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Five Future Trends To Expect From Saudi Arabia's Startup Investment Landscape As the market matures, investors need to be careful to allocate larger portions of their funds to invest in subsequent rounds with their startups, or to raise additional funds to write bigger checks.

By Erika Masako Welch

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

Lucidity Insights

As the world continues to pay attention to the dynamic investment landscape in Saudi Arabia, we sought the insights of prominent investors in the country. We asked key investors in the Kingdom, from venture capitalists (VCs), angel investors, and fund managers this question: "What future trends can we expect to see from the KSA startup investment ecosystem?"

Here is what we heard:

1. More maturity in the market means more growth-stage investing to come. We heard from startups, VCs, and government bodies alike that there is a major gap in Series B+ growth-stage funding, which will continue to widen as Saudi's startups continue to mature at breakneck speeds. Some local and regional VCs are actively looking to raise growth-stage funds, while many also believe that this is a role that international VCs can increasingly play in the Saudi market, like Softbank and Sequoia have recently done.

2. Bigger deal sizes = Bigger check sizes. As the market matures, investors need to be careful to allocate larger portions of their funds to invest in subsequent rounds with their startups, or to raise additional funds to write bigger checks.

3. The entrance of specialized funds. The Saudi market is already seeing specialized funds form to support investments in deep tech, artificial intelligence, healthtech, biotech, crypto, etc. There is also the expectation that many global investors will start making investments in the market with their global specialized funds.

4. More interest from international investors. Eight out of 10 local investors we spoke to expected to see more international investors take interest in Saudi startups. The unit economics in the region is too good for investors to ignore. The return on investment per US$1 million invested in startups in the MENA region today is far greater than any other region in the world. Couple that with improvements in government regulations, strong centralized support for entrepreneurship, access to capital, and smart, globally-minded, internationally educated local founders, and it becomes clear why entities like Sequoia Capital, Softbank Vision Fund, and Founders Fund have already made their first investments in Saudi startups.

5. Global startups moving headquarters or opening satellite operations in the Kingdom. With multiple VCs starting to look outward to invest in global startups with a mind to help them enter and provide its products and services to the Kingdom, an influx of international startups with Saudi offices is expected in the coming 24 months.

Learn more about both the successful and the emerging startups in the KSA ecosystem in the report, The Evolution of Saudi Arabia's Startup Ecosystem 2010-2022.

This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa's tech and entrepreneurial ecosystems.

Erika Masako Welch

Chief Content Officer, Lucidity Insights

Erika Masako Welch is the Chief Content Officer of Lucidity Insights.
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