The Middle East startup scene is telling two very different stories this year. The biggest funding deals have already raised more money than in all of last year, but funding for younger early-stage companies has dropped 45%. Joining me is Philip Bahoshy, Founder and CEO of MAGNiTT. Philip, welcome to the show. You built MENA’s venture dataset from scratch. Why was reliable data the missing infrastructure?
Decisions are made on credible, reliable, and accurate data. Without that, it is difficult to make correct decisions. I started MAGNiTT ten years ago as a connection platform to connect entrepreneurs and investors. But we continued to pivot towards the core problem — that accurate data and representation of what was happening here in the region was missing. We started with just transactions and have since gone deeper and wider — private equity, private credit, fund performance, DPI calculations, exit multiples. Without that data you cannot make credible decisions.
Mega rounds have already surpassed 2025 levels but early-stage deals are down 45%. Is the headline number hiding a pipeline problem?
Global venture capital has seen a record year of deployment but when you deep dive, there is a heavy skew in mega deals in AI, defence, and security. Many of the sovereigns here have been active players investing in the US, in frontier labs, and AI hardware infrastructure. When you look at total transactions dating back to 2022 when interest rates went up to 5%, you have almost seen a straight-line decline in the total number of transactions globally in venture as an asset class. Sovereigns in the region have been fuelling the ecosystem in the last two to three years — record investment last year driven by the UAE and Saudi Arabia. But this year it has masked a more than significant decline in total number of transactions, specifically early-stage investments.
What does today’s drop in early-stage deals tell us going forward?
The pipeline of the future is the investments you make today. A 45% drop in seed deals becomes a challenge for the next evolution of the ecosystem — that is one pain point. Our report published in April-May identified five pressure points. One was that pipeline question. Second, late-stage capital becomes scarcer — as international investors are more cautious of the region, you rely on local capital. Third, we are facing an exit liquidity challenge that can be stimulated through M&A — but we have seen a slowdown in M&A and IPOs have been few and far between. Fourth, international attraction of investors. Fifth, investments now will lead to bigger opportunities in the next two to three years.
How does Abu Dhabi score in your data compared to Dubai and Riyadh?
MAGNiTT generally measures at a country level, but we look at data for Dubai and Abu Dhabi. A lot of investment activity is based out of ADGM and the financial hubs. You have key investors like Mubadala Capital with a venture fund focused here, investors like Shorooq based in Abu Dhabi who are active, and the likes of Lunate and IMAD and MKG investing internationally. It is a question about the focus of investment and venture as an asset class for the wider region.
Thank you Philip.
