The H1 2023 KSA Venture Investment Report examines the continued impact of the economic challenges on the venture capital ecosystem of the region.
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In 2023, the Saudi economy continued to grow, albeit at a slower pace. The decline was primarily attributed to a reduction in crude oil production. Despite the challenges in the oil sector, the non-oil sector displayed robust growth in the first quarter of 2023. This growth was in line with the country's structural reforms and ongoing diversification strategy as part of Vision 2030.
The impact of the ongoing macroeconomic challenges resonated in the Kingdom, similar to the overall global market and MENA peers, as the country followed the Federal Reserve’s rate hikes, pulling the brakes on liquidity which lies at the basis of new investments.
During the second quarter of 2023, VC funding and deals in KSA reached their lowest level since Q3 2020. The performance in Q2 2023 was notably weaker compared to the preceding quarter, mainly due to the occurrence of Ramadan and the two Eids falling in April and June, resulting in fewer deal negotiations and announcements. This had a considerable impact on the overall performance of the first half of the year, which also faced challenges from the global macroeconomic conditions and the effects of higher interest rates on liquidity and investor sentiment. Capital deployed in the Kingdom contracted by 27% YoY during H1 2023, totaling $446M, with significant contributions from two major deals of over $100 million each, closed earlier in the year by E-Commerce/Retail startups Floward and Nana.
Moreover, the number of deals saw a decline of 44% YoY, dropping from 96 deals in H1 2022 to 54 deals in H1 2023, reflecting a similar trend observed in the overall MENA region, where deals decreased by 49% YoY in the same period. The combination of various factors in 2023 dragging forward from last year resulted in a challenging environment for VC funding and deal activities in the Kingdom.
In H1 2023, Saudi Arabia emerged as a dominant force in venture capital funding in the MENA region, securing 42% of the total capital deployed in the area. Key contributors to Saudi Arabia's numbers were the top three deals, closed by Floward, Nana, and Sary, which also ranked among the top five deals in the entire MENA region.
At the level of deals, UAE, KSA, and Egypt, the three leading countries in the MENA region in terms of venture capital deals, experienced a 51% YoY decline in activity, with Saudi Arabia ranking second. Following global and regional trends, Saudi Arabia also faced the impact of reduced venture capital activity, influenced by various economic factors such as higher borrowing costs. These elements contributed to dampening investor sentiment and resulted in a decrease in the number of transactions in the Kingdom's venture capital landscape. However, the Kingdom's dedication to fostering a thriving startup ecosystem and the implementation of its supportive initiatives make it an attractive option for startups seeking stability and growth prospects in the MENA region.
What is in the report?
The latest half-yearly report offers strategic insights into the performance of the KSA VC ecosystem. This report covers a 5-year analysis of the KSA's venture funding evolution, with a specific focus on the country comparison and industry performance in 2023. You will get access to precious information such as:
KSA Venture Funding Evolution: Get a detailed analysis of the past five years, highlighting the growth and development of venture funding in the KSA with a focus on performance in H1 2023.
Key rankings such as the Top 20 investors, Top 20 funding rounds, Top 10 last exits, and 5-Year exit evolution of KSA.
Who is it for?
Whether you’re a private investor, a VC, an investment company, a CVC, or working in corporate, this report gives an overview of the ecosystem and caters to a diverse audience including any curious minds who want to use the yearly, quarterly and monthly charts in this report to track investment activity.
You can also see in which country and industry the investment activity focused in terms of deals and capital deployed, allowing you to leverage insights and make wise choices.
The report can also be used by consultants looking to identify technology innovation trends and who will find it valuable to look at the evolution of M&A activity and concentration of acquirers/acquired startups.
Last but not least, government entities searching for investment opportunities will also find valuable information to make informed decisions.
Where is this information from?
The report was 100% created using data from MAGNiTT. MAGNiTT is the leading VC verified data platform and offers a comprehensive directory of technology innovation trends. Our unique SaaS solution includes investment directories listing startup venture funding across the Middle East, Africa, Pakistan, and Turkey, and now Singapore. By using MAGNiTT, you will also get access to market sizing tools to visualize investment growth and trends across various industries, geographies, and stages, as well as comparison tools for benchmarking geographies, industries, and investor performance. Furthermore, MAGNiTT offers exit comparisons by examining mergers and acquisitions.
Learn more about MAGNiTT's Data Methodology.