RIYADH: Saudi Arabia has been one of the top-performing markets in the venture capital space in the Middle East and North Africa, said a leading venture capital player.
According to Mohammed Al-Zubi, the founder of Saudi venture capital firm Nama Ventures, the Kingdom’s position can be attributed to four main factors.
The first factor was the unparalleled support by the government in facilitating funding programs in the country.
The second was the rise of awareness of family offices and institutions of VC as an asset class. The third was an increasing interest among international investors to invest in Saudi startups and the opportunity they present.
“Lastly, Saudi entrepreneurs had reached a high level of knowledge and sophistication,” explained Al-Zubi.
HIGHLIGHTS
• According to Mohammed Al-Zubi, the founder of Saudi venture capital firm Nama Ventures, the Kingdom’s position can be attributed to four main factors.
• The first factor was the unparalleled support by the government in facilitating funding programs in the country.
• The second was the rise of awareness of family offices and institutions of VC as an asset class.
Nama Ventures has been an active investor in startups worldwide and is currently focusing on tech-based early-stage ventures.
Furthermore, the Kingdom saw a record 76 investors participating in deals closed in local startups, with 25 percent from investors outside the Middle East and North Africa region in 2021, according to the industry research firm MAGNiTT.
The report also stated that the Kingdom witnessed a 54 percent increase in venture capital deals year-on-year, with $548 million raised across 139 deals in 2021.
Saudi investors have been the most active in the Middle East and North Africa region in terms of participation in deals, in addition to the Kingdom ranking the highest in the amount raised in the first five months of 2022, according to Wamda’s monthly report.
Beginning of a bubble burst?
With huge business traction among Saudi startups, experts are beginning to worry about a global bubble burst.
Seif Shieshakly, co-founder and managing partner at consulting firm Four Principles, told Arab News that the region is experiencing a bubble burst.
Mohammed Al-Zubi, the founder of Saudi venture capital firm Nama Ventures.
Shieshakly explained that people are jumping into startup investment opportunities without making sure of basic business questions such as sustainability and cash flow, adding that this is similar to the dot com bubble in 2000.
“In the end, you had companies that had very questionable business models, but just because they were intact, they were suddenly getting ridiculous valuations,” he added.
Four Principles is ranked as the Middle East’s leading consulting firm for lean and six sigma management practices, supporting large corporations in establishing startups within their company portfolio.
Funding bottlenecks?
Moreover, experts worldwide expect a massive decline in startup funding in the next half of 2022.
Global venture funding in May 2022 was the first time in more than a year that the market was valued below $40 billion, according to Crunchbase, a startup research company.
The Middle East and North Africa region also experienced a fall in venture capital funding when it witnessed a 40 percent month-on-month decline in investment value in May 2022, according to Wamda Capital, an entrepreneurship research firm.
These signs might be taken as warnings for investors, startups, and economies, but venture capitals are still riding high for the upcoming period.
Seif Shieshakly, co-founder and managing partner at consulting firm Four Principles.
“We think what is to come is extremely exciting for the startup and VC space in Saudi Arabia. We think many Saudi startups have not realized their full potential and have not had the exposure and value their counterparts in other geographies have enjoyed,” explained Al-Zubi.
Another Saudi venture capital firm, BIM Investment, is doubling down on the Saudi market as it announced in June the launch of its second fund, BIM Investment II, a $32 million fund targeted at the Kingdom.
“We find the Saudi market today to be competitive and rapidly growing, creating qualitative challenges that allow emerging companies to have many opportunities,” Rayan AlSharif, Partner at BIM Investment, said in a statement.
