RIYADH: Start-ups in Saudi Arabia recorded their best ever quarter for fund-raising in the three months ending September 30, attracting $205 million in 34 deals, according to data platform Magnitt.
Venture capital investments in start-ups in the kingdom more than quadrupled in the third quarter of 2021, compared with the same period last year, according to the Q3 KSA Venture Investment Report compiled in cooperation with the Saudi Venture Capital Company, report agencies.
The number of deals sealed by start-ups in the kingdom rose five-fold in the quarter, versus the same period in 2020, to 34 transactions, the report showed.
Saudi start-ups have finalised 91 deals year-to-date in 2021, a more than three-fold increase in venture capital transactions from a year ago and exceeding the number of transactions closed last year, Magnitt said.
Saudi Arabia is seeking to grow its start-ups and small and medium enterprise sector as part of its push to diversify its economy from oil, create jobs and attract high-skilled talent into the kingdom.
The kingdom’s FinTech start-ups closed the most deals, while the IT sector accounted for 39 per cent of capital deployed into Saudi-based start-ups, ranking the top industry by funding amount. However, 82 per cent of the sector’s capital was raised through Unifonic’s funding round.
E-commerce was the only industry among the top five in Saudi Arabia to see a drop in both deals (by 15 per cent) and funding (by 27 per cent). Despite this, the sector attracted the second-highest funding in the year-to-date period in 2021.
Funding rounds under $500,000 went from accounting for 66 per cent of all deals in 2020 to only comprising 26 per cent of transactions in 2021 year-to-date.
“While other Mena geographies attracted foreign attention, Saudi Arabia’s venture capital ecosystem activity was driven by local investors,” the Magnitt report said.
Only 17 per cent of the 53 investors that financed Saudi-based start-ups were based outside of the Middle East and North Africa region, compared to 46 per cent in the UAE and 44 per cent in Egypt.
Almost two-third of investors that actively backed start-ups in Saudi Arabia were based within the country.
The Saudi venture capital ecosystem recorded three exits in 2021 by end of the third quarter, Magnitt said.
Start-ups to exit comprised two from the media and entertainment industry, and one from the advertising and marketing sector. Two years was the most time any of these start-ups took to exit from their formation. Egypt announced four exits and the UAE seven.