Saudi Arabia has experienced an upward trend in the number of transactions and total funding over the past five years, with 2019 being a record year. In 2019, the Saudi startup ecosystem registered an investment of €67 million, 35% more than a year ago. The Kingdom has also seen a 92% increase in transactions to 71 and there has been an increase in government initiatives, accelerator programs and the total number of investors. According to the report from the startup data platform MAGNiTT, sponsored by the Saudi Venture Capital Company (SVC), one of the initiatives of the General Authority for Small and Medium Enterprises (Monsha'at), the most Notable included the €39 million raised by EdTech startup Noon Academy, as well as €8.6 million for food and grocery delivery startup Nana Direct. Among the most active investors were the new Misk 6.6 Mena Accelerator and Misk Growth Accelerator, as well as venture capital firms 500 Startups, OQAL and Wa'ed Ventures.
41 institutions have invested in Saudi Arabia-based startups, while accelerators accounted for 32% of all transactions. "As Saudi Arabia moves towards Vision 2030, we will see some trends. First, more investors will continue to enter the market, using government support. Second, we will see companies evaluate their innovation strategy, which is sorely lacking in the ecosystem from a startup engagement standpoint. Third, experienced employees will leave their jobs to start businesses in their area of expertise, disrupting certain industries like fintech," said Ahmed Al Jabreen Venture Partner at 500 Startups.
(Image credit: future)
(Image credit: future)
Strategy to mitigate failures
Nora Al Sarhan, SVC's chief investment officer, said SVC is well positioned to spearhead quality investing by filling the capital gap in the market and providing a strategy to mitigate failures by diversifying risk for investors. In total, 41 institutions invested in Saudi Arabia-based startups in 2019, an increase of 58% compared to 2018. 68% of these investors are based in Saudi Arabia, while 32% of them are based in Saudi Arabia. outside the Kingdom, mainly in the UAE. "Recently created accelerators and other public and private initiatives are fueling the growing ecosystem of startups and venture capital in Saudi Arabia," said Philip Bahoshy, founder and CEO of MAGNiTT. Due to the steady increase in funding and number of transactions, he said Saudi Arabia had increased its regional ranking in terms of total funding and number of transactions, ranking third in 2019 in the Middle East and North Africa. Saudi Arabia is one of the fastest growing ecosystems in the region, he said, adding that the government is identifying innovation and entrepreneurship as 39; one of its main objectives according to Vision 2030, many new initiatives were launched in 2018 and 2019. Usually these initiatives take time to materialize, but "we have already seen their impact on the ecosystem of the country and the MENA region." With one of the largest economies and digitally literate populations in the region, e-commerce maintained its top spot in 2019 and accounted for 27% of all transactions, followed by the delivery and transportation industry at 26%. Bahoshy said that the rising industries are education and IT solutions, which ranked third in terms of total funding and number of transactions in 2019. "We will continue to see Egypt and Saudi Arabia grow in terms of market share and it is expected further consolidation among major regional players this year in fragmented areas such as logistics, e-commerce and transportation to gain competitive advantage," he said. The United Arab Emirates maintained its dominant position as the top recipient of VC funding (60% of all deals) last year, but Egypt surpassed all countries in terms of number of deals (25% of all deals). transactions).