A report by "Magnit" revealed a slowdown in venture capital investments in the Middle East and North Africa region during the first half of 2026, with the number of deals declining at a faster pace than the drop in funding, indicating investor caution despite continued regional capital flows.

Total funding fell 22% year-on-year to about $1.35 billion, while the number of deals dropped 41% to 214 deals, with the top 10 deals accounting for 58% of total funding.

The number of international investors shrank 48%, compared to relative stability among regional investors.

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Farah Al-Nahlawi, director of research at "Magnit," said that the decline in the number and value of venture investments is a global phenomenon, with the number of deals worldwide starting to fall since 2021, while investment value rose.

Al-Nahlawi added, in an interview with "Al Arabiya Business," that the venture capital market is seeing a concentration in large deals supporting the artificial intelligence, security, and defense sectors.

She explained that the slowdown in venture capital investments in the Middle East and North Africa is not isolated from global markets, with the number of deals declining faster than the drop in funding value due to concentration in a few large deals.

Al-Nahlawi said that the first half of 2026 saw a 48% decline in non-mega deals compared to last year, but we witnessed a concentration in larger-sized deals.

She added that this decline is not linked to the geopolitical tensions the region experienced recently, as deal value fell in the second quarter of 2026 by 2% compared to the first quarter.

Impact of Geopolitical Tensions

She clarified that the impact of geopolitical tensions on the venture capital market will appear during the third and fourth quarters of this year.

She said that last year, international investors accounted for 50% of venture investments, amid significant efforts by governments in the region to attract international investors.

She added that the decline in international investors' investments during the recent period was due to their being affected by economic uncertainty.

Al-Nahlawi explained that there are three types of international investors: the first are those with offices in the region, the second are investors with diversified portfolios, and the third are new investors wishing to invest in the region.

She said that international investors' appetite for the Middle East and North Africa region is expected to rise again as geopolitical conditions stabilize and liquidity increases.

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