NEW FUND FLOWS ENERGISE SAUDI START-UPS

Saudi Arabia’s start-ups raised USD 95 million in the first half of the year, a staggering 102% higher than in the same period of 2019.

A new report by Magnitt, in collaboration with Saudi Venture Capital Company (SVC), said funding for start-ups in the first six months had already surpassed that of the whole of 2019.

The kingdom’s thriving, but nascent, digital start-up sector saw 45 venture deals take place in the first half, up 29% from the comparable period last year.

“H1 2020 saw 45 investments take place in Saudi Arabia, an increase compared to H1 2019,” the research company said in its report. “Among the most active investors were the Misk 500 MENA Accelerator, as well as other investors and angel groups 500 Startups, Impact46, KAUST, OQAL, and SVC.”

As many as 32 institutions made investments in Saudi-based start-ups during the period, an increase of 7% compared to the same period last year. Just under 60% of these investors were based in Saudi Arabia, while 41% were international, primarily from the UAE and the United States.

“E-commerce has been among the top invested industries in Saudi Arabia and the entire MENA region historically. A specific segment within e-commerce that has seen the majority of this funding is grocery e-commerce, with Jahez and Nana both raising significant funding rounds” Magnitt said.

Jahez, the Saudi food delivery service, led the funding in the first half, raising USD 36.5 million in a Series A round led by Saudi venture capital firm Impact46.

Impact46 said it was looking to tap into the SAR 4.4 billion online food delivery market through Jahez, which employs 180 people and operates in 19 Saudi cities, including all the main urban centres.

“Our starting point when creating Jahez was to give restaurants the tools they need to remain competitive in a digital world,” said Ghassab Al-Mandil, Jahez CEO and co-founder. “In the current climate in particular, we help restaurants, supermarkets, pharmacies, and other retailers gain access to a new digital channel and generate revenue by selling through Jahez.”

The funding round will help the company invest in building new offerings, expand its verticals products and develop in-house technology.

Nana, a grocery delivery service company, saw the next biggest round of fund raising this year in the kingdom, securing USD 18 million in Series B funding from current investors Watar Partners, SVC, and Wamda. The company’s key partners include Panda and Carrefour hypermarket chains.

Government agencies are playing a nurturing role in boosting small businesses and creating new supporting networks and policies to ensure that the pandemic do not threaten their prospects.

Saudi Arabian Monetary Authority launched five key initiatives to support SMES in March, including deferred payments, loan guarantees, funding for lending, support for e-commerce and POS fees, and exemption of all fees for e-banking facilities.

Similarly, the Saudi Industrial Development Fund said it will restructure and defer loan instalments this year for small projects and set up a special programme to fund SMEs’ working capital.

The Saudi Development Bank also launched a SAR 12 billion programme to support start-ups, small enterprises, and low-income households.

These measures are important as the SME sector and the wider private sector is emerging as major growth drivers of the economy. Last year, the private sector expanded 3.8%, with strong growth in construction, wholesale and retail trade, restaurants and hotels and transport, storage and communication sectors – all of which are dominated by SMEs.

The kingdom’s Vision 2030 programme aims to raise the private sector’s contribution to the economy to 65% by 2030 from 40% currently.

“The establishment of the National Competitiveness Center (Tayseer) helped to develop a competitive environment in the kingdom by implementing more than 400 reforms to serve investors,” according to SAMA.

These include procedures automation, and development of regulations and policies.

In addition, authorities have launched Meras, the Comprehensive Service Center, which offers a licenses and electronic services package, including a one-hour set up for starting a business and establishing companies.

“The launch of the Biban forum seeks to create the appropriate environment for existing and new SMEs to ensure their growth. In addition, the launch of the municipal investment portal ‘Furas’ to present investment opportunities in all regions of the kingdom,” SAMA said.