| Saudi Arabia emerged as one of the biggest markets for funding in the small and medium enterprises (SME) space in 2019, according to a new report. It was a great year for investment in start-up in MENA, as most Arab countries including Saudi Arabia, launched a number of initiatives and created new investment opportunities to encourage a start-up ecosystem in the region. Indeed, 2019 marked another record year when tracking the number of investments – now up to 564 raising USD 704 million, higher than any previous year, with total funding increasing by a compounded annual growth rate of 47% and deals growing by a CAGR of 60% over the past decade, according to Magnitt research. The report noted that Saudi Arabia was the fastest growing country in the region in terms of number of deals made and funding raised. The kingdom saw 68 deals in 2019, a 4% jump over the previous year, beating both Egypt (which saw a 1% decline in deals), and the UAE (which fell 3%). The kingdom’s start¬-ups raised USD 66.6 million last year, a 3% increase over 2018, making it the fastest growing country in terms of monies raised, Magnitt noted. “Saudi Arabia has shifted up in the GCC and MENA ranking by both number of deals and total funding,” Magnitt said in its report. “There are three main reasons – first, the realisation of the importance of SME investment; second, the availability of risk capital, resulting in creation of new or larger VC funds and third, embracing entrepreneurship as a respectable career path. We expect the invested capital to increase very significantly in the next five years.” Magnitt underscored that 2020 could see investments in MENA-based start-ups reaching USD 1 billion as several industries, including e-commerce and transport, in Saudi Arabia and the wider region, are heavily fragmented, and investors and start-ups will look to consolidate to gain a competitive edge.
BSTART-UP SCENE The Saudi start-up scene is especially thriving given the market’s strong underlying fundamentals and a booming venture capital scene. “Saudi Arabia benefits from being one of the largest populations and economies in the MENA region, with high mobile and Internet penetration. This offers an ideal testing ground for entrepreneurs to locally start ventures, as well as a key market for international companies to scale into,” Philip Bahoshy, CEO and founder at Magnitt, told Refinitiv. The Saudi start-up scene is also being driven by deep-pocketed investors, such as the Public Investment Fund (PIF). In December, PIF launched a new USD 1 billion ‘Jada’ initiative, which will invest in venture capital and private equity funds geared towards small businesses. “Jada is the first instrument of its kind in the kingdom,” the PIF said in a statement. “It is a catalyst for small and medium enterprises, seeking to secure rewarding incomes, to ensure financial sustainability and support the kingdom’s priorities in terms of supporting small and medium enterprises.” In October, Saudi Arabian General Investment Authority signed up with 18 venture capital firms based out of several countries in the areas of deep tech and property technology (protech), to spark an SME evolution in the kingdom. “This is a huge leap for the kingdom, as we are opening doors for foreign venture capitals, while encouraging investors and entrepreneurs to branch out to KSA; especially after amending 60% of the licenses requirements and allowing 100% ownership for the foreign investors,” said Sultan Mofti, SAGIA’s deputy governor of Investment Attraction and Development. The initiative will allow foreign start-ups endorsed by angel investors to obtain an Instant Entrepreneurship License from SAGIA with 100% foreign ownership within three hours. The two largest angel groups joining the initiative are Oqal Group and Dubai Angel Investors. While start-ups and new technologies are key focus areas, the Saudi government is also eyeing opportunities in the agriculture sector. In January, the General Authority for Small and Medium Enterprises (Monshaat) launched an innovative programme to accelerate the production of dates in the regions of Ahsa, Madinah and Qassim. The programme aims to develop SMEs through best practices in the agricultural sector, and give an existing sector incentives to find new innovations. Monshaat will allocate SAR 3 million to 30 start-ups in order to stimulate and develop companies, according to Sami Al-Husseini, Monshaat deputy governor for Small and Medium Enterprises. | 
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