Saudi Arabia’s startup ecosystem has seen a tremendous growth in funding in 2022, with over $1.2 billion of venture, corporate and equity funding going to Saudi startups. This represents a 20x growth in just five years, with the average deal size in Saudi growing substantially to over $20 million per deal in 2022. This impressive growth in funding has catapulted Saudi Arabia to become the second-largest startup ecosystem in the Arab world, behind only the UAE.
One of the key factors behind this growth has been the laser focus on entrepreneurial ecosystem development by the Saudi government. The government has invested heavily in building a strong infrastructure to support startups and foster innovation in the country. The focus has been on developing policies and programs that encourage entrepreneurship and attract foreign investment. This has led to the creation of a supportive environment for startups in the country.
Another sector that has been driving the growth of the Saudi startup ecosystem is fintech. Fintech emerged as the most funded sector in the Kingdom in 2022, with four out of the top 10 funded startups being fintech companies. The top two funded startups in the country, Tamara and STC Pay, each raised more than $200 million. This is not surprising, as fintech is considered the backbone infrastructure from which many other tech industries can commercialize and receive digital payments.
The growth in the fintech sector can also be attributed to the fact that there are investors who are willing to fund fintech startups at every stage in the Kingdom today. This has helped overcome some of the funding gaps that other industries are still facing. The number of registered and licensed fintech companies operating in the Kingdom has also grown from 80 to 147 startups.
In addition to fintech, foodtech has also emerged as a major sector in the Saudi startup ecosystem. The top 10 most funded Saudi startups (based on publicly disclosed figures) shows that fintech and foodtech are the two largest broad sectors pulling in the most capital in the Saudi startup ecosystem.
The growth in funding for Saudi startups has not just been in terms of the volume of funding being raised, but also in ticket sizes across rounds. The average seed round has increased at a CAGR of 30.5% from an average of $500,000 in 2017 to $1.9 million in 2022. Average early-stage funding (Series A and Series B) rounds have also increased at a CAGR of 37.2% since 2017, from an average of $5 million to an average of $23 million in 2022. Late-stage investments have grown the most, showing over a 100% CAGR since 2019.
In conclusion, the Saudi startup ecosystem has seen tremendous growth in funding in 2022, with the fintech and foodtech sectors leading the way. The laser focus on entrepreneurial ecosystem development by the Saudi government, coupled with the willingness of investors to fund startups at every stage, has created a supportive environment for startups in the country. This bodes well for the future of the Saudi startup ecosystem, and we can expect to see even more growth and innovation in the years to come.