Saudi Arabia puts buzz back into Mideast startup scene

Visitors are seen at the Saudi Aramco stand at an exhibition in Manama. The oil giant has become increasingly active in startup funding. (Reuters)
Updated 30 November 2017
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Saudi Arabia puts buzz back into Mideast startup scene

LONDON: A maturing investment ecosystem is bolstering startups across the MENA region, according to a new report, with a notable increase in activity from Saudi investment institutions over the past year.
Since 2005, the top 200 funded startups in the MENA region have attracted more than $2 billion in capital, according to a report issued by MAGNiTT, which tracks the development of startups across the region.
To date, the majority of top funded startups in the region were established in the UAE, and the primary financial backers have also tended to be UAE-based.
But a recent uptick in funding from Saudi investment firms points to a developing ecosystem for startups in the Kingdom, according to MAGNiTT founder Philip Bahoshy.
“The Crown Prince has made it part of his Vision 2030 to try to push for further entrepreneurship in the region. While previously it was just an idea, now it is becoming a strong reality,” Bahoshy told Arab News.
As the Kingdom and governments across the Middle East diversify national portfolios away from natural resources and heavy industry, waves of startups providing everything from financial services to digital football fan clubs have burst onto the scene.
Following a number of success stories — including the high-profile acquisition of UAE-based Souq by the American e-commerce giant Amazon — the investment culture supporting startups has developed apace.
In August, Saudi Aramco Ventures, a unit of the Kingdom’s national oil company, invested more than $20 million in the payments startup PayTabs.
The momentum continued this fall when the Saudi-based restaurant management startup Foodics raised $4 million, with inputs from local funds Raed Ventures and Riyad Taqnia Fund (RTF).
The movement in Saudi Arabia follows a broader regional trend, Bahoshy said, where investors are beginning to see meaningful returns on startups established between 2012 and 2015.
Investors across the region have shown a preference for early-stage funding, according to the report, pouring more than $400 million into Series A funding rounds since 2005.
Still, increasing investment at the earliest stages of the startup cycle remains a challenge. On average, regional startups require over three years to close Series A funding but raise just $1.5 million in the Seed and pre-Seed stages.
Citing the lack of a transparent angel investing community in the region, Bahoshy said that governments and international financial institutions such as the World Bank should help incubate startups in their nascent stages and support local entrepreneurs.
“As more startups enter the ecosystem, you need to continue to fuel the base of that pyramid so (the companies) continue to grow,” Bahoshy explained.
According to the report, Middle East Venture Partners, 500 Startups and Wamda Capital are the most active investors in the region, contributing significant capital to the sector.
E-commerce startups have attracted the most funding to date, generating some $700 million since 2005. But of late, investors have shown a preference for startups providing financial technology products, like remittance payments and peer-to-peer lending.
Bahoshy said that startups providing solutions for broader regional challenges such as sticky logistics and cross-border banking frictions stand the best chance of attracting meaningful investment.
More than half of the top-funded startups in the MENA region were founded in the past five years, suggesting a momentum around financing entrepreneurship that has not seen previously been seen.
Broadly speaking, Bahoshy said the outlook for startup funding across the region was one of cautious optimism.
“The general trend is positive. We’re beginning to see new entrances into the space (including) Saudi venture capitalists and international investors,” he said.
 


‘Get prices down’ Trump tells OPEC

Updated 20 September 2018
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‘Get prices down’ Trump tells OPEC

  • Trump highlights US security role in region
  • Comments come ahead of oil producers meeting in Algeria

LONDON: US president Donald Trump urged OPEC to lower crude prices on Thursday while reminding Mideast oil exporters of US security support.
He made his remarks on Twitter ahead of a keenly awaited meeting of OPEC countries and its allies in Algiers this weekend as pressure mounts on them to prevent a spike in prices caused by the reimposition of oil sanctions on Iran.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted.
“We will remember. The OPEC monopoly must get prices down now!”
Despite the threat, the group and its allies are unlikely to agree to an official increase in output, Reuters reported on Thursday, citing OPEC sources.
In June they agreed to increase production by about one million barrels per day (bpd). That decision was was spurred by a recovery in oil prices, in part caused by OPEC and its partners agreeing to lower production since 2017.
Known as OPEC+, the group of oil producers which includes Russia are due to meet on Sunday in Algiers to look at how to allocate the additional one million bpd within its quote a framework.
OPEC sources told Reuters that there was no immediate plan for any official action as such a move would require OPEC to hold what it calls an extraordinary meeting, which is not on the table.
Oil prices slipped after Trumps remarks, with Brent crude shedding 40 cents to $79 a barrel in early afternoon trade in London while US light crude was unchanged at about $71.12.
Brent had been trading at around $80 on expectations that global supplies would come under pressure from the introduction of US sanctions on Iranian crude exports on Nov. 4.
Some countries has already started to halt imports from Tehran ahead of that deadline, leading analysts to speculate about how much spare capacity there is in the Middle East to compensate for the loss of Iranian exports as well as how much of that spare capacity can be easily brought online after years of under-investment in the industry.
Analysts expect oil to trend higher and through the $80 barrier as the deadline for US sanctions approaches.
“Brent is definitely fighting the $80 line, wanting to break above,” said SEB Markets chief commodities analyst Bjarne Schieldrop, Reuters reported. “But this is likely going to break very soon.”