Saudi Arabia secures $1.4bn in 2023, leads MENA VC fundraising

Investment in Saudi startups surged by 33 per cent year-on-year (YoY) to $1.4bn in 2023, according to Dubai-based data platform MAGNiTT, constituting just over half of all venture capital funding raised in the Middle East and North Africa.

The growth in Saudi Arabia’s venture capital market is being driven by the government’s focus on innovation, a dedicated unicorn project, and investments from sovereign funds such as SVC, Jada, and Sanabil.

The kingdom captured the highest share of total venture capital funding in the Middle East in 2023, accounting for 52 per cent of the total capital deployed in the region, up from 31 per cent a year ago.

“The kingdom’s leading position in the venture capital scene in the region comes as a result of the many governmental initiatives launched to stimulate the venture capital and startup ecosystem within the Saudi Vision 2030 programs, and the development of the legislative and regulatory environment for the ecosystem,” Dr. Nabeel Koshak, CEO and board member at SVC said, adding that this is in addition to the emergence of active investors from the private sector.

Saudi Arabia’s tech sector was helped by two large deals involving local fintechs Tabby and Tamara in the last quarter of the year, which allowed the Gulf state to grab a top five spot for emerging market funding alongside Singapore, Turkey, Indonesia and Vietnam.

Saudi Arabia’s Public Investment Fund created a $1bn fund of funds for venture capital firms, and it also invests directly through its subsidiary, Sanabil.

The $700 billion wealth fund has been ploughing money into tech firms and startups as the kingdom seeks to bolster its venture capital industry while encouraging entrepreneurs to set up their businesses and create jobs.

Saudi Arabia bucks the trend

Despite a 33 per cent increase in venture funding in Saudi Arabia, funding across the MENA region plunged by almost a quarter to $2.6bn in 2023 as rising inflation, soaring global interest rate hikes and oil production curbs impacted appetite for venture capital across the world.

“Interest rate hikes have proven to be challenging for the venture capital landscape globally and the MENA region has not been immune to this. As we enter 2024, investors are cautiously optimistic, showing renewed interest in technology and venture opportunities,” said Philip Bahoshy, CEO of MAGNiTT.

The latest data from MAGNiTT shows that several local and foreign investors retreated from the region last year, with only 366 investors backing MENA startups, down 30 per cent than in 2022.

Despite initial interest from Silicon Valley and global investors in the region, MAGNiTT said that only 45 per cent of investors came from outside MENA.

Meanwhile, UAE maintained its lead over deal flow, boasting the highest number of transactions in the region despite a 9 per cent YoY decline, driven by an increase in the number of serial entrepreneurs and early-stage companies using the Emirates as a regional launchpad.

Read: UAE, Saudi Arabia lead MENA VC fundraising, says MAGNiTT