Exploring Saudi Arabia's Dominance in Venture Funding

Saudi Arabia’s recent venture funding performance has become the talk of the town, with the Kingdom securing over $1.38 billion in capital in 2023. This is a significant rise from the past decade, and industry experts predict this number will only continue to increase in the coming years. This increased investor interest has fascinated many people, largely due to it being very unprecedented in its success. 

How did a country mainly known for its oil reserves develop such a flourishing startup scene? What factors contributed to the dominance of venture funding in the Kingdom? 

In this article, we will discuss the answers to all these questions and more. 

KSA's Venture Funding Performance  

2023 was the year for Saudi Arabia, with the country making huge strides in fundraising and startup growth. Owing to a 33% rise in venture capital market growth, Saudi Arabia secured the crowning title of the most funded country in the MENA region for the first time. This is in contrast to a mostly declining performance by other neighboring countries in the GCC, making this achievement all the more important. 

This success is driven by four mega deals worth over $100 million, with two Saudi startups reaching unicorn status in the last quarter of 2023 alone. Both FinTech company Tamara and BNPL platform Tabby were able to cross $1 billion in valuation in 2023 and can be accredited to play a major part in boosting the country’s overall startup ecosystem. 

Many international investment firms are beginning to take note of the region’s opportunities, resulting in an influx of office openings in the region. Just recently, Singapore’s Golden Gate Ventures opened its first MENA office in Saudi Arabia. Tabby and Floward, two mega deal scorers of 2023, were originally based in the UAE and Kuwait respectively. Both companies are now headquartered in Riyadh after witnessing the massive market potential Saudi Arabia has to offer. 

There is no doubt that the startup ecosystem of Saudi Arabia has become all the more vibrant over the past decade. This increased interest in entrepreneurship and innovation is a result of multiple factors, both externally adopted and internally pushed. 

New Reforms Encourage Entrepreneurs

Intense internal backing from the government has been a driving force behind the increased flurry of tech startups in the country. Under Saudi Vision 2030, the country aims to increase the contribution of small and medium enterprises to the GDP from 20% to 35%. This, along with other government initiatives like the launch of Saudi Venture Capital Company and SME support agency Monsha’at have resulted in the promotion of entrepreneurship in KSA. 

Notions that were never possible before, like 100% foreign ownership of businesses and set up of SEZs (social economic zones) are now entirely valid in Saudi Arabia. Other promising reforms include a reduction in investment license requirements by 54% and a royal order issued to translate all business laws and regulations into English. This is a surefire nod to the government’s acceptance and encouragement of investment in the region. 

There has also been an increased emphasis on digitization and the adoption of digital alternatives for government operations. This has not only allowed for much easier business setups but also created a digitally forward society open to accepting innovative solutions offered by FinTech startups. The recent launch of a Premium Residency option for tech entrepreneurs is also another attractive initiative, as it offers many never-before-seen benefits to foreigners looking to do business in Saudi Arabia.

Growing Focus on Regional Talent

There has been a greater emphasis on inculcating technological innovations in the Saudi workforce in recent years. This is to boost the skillset of the public sector, which will in turn help foster innovation and digital transformation in businesses. In 2022, multiple initiatives were launched to enhance the digital skills of 100,000 Saudi nationals by the government. These programs included content on AI, cybersecurity, gaming, and programming in their curriculum. 

The population of Saudi Arabia is quite young, with over 50% of its citizens under 30. There are more open-minded, tech-savvy members of society than ever, resulting in an abundance of talent in the region. The country has also invested heavily in STEM fields in recent years, resulting in a greater interest in technology and science as a discipline. 

Access to Funding

Funding in Saudi Arabia is at an all-time high, with startups taking home over a billion dollars in investment this past year. This is a combined effort of both public and private institutional investors, with the latter gaining more traction in recent times. 

The government has also made considerable effort to boost access to funding. In the first half of 2023, Saudi Arabia’s SME Bank reportedly earmarked over $2.66 billion to small and medium-sized enterprises to promote entrepreneurship in the country. This measure has allowed companies to not only expand operations but also create new jobs and invest in product development. 

Final Thoughts

Saudi Arabia has emerged as a key player in the world of venture funding. The region has shown time and again the many benefits it has to offer, and there is no sign of slowing down any time soon. 

At Tawaref, we actively facilitate the investment and funding of top startups in MENA, while also providing a platform for companies to land in Saudi Arabia. Such entrepreneurship and innovation are what we thrive on, and we can’t wait to see what comes next.

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