing a Turkish Foreign Ministry source. Foreign and defense ministers and chiefs of staff from all three countries will attend, with talks covering defense capabilities, military interoperability, and joint defense production.

New members? Turkey said the pact is open to expansion, naming Egypt as a potential candidate, and reports suggest Bangladesh has also been invited to join.

REMEMBER- Modeled on Nato’s collective-defense principle, the Makkah Joint Defence Agreement, signed earlier this month, commits its three Sunni-majority members to treat an armed attack on any one of them as an attack on all. It binds together a nuclear-armed state (Pakistan), Nato’s second-largest army (Turkey), and the world’s top oil exporter (Saudi Arabia) — a bloc that took shape as the Iran war missile fire across the Gulf left members questioning how much they can lean on Washington for security.

Egypt’s REIF pipeline gets a Saudi entrant

A Saudi-Egyptian consortium is setting up a real estate investment fund (REIF), branded Asl, spanning Egypt and KSA — and plans to deploy up to SAR 1 bn (c. USD 266.7 mn) in its first year, through Asl Holding, with a focus on real estate and hospitality, Chairman Haitham El Sherbiny told Al Arabiya. The plan lands a week after Asl Holding acquired Egyptian developer Zurich Developments and Saudi contractor Alkayan, which between them carry a stated investment value of roughly EGP 50 bn. Neither transaction’s price has been disclosed.

What’s still being set up: Asl Holding is in the final stages of securing Egypt’s Financial Regulatory Authority (FRA) approval to become a holding company in Egypt — a vehicle to develop and manage the acquired companies’ projects, CEO Ahmed Attia said. That approval is separate from the fund itself, which would need its own FRA license before it can raise money.

IN CONTEXT- Six licensed REIFs held combined net assets of roughly EGP 12.6 bn at the end of 2Q 2026, up from EGP 9 bn a quarter earlier, with the FRA reviewing more than 20 new applications on top of the 23 already pending, an FRA official told EnterpriseAM earlier this month.

The plan: Asl Holding is targeting 1k new hotel keys over three years and weighing a move into the Red Sea, bringing in international operators to run the rooms. Its portfolio spans seven projects across New Damietta, New Mansoura, Sheikh Zayed, and New Cairo, where it holds a 35-feddan plot. A Fifth Settlement launch is due in October and a second Sheikh Zayed project before year-end.

BACKGROUND- The state is counting on private money for almost all of its tourism buildout, with hotel acquisitions and partnerships expected to do much of the heavy lifting on new capacity. Of the EGP 118.5 bn in tourism and antiquities investment planned for FY 2026/27, private investors are expected to put up EGP 117.8 bn — 99% of it — according to a government document seen by EnterpriseAM. The market added some 6k rooms in 1H 2026 alone.

Data point

SAR 3.36 tn — that’s Saudi Arabia’s M3 money supply in July, up 8.2% y-o-y, according to the latest Statistical Bulletin (pdf) from Sama. The largest contributors to the money supply were demand deposits (43%), time and savings deposits (42%), other quasi-cash deposits (8%), and banknotes in circulation outside banks (7%). Total liabilities were around SAR 5.75 tn.

SOUND SMART- M3 is the broadest measure of all the money in a country. It includes physical currency, current accounts, and other money that can be quickly mobilized (what econ-nerds call M2), as well as time deposits, money market funds, and the like.

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The big story abroad

In the first US strike on Iran in over a month, US forces targeted two Iranian rocket launchers on Larak Island in the Strait of Hormuz. US officials called the action a preemptive strike, reporting that Iranian forces were preparing to deploy sea mines into the waterway. Iran responded by launching missiles toward Jordan, though they were reportedly intercepted.

In the M&A scene: Ins. broker and consulting firm Aon is closing in on an agreement to acquire KKR-owned ins. broker USI for around USD 17 bn, expanding Aon's ability to serve midsize businesses. The move — the latest in a spate of big exits for KKR — is projected to be accretive to earnings per share starting in 2028.

Shein’s value shrinks pre-IPO: China’s fast fashion giant Shein is on track to go public tomorrow at a valuation amounting roughly one quarter of its 2022 value of USD 100 bn. The decline coincides with ebbing investor enthusiasm for Chinese consumer IPOs, as high-profile AI debuts stole the market's attention over the past year.

Saudi’s venture pause won’t last, and the money is ready to redeploy

The capital that went quiet in Saudi in 1H is coiled to come back. That’s the read from a senior venture investor who spoke to us on condition of anonymity, pushing back on the common view that this year’s agreements were the tail of a pre-committed pipeline and that 3Q brings the true reckoning of the war’s impact once it empties. As he sees it, funds paused to reassess risk after the war broke out in April, sitting on their capital rather than deploying it, with many waiting on a reopening events calendar to start again.

DATAPOINT- The Kingdom’s startups raised USD 219 mn across 72 rounds in 1H, with funding down 74% y-o-y against a 41% drop in round count, according to Magnitt data.

The pause was a fiduciary call. When the war broke out, funds eased off deployment to reassess valuations, manage risk, and open up better entry points and negotiating room, our source tells us. Growth-stage startups ran the same math, mapping runway and hiring freezes against client payments that might come late. Earlier-stage founders, newer and thinner on staff, were slower to react and watched launch timelines slip from a month or two to four and six.

What froze dealflow as much as anything was the calendar. The events that put investors, founders, and traction in the same room were postponed through the first half. With LEAP opening today and Money20/20 to follow between 14-16 September, our source expects a backlog of announcements and initiatives that have been waiting for their PR moment — and sentiment to return alongside them. Once activity becomes visible again, confidence can start to rebuild, and money moves once money is seen to move. They expect funding to remain below previous years, but upcoming events could help bring some of the lost momentum back.

The dry powder backs the case. MENA funds are sitting on an estimated USD 1.45 bn in committed-but-undeployed capital, 88% of everything raised since 2024, with Saudi drawing the largest deployed share. The capital is still there — it’s waiting on conditions to settle before it deploys. The two or three funds still fundraising are the exception, with LPs who would rather wait out the instability before answering a capital call.

Don’t expect it back evenly. Growth-stage startups get the attention first. Early-stage rounds can still close, but only at valuations founders reset down from their pre-war marks.

The other filter that cuts across every stage is AI defensibility. Investors want to know whether AI can cheaply replicate what a startup is building, and hesitation is highest around pure AI agents and standalone enterprise-AI plays — where too many firms are selling the same concept with too little enterprise adoption to identify clear market leaders. Startups embedding AI into a concrete commercial product are raising more easily.

The laggards are the foreigners. Local investors can walk into a company and read the numbers, while international VCs, working off media reports without people on the ground, are slowing negotiations until the picture steadies. That tracks with the 1H data — Saudi-based investors supplied 74% of the Kingdom’s funding, up from 54% a year earlier, as the international share fell away.

Venture moves in cycles, and these lean stretches tend to yield the best returns, because startups turn strictly capital-efficient and make every SAR count. It filters too: founders who left corporate jobs in the boom years and lack the stamina for bridge rounds and lean cycles are drifting back to salaried roles, leaving the ones with the appetite to stay.

On the exits, the backlog is reshaping dealmaking. M&A is picking up as startups that struggled through the past six to nine months hold realistic conversations about merging — talks that inflated valuations used to block. Higher-value strategic acquisitions and IPOs have stalled with the Saudi listing market, pushing even conventional non-tech names to hold off.

What to watch: Keep an eye on Leap and Money 20/20 for the first wave of announcements, the 3Q data for whether early-stage flow revives, and the IPO pipeline most of all. A single listing that clears by year-end would, they argue, do more to restart the cycle than a top-tier international name closing one local agreement, or any amount of dry powder sitting still.

Construction awards cooled in July as cost pressures held

The construction pipeline lost steam in July, with 11 contracts awarded worth a combined SAR 9.6 bn, the Saudi Contractors Authority reported (pdf). That’s less than half the 23 projects projected in its June outlook and a sharp step down from the last few months.

Down from a high: June saw a yearly high of 25 contracts worth SAR 29.5 bn, while May led the year in value at more than SAR 30 bn across 18 contracts. YTD, 97 projects worth more than SAR 111.3 bn have been awarded.

Construction and building did the heavy lifting again, taking seven of the 11 contracts for a combined SAR 6.6 bn. Infrastructure followed with SAR 2.8 bn across three projects, and water and energy accounted for the remaining SAR 375 mn from a single award.

Riyadh took the lion’s share. The capital claimed seven of the 11 contracts, worth more than SAR 7.5 bn between them. Hail followed with three projects worth SAR 1.9 bn, and the Eastern Province picked up a single SAR 375 mn contract.

The delivery timeline: The July projects are set to be built out over three years — three worth more than SAR 2.79 bn due for completion in 2028, five worth over SAR 5 bn in 2029, and three valued above SAR 1.51 bn in 2030.

Looking ahead, the Authority expects 11 contracts to be awarded in August, more than 70% of them in construction, building, and infrastructure, with around half concentrated in the Eastern Province and Makkah. Owners expected to bring projects to market include the National Housing Company, Retal Urban Development, Dar Wa Emaar, Aramco, the Saudi Water Authority, Alomar Investment, and Thabat Real Estate.

REMEMBER- Costs are climbing more slowly, but the pressure hasn’t lifted. The Construction Cost Index rose 2.3% y-o-y in July, its slowest pace in four months, and held flat m-o-m, per Gastat. Beneath the headline, costs of equipment rentals and materials — the inputs most exposed to the war — are still rising as logistics disruptions and Houthi threats work through supply chains.

Red Sea International names Ghassan Nassief CEO

Ghassan Nassief (LinkedIn) took over as group CEO of Red Sea International, replacing Hani Baothman, according to a Tadawul filing. Nassief brings more than 25 years of experience across corporate banking, financial advisory, and restructuring, most recently as managing director of Teneo Saudi Arabia. He founded GNN Financial Advisory and held senior roles at Emirates Islamic Bank, Saudi Hollandi Bank, NCB, Bank Albilad, SABB, and Banque Saudi Fransi.

The restructuring context: Baothman steps down after completing a restructuring program that wound down the company’s unprofitable international operations and refocused it on its core oil and gas business at the Jubail facility. He stays on as managing director to see through the company’s strategic priorities, including a planned capital increase.

Derayah Financial commits SAR 244 mn to AI and frontier tech, Riyadh Air and Saudia launch a domestic codeshare

Derayah puts SAR 244 mn behind AI, frontier tech

Derayah Financial is buying its way into the AI boom, committing SAR 244 mn (USD 65 mn) to HOF Capital Strategic Opportunities Fund II, a Cayman-based vehicle targeting AI, enterprise software, and frontier technology, it said in a Tadawul disclosure. Some SAR 97.5 mn — 40% of the commitment — was called at closing on 28 August, with the remaining 60% to be drawn over the following 24 months. The fund is targeting SAR 4.5 bn with a hard cap of SAR 5.6 bn and expects to build a portfolio of roughly 15 investments.

This is a means to an end: Derayah plans to launch its own multi-strategy AI and technology fund, pending regulatory approval, and fold this commitment into it once live. The logic is to expand its asset management arm in private markets while offering local investors access to global AI and tech names they would struggle to reach directly — with the payoff coming through subscription and management fees once the new fund is placed.

Riyadh Air, Saudia share domestic flights

Riyadh Air and Saudia launched a codeshare on six domestic routes, with Riyadh Air placing its RX code on Saudia-operated flights from its Riyadh hub to Abha, Al Qassim, Dammam, Jeddah, Medina, and Tabuk, per a press release.

What does it mean? Both carriers are PIF-owned, and the arrangement, which lets travelers connect on a single ticket, suggests the Kingdom is coordinating its two national airlines rather than having them compete head-to-head on domestic routes. In practice, that means Saudi will operate the flights while Riyadh Air sells seats under its own flight numbers, with through-checked luggage. Reciprocal loyalty earning, lounge access, and a reverse SV codeshare on Riyadh Air flights are slated to follow.

Warsh breaks with Powell-era practice at Jackson Hole

Federal Reserve Chair Kevin Warsh used his first Jackson Hole keynote Friday to break with the last 20 years of central bank communication practice — and to signal that the September rate decision is materially harder for our region than the market had priced heading into the weekend. September rate hike odds jumped from around 35% pre-speech to 57% by close, with the two year Treasury yield jumping 6 basis points to 4.298%, the 10-year climbing to 4.72%, and the 30-year sitting at 5.21%.

The substantive argument was hawkish. Warsh recommitted to the Fed’s 2% PCE inflation target and told the audience that despite better-than-expected summer readings, “underlying trends have not meaningfully improved” on inflation. PCE is at 3.7%. Reuters called the remarks the closest Warsh has come to acknowledging additional rate increases could be necessary. Navy Federal’s Heather Long summarized the reaction: “A hike probably won’t come in September, but it will by October or December.”

The framework signal matters more than the September call. Warsh explicitly refused to provide forward guidance, telling markets “we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade.” That is a direct break from Powell-era communication practice, and it reinforced what analysts have been calling Warsh’s biggest change at the Fed: dialing back on communication to markets and the public about the Fed’s future plans. For markets used to reading Fedspeak as the primary input into every asset-pricing decision, this is a structural change in how information flows.

The Washington Post’s take was blunter — Warsh “renewed his inflation-fighting credentials” and put more pressure on the central bank to raise rates when it next meets September 15-16 if inflation doesn’t improve. The July FOMC vote was already 9-3 to hold, with Hammack, Kashkari, and Logan dissenting for a hike. Warsh’s speech gave weight to that dissenting bloc, and put him more clearly at odds with Trump’s demand for lower rates, turning the September meeting into a public test of Fed independence under political pressure.

The regional implications: At least five GCC central banks will follow Warsh wherever he goes, whether they have a domestic case for it or not. The SAR, AED, QAR, BHD, and OMR are all pegged to the USD which means all five central banks have to move within days of the Fed to protect the peg and close off arbitrage. Meanwhile, Kuwait, pegged to an undisclosed basket in which the USD dominates, has some discretion. The catch is that a hike would land on economies running inflation at 1.8% in Saudi Arabia (as of July) and between 2.2% and 3.1% across Kuwait, Qatar, Bahrain and Oman on the most recent prints. The region would then be importing a solution to a problem it doesn’t have which may leave GCC borrowers refinancing at higher rates without a domestic slowdown to justify them.

There’s also more weight to be given to what Warsh did not say. He did not commit to a reaction function. He did not tell markets when the Fed would move. He did not soften his tone in response to political pressure. What he did was recommit the central bank to its inflation mandate while explicitly disclaiming the market’s expectation that the Fed would guide them through every decision. That is a different Fed — and the operating manual for a different Fed does not yet exist for the strategists, treasurers, and CIOs across our coverage area who spent the last 15 years learning the Powell manual.

Bottom line. Friday was the moment the Warsh framework became visible. The September 15-16 meeting is now the calibration event, but the framework governs the next four years regardless of what happens at that meeting. Every long-dated regional issuance decision, every eurobond calculation, every Gulf SWF duration book, and every EM refinancing plan needs to be repositioned against a Fed that has explicitly said it will no longer be the primary input into markets’ next trade.

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MARKETS THIS MORNING-

Asian share markets dropped earlier today following renewed military conflict between the US and Iran. Escalating geopolitical tensions, alongside rising bond yields, dragged South Korea’s Kospi down 1.8% and Japan's Nikkei down 1.7% while the MSCI Asia-Pacific index — excluding Japan — declined by 0.7%.

TASI	11,159	-0.7% (YTD: +6.4%)
MSCI Tadawul 30	1,502	-0.8% (YTD: +8.3%)
NomuC	21,771	-0.1% (YTD: -6.6%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	54,937	-0.3% (YTD: +31.3%)
ADX	10,045	+0.1% (YTD: +0.5%)
DFM	5,883	+0.3% (YTD: -2.7%)
S&P 500	7,712	-0.3% (YTD: +12.7%)
FTSE 100	10,824	+0.3% (YTD: +9.0%)
Euro Stoxx 50	6,231	-0.8% (YTD: +11.9%)
Brent crude	USD 89.44	+1.4%
Natural gas (Nymex)	USD 2.85	-1.5%
Gold	USD 4,507	-0.5%
BTC	USD 78,500	+0.4% (YTD: -10.4%)
Sukuk/bond market index	905.18	-0.2% (YTD: -1.5%)
S&P MENA Bond & Sukuk	151.34	-0.1% (YTD: -0.4%)
VIX (Fear gauge)	14.43	-0.6% (YTD: -3.4%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.7% yesterday on turnover of SAR 3.5bn. The index is up 6.4% YTD.

In the green: Naseej International Trading (+10.0%), Saudi Fisheries (+10.0%), and Bawan (+5.8%).

In the red: Northern Region Cement (-5.4%), Rabigh Refining and Petrochemical (-4.1%), and National Industrialization (-3.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 22.2 mn. The index is down 6.6% YTD.

In the green: Shmoh Almadi (+12.3%), Professional Medical Expertise (+10.8%), and Hawyia Auctions (+9.2%).

In the red: Molan Steel (-17.0%), Alfakhera for Mens Tailoring (-8.6%), and National Building and Marketing (-7.9%).

CALENDAR

AUGUST

30 August-1 September (Sunday-Tuesday): Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center.

31 August-3 September (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center - Malham.

SEPTEMBER

8-10 September (Tuesday-Thursday): The WTM Spotlight Riyadh, Riyadh Front Exhibition & Conference Center (RFECC), Riyadh.

14-17 September (Monday-Thursday) The fourth Unesco Global Forum on the Ethics of AI (GFEAI), The Ritz-Carlton, Riyadh.

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

28 September-1 October (Monday-Thursday): The International Conference on Theory and Practice of Electronic Governance (ICEGOV), Prince Sultan University, Riyadh.

OCTOBER

25-26 October (Sunday-Monday): The Global Proptech Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

26-28 October (Monday-Wednesday): ACHEMA Middle East, Riyadh International Convention & Exhibition Center.

26-29 October (Monday-Thursday): The Future Investment Initiative, King Abdulaziz International Conference Center, Riyadh.

28-29 October (Wednesday-Thursday): Procurement and Supply Chain Futures Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

28-29 October (Wednesday-Thursday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

30 October-1 November (Friday-Sunday): The New Global Sport Conference, Sofitel Hotel & Convention Centre, Riyadh.

NOVEMBER

11-12 November (Wednesday-Thursday): Aluminum Arabia, The Arena, Riyadh.

16-19 November (Monday-Thursday): Cityscape Global, Riyadh Exhibition and Convention Centre (Malham), Riyadh.

29 November-1 December (Sunday-Tuesday): The UN Trade and Development Global Supply Chain Forum, Riyadh.

29 November-1 December (Sunday-Tuesday): The Global Logistics Forum, King Abdulaziz International Convention Centre, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
November: The Esports Nations Cup, Riyadh;
The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah;

2027

FEBRUARY

1-3 February (Monday-Wednesday): Energy Regulators Regional Association annual conference, Riyadh.

MARCH

21-25 March (Sunday-Thursday):The World Water Forum, Riyadh.

22–24 March (Monday-Wednesday): Capital Markets Forum, Four Seasons Hotel, Riyadh

APRIL

26-29 April (Monday-Thursday): World Energy Congress, Riyadh.

JUNE

1-3 June (Tuesday-Thursday): The Saudi Entertainment and Amusement Expo, Riyadh Front Exhibition and Conference Center.

Signposted to happen sometime in 2027:

The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed;
Aero Middle East and Sand & Fun takes place in Thumamah Airport, Riyadh.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

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