VC investments in Saudi Arabia to reach $500m annually by 2025

News Research

Saudi Technology Ventures (STV), the largest venture capital fund in the Middle East unveiled today its “STV Insight Report: How can Saudi Arabia grow their Venture Capital industry by 2025?”. The Report outlines the current VC investment landscape in Saudi Arabia and the factors that could contribute to the country’s VC growth potential.

Abdulrahman Tarabzouni, CEO at STV said “The Saudi VC sector has reached a positive inflection point. It has seen record money invested in 2018, $50 million, and to date, a considerable amount of new policies and regulations has been rolled out which makes the next growth phase very real. The realization is Saudi Arabia can reach $2 billion of cumulative VC investment by 2025, as highlighted in the Report. Appetite is growing from regional and global VCs to invest. Established industries in Saudi are ripe for disruption.

“Saudi Arabia has a unique entrepreneurial spirit and Saudi youth have a stronger motivation towards tech entrepreneurship compared to their international peers. We believe that success stories such as Careem are fuelling optimism in the start-up space. With an increase in direct engagement, strong mentorship and acceleration programs being made available, we believe young Saudis can really kick-on and lead the start-up sector across the MENA region for the next decade.”

Key Highlights
Venture capital (VC) investments in Saudi Arabia are growing rapidly, and yearly invested capital has the potential to expand tenfold to $500 million in 2025 from $50 million in 2018. The growth trajectory is such that the cumulative injection of capital will reach $2 billion between 2019 and 2025.

The Report shows there is a clear opportunity for Saudi Arabia to capture its fair share of MENA VC investments compared to its GDP weight in the region. The Saudi VC market is maturing, and VC investments in the country grew to $50 million in 2018 (2015: $7m).

The surge in VC activity can be attributed to several favourable conditions in Saudi Arabia which determine a flourishing tech ecosystem. These are:

  • Strong demand for tech products from consumers, businesses and the government
  • Recent exits have validated the VC model in the region, while successful Saudi-born tech solutions have enhanced the technology sector’s appeal to talent
  • The tech ecosystem and value chain are enabling rapidly as enablers that accelerate the formation of digital ventures are established
  • A growing presence of incubators and VCs has positively contributed to the maturity of the ecosystem
  • Ease of doing business has improved significantly in line with new entrepreneur-friendly regulations

The Report also highlights challenges the sector faces, detailing the lack of available talent as a primary challenge. Demand for talent is not unique to Saudi Arabia, however, the gap between the supply of talent and the demand from both local and global tech companies is widening fast. The Report goes on to explain how investors and fast-growing tech companies have a role to play in developing local talent and skilled professionals for Saudi Arabia’s start-up sector to truly unlock the potential and leverage that value for future generations.

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