MENA VC survives on bigger bets

MENA venture capital holds up — for now: Startups across MENA raised USD 1.35 bn across 214 agreements in 1H 2026, down 22% y-o-y, according to a MAGNiTT report seen by EnterpriseAM. The headline steadiness masks a sharper shift underneath as the agreement volume fell 41% to 214, the lowest half-year count since 2022, even as total funding held broadly firm.

MAGNiTT reads the resilience as a lag, not a verdict. 1H capital reflects agreements signed six to nine months ago, before April’s regional conflict, and the firm frames the deal-count slide as part of a global contraction rather than a MENA-specific retreat, as global transaction volumes have now fallen for five straight quarters.

The real test is still ahead: Funding barely moved between the quarters, slipping 2% to USD 667 mn in 2Q from USD 679 mn in 1Q. Agreement activity told a different story, dropping 27% q-o-q to 90 transactions, the lowest quarterly count in at least two years. “Capital deployment in 1H reflects decisions made six to nine months ago, [agreements] already in motion before the regional conflict,” MAGNiTT founder and CEO Philip Bahoshy tells EnterpriseAM. The clearer warning sign, he argues, sits earlier in the funnel: early-stage transactions fell more than 50% y-o-y, “the truest measure of ecosystem appetite.”

Why MAGNiTT is watching 3Q: The firm sees a direct parallel to 2020, when announced agreements carried headline funding through the first half before dealmaking stalled in the third quarter as the pipeline ran dry. With the summer lull compounding the conflict’s drag on new deal formation, MAGNiTT expects 3Q to be the first clean read on whether the region is genuinely resilient or simply drawing down a pre-committed pipeline.

MEANWHILE- A handful of mega rounds held up the average. Two transactions worth a combined USD 480 mn, roughly 36% of all capital deployed in 1H, cushioned the decline, while the 10 largest agreements absorbed 58% of the total. The concentration is the story: strip out the top of the table and the picture thins considerably.

International investors retreat: Active foreign investors fell 48% y-o-y to 95 from 181, while the number of MENA-based investors held broadly steady. Capital deployed by overseas players dropped even harder, down 65% y-o-y.

ALSO- MENA-based investors supplied 81% of all venture funding in 1H, up from 58% a year earlier and their highest share in more than five years. Local capital is now carrying the ecosystem.

The UAE led the headline, but the concentration matters: The UAE attracted USD 895 mn, 66% of all MENA funding and a 53% y-o-y jump, even as its agreement count fell 37%. Some 60% of the UAE’s capital came from three agreements backed by a single investor, BlueFive Capital, among them CargoX (USD 250 mn) and Mal (USD 230 mn), the two mega rounds propping up the regional total. ”Adjusted for those, [the UAE and Saudi] are far closer than the headline figures suggest,” Bahoshy says.

The Kingdom came second at USD 219 mn, down 74% y-o-y, but “the comparison base is doing a lot of the work,” Bahoshy says, noting that 1H 2025 was an exceptional peak for the Kingdom, lifted by large rounds that don’t repeat every cycle. Saudi closed 72 agreements, nearly level with the UAE’s 79.

Elsewhere: Egypt funding fell 29% to USD 142 mn. Among smaller markets, Morocco posted the sharpest gain, up 305% to USD 32 mn, while Oman rose 82% to USD 22 mn.

Fintech stayed the biggest magnet: The sector held its lead at USD 617 mn, despite a 9% y-o-y dip. Transport and logistics was the fastest riser, up 661% to USD 273 mn, but almost entirely on one agreement: CargoX accounted for 92% of the sector’s total. Enterprise software drew USD 115 mn (+4%), food and beverage jumped 310% to USD 76 mn, and real estate startups raised USD 72 mn.

Appetite is shifting up the stages: The deal mix moved modestly beyond the earliest-stage startups, with early-growth rounds rising to 18% of all agreements from 14% in 2025. Earliest-stage agreements slipped to 82% of the count, while late-stage and venture-growth ones stayed effectively absent.

Exits keep slowing: MENA recorded just 16 M&A transactions in 1H, down 56% y-o-y, in step with softer global exit markets, where dealmaking slowed again in 2Q.

Public tech held up better than private: MAGNiTT’s newly launched tech index rebounded 20.9% in 2Q, recovering nearly all of its 1Q losses to finish the half down just 0.2%. The bounce was company-specific, led by Talabat, Space42, and Elm, rather than a ride on the global AI rally, which lifted emerging-market tech stocks 92% over the same window. Regional tech is tracking its own fundamentals.

What to watch: Bahoshy flags three signals that will define 2H: the return of international investors, a recovery in early-stage agreement flow once the summer passes, and the stabilization of exits. All three, he argues, read ecosystem health more honestly than the headline funding figure, and all three will show up first in the 3Q data.

MARKETS THIS MORNING-

Asia-Pacific markets are mixed in early trading this morning as oil jumped to a one-month high after the US announced it was reinstating its blockade of Iranian shipping and introducing a 20% fee on cargo moving through the Strait of Hormuz. Japan’s Nikkei is flat, while South Korea’s Kospi is looking at gains. Meanwhile, the Hang Seng and Shanghai Composite are both down.

THE CLOSING BELL-

The DFM fell 1.2% yesterday on turnover of AED 707.9 mn. The index is down 1.3% YTD.

In the green: BHM Capital (+1.9%), GFH (+1.5%), and Takaful Emarat (+1.3%).

In the red: Dubai Taxi (-3.1%), Emaar Development (-2.8%), and Dubai Islamic Ins. and Reins. (-2.8%).

Over on the ADX, the index fell 0.3% on turnover of AED 1.1 bn. Meanwhile, Nasdaq Dubai was up 1%.