RIYADH: Saudi Arabian startups raised more than a quarter of a billion dollars in venture capital (VC) funding during the first half of 2021, according to a new industry report.
A total of $1.228 billion was raised by startups in the Middle East and North Africa (MENA) in the first six months of the year, a rise of 63 percent year on year and 12 percent more than was raised during the whole of 2020, according to figures from the MENA H1 2021 Venture Investment Report, published by Dubai-based research platform Magnitt.
According to the report, the top three countries in the MENA region for startup funding were the UAE, Egypt and Saudi Arabia, accounting for 71 percent of total investment.
The UAE was the dominant market, making up 26 percent of total funding, followed by Egypt with 24 percent and Saudi Arabia with 21 percent, for a total of $257.88 million.
“It’s also important to note that within this top three ranking, Egypt was the only geography to observe a deal count increase year on year, while Saudi Arabia has almost closed the deal count gap with UAE from 44 deals in 2020 to just an 11-deal difference in H1 2021,” the report said.
The food and beverage sector was the most popular among VCs in terms of dollars invested, while the fintech sector generated the most deals.
Just under a third (31 percent) of funding came from investors outside the region and nine of the MENA deals were acquisitions.
“As mentioned before, we’ve seen a drop in the overall number of deals in MENA yet an increase in average round size, signaling investors’ interest in later-stage funding rounds,” the report said.
According to this year’s Global Entrepreneurship Monitor report, total entrepreneurial activity in Saudi Arabia increased in 2020 by 24 percent compared to 2019. It also showed that more than 90 percent of adults saw entrepreneurship as a favorable career choice, while a third of Saudis surveyed said that they were keen on launching a business within the next three years.
“The entrepreneurship environment in Saudi Arabia is growing so fast to the point that you have got to hold on to your seat. It is growing exponentially,” Wassim Basrawi, former managing director of the Saudi Aramco Entrepreneurship Center (Wa’ed), told Arab News in an interview. “I think what we are going to see next year is different from what we saw last year, it is so fast that it does not compare to the last 10 years, not even close.”
The biggest deal during the year was closed by Dubai-based cloud kitchen Kitopi, which this month announced it had raised $415 million from a group of investors including SoftBank Group Corp.’s Vision Fund 2, boosting its value to more than $1 billion.
Kitopi will make Saudi Arabia its Middle East headquarters while Dubai will remain as a global head office as it looks to expand into Southeast Asia, CEO Mohamad Ballout said in an interview with Bloomberg.
The company expects the Kingdom to account for the majority of the its business within 12 months, Ballout said. “We’re going to be putting about $200 million of capital in Saudi Arabia to build out our business there,” he added.