SME

VC FUND FLOW DEMONSTRATES STRONG APPETITE FOR SAUDI START-UPS

The value of deals in the kingdom involving start-ups reached a record SAR 3.7 billion in 2022, according to a new report.

The 71% year-on-year surge in deal value highlights the huge interest in SMEs in general, and tech-savvy small businesses in particular, all of which are looking to get a foothold in their respective markets.

The number of deals in 2022 reached 144, slightly lower than the record 149 deals that received funding in 2021, according to the Saudi Arabia Venture Capital Report 2022, by Magnitt.

The number of investors eyeing deals in the technology SME space had also jumped four times to 104 at the end of 2022 compared to 26 in 2018. All in, there are 31 funds hunting for deals in the space, with 16 institutional investors, five angel groups, and five angel investors as co-investors in start-ups.

Due to the steady increase in venture capital investment, Saudi Arabia maintained its regional rank as the second most funded market in 2022, behind the UAE.

 

INVESTING IN HOME-GROWN START-UPS

Saudi Venture Capital (SVC), a subsidiary of the Small and Medium Enterprise Bank (which is affiliated with the National Development Fund), has also played a critical role in nurturing the SME environment in the kingdom.

The SVC Impact Report revealed that the total committed investments of SVC amounted to USD 560 million since its inception, while the total committed investments including partners are estimated at USD 3.9 billion. SVC invested in 35 funds, which have invested in 525 start-ups through 904 deals so far, including several vital sectors such as e-commerce, fintech, information and communications technology, education, delivery, and transportation. Funding deployed into Saudi Arabian start-ups grew 17 times to a record-high close of USD 1 billion in 2022 versus USD 59 million in 2018 when SVC started operation.

The impact report showed that SVC’s strategy contributed over the past four years in increasing the number of investors, encouraging existing and new financial companies to establish VC and PE funds, and motivating regional and global funds to invest in Saudi start-ups and SMEs.

Beyond start-ups, other entities are supporting new SME initiatives in the kingdom. In a bid to boost Arabic content, the Cultural Development Fund (CDF) signed a partnership agreement with King Abdulaziz Center for World Culture (Ithra) to support content creation, enhance co-operation in developing culture projects, spread knowledge, and encourage national talents locally and globally.

“CDF provides SAR 15 million in support targeting SMEs that desire to produce Arabic content with world class quality and standards,” according to the institution. “CDF also sponsored the Red Sea International Film Festival, where it has received a large number of positive interactions from the audience, who expressed interest in learning more about the film sector financing programme, which the fund intends to launch in early 2023.

 

LEAP23

Meanwhile, LEAP23, the kingdom’s major tech event reportedly set new records with 172,000 delegates in attendance.

“Momentum continues to go into orbit. In its first edition, LEAP22 enjoyed the largest debut of any technology event in history. In its second year, LEAP23 has rewritten the rule book once more to become the world’s largest technology sector event by attendance,” said Michael Champion, who heads Tahaluf, organisers of LEAP.

Deals during the event reached USD 9 billion as investors eyed investments in future technology, tech start-ups and ecommerce in the kingdom, which are vital for the growth of digitally focused SMEs.

The deals included USD 2.1 billion committed by tech giant Microsoft in a global super-scaler cloud in Saudi, business software company Oracle investing USD 1.5 billion to expand its MENA business by launching new cloud areas in the country, Huawei’s USD 400 million investment in cloud infrastructure for its services in the kingdom. Other deals included USD 4.5 billion across global and local assets in multiple sectors, according to the organiser of the LEAP event.

Building on the tech wave, The Social Development Bank (SDB) signed a deal with the National Technology Development Program to finance the technology sector through Lendtech initiative, which supports micro, small and medium technology companies by providing soft loans for Saudi entrepreneurs wishing to invest in technology. 

“In 2022, the number of SDB beneficiaries exceeded 150,000 individuals, with financing value over SAR 13 billion, and 8,600 enterprises with a financing value over SAR 5 billion,” according to the SDB.