Arab
News, Wednesday, Jul
10, 2024 | Muharram 4, 1445
KSA
leads regional VC activity with $412m in funding in H1
Saudi Arabia:
Saudi Arabia has maintained its lead in
regional venture capital funding for the second consecutive year, securing $412
million in the first half of 2024, according to new data.
The Kingdom retained its top position across the Middle East and North Africa
region in terms of total venture capital investment for the period, despite a
slight 7 percent year-on-year decline, as reported by data platform MAGNiTT.
A significant portion of this funding, 32 percent, was attributed to a single
$130 million deal involving Salla, marking the only mega-round in the region for
2024 so far.
Deal flow activity experienced a slight 3 percent annual decline, placing Saudi
Arabia as MENA’s second-most active country by transaction volume. The Kingdom
now commands 30 percent of total deals, up from 25 percent in the first half of
2023.
Furthermore, Saudi Arabia’s contribution to the region’s total funding increased
from 38 percent in the first six months of 2023 to 54 percent in the first half
of this year, demonstrating the country’s growing influence.
In an interview with Arab News, Philip Bahoshy, CEO of MAGNiTT, highlighted the
Kingdom’s robust ecosystem development despite the challenging economic
environment.
“Saudi Arabia continues to grow its underlying ecosystem even in the current
economic environment. What was notable from the report this time was that
despite total funding being almost flat, a key driver of its growth was an 84
percent year-on-year increase on non-mega deal funding,” Bahoshy stated.
He also pointed out that while last year’s capital was driven by four mega
deals, this year’s significant growth with only one such trade is highly
positive.
In terms of industry trends, fintech remained the most popular sector for
investors by transaction volume, while e-commerce led in funding, with two of
the top five deals in Saudi Arabia originating from this sector.
Investor participation has been robust, with 72 entities backing Saudi-based
startups, up from 62 in the same period last year.
The share of international investors increased by 17 percentage points,
capturing 28 percent of the total investors in Saudi Arabia’s VC space in 2024.
Bahoshy attributed Saudi Arabia’s leading position to strong support from
entities such as Saudi Venture Capital Co. and Jada Fund of Fund, alongside
strategic policies from the Ministry of Communications and Information
Technology aimed at driving investment into the Kingdom.
He noted that 84 percent of total transactions came from early-stage
investments, a rise from 82 percent, with series A transactions increasing to 14
percent from 10 percent.
“As a result, accelerator programs and series A startups are able to capture
capital not only from local investors but international investors,” Bahoshy
said.
Merger and acquisition transactions in Saudi Arabia were relatively muted with
only two transactions so far in 2024, compared to four in the same period of
2023.
Most of these transactions occurred in the first quarter of 2024, with none in
the second quarter. However, Saudi Arabia ranked second in exit activity in the
MENA region, after the UAE, reflecting a broader regional trend.
Looking forward to the second half of 2024, Bahoshy indicated that the third
quarter of the year tends to be slower for venture capital deployment across
MENA due to seasonal factors, but the fourth quarter usually sees a surge in
activity with numerous conferences and visits to the region.
“If this coincides with post US elections, potential interest rates coming down,
we can expect to have a very strong finish to the year in terms of both
potential IPO listings, late-stage investments, and continuous development at
the early stage of the funnel,” Bahoshy said.
“The second half of the year historically always tends to be stronger than the
first, which is positive not only for Saudi Arabia, but the wider MENA
ecosystem,” he added.
Saudi Arabia’s success in the venture capital arena is supported by both
domestic initiatives and growing international interest.
Bahoshy emphasized the long-term nature of these investments, stating, “A lot of
initiatives are being done in Saudi Arabia to continue to attract not only
startups but investors to the Kingdom.”
“These are long tail investments into the activity that’s happening in venture,
especially with many funds looking to set up as well as the importance of
highlighting talent acquisition to the Kingdom,” he stated.