VC FIRMS LEND A HELPING HAND TO SAUDI START-UPS

Saudi Arabia’s venture capital firms are teaming up to nurture small and medium enterprises (SMEs) and create new national champions.

In October, Saudi Telecom Co (STC) signed a co-operation agreement with Badir Technology Incubators and Accelerators Program to support technology start-up projects through innovative solutions.

“STC Business provides small- and medium-sized enterprises (SMEs) with a wide range of services including setting up infrastructure and providing technical services on a daily basis such as phone and internet connection as well as advanced services, including the Internet of Things (IoT), cloud computing, cybersecurity solutions, and sales management,” according to a company statement.

Badir Technology, which was started in 2007 by King Abdulaziz City for Science and Technology, aims to contribute to the kingdom’s technology start-up scene by providing telecommunication services and digital solutions.

Badir Technology raised nearly SAR 110 million (USD 29.32 million) across 63 funding deals last year – making it a record year. Individual investors topped the list of funding deals, followed by private companies, venture capital firms and governmental institutions.

Individual investors, who were the most active in terms of funding size, pumped SAR 40.69 million (USD 10.85 million) into start-ups last year followed by private sector companies investing SAR 35.20 million (USD 9.39 million). Venture capital firms invested SAR 30.68 million (USD 8.18 million) while government funding into start-ups reached SAR 3.54 (USD 944.533), the company said.

“The Saudi start-up industry is seeing bright prospects with funding activity gaining pace in the second half of 2018,” said Nawaf Al Sahhaf, Badir CEO, in a statement: “I am optimistic that we will see the surge in investments and opportunities in the seed round and angel funding for start-ups this year. Series A and Series B are bullish as well, given the thriving and expanding Saudi start-up industry.”

“With the increased awareness campaign for the incubator programmes, we were able to reap better results with more funding from the anticipated quarters. Saudi start-ups have a wide range of financing options as funding volumes in the local market has increased steadily, with a lot of fresh money flowing into seed and early-stage companies,” he added.

The programme has targeted the creation of 600 start-ups and 3,600 jobs by 2020 by focusing on expanding its innovation and entrepreneurial hubs across the kingdom.

Meanwhile, Business Incubators and Accelerators Company (BIAC), a unit of the Saudi Technology Development and Investment Company (TAQNIA), which is by the Public Investment Fund, also announced that it signed four agreements to provide support to technology start-ups in the fields of finance, telecommunication, health insurance, and travel and tourism. BIAC signed the four agreements with Social Development Bank (SDB), Saudi Telecom Company (STC), Al-Mosafer, and Bupa Arabia for Cooperative Insurance Company.

Separately, UnitX, an artificial intelligence (AI) and supercomputing start-up spin-out company from King Abdullah University of Science and Technology (KAUST), secured USD 2 million of co-investment from the KAUST Innovation Fund and Saudi Aramco’s Wa’ed Ventures fund.

“This injection of joint funding will support UnitX in its quest to democratise supercomputing and help enterprises of all sizes leverage technologies such as high-performance data analytics to make data-driven decisions, reduce IT spending, innovate and become globally competitive,” the companies said.

The kingdom is emerging as one of the fastest-growing start-up and venture capital markets in the MENA region.

A September 2019 report from MAGNiTT, which tracks regional start-up deals, noted an 82% increase in year-on-year funding in the first six months of 2019, with a 44% rise in deal volumes and a total of USD 40 million invested into Saudi Arabia-based start-ups. This follows USD 48 million-worth of investment ploughed into start-ups in 2018 across 34 VC deals.

Credit facilities to micro, small and medium enterprises have risen this year to 6.2%, compared to 6% last year. Saudi financial services provides loans of around SAR 113 million each in the first two quarters of the year, according to data from the Saudi Arabian Monetary Authority.

Banks have raised their exposure to SMEs to 5.9% of their total in the second quarter to around SAR 105.15 million, marginally higher than the SAR 105 million loaned in the first quarter (also 5.9% of total).