Today's Edition
MAYS IBRAHIM (ABU DHABI)
UAE startup funding rose 47% year-on-year to a record $419 million in the first quarter of 2026, according to venture data platform MAGNiTT.
The milestone came despite deal activity falling 45% year-on-year to a three-year first-quarter low of 37 transactions, its report said.
This was largely driven by Property Finder's $170 million funding round, one of the region's largest venture deals, which helped sustain headline funding levels.
According to the report, the divergence between funding and deal volumes reflects a trend seen in venture capital markets globally, where investors are increasingly backing a smaller number of companies through larger, higher-conviction investments rather than spreading capital across a wider pool of startups.
“The data suggests that funding totals alone are becoming a less reliable indicator of ecosystem health,” the report said, noting that deal volume, investor participation and growth-stage activity are increasingly important measures of market momentum.
Despite the record funding total, early-stage startups continued to dominate the market, accounting for 59% of all transactions during the quarter.
Only two Series B deals were recorded, while Series A and late-stage activity remained subdued.
Fintech retained its position as the UAE's most active startup sector by deal count, while gaming and real estate startups gained momentum, each recording four transactions during the quarter.
International investors remained the largest source of venture capital activity, accounting for 47% of unique investors in the UAE despite a 31% annual decline in participation.
Local investors increased their share to 29%, indicating growing domestic engagement in the ecosystem.
The report also highlighted the challenges facing startups as they seek to scale beyond early-stage funding.
Over the past decade, more than 2,600 startups across the Middle East and North Africa secured early-stage funding, but only 168 progressed to Series A rounds and just eight reached late-stage funding.
The UAE showed the strongest startup progression rates in the region, with 10.6% of funded early-stage companies advancing to Series A, compared with a regional average of 6%.
Saudi Arabia, meanwhile, recorded the fastest expansion in startup activity, supported by a compound annual growth rate of 27% in funded startups over the past 10 years.
The findings suggest that while startup creation across MENA has accelerated significantly, the ability to consistently produce scale-ups remains concentrated in a handful of more mature ecosystems, led by the UAE and Saudi Arabia.
Merger and acquisition activity remained limited in the first quarter, with four transactions recorded, three of which involved international acquirers, according to MAGNiTT.
