Venture capital is a form of financing that involves the provision of equity capital to start-ups and emerging companies that are believed to have a high potential for growth. Venture capitalists are individuals who run funds that specialize in identifying new companies that are likely to grow in the future. Unlike other forms of capital, venture capital is not always in monetary form, but can take the form of industry expertise that can enable a firm to grow in the long term. Venture capital is a popular form of financing in Saudi Arabia. In 2021 alone, venture capital provided to new firms in the country was more than SAR 630 million. Venture capital is therefore a reliable method of financing that can be effectively used by Saudi start-ups for growth.
Demand for venture capital is on the rise in Saudi Arabia mainly due to the high volume of investments in different areas of the economy. There has been a marked growth in both the volume and quality of start-up companies in Saudi Arabia. New and emerging firms have sustainable business models that are expected to support key pillars of the economy. Venture capital firms therefore, can easily find firms in need of capital that they can invest in without taking on a substantial amount of risk. The high number of start-up companies in the country thus, supports the growth of the venture capital industry.
The availability of venture capital firms in Saudi Arabia is also a key reason for the rapid growth of the venture capital industry in the country. Numerous venture capital firms, like Nama Ventures for example, are in place in the country that can comprehensively address the capital needs of their clients. The growth in the value of deals made in the venture capital market indicates there are numerous high-value venture capital firms in the country. The availability of venture capital firms in the country is therefore a key factor that supports the growing popularity of venture capital as a source of financing for local firms.
Government support, as well as the growth of the economy, are also key factors that support the growth of venture capital as a source of financing for startups. The government of Saudi Arabia has been at the forefront of supporting the use of venture capital by new firms. In addition, Investors expect the economy to grow in the near future as it recovers from the effects of the pandemic. Strategic investments made by the government in certain sectors of the economy are also expected to stimulate their growth. Investors, therefore, have high expectations about the growth that is likely to be witnessed in different industries, which is a key reason for the growth in the value of investments made in the recent past.
Venture capital is, therefore, a popular form of start-up financing in Saudi Arabia. Government programs, as well as high investor expectations, are key reasons why venture capital is gaining popularity and why we set up our fund, Nama Venture. A high number of start-ups, as well as the availability of venture capital firms, also boost the growth of the venture capital industry in Saudi Arabia.