Saudi Arabia’s booming startup ecosystem

Saudi Arabia’s booming startup ecosystem
Sary is among a new breed of Saudi technology startups attracting funding from venture capital funds. (Supplied)
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Updated 07 August 2021

Saudi Arabia’s booming startup ecosystem

Saudi Arabia’s booming startup ecosystem
  • Startup funding jumped from $8m in 2016 to $150m in 2020
  • Public funds investing alongside private investors

RIYADH: If you’re an ambitious entrepreneur with a breakthrough commercial proposition, this is a good time to be in Saudi Arabia. Within a relatively short space of time, the Kingdom’s startup ecosystem – particularly in the tech arena – has matured quickly and dramatically.

Whereas the KSA’s pre-2016 startup funding rate was about $8 million per annum, that figure leapt to just over $150 million in 2020 (a 35 percent year-on-year increase) and is seeing exponential growth in 2021, according to business research firm Magnitt.

Kholoud Al-Mohammadi of Impact46 (a Riyadh-based venture capital and private equity firm) told Arab News there are two main drivers behind this shift. “First, you have consumer adaptation to technology. And the second element is the change in regulations and the support of regulatory bodies.”

On the consumer side, the KSA has a young, tech-savvy population with a big appetite for online services – making it attractive for marketeers. In terms of regulatory changes, a key aspect of Vision 2030 is the empowerment of entrepreneurs. Foreign direct investment (FDI) has been eased and 2018 saw the launch of the Monsha’at-backed Saudi Venture Capital Company (SVC) and the PIF’s Jada fund of funds.

These public funds work alongside a range of private investors, both global and local – from 500 Startups (a leading US VC firm now targeting MENA and the KSA); to Saudi VC funds including Saudi Telecom’s STV, Raed Ventures, Riyad TAQNIA Fund and Riyadh Valley Company; and KSA-based angel networks such as Oqal.

Saudi Arabia has been building a solid foundation for a robust entrepreneurship ecosystem over the past few years.

Prof. Zeger Degraeve, executive dean at MBSC

The Commission for Small and Medium-sized Businesses now also provides an online portal for fundraising, connecting private investors with startup founders.

“The concept is great”, Ahmed Alnafie of the design and marketing startup Invenu told Arab News. “It allows all the funding institutions to get back to you through a single unified portal, and aggregates investors so you don’t have to approach them one by one.”

This can help startup founders without a personal network of family and friends to invest in their ventures – something that has traditionally held back potential Saudi entrepreneurs lacking the right connections.

CULTURE OF ENTREPRENEURSHIP
Such initiatives have helped grow a culture of entrepreneurship in the Kingdom that is reflected in the findings of a recent report from the Prince Mohammed Bin Salman College of Business and Entrepreneurship (MBSC) along with the Babson Global Center for Entrepreneurial Leadership (BGCEL).

Among Saudis surveyed for the GEM report, 90 percent agreed or strongly agreed it is easy to start a business, placing the Kingdom in top position among GEM economies. Saudi Arabia also reported the highest rate of market confidence, with 80 percent seeing opportunities to start a business as a result of the changes brought about by the pandemic.

That was born out last year, when, despite the challenges of COVID-19, Saudi Arabia’s total rate of startup activity increased from 14 percent of the population in 2019 to 17 percent in 2020. Entrepreneurial activity in Saudi Arabia increased by 24 percent compared with 2019.

“Saudi Arabia has been building a solid foundation for a robust entrepreneurship ecosystem over the past few years,” said Prof. Zeger Degraeve, executive dean at MBSC. “This strong footing enabled the Kingdom to remain resilient even in the face of extreme challenges stemming from the pandemic and provide required support for SMEs and startups.”

ACCESS TO TALENT
In fact, the COVID-19 pandemic has been a major catalyst for the Kingdom’s startup sector, for three reasons.

First, the pandemic forced the rapid uptake of various online platforms, as people were suddenly confined to their homes during the lockdown phase.

Second, traditionally tech-resistant sectors such as government, health care and education had no choice but to introduce online solutions – which under normal circumstances they would be wary of experimenting with given the critical nature of their activities.

And third is the access to good talent: while meetings and presentations were usually ‘live’ pre-COVID – requiring key talent to be physically present – online meetings quickly became the norm, meaning that talent can be located almost anywhere on earth. This allowed startup founders to form teams, launch and raise funds even in the midst of the pandemic.

“I know the pandemic caused a lot of businesses to fall back or have some difficulties, but it sure helped the argument for technology itself – regardless of the sector,” said Al-Mohammadi. “A process that would normally take years and years happened within a few months. The pandemic was a real testament to the need for tech-based solutions. Tech is not a luxury anymore, it’s a necessity.”

This positive mix of COVID-related factors benefitted numerous KSA-based startups, including Gamze Beauty (a provider of beauty products), Jahez (food delivery solutions), Noon Academy (educational technology) and Raqqamyah (peer-to-peer lending) – all of which either launched or raised considerable funds in the course of 2020-21.

FINTECH FUNDING
Saudi VC funding grew by 65 percent year-on-year to reach a record SR650 million in the first half of 2021, accounting for 14 percent of VC funding across the MENA region, according to MAGNitt data.

Fintech startups were responsible for almost a quarter of transactions, while e-commerce saw a decline in its contribution to deals, as it did across the MENA region. Fintech startups raised 1,700 percent more capital year-on-year while funding into e-commerce declined by 54 percent, according to the report.

The distribution of funds in Saudi Arabia improved in uniformity as the top five deals of the Kingdom accounted for 47 percent of total capital deployed in the country, down from 81 percent in the first half of 2020.

Traditional lenders have also been increasing their financing of startups and small businesses. The financing of small, medium and micro enterprises in Saudi Arabia by banks and finance companies increased by 67.9 percent between 2018 and 2020, according to Saudi Central Bank data.

Banks increased funding to SMEs by 70 percent to SR170.4 billion in that period, while finance companies increased their lending from SR7.8 billion to SR11.9 billion, the data show.

GOVERNMENT SUPPORT
“There is no doubt that understanding the importance of the role of small and medium enterprises is evident in the goals of Saudi Vision 2030, especially in the axis of a prosperous economy, where the vision gave ambitious goals and this began with the establishment of the Small and Medium Enterprises General Authority (Monsha’at),” Rana Zumai, a consultant who advises SMEs in Saudi Arabia, told Arab News.

“The state’s efforts and decisions have enhanced the capacity of small and medium enterprises in various aspects, such as creating jobs in the economy and improving the level of competitiveness, in addition to raising the level of employment and exports,” she said.

Vision 2030, combined with the overall push toward diversification of the Saudi economy away from oil, is opening up opportunities in entertainment, media, tourism, culture, media and biotechnology, among other areas.

“I think we’re at the start of something big”, said Al-Mohammadi. “Saudi Arabia used to be thought of as a market to expand to, but now with the new infrastructure and the new regulatory support and the local and global funding coming in, it has become validated as a startup hub.”


SAMI launches JV with French firms to build aerostructure components in Kingdom

SAMI launches JV with French firms to build aerostructure components in Kingdom
Updated 10 sec ago

SAMI launches JV with French firms to build aerostructure components in Kingdom

SAMI launches JV with French firms to build aerostructure components in Kingdom

The Saudi Arabian Military Industries, a wholly owned subsidiary of the Public Investment Fund, on Saturday launched a joint venture with French company Figeac Aero and Dussur to build a manufacturing facility in the Kingdom to produce aerostructure components. 


Egypt to increase cotton gins capacity, says official report

Egypt to increase cotton gins capacity, says official report
Updated 04 December 2021

Egypt to increase cotton gins capacity, says official report

Egypt to increase cotton gins capacity, says official report

RIYADH: Egypt aims to increase cotton gins capacity to 4.4 million kantars annually up from 1.5 million kantars, according to a government report issued on Saturday.

A kantar is the official Egyptian weight unit for measuring cotton. It corresponds to the US hundredweight, and is roughly equal to 99.05 pounds, or 45.02 kg. It is equal to either 157 kg of seed cotton or 50 kg of lint cotton.

The Egyptian government is trying to breath a new life into the country’s textile industry, which contributes almost 3 percent to the gross domestic product, employs one-third of the industrial labor and generates exports worth $2.6 billion annually. 

According to reports, the country’s cotton production rose by 30 percent during 2021.

Egypt increased the cultivated area this year to 236,000 feddans (one feddan equals 1.038 acres or 0.42 hectare) compared to 182,000 feddans last year.

In its annual report on Egypt’s cotton on March 31, 2021, the US Department of Agriculture said that “cotton area harvested in Egypt was forecast to increase seven percent to 70,000 hectares (ha), from 65,000 ha in MY 2020/21.” It added that Egypt’s production is estimated to increase to 250,000 bales this year compared to 215,000 bales in the previous year.


Bitcoin falls by a fifth, cryptos see $1bn worth liquidated

Bitcoin falls by a fifth, cryptos see $1bn worth liquidated
Updated 04 December 2021

Bitcoin falls by a fifth, cryptos see $1bn worth liquidated

Bitcoin falls by a fifth, cryptos see $1bn worth liquidated

NEW YORK: Bitcoin shed a fifth of its value on Saturday as a combination of profit-taking and macro-economic concerns triggered nearly a billion dollars worth of selling across cryptocurrencies.

Bitcoin was 12 percent down at 0920 GMT at $47,495. It fell as low as $41,967.5 during the session, taking total losses for the day to 22 percent.

The broad selloff in cryptocurrencies also saw ether, the coin linked to the ethereum blockchain network, plunge more than 10 percent.

Based on cryptocurrency data platform Coingecko, the market capitalization of the 11,392 coins it tracks dropped nearly 15 percent to $2.34 trillion. That value had briefly crossed $3 trillion last month, when bitcoin hit a record $69,000.

The plunge follows a volatile week for financial markets. Global equities and benchmark US bond yields tumbled on Friday after data showed US job growth slowed in November and the omicron variant of the coronavirus kept investors on edge.

Justin d'Anethan, Hong Kong-based head of exchange sales at cryptocurrency exchange EQONEX, said he had been watching the increase in leverage ratios across the cryptocurrency markets as well how large holders had been moving their coins from wallets to exchanges. The latter is usually a sign of intent to sell.

“Whales in the crypto space seem to have transferred coins to trading venue, taken advantage of a bullish bias and leverage from retail traders, to then push prices down,” he said.

The selloff also comes ahead of testimony by executives from eight major cryptocurrency firms, including Coinbase Global CFO Alesia Haas and FTX Trading CEO Sam Bankman-Fried, before the US House Financial Services Committee on Dec. 8.

The hearing marks the first time major players in the crypto markets will testify before US lawmakers, as policymakers grapple with the implications of cryptocurrencies and how to best regulate them.

Last week, the US Securities and Exchange Commission (SEC) rejected a second spot-bitcoin exchange-traded fund proposal from WisdomTree.

Data from another platform Coinglass showed nearly $1 billion worth of cryptocurrencies had been liquidated over the past 24 hours, with the bulk being on digital exchange Bitfinex.

A plunge in bitcoin funding rates — the cost of holding bitcoin via perpetual futures which peaked at 0.06 percent in October — also showed traders had turned bearish.

The funding rate on cryptocurrency trading platform BitMEX fell to a negative 0.18 percent from levels of 0.01 percent for most of November.


Saudi, French firms discuss energy, finance, tourism cooperation as Macron visits the Kingdom

Saudi, French firms discuss energy, finance, tourism cooperation as Macron visits the Kingdom
Updated 56 min 15 sec ago

Saudi, French firms discuss energy, finance, tourism cooperation as Macron visits the Kingdom

Saudi, French firms discuss energy, finance, tourism cooperation as Macron visits the Kingdom

JEDDAH: A group of leading Saudi and French companies are holding discussions at an investment forum in Jeddah as French President Emmanuel Macron is set to meet with Crown Prince Mohammed bin Salman today during his official trip to the Gulf region, where he is visiting Saudi Arabia, the UAE and Qatar between Dec. 3 and 4.

The forum is opened by Khalid Al Falih, Minister of Investment, Saudi Arabia and Franck Riester, Minister Delegate for Foreign Trade and Economic Attractiveness.

Represenatives of French companies and banks including EDF Renewables, Engie, Sanofi, and BNP Paribas are meeting with chairmen and CEOs of leading Saudi firms including ACWA Power, Banque Saudi Fransi, Riyad Bank, and Saudi Military Industries Co. Officials from the Public Investment Fund and Royal Commission of AlUla among others are also participating in the forum. 

Below is the agenda for the one-day forum where a some memorandum of understanding are expected to be signed:  


Saudi Arabia to start mandatory e-invoicing first phase on Dec. 4

Saudi Arabia to start mandatory e-invoicing first phase on Dec. 4
Updated 03 December 2021

Saudi Arabia to start mandatory e-invoicing first phase on Dec. 4

Saudi Arabia to start mandatory e-invoicing first phase on Dec. 4

RIYADH: Saudi Arabia will start implementing the mandatory application of the first phase of e-invoicing “fatoorah” on Saturday Dec. 4, Argaam reported.

An e-invoice, according to regulations, is a tax invoice that is issued electronically by each taxpayer subject to value-added tax in the Kingdom

The first phase requirements consist of ensuring that there is a technical e-invoicing solution compatible with the relevant requirements. This means no handwritten invoices or invoices written through text editors or number analysis applications on computers.

A fine of SR5,000 ($1,332) will be applied for not issuing and saving the invoices electronically.

The fine for not including the QR Code in the e-invoice and not reporting any malfunction in the issuing of the e-invoice to the authority starts with a warning. The fine for violating the deletion or modification of e-invoice starts from SR10,000.

The second phase of e-invoicing will be implemented in a phased manner, starting from January 1, 2023, to establish integration between e-systems of taxpayers and the authority’s regulations, Argaam said.