Arab News, Sunday, Jan 08, 2023 | Jamadi Al Thani 15, 1444
Saudi Arabia’s entrepreneurial ecosystem demonstrating significant change
Saudi entrepreneurs have shown prominence and courage in bolstering economic
growth through innovation and entrepreneurship.
The Middle East region has witnessed unprecedented
growth in the establishment of small and medium enterprises along with the shift
toward entrepreneurship with Saudi Arabia setting an example for a blooming
Entrepreneurship in the Kingdom and the region has
changed significantly throughout the years with founders demonstrating exquisite
skills in venture funding, accelerating, and scaling.
In an exclusive interview with Arab News, Saud
Alsabhan, vice governor of entrepreneurship at Saudi Arabia’s Small and Medium
Enterprises General Authority, also known as Monsha’at, said that the Saudi
entrepreneurial ecosystem has developed its own logic.
“Over the past six years, we have seen
unprecedented growth in our own entrepreneurial ecosystem, both institutionally
and organically. With nearly a million SMEs throughout the country, over 90
percent of adults now see entrepreneurship as the right career move,” he added.
The Saudi government has been supporting private
institutions targeting startups to further boost investment and engagement in
Alsabhan added that Saudi entrepreneurs are now
getting access to lending mechanisms as well as upskilling programs,
accelerators, and incubators.
The boost in knowledge and programs has shown
significant effects on venture capital investment as Saudi startups raised $980
million in the first three quarters of 2022, an increase of 108 percent compared
to 2021, according to a report by Monsha’at.
“Our Monsha’at Academy, for example, has already
upskilled over 20,000 trainees in better SME capacities, while our Mazaya
platform, which helps SMEs optimize costs, has helped over 48,000
beneficiaries,” Alsabhan explained.
He added that the Kingdom has also witnessed
startups that support SMEs like Nawafth, an online consulting services app;
Tomoh 2.0, a company that scales SMEs; and Fikra, a platform that drives
enterprises to develop better public services.
“Add to this the robust and ambitious funding
mechanisms being provided by other institutional actors, and it’s no
exaggeration to say there’s never been a better time to be a small and
enterprising business in Saudi Arabia,” Alsabhan stated.
Founder of Kuwait’s largest online marketplace
4Sale, Tarek Sakr, told Arab News exclusively that Saudi Arabia has spearheaded
the growth of entrepreneurialism in the region but expects a downfall in venture
funding in 2023.
“Countries like Saudi Arabia are spearheading the
growth of entrepreneurialism in the region, and these are the markets where I
see entrepreneurial knowledge in practice — all the way from idea inception to
He added: “Saudi Arabia stands out due to its
government and sovereign wealth fund which have developed impressive support
schemes for entrepreneurs and systematically encourage new business projects,
trying to ease the journey at every turn.”
Sakr explained that entrepreneurs in 2022 showed
their resilience following global economic crises like inflation and the
Russian-Ukraine war which in turn made startups focus more on generating
revenues instead of public relations exercises.
“In recent years, founders in the Middle East have
experienced very few hurdles when fundraising, following a seemingly clear path
set out by investors to secure the funding they desire. With this ‘cheap money’
came an increasing focus on presenting your startup in the right light — and
marketing became as important, or even more important than building the
business,” Sakr said, describing the venture-funding space prior to 2022.
As venture funding is vastly driven by
acquisitions and mergers, Sakr explained that the startup ecosystem in the
region was perceived as an extremely attractive investment opportunity but “the
tide has changed.”
“My prediction is that funding in 2023 will not
continue to increase at rates seen in recent years. The tangible reason for that
is a lack of exits in sufficient numbers to keep the excitement going,” he
He added that future investments in startups will
be “smart money” with more conditions and due diligence attached.
Sakr further elaborated that in order to further
boost the ecosystem and avoid a downfall, startups must have access to
traditional loans instead of relying on investors for funding.
“Today, for most early technology startups,
venture capital funding is much more feasible than receiving a loan from a bank,
due to strict due diligence requirements,” he added.
Alsabhan believes that internationalizing the
entrepreneurial ecosystem is one way of enhancing the startup space.
He explained that most of the products and
innovations are built outside the Kingdom although the Saudi population is
highly educated and youthful.
“At Monsha’at, and throughout the government, we
are keen to redirect some of that intellectual and entrepreneurial trend by
inviting more investors, entrepreneurs, innovators, and creative individuals to
invest their time, resources and ideas into Saudi Arabia,” Alsabhan added.
Moreover, global venture capitalists are also
excited about the region’s startup space, specifically Saudi Arabia, but
encourage entrepreneurs to be more careful when gathering funding and starting a
business as the ecosystem starts to magnify.
Igor Ryabenkiy, CEO and managing partner of AltaIR
Capital, an early-stage global venture capital firm, gave a few tips for
entrepreneurs to dodge a bubble burst.
Ryabenkiy advises ambitious startups to avoid
being hung up on the local markets and to look for global expansion from the
“If startup founders decide to build a global
company, it is important to convey their idea to users, investors, and the
market and develop a strong go-to-market strategy. We also suggest hiring
international professionals with technological and business expertize,” he told
Arab News exclusively.
Ryabenkiy further explained that when it comes to
fundraising, startups should be selective about the investors they bring to the
table and look for industry knowledge as opposed to just monetary value.