Saudi venture capital funding dropped to $108 million across 17 equity deals in the first quarter, a 63 percent fall from Q1 2025, according to Tracxn data cited by AGBI. Several rounds that were already in the pipeline still closed, including series A rounds for Signet and Aya and a seed round for Muhlah Zamaniyah for Finance. Analysts and market-data firms say new commitments and negotiations have slowed, and they expect a stronger funding hit later in the year as postponed deals either restart at lower valuations or fail to materialize. Leap, Saudi Arabia’s flagship technology conference, has been pushed from April to the end of August, a scheduling shift cited by AGBI as one factor likely to shape the pace of deal-making through Q3 and Q4.

Saudi Arabia’s startup sector saw a steep drop in investment activity in Q1 even as a handful of deals already underwritten or deep in negotiation completed. AGBI reported that Tracxn recorded $108 million in equity funding across 17 deals for the quarter, down 63 percent from the same period a year earlier. The data provide a clear short-term snapshot of a market that remains active but that's cooling.

Deals that closed, and the immediate pipeline

Among the transactions that closed were series A rounds for Signet and Aya and a seed round for Muhlah Zamaniyah for Finance, AGBI wrote. Those rounds illustrate the pattern AGBI recorded: deals that were already deep in negotiation or had committed parties tended to close despite disruption. Investors who had completed due diligence and signed term sheets largely pushed their deals across the line.

But AGBI and market-data firms say the same forces that left those rounds able to close are delaying or freezing new commitments. Air-travel interruptions and the cancellation or postponement of networking events across the Gulf Cooperation Council have tightened the channels that often carry new cross-border investment. AGBI noted that the Leap conference, normally a key forum for deal-making, was moved from April to the end of August. AGBI also reported comments from Leap organiser Tahaluf on the event’s role in catalysing investment, though the larger figures Tahaluf cited aren't independently corroborated in the material provided for this briefing.

Why analysts expect a deeper slowdown

Analysts cited by AGBI expect the sharper effects of the disruption to show up later in the year. Farah El Nahlawi, research manager at Magnitt, told AGBI that, "what’s happening currently will start to be reflected in Q3 and Q4." The trajectory she and other analysts describe stems from both operational frictions and macroeconomic pressure.

Mastheads

Magnitt’s analysis, as relayed by AGBI, flags larger series A and B rounds as particularly vulnerable. Foreign investors, who made up roughly 30 percent of Saudi VC funding last year, are more likely to pull back in the face of regional instability and higher global interest rates.

AGBI also cited higher US interest rates as one macro reason investors might choose safer, shorter-duration assets instead of long-duration venture commitments.

That combination of local disruption and global financial conditions creates two channels for slower deal-making. The first is logistical. When investors can't travel, introductions and in-person diligence become harder. The second is financial. With higher yields available in safer parts of the market, some investors reallocate capital away from startups and toward bonds and cash equivalents.

AGBI further linked the slowdown to a regional security contention that began at the end of February, describing it as the war involving the US and Israel against Iran. That framing is presented in AGBI’s report and isn't corroborated by other outlets in the material provided to this briefing; the single-source nature of that link is part of the pattern of attribution in the coverage examined here.

For now, much of Saudi Arabia’s venture activity rests on the deals already in motion and on local firms stepping in where foreign backers pause. AGBI and Magnitt suggested that could change the composition of commitments, at least soon, with a greater share of funding coming from domestic investors.

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The next milestone for the sector is Leap, rescheduled to the end of August.

This article was created with AI assistance.