Saudi Arabia's start-ups receive record $152m funding in 2020

FinTech and e-commerce ventures accounted for 30% of all funding deals in the kingdom last year, Magnitt says

Streets in illuminated cityscape, Riyadh, Saudi Arabia

Start-ups in Saudi Arabia, the Arab world’s biggest economy, secured record funding of more than $152 million in 2020 from investors despite a pandemic-driven economic downturn, according to data platform Magnitt.

The funding received was 55 per cent higher compared to the previous year, driven by a record number of investments from venture capital funds and angel investors into the kingdom's start-ups, Magnitt, which tracks start-up investments across the broader region of Middle East and North Africa, Pakistan and Turkey, said on Monday.

Investors concluded 88 funding deals for tech start-ups, a 35 per cent year-on-year rise, bucking the general trend of the broader Mena market, Magnitt said in its annual 2020 Saudi Arabia Venture Capital Report, compiled in co-operation with Saudi Venture Capital Company.

Start-ups in Mena secured record funding of more than $1 billion last year, however the capital was spread across fewer deals sealed mainly during the first half of the year, Magnitt said earlier this month.

The kingdom maintained its third place in the Mena region for both the number of deals and capital invested in the region. Its start-up deal-flow growth rate was the fastest across the region.

“All of these record-highs point towards a thriving and maturing ecosystem in Saudi Arabia,” Philip Bahoshy, chief executive of Magnitt, said.

Last year was a “roller coaster year”, as Covid-19 accelerated technology adoption and highlighted the importance of tech start-ups in emerging venture markets, he added.

“In Saudi Arabia, we’re seeing founders, investors, governments and enablers working together to solve the pain-points of the ‘new normal’, and these numbers are evidence of that.”

The Covid-19 pandemic has pushed the global economy into the deepest recession since the 1930s, upending trade and global supply chains and disrupting the travel and tourism sector. The pandemic, however, has benefitted sectors including technology, healthcare and e-commerce.

The pandemic-driven slowdown has also accelerated technology adoption, prompting venture capital firms and investors to re-allocate funding to tech start-ups that offer digitisation and automation to businesses.

The effect of the pandemic on fundraising was staggered across the start-up ecosystem, but was more evident in the second half, which saw $41m raised in 30 funding deals - a 63 per cent and 48 per cent year-on-year decline in the value and number of deals, respectively.

The full year amount of $152m was driven by the record first half, in which start-ups raised $111m, higher than the total amount secured in 2019.

E-commerce and FinTech retained the top spots by the number of deals, with the two sectors together representing 30 per cent of all deals in 2020. Investments in e-commerce start-ups accounted for 45 per cent of all venture funding in the country, according to Magnitt data.