Insights from KSA's ecosystem: Reflecting on MAGNiTT’s 2020 Saudi Arabia Venture Capital Report
Earlier this week, we released our annual 2020 Saudi Arabia Venture Capital Report, sponsored by the Saudi Venture Capital Company (SVC). The report tracks and analyses venture capital investments in technology startups in the Kingdom of Saudi Arabia, one of the fastest-growing and maturing ecosystems in the MENA region.
The report discovered that despite the backdrop of COVID-19, 2020 was in fact a record year for the country’s venture space. In a sign of continued growth, $152M was invested in 88 startups, marking a record 55% increase in total funding.
To delve into and understand KSA's ecosystem further, take a moment to hear from some of the country's most prominent investment stakeholders. Get their perspectives on Saudi Arabia's record-breaking year, what they believe this is attributed to, and predictions for the year ahead.
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Abdulrahman Al-Modaimeegh | Partner, Impact46
"The entrepreneurial ecosystem has been rapidly growing in the past years, marking that Saudi Arabia is expanding regionally to back tech startups. Despite the exceptional circumstances experienced by the startup ecosystem during the course of this year, the government’s initiatives in supporting the regulatory and legal aspects to expand SME’s operations and the means of funding are shaping Saudi as the hub of innovation. Impact46 portfolio companies have played a key role during the pandemic, as we saw the need for tech services that contribute to the development of digital transformation in the Kingdom."
Abdulrahman Bin Mutrib | Founding Partner and Chairman, Merak Capital
"Despite its difficulty, 2020 witnessed the continued success of the VC and the entrepreneurial ecosystem in the Kingdom, with a significant increase in the number and amount of investment rounds for Saudi startups, in addition to the issuance of the new companies’ laws. This growth is due to the collective efforts of the whole ecosystem and the leadership of the Saudi Venture Capital Company, the “Jada” Fund of Funds, and private VC funds.
"Accordingly, the Kingdom has ranked 12th in the Venture Capital Availability Index, issued by the Global Competitiveness Center. We expect in 2021 greater success and maturity for the VC industry. This year will be the beginning of reaping the fruits of these efforts by the potential exit of VC-backed Saudi startups. This will in turn contribute to an increase in the size and number of investment rounds, and the number of new investors. This will also stimulate more young Saudi men and women to work in this vital sector of the economy."
Osamah Alamri | Executive Director of Strategy, SVC
"The Saudi venture capital (VC) ecosystem has maintained its rapid growth in the past three years. The recent growth and the record VC funding of $152M in 2020, despite the slowdown of COVID-19, is a result of government stimulation initiatives as well as the emerging of more active investors and innovative entrepreneurs. The Saudi Venture Capital Company (SVC) plays a crucial part in stimulating the private VC investment to sustain and foster the rapid growth of the VC ecosystem in the kingdom.
"To achieve that, SVC’s strategy was developed meticulously based on regional and global working models of government VC funds. Due to the dynamic evolvement of the Saudi VC ecosystem, SVC’s strategy is reviewed quarterly to ensure that existing equity funding gaps are minimized, and the private investors are properly stimulated."
Athary Almubarak | Director of Strategy, Jada
"With a 55% year-on-year increase in funding for Saudi-based startups in 2020, Saudi’s venture capital (VC) sector’s contribution to its socioeconomic diversification is clear to see. Jada has been at the heart of this exceptional uptick in an exceptional year. Throughout 2020, we supported promising Saudi entrepreneurs by catalyzing Saudi’s VC sector with astute and timely injections of capital.
"The investments Jada have made into eight VC funds attracted new investors to this market and provided key unlocks in high-potential opportunities. We’ve been thrilled to see more local Saudi VC talent establishing themselves, which our Emerging Fund Manager Programs have fostered. Moving ahead, as we continue to identify high-potential opportunities, Jada remains committed to upskilling more professionals in 2021."
Amal Dokhan | CEO, GEN Saudi
"Startups are becoming an important player in the Saudi market with many talented entrepreneurs that are pushing the boundaries with their innovations to serving their customers, and in order for these startups to grow and lead here comes the role of the VCs that are backing these startups not just with cash but also with knowledge and strong means to access new markets. This seriousness in the Saudi and MENA markets has incentivized many VCs to deploy more investments and encouraged Angels to start actively playing a huge role at the early stage of the startup journey. In order to increase the pipeline for VCs, we are aspiring to bring more accelerators that are VC backed for a higher quality deal-flow creation."
Talal Alasmari | Founding Partner, Raed Ventures
"During the pandemic that hit the world in 2020, it became clear that traditional companies are not as safe as they thought. Many global economies were unable to withstand the economic blow. The silver lining to this is that technology is the main focus of modern-day companies. The pandemic has proven that companies that have quickly adopted technology were more able to adjust or develop their business models to keep pace with expeditious growth. Technically lagging companies continued to face the struggle for survival. Amidst this global crisis, I can seemingly visualize that the Kingdom of Saudi Arabia will have growth in embracing new technologies. I believe that the recent fast-paced development in technology will continue to place the Kingdom among countries that adopt modern technologies, which will change all sectors in it permanently."
Maan Eshgi | Partner, VentureSouq
"The main trend we are paying attention to is the increasing focus of GCC governments and major private sector operators on inbound investment. It took time for the strategy of leveraging capital to catalyze regional investment to play out, but it seems to be happening now, and we expect it to continue in a significant way in 2021. We have two levels here: (1) Regional SWFs & Fund of Funds are backing regional VCs on the promise that the VCs will focus on regional early-stage technology deals. (2) Big investments by big tech firms are starting to happen, such as the Google & Aramco’s cloud storage deal, Alibaba’s announced partnership with STC to invest up to $500M into high-performance public cloud service in the Kingdom, and Netflix’s continued investment into KSA content through its partnerships with Telfaz11 and Myrkott."
Adwa AlDakheel | Founder and CEO, Falak Investment Hub
"In less than 2 years, Saudi Arabia has witnessed an evolution of the entrepreneurial ecosystem that other ecosystems need 5+ years to witness. As Falak Investment Hub has witnessed firsthand, the increase in quality of deal flows, the increase of innovation triggered to solve local opportunities, and the increase in talent pool has enabled this tremendous shift in our ecosystem. With over 16 early and growth-stage investments done from Falak in the past 2 years, we are lucky to be on the front-lines of our VC and entrepreneurial ecosystem at this timing is specific, and we are lucky to be making history on the go."