Riyadh - Sharikat Mubasher: The venture capital (VC) market in Saudi Arabia witnessed a significant contraction during the first quarter (Q1) of 2026, following an exceptional 2025 performance, during which the market recorded a 188% year-on-year (YoY) increase in funding and a 41% YoY rise in deal activity.

The ‘Q1 2026 State of Venture Capital in KSA’ report, released by MAGNiTT, stated that the Kingdom’s VC market witnessed a 39% YoY decline in deal volume and a 62% decrease in funding during Q1-26 compared to the same quarter in 2025.

The gaming sector emerged as the most active sector by deal count for the first time, supported by strong government initiatives, while the fintech sector led funding, accounting for 80% of total capital deployed.

Local investors dominated the market, representing 60% of active investors, while international participation declined to 15%, down from 35% in 2025, marking the lowest level recorded over the past five years.

Additionally, Saudi Arabia led the MENA VC landscape by deal count, maintaining its position ahead of regional peers despite the slowdown, followed by the UAE.

The report analyzes Saudi Arabia’s VC performance over the past five years, highlighting the key trends and developments that have defined its growth. With a special focus on Q1-26, the report examines sector activity, funding and deal patterns, ticket sizes, investor participation, and M&A trends, while assessing how current conditions may influence the market’s trajectory.