Big year ahead for Saudi´s startup ecosystem

Investments in Saudi Arabia-based startups more than doubled in Q1 of 2021 compared to the same period last year, amounting to a total of US$82m

Investments in Saudi Arabia-based startups more than doubled during the first quarter (Q1) of 2021, compared to the same period of 2020, amounting to a total of US$82m, according to MAGNiTT’s report.

According to KSA Q1 2021 Venture Investment Report viewed by Leaders Magazine, Saudi startups have participated in 24 funding rounds over the quarter, with the highest five rounds combined raising over US$50m.

Last year, the country’s venture capital funding increased by 55%, reaching a record of US$152m.

Philip Bahoshy, Founder and CEO of MAGNiTT said: “All of these record-high points towards a thriving and maturing ecosystem in Saudi Arabia. In KSA, we are seeing founders, investors, governments, and enablers working together to solve the pain points of the new normal, and these numbers are evidence of that”. At the end of 2020, MAGNiTT forecasted that Saudi Arabia’s startup ecosystem would overtake Egypt and rank in 2nd place for capital invested in 2021.

Foodics, the Saudi restaurant management platform, raised a massive volume of funding during Q1 2020, SR75m (US$20m) through a Series B funding round led by Sanabil Investments, the venture capital arm of Saudi Arabia’s Public Investments Fund (PIF).

Last October, a study by STV Saudi Arabia, a prominent technology venture funds in the Middle East and North Africa, showed the Kingdom and the Middle East and North Africa region have generally witnessed significant growth in financing and venturing capital investments in recent years.

It is noteworthy that Saudi Arabia ranked third in the Middle East in venture investment by the end of 2020, acquiring a share of 15% of investment rounds and the volume of financing, up from 11% by the end of 2019. The UAE was on the top of the list (56%), followed by Egypt (with a share standing at 17%).

IMF calls for the establishment of private investment funds to support startups in GCC

Jihad Azour, Director of the Middle East and Central Asia at the International Monetary Fund (IMF), said the Gulf Cooperation Council (GCC) needs to activate private investment funds to support private sector activity and startup projects. According to him, this will allow startups to expand and face challenges.

Azour added that GCC states have the opportunity to take advantage of the low cost of debt to support economic diversification plans to build economies not based on oil as their primary source of income.

He praised Saudi Arabia policies to attract foreign direct investment through amendments to regulations & laws and the various projects already launched – Al-Ula development plan as the latest recently announced.

Saudi startup accelerators

Activity in Saudi Arabia’s startup accelerators has been on the rise, paving the way for a more capable ecosystem. Recently, The Ministry of Communications and Information Technology announced a partnership agreement with the Global TechStars Accelerator and Raed Ventures Investment Fund.

The partnership aims to enhance the success of emerging companies in the Kingdom and support the commercial growth of Saudi startups, accelerate their adoption of digital technologies, and branch out into different markets.

According to the Ministry, the three entities will invest their vast expertise in stimulating, accelerating and maximizing the effectiveness of the performance of emerging companies in Saudi society.

The action will be through an integrated backup program for entrepreneurs under the supervision of a group of mentors and international experts. The program includes a series of workshops and training courses, in which the specialists will work with entrepreneurs to discover the strengths and elements of success and how to strengthen them in their projects. They will also work to overcome the obstacles they may encounter during the project launch phase.

The scheme expects to adopt ten startup companies in its first program to allow their various businesses and partnerships expansion. Projects involved in the programs will also receive a funding of SR450,000 (US$120,000), provided that the project meets the conditions for obtaining it.

Dr Ahmed Al-Thunayan, Deputy Minister for Future jobs and Digital Entrepreneurship at MCIT, said that the Ministry is keen to support Saudi startups in line with the Kingdom’s Vision 2030. He added that the Ministry believes in the importance of digital entrepreneurship as a vital source for the digital economy. 

The co-founder of Raed Ventures, Talal Al-Asmari, agreed and explained that the program intends to stimulate new local and regional entrepreneurs to reach knowledge horizons full of global experiences over the next few years.

On the other hand, King Abdullah University of Science and Technology (KAUST), in partnership with Saudi British Bank (SABB), has announced the opening for startup applications for the 2021 TAQADAM Startup Accelerator.

According to KAUST, the next TAQADAM cohort will welcome up to 60 new startups from around the world, each receiving SR150,000 in zero-equity grant funding, plus access to co-working spaces, training, and expert mentors.

“The 2021 TAQADAM Startup Accelerator will be the most exciting ever. Building on the success of the 2020 cohort, delivered in extraordinary circumstances, we look forward to making this year even better,” said Dr Kevin Cullen, vice-president of Innovation and Economic Development at KAUST”. 

Since its inception in 2016, we have seen the scale and quality of the program increase every year and attract world-class talent to this, our world-class accelerator. We experimented and learned a lot in 2020 and will use that to create an even more valuable experience for the next generation of brilliant entrepreneurs,” he added.

Accepted startups would go for a six-month program to learn key elements of successful entrepreneurship, with workshops and sessions focused on product design, market fit, business-model planning, team development, and fundraising. The initiative, managed by KAUST, aims to develop early-stage entrepreneurs into new, high-potential startups.

Launched in 2016, TAQADAM Startup Accelerator has certified 115 startups and granted over SR16m in zero-equity grant funding to date.