SAUDI’S START-UP SCENE SHINES

The Saudi start-up scene remained vibrant in 2019, with venture capitalists and investors eyeing opportunities across the country.

A total of 41 institutions invested in Saudi-based start-ups last year, representing a 58% increase compared to 2018. As many as 68% of these investors are based in Saudi Arabia, whereas 32% of them are headquartered outside of the kingdom – mainly in the United Arab Emirates, according to Magnitt, which tracks small to medium enterprise and start-up financing in the Middle East region.

“With the newly established Misk 500 MENA Accelerator in partnership with 500 Startups and Misk Growth Accelerator, in partnership with Seedstars and Vision Ventures, accelerator programmes played a key role in the Saudi start-up ecosystem in 2019,” Magnitt said in its 2019 Saudi Venture Capital Snapshot. “In total, accelerators accounted for 32% of all deals.”

In 2019, the country saw 71 VC funding deals, which raised USD 67 million, compared to 16 deals in 2015 that garnered USD 7 million. Similar to 2018, e-commerce and delivery and transport were the top industries by total VC funding and number of deals in 2019, while data analytics increased to third place by deals.

Education-oriented start-ups are also a growing trend in Saudi Arabia, with Noon Academy’s USD 8.6 million funding round contributing significantly to the sector. Noon Academy is one of the fastest growing educational technology (EdTech) start-ups in the Middle East, with more than 3 million registered students in Saudi Arabia and Egypt, and rapidly expanding to other geographies.

“We are proud of the remarkable increase in value and volume of early-stage investments in Saudi Arabia via the Saudi Venture Capital Company (SVC) and its partners,” said Mohammed Almalki, VP of Funding at Monsha’at.

SVC, which was initiated by Monsha’at to address the needs of entrepreneurs and SMEs by increasing access to financing across all stages, has made it easier to conduct business and ensure long-term success by deploying a total of around SAR 2.8 billion across different investment vehicles.

“In 2020, we are eager to establish a bank for SMEs, with the aim of providing financial resources and solutions, including lending, capital funding, and advisory services in line with the best practices,” Almalki said.

“We anticipate a more effective entrepreneurial environment through business incubators, accelerators and innovation centres, which will result in higher quality start-ups and will lead to better deal flow and, consequently, a more dynamic venture capital environment with greater activities carried out by VCs.”

Among major developments in the sector last year, Misk Innovation launched both the "Misk 500 MENA Accelerator" with 500 Startups and the "Misk Growth Accelerator" with Seedstars and Vision Ventures in 2019.

Wa’ed Ventures, the corporate venture capital arm of Saudi Aramco, was the most active corporate venture capital firm by number of deals in 2019. Meanwhile, OQAL, the Saudi angel group, invested in 18 Saudi start-ups in 2019, becoming the most active angel group by number of deals.

Separately, the Capital Markets Authority (CMA) launched its Experimental FinTech Permit in 2018 and issued FALCOM Financial Services, such as financial technology experimental permit (ExPermit) to create an equity crowdfunding platform in the kingdom.

In addition, MIT Enterprise Forum (MITEF) Saudi Arabia, part of the MIT Enterprise Forum global network, in a deal with Bab Rizq Jameel, an initiative of Community Jameel, signed a new memorandum of understanding with the Saudi General Investment Authority (SAGIA) to push entrepreneurship in the country and support more entrepreneurs.

The MITEF Saudi Arabia is a vital platform that brings together and attracts a distinct quality of Saudi entrepreneurs in a variety of fields. Featuring an elite of promising start-ups from Saudi Arabia, the Arab countries and the world, this year's edition focuses on investing in start-ups by organising the Startups Investment Forum in March.

The G20 Summit in Saudi Arabia later this year will also focus on empowering small and medium enterprises (SMEs). In January, the first G20 Global Partnership for Financial Inclusion Plenary Meeting (G20 GPFI) in Riyadh underscored the importance of providing access to funding for women, young people and SMEs.

“The focus in 2020 will be to harness digital and innovative technologies to advance financial inclusion of youth, women and SMEs to unleash their full potential and contribution to economic growth in both advanced and emerging markets,” said Haitham Al Ghulaiga, Saudi co-chair of the G20 GPFI.