FII: Start-ups are opting to stay private owing to an influx of funding, VCs say

Venture capitalists invested a record $288bn into start-ups during the first half of 2021

Companies are opting to stay private as long as possible because of an uptick in funding, according to venture capitalists.

"Companies are preferring not to go public because there is enough money for them to continue staying private until they are able to be under public scrutiny," Fadi Ghandour, executive chairman at Wamda Group, told a panel discussion at the fifth edition of the Future Investment Initiative in Riyadh.

Venture capitalists invested a record $288 billion into start-ups during the first half of 2021 – an all-time high, according to Crunchbase. This year, more venture-backed companies went public at a valuation of at least $10bn than in all of 2020 and more than 250 companies have already joined the unicorn club – up from 161 last year.

Regionally, Mena start-ups raised $1.2bn in the first half of 2021, up 64 per cent over the same period a year ago, according to data platform Magnitt.

There is "a significant shift in modern venture capital history", said Jack Selby, managing director of Thiel Capital.

The Covid-19 pandemic has also shifted the focus areas of venture capitalists, with many now investing in emerging industries.

"Traditionally speaking, venture capitalists went to consumer, e-commerce, enterprise and other trends in 2000s. But now we see massive platforms in life-size gaming, crypto and others, so the level of innovation we are seeing as a response to the pandemic is totally unprecedented," said Hani Enaya, head of private investments at Sanabil.

The panellists also encouraged entrepreneurs to take risks while continuing to grow and scale. Mr Ghandour said that entrepreneurs were the "light at the end of the tunnel" amid the pandemic and those who refused to tap into the digital boom were proven wrong.

"The transformation of an oil-based economy to a digital economy that all our governments are working towards, is happening right now."

Updated: October 28th 2021, 4:23 PM