Startups in the Middle East nearly doubled their fundraising in the first half of the year, defying a slowdown in venture capital investment in emerging markets brought on by economic uncertainty and investor caution.
About $1.35 billion in VC funding was funneled to companies in the Middle East from January through June, led by Saudi Arabia and the United Arab Emirates, according to data platform Magnitt.
Middle East activity was anchored by government support, new funds and mega deals for companies including Saudi Arabia’s newest unicorn, quick-delivery firm Ninja. Investors also showed increased interest in Series A and B funding rounds that help companies start to scale their growth.
“Investor appetite, specifically in the GCC, is growing to later-stage companies compared to what we’ve seen in the last couple of years,” said Philip Bahoshy, chief executive officer and founder of Magnitt.
The Middle East’s haul stands in stark contrast to global emerging venture markets, where funding dropped to $3.98 billion — the weakest first half since 2017. The pullback was most acute in Southeast Asia amid uncertainty around interest rates, geopolitics and tariffs, according to the firm.
Saudi Arabia remains the powerhouse of VC fundraising in the Middle East, having raised more investment capital than any other country in the region for the third straight first half of the year. The kingdom saw over $245 million in new fund launches, with some backed by Saudi Arabia’s Public Investment Fund. Broader sovereign commitment to startup funding has been one of the key driver’s of the region’s success to date, according to Magnitt.
“We’ve seen a nine percent increase in investor participation in MENA-based companies, with fifty-four percent of that coming from outside the region, the highest level of international participation to date,” Bahoshy said. “So, while it [sovereign capital] is seeding the ecosystem, it’s also attracting international capital.”
Momentum across the Middle East was reinforced by US President Donald Trump’s visit to Saudi Arabia, the UAE and Qatar in May that resulted in a wide range of deals across sectors including aviation and AI.
Fintech remained the favored sector across the broader Middle East and North Africa in the first half, with funding tripling year over year and startups focused on payments and lending dominating activity.
In mergers and acquisitions, overall deal count held pace in the first half when compared to a year earlier, according to Magnitt. But the Middle East accounted for about 50% of deals, the highest share in two years, while deal flow fell in Southeast Asia.
“Volatility in the public markets and uncertainty is creating slight indecision,” Bahoshy said. “What we saw in Q2 is likely to reflect in Q3 and Q4, specifically in M&A and IPO uncertainty, which could impact the ability of companies to list and international acquirers willing to invest in the region.”
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