UAE Series A rounds halved in 1H as startups struggle to find investors willing to lead

UAE startups are still raising big money — getting to the next round is another matter. Series A rounds halved in 1H 2026 even as larger investments kept overall funding elevated, according to Magnitt data shared with EnterpriseAM. International investors are still showing up, but their share of Series A capital has fallen to its lowest level in more than five years — leaving regional backers to support a pipeline of startups already struggling to graduate beyond seed.

The headline numbers hide a much thinner market: UAE startups raised USD 895 mn in 1H, up 53% y-o-y, even as transaction count fell 37%, according to Magnitt’s mid-year report. But Series A funding fell around 20% as the number of rounds halved, Magnitt founder and CEO Philip Bahoshy tells EnterpriseAM, and AI companies took around 60% of it. Series B funding rose on a flat transaction count, pointing to bigger checks going to a similarly small pool of businesses. Together, the two stages accounted for just a fifth of UAE funding.

The pipeline was narrow to begin with: Only 10.6% of UAE startups that raised early-stage funding between 2015 and 2025 went on to secure a Series A, according to Magnitt’s 10-Year Funnel Analysis — and only around 23% of those raised a Series B. Fewer companies entering Series A today means fewer growth-stage businesses two or three years down the road.

“We have become much better at funding companies at inception than at financing their next stages of growth,” Victor Sunyer, partner for growth equity at Nuwa Capital, tells EnterpriseAM.

The missing lead check

Foreign investors haven’t disappeared — they’re just writing smaller checks: International investors made up 55% of UAE Series A participants in 1H, broadly in line with 2025, but supplied an estimated 35% of the capital, Bahoshy says. At Series B, their share of both investors and capital held at around half, in line with historical levels.

The real gap is someone to lead: The region has family offices, smaller growth funds, and institutions capable of participating in sizable investments, Sunyer says. Far fewer are prepared to commit a substantial amount upfront, conduct due diligence, set the valuation, and bring other investors into the round, he adds. That can leave founders with interested backers but nobody willing to get the fundraising process moving.

Some of the investors who could lead haven’t heard of these companies: Varun Rekhi, a growth investor at European VC Speedinvest, says some UAE businesses growing three or four times a year remain largely unknown to major overseas funds. He sees that information gap — alongside founders’ ability to articulate their investment case — as one of the biggest barriers to attracting international capital.

That leaves founders caught in a loop: “Series A investors say come back with more traction,” Rekhi says — but startups often need more money to produce that traction. He expects more bridge and pre-Series A rounds to fill the gap.

Can regional capital pick up the slack?

On paper, regional investors have stepped in: Their share of UAE startup funding rose from around 20% in 2025 to more than 80% in 1H 2026, Bahoshy says. They supplied more than 60% of Series A capital and nearly half of Series B funding.

But a handful of big wagers are doing much of the work: Three BlueFive Capital-backed transactions accounted for around 60% of total UAE funding in 1H, including CargoX’s USD 250 mn and Mal’s USD 230 mn rounds, according to our previous coverage. Excluding those investments, the foreign share of overall UAE funding returns toward its five-year average, Bahoshy says. The regional shift at Series A is real, but the countrywide figures overstate how broadly the investor mix has changed.

There’s only so much regional capital can carry: “Regional funds do not currently have enough firepower to fill it on their own,” Sunyer says. MENA-focused VCs are sitting on USD 1.45 bn in dry powder — 88% of what 17 funds have raised since 2024, according to Magnitt data we covered in August — but that’s spread across different mandates, geographies, and stages, not earmarked for UAE growth rounds.

The deeper problem sits with the LPs: Limited partners — the institutions and individuals backing VC funds — have favored seed strategies over the growth funds their portfolio companies will eventually need, Sunyer says, and some prefer to invest directly in later rounds to “capture higher returns themselves.” The lack of exits doesn’t help: MENA recorded just 16 startup M&A transactions in 1H, down 56% y-o-y, according to Magnitt, leaving LPs few proven routes to get their money back.

Nuwa is working around the gap transaction by transaction: Nuwa has developed a growth syndicate bringing family offices and other investors into individual transactions, allowing it to assemble larger checks while giving participants flexibility over which companies they back. Sunyer says the program has made three investments so far and aims to support six to eight businesses.

Regional capital can also act as a bridge to foreign money rather than a replacement for it: Rekhi points to managers such as Key Capital, COTU, Arbor Ventures, and BYLD introducing regional startups to global funds. His own firm offers another model: Speedinvest’s Middle East and Africa fund, backed by Mubadala, Qatar Investment Authority, and EIB Global, targets initial investments of around USD 5 mn, primarily at Series A and B — exactly the stage where the gap is widest. “Sovereign investors can [also] make a real difference by anchoring rounds and bringing larger pools of capital to the table,” Sunyer says.

What still gets a check

Besides AI startups, one of the growth-stage rounds raised over the past year was from Keyper — and it saw a mix of foreign and regional investors. The proptech raised USD 11 mn in July in a round led by Speedinvest — its first international lead investor — alongside regional and strategic backers including Mashreq’s venture arm, Arab National Bank, Dubai Future District Fund, Property Finder, and Ellington Properties. The investment followed an earlier USD 4 mn Series A.

The lead investor did the legwork: Speedinvest spent nearly a year getting to know the founders before investing, Rekhi says, drawn by Keyper’s focus on landlords rather than racking up tenants, as well as the underlying UAE real estate story. “For me, Keyper was a macro story first, and when you look under the hood, it is an operator story.” That year of diligence is exactly the lead-investor work Sunyer says few regional backers are willing to take on. Foreign and regional investors were also asking different questions: “International investors were assessing the market as well as the company. Regional investors already understood the market and were assessing us,” co-founder and CEO Omar Abu Innab tells EnterpriseAM.

The new reality

The pitch itself has changed: “Three years ago a regional expansion plan was an asset in a pitch; today the question is whether you have finished the market you are already in,” Abu Innab says. Sunyer sees the same shift from the investor side: Revenue growth still matters, but investors want customer retention, healthy margins, returns on acquisition spending, and a credible path to profitability.

Even strong growth no longer ensures a quick close: The global AI boom is resetting growth expectations across sectors, Rekhi says, leaving businesses growing 70-100% a year spending four to six months trying to close a round as investors reassess growth rates, team size, and execution speed.

Founders shouldn’t wait for easy money to return: Sunyer advises startups to allow longer to close rounds, raise enough to materially strengthen the business, and avoid spreading capital across too many markets or products. “A broad recovery in fundraising should be upside, not something the business depends on,” he says.

Ultimately, the 2H outlook looks like more large, concentrated rounds: “Headline funding may stay supported by large rounds for the rest of the year,” Bahoshy says. The clearer test will be whether more UAE startups are actually making it through the funding funnel — rather than a smaller pool of established businesses simply attracting ever-larger checks.