Arab News, Thursday, Jan 14, 2021 | Jamadi Al Thani 1, 1442
Saudi Arabia sees 55% surge in tech startup funding
Saudi Arabia: Saudi Arabia recorded a 35 percent year-on-year
increase in the number of investment deals in the technology startup sector last
year, according to a new industry report.
A study by data research platform Magnitt found that the Kingdom accounted for
18 percent of the 496 investment deals across the Middle East and North Africa
last year.
Saudi Arabia, the UAE and Egypt were the largest markets, accounting for 68
percent of total deals. However, while the Kingdom saw the number of investment
deals increase by over a third, the UAE and Egypt saw their volume decrease by
17 percent and 10 percent, respectively.
When it comes to the monetary value of the deals, the UAE and Egypt still
dominated overall, but Saudi Arabia recorded a surge of 55 percent year-on-year
to $152 million. By comparison the value of deals in the UAE rose 5 percent and
Egyptian funding increased 31 percent.
Nabeel Koshak, CEO at Saudi Venture Capital Company, said: “Saudi Arabia is
witnessing an increase in the quality and quantity in the deal flow of startups.
I am thrilled by the distinguished entrepreneurs who are creating fast growth
and scalable startups. Despite the slowdown of COVID-19, Saudi Arabia saw a
record increase in venture capital funding (55 percent) in 2020 compared with
2019.”
Overall, across the Middle East and North Africa, 2020 saw a record of just over
$1 billion invested in start-ups, an increase of 13 percent year-on-year. This
is despite the volume of deals decreasing by 13 percent over the same period.
The impact of the pandemic can be clearly seen in the data. In the first half of
the 2020, $725 million of funding was raised, an increase of 29 percent compared
with $563 million in the first six months of 2019. In the second half of the
year, $306 million was raised, a decrease of 35 percent compared with the last
six months of 2019.
Philip Bahoshy, CEO and founder at Magnitt, said: “Exactly one year ago when we
published Magnitt’s 2019 annual venture report, I predicted that — barring war
or natural disaster — we would see $1billion invested in MENA’s startups in
2020. We saw neither war nor natural disaster. Instead, a global pandemic
changed the world.
“It has been a difficult year for all of us in many ways, and it is likely that
the pandemic will continue to affect the global population as well as the
macroeconomic outlook for our region long into 2021,” he added.
The report also identified a clear change in the allocation of capital away from
early-stage ventures.
Pre-seed investments — deal sizes of less than $100,000 — represented 47 percent
of transactions in 2019, while in 2020 it fell to 27 percent. This revealed that
last year investors were showing a preference for bigger-ticket Series A
investments, or deals of between $100,000 and $3 million.
In terms of sector focus, the impact of COVID-19 can be clearly seen. Funding
for the food and beverage and healthcare startups tripled to $122 million and
$72 million, respectively.
Courtney Powell, chief operating officer at California-based 500 Startups, said
that 2021 would be a turning point for entrepreneurship in the Middle East and
North Africa.
“It’s the culmination of years of work by key stakeholders. Deal flow is healthy
and getting stronger every day, there is more capital available than ever, and
there is an intense hunger to see the region diversify away from historical
drivers of gross domestic product and become a leading knowledge economy.”
In its predictions for 2021, Magnitt has forecast that Saudi Arabia will
overtake Egypt by total number of investments and total capital deployed and
become second only to the UAE in the rankings.