MENA startup funding fell to $941 million in the first quarter of 2026, marking a 21.5 percent quarter-on-quarter decline
Startups in the UAE led regional funding in the first quarter of 2026, raising $625.8 million across 46 deals. In the Middle East and North Africa (MENA), startup funding fell to $941 million in the first quarter of 2026, marking a 21.5 percent quarter-on-quarter decline and a 37 percent drop year-on-year, as escalating geopolitical tensions weighed on investor activity across the region.
According to the latest report by Wamda, the year opened on a relatively strong note, with nearly half a billion dollars deployed across 59 deals in January. By mid-February, however, escalating tensions between the U.S., Israel and Iran began to weigh on investor sentiment. As the conflict intensified, investment activity slowed, with February closing at $326.6 million.
17 startups raised less than $50 million in March
Beyond sentiment, the war had tangible economic consequences. Disruptions to seaborne logistics, particularly following Iran’s blockade of the Strait of Hormuz, one of the world’s most critical oil transit chokepoints, heightened global risk exposure and reinforced investor caution across the region.
With uncertainty persisting and only a fragile truce in place, March recorded one of the weakest MENA startup funding months in recent years. Just 17 startups raised less than $50 million in total, reflecting a near standstill in deal activity.
A brief window of optimism emerged as global attention turned to anticipated negotiations in Islamabad. However, the collapse of talks by the end of the week quickly reversed sentiment, reinforcing expectations of a challenging second quarter and a longer recovery cycle for both startups and investors.
Fintech leads sectoral funding
Following the UAE, Saudi Arabia saw 57 startups secure $156.7 million in Q1 2026. Egypt’s startups ranked third in the MENA region, attracting $86 million across 12 transactions. Elsewhere, Morocco showed relative resilience, raising $22.6 million across six deals, largely driven by Yaakey’s $15 million Series A in January. Meanwhile, Bahrain followed with $22 million raised across two transactions.
Fintech once again led sectoral funding, accounting for 46 percent of total investment, with 25 startups raising the largest share of capital. Proptech followed with $228.6 million across 12 deals, while foodtech startups secured $60 million through three transactions.
Despite ongoing discussions around alternative financing, debt contributed just 11 percent of total funding during the quarter.
Capital remained heavily skewed towards early-stage startups in terms of deal count, with 110 startups raising a combined $233 million. In contrast, only seven late-stage rounds were recorded, accounting for $113 million, highlighting the continued slowdown in growth-stage capital deployment.
B2B startups dominate MENA deal activity
While B2B startups dominated MENA deal activity, accounting for 74 transactions worth $199 million, B2C startups attracted the majority of capital. A total of $564.6 million was deployed across 43 B2C deals, reflecting continued investor appetite for consumer-facing platforms with scalable revenue potential.
The remaining funding went to startups operating hybrid models.
The report also revealed that funding disparities remain stark. Only five women-led startups raised capital during the quarter, securing a combined $500,000. In contrast, male-founded startups accounted for approximately 98 percent of total funding, raising $924 million.
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Second quarter outlook remains uncertain
The outlook for MENA startup funding in the second quarter remains uncertain. Prolonged geopolitical instability is expected to dampen investor confidence, particularly across sectors closely tied to regional and global trade flows, including logistics, travel and e-commerce.
Inflationary pressures are likely to intensify in more fragile economies such as Egypt, while oil prices are expected to remain elevated. At the same time, the GCC may see a moderation in the investment momentum it has sustained in recent years. Investors are likely to adopt a more cautious stance, delaying capital deployment until there is greater clarity around the evolving geopolitical landscape.
