As the global VC landscape heads into a certain funding winter, startups looking to fundraise and LPs looking to invest have shifted their focus to warmer investing climates. While the Y Combinator warns startups to brace for a 12-month VC recession, the Middle East is experiencing growth in development, led primarily by the Kingdom of Saudi Arabia.

While the Western VC field has shown a drop in valuations since three months ago, Saudi Arabia tracked a record number of companies reaching stellar post-IPO growth rates in the last year.

The Saudi startup ecosystem is a vibrant, unexplored greenfield opportunity that is sure to be a lasting source of globally elite tech talent. Factors such as macroeconomic confidence, government support, availability of easy capital, and Saudi’s powerful R&D capabilities all contribute to Saudi Arabia’s emergence as the new tech oasis.

However, just like any emerging VC ecosystem, Saudi Arabia’s startups and funds still have a lot of development ahead of them before the world can finally turn its attention to the country’s raises and IPOs. 

So, how’s the Saudi tech ecosystem faring right now? Why is the KSA poised to outperform the world during the upcoming funding depression? What are the advantages of raising funds in Saudi Arabia? What are the shortcomings and common misconceptions about raising funds in the region?

Let’s dive right in!

The state of the Saudi VC ecosystem

Overall, the Saudi startup landscape has been successfully evolving during recent years, accumulating more and more startups across a pretty diverse spectrum of vertices and opening more VC and PE funds that target both early- and late-stage ventures.

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Many young ecosystems fall into the trap of most institutional finance being spurred into later stages due to funds being more risk-averse, Saudi funds actually show a very healthy attitude toward earlier-stage startups.

Last year saw some great raises across both tech and non-tech domains. Sixty percent of capital (both domestic and foreign) deployed in Saudi Arabia over the first half of this year was allocated to the five raises below. 

Another reason that Saudi Arabia is a highly promising playground is the fact that its ecosystem, although currently nascent, actually has built-in wisdom, giving bright founders and investors enough room to source both capital and deals.

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Top Saudi Ecosystem players slide

Thus, Saudi Arabia has everything it needs to become a flourishing VC sandbox with astronomical IPOs, great tech, and a major long-term push toward becoming a leading service and tech economy.

The recipe for sustainable growth

2022 has been a year of great achievements for the Saudi economy. Not only has the country shown success in recovering from the pandemic, but, despite decreases in global developments and international capital markets, Saudi Arabia managed to protect itself from the global financial fallout.

Saudi Arabia's golden year slide

Saudi Arabia’s amazing VC funding growth is built upon four main pillars:

  • A disruptive, more liberal regulation tailwind
  • A diverse ecosystem that fuels and incentivizes R&D
  • Prolonged macroeconomic growth 
  • Vision 2030, which unites the state and the private sector in working together for a bright national future

Saudi funds are investing massively, yielding higher and higher capital from LPs and offering higher checks. In the process, they are becoming more open to risk and thus to early-stage tech disruption. 

A relaxed regulatory environment and new fiscal and financial initiatives under the Vision 2030 project are set to welcome an influx of Western capital into the Saudi ecosystem, while its diverse ecosystem and expanding R&D centers will fuel the country’s deal flow and innovation engine.

Waveup is fully aware of the current global funding downwind, and we are certain that the Saudi economy and startup ecosystem will greatly outperform Western markets as we enter a harsh winter.

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Are you a Saudi founder? Raise now!

Hopefully, after reading the insights above, you’re now convinced that the Saudi VC ecosystem is experiencing a gold rush. Investors have money to write out tickets bigger than ever, even as funds are cutting down around the world. 

If you’re considering raising funds for your startup, it is about time you call a strategic meeting with your partners to discuss the urgency of the next fundraise. The market momentum is simply historic, and you need to make sure you’re not only developing your product internally and onboarding new customers, but that you’re also freely navigating your investor landscape. 

Are you ready to raise funding? Take a look at our article here to find out which key metrics to track and which questions you need to answer before getting started with outreach to investors.

The challenges of pitching in the Saudi tech valley

As a Saudi founder, you must understand that this opportunity has to be pursued. Although investors in the KSA are in a better position than funds in other countries, you still need to know how to stand out from the crowd. 

Just like any young ecosystem, Saudi Arabia is no alien to common challenges faced by founders trying to raise capital, such as: 

  • Trouble winning over risk-averse investors
  • Issues navigating the regulatory landscape and Shariah compliance
  • Lack of diverse thought leadership
  • Lack of seasoned advisors on strategy and business narrative

Overcoming all of these challenges is not just a life-or-death milestone for founders, but also an important growth mark for the entire Saudi economy. One thing is clear to all agents in the Saudi ecosystem: the sandbox will become more inclusive and open to the outside world. Considering the KSA’s outstanding performance during this year of global loss and capital depreciation, Saudi founders must enrich their business stories to make the most of this Saudi golden year.

Our top tips for Saudi founders this year

Waveup helped hundreds of startups across the globe raise over $480M last year alone. Here are the top tips we can give to Saudi talent trying to make the most out of raising funds in the world’s funding oasis:

  • Refine your business and product vision: define valid goals for your idea and business as a whole and validate them through market research and traction. Investors love a solid, protectable vision for your startup’s future since it serves as an indispensable benchmark for all your future decisions. Does your startup vision satisfy investors’ appetites?
  • Build your competitive moat: a vital part of your overall business strategy is your key business differentiators. Have you got your moat under control? Are you sure you’ve ideated every aspect of your product’s USP?
  • Track the right product metrics: the best way to monitor your process toward achieving your business vision is to track the right product metrics. It is vital that you know which metrics to track and pitch to your investors.
  • Polish your financials: your financial model is likely to be one of the most thoroughly studied documents of your business during VC due diligence. Just because Saudi investors are faring better than everyone else, that doesn’t mean you can let go of your finances. Take a look at some critical mistakes founders make in their financial projections and the fundamentals of financial modeling for startups.
  • Rebuild your pitch deck: your pitch deck is the ultimate master document of your whole idea, business, and vision. That’s why pitch decks are quick and efficient ways to provide a snapshot that filters out the “no-go’s” from the potentially promising investment opportunities that might be worth examining in more detail. If you want each investor meeting to end with an opportunity to get to due diligence, you must revise your business story.

Wrapping up

Here at Waveup, we have extensive experience on both sides of the investment table, gaining unparalleled expertise in executing the fundraising and supporting the business in both pre- and post-raise stages to ensure sustainable growth.

We see Saudi Arabia as the top global venture playground – both in the short and long term. We combine our global knowledge with local Saudi experience to deliver the best-working additions to founders’ business stories: 

  • Fundraising support at any stage
  • Business analysis 
  • Financial modeling 
  • Investor documents preparation (e.g., pitch decks, business plans, value creation plans, and more)
  • Content and business story support

4 posts

Ernest

Business Consultant

Hey! I’m Ernest, Business Consultant here at Waveup. During the last two years, I've spent countless hours working with startup founders first at an incubator, then leading an accelerator program before joining a VC fund. With my articles I’m sharing what I learned and keep learning by consulting stellar companies.