2019 witnessed a significant improvement in the Saudi Arabian startup scene with 71 deals taking place, a 92 percent increase compared to 2018, according to a new report.
The Kingdom’s startups also saw a large 35 percent rise in the amount invested to $67 million, headlined by an $8.6 million funding round for education technology platform Noon Academy, and a $6.6 million for food and grocery delivery startup Nana Direct.
“In 2020, there will be considerably more money available for entrepreneurs, and we will
start to see a clear shift in power from investors to entrepreneurs,” said Abdullah Altmami, managing director of iNet Fund, a company headquartered in Riyadh focused on technology investments.
The number of institutions investing in Saudi-based startups also saw a significant increase, up 58 percent from 2018, with 68 percent from the Kingdom.
E-commerce and logistics startups, specifically delivery and transport focused, remained the top startups for funding last year, followed by education and IT solutions.
Last year saw significant reforms undertaken by authorities as Saudi Arabia seeks to fulfill its Vision 2030 agenda of diversifying the economy and increasing the private sector’s contribution of GDP to 65 percent from its current 40 percent.
In June, the Kingdom announced it would be relaxing the 49 percent limit for foreign strategic investors in shares of listed companies. According to the report, 32 percent of the institutions that made investments into Saudi-based startups were international investors, both from the region and beyond.
“With this continued government initiatives and international partnerships, foreign investors will become increasingly interested in the Kingdom and its startups, especially when they continue to mature and grow capturing more scale,” said Philip Bahoshy, founder and CEO of MAGNiTT, a startup data platform and author of the report.
Authorities have openly supported the country’s startup ecosystem. The Mohammed bin Salman Foundation (Misk Foundation), which was established by Saudi Arabia’s Crown Prince Mohammed bin Salman in 2011, announced last week that it is targeting 300,000 entrepreneurs for support in developing their startups in 2020.
“Entrepreneurship has become a key focus for the country’s government entities, which will certainly support young startups to grow their startups and scale within and outside the country,” said Bahoshy.
In comparison to its regional rivals, Saudi Arabia has certain systemic advantages. Its position as the largest economy in the Middle East-North Africa (MENA) region provides a certain attraction to entrepreneurs. The larger market may help businesses scale faster and grow, crucial for a startup in proving that their business model is sound.
The size of the Saudi Arabian market provides “the perfect testing ground” for startups before they expand into other markets, Bahoshy added.