Startups across the Middle East and North Africa (MENA) raised $1.35 billion through 214 venture capital deals during the first half of 2026, according to a new report released by MAGNiTT.

The report shows that while capital continued to flow into the region's startup ecosystem, overall venture activity slowed as international investor participation declined and funding became increasingly concentrated in a limited number of large transactions.

Funding and Deal Activity Decline

MAGNiTT reported that total funding fell 22% year-over-year compared with the first half of 2025.

The decline was even more pronounced in deal activity, with the number of transactions dropping 41% to the lowest first-half level recorded in the past five years, reflecting a significant slowdown in investment activity despite continued support for larger companies.

Large Deals Dominate the Market

According to the report, the headline funding figure masked a growing concentration of capital.

Two mega funding rounds totaling $480 million helped cushion the market's overall decline, while the 10 largest transactions accounted for approximately 58% of all capital invested during the first six months of the year.

This trend highlights investors' increasing preference for backing a smaller number of more mature startups.

Average Deal Size Increases

As funding became more concentrated, the average deal size rose to $7.9 million.

However, the median deal size remained stable at $2 million, indicating that early-stage and mid-sized investments continued despite the dominance of larger funding rounds.

Regional Investors Fill the Gap

The report found that international investor participation experienced the sharpest decline during the period.

The number of foreign investors fell 48%, dropping from 181 investors in the first half of 2025 to 95 investors during the same period in 2026.

In contrast, regional investors maintained strong activity, with 148 investors participating across the ecosystem while significantly increasing their capital commitments.

Investment from MENA-based investors rose 23% to $940 million, marking the highest first-half total recorded in five years.

As a result, regional investors contributed approximately 81% of all venture capital invested in MENA startups during the period, helping offset the decline in international funding.

UAE Maintains Regional Leadership

At the country level, the United Arab Emirates strengthened its position as the region's largest venture capital market.

Startup funding in the UAE increased 53% to $895 million, representing 66% of all venture capital invested across the MENA region during the first half of 2026.

Despite the growth in funding value, the number of deals completed in the UAE declined 37%, underscoring the continued concentration of capital in larger investment rounds.

Investors Become More Selective

MAGNiTT said the first-half results point to an evolving investment landscape rather than a collapse in venture funding.

Investors have become increasingly selective, prioritizing startups with proven business models, stronger operational performance, and clearer growth potential amid ongoing geopolitical and macroeconomic uncertainty.

The report added that several investment stages and sectors continue to demonstrate resilience despite slower overall activity.

Looking ahead, MAGNiTT said the performance of the second half of 2026 will largely depend on whether international investor confidence returns and whether regional investors continue to play their growing role in supporting the MENA venture capital ecosystem.

The findings are based on MAGNiTT's proprietary database, which tracks more than 34,800 startups, 22,500 funding rounds, and nearly 1,300 exits, making it one of the region's most comprehensive sources of venture capital and private equity data.