Infographic: Tracking How Saudi Arabia's Startup Funding Skyrocketed In 2022 Saudi Arabia may be relatively new on its entrepreneurial and digital economy journey, but the Kingdom's laser focus on developing a strong entrepreneurial ecosystem has helped startup activity grow, and quickly.

Saudi Arabia's startup ecosystem has grown at an unprecedented pace, from just a few SMEs prior to the launch of Vision 2030, to ground-breaking life-enhancing tech startups six years and a pandemic later. In 2022, the Kingdom came in second in the Arab world in total funding value with US$1.2 billion of venture, corporate and equity funding going to Saudi startups. Saudi Arabia also came in third in the region for the number of deals (91) signed, behind the UAE and Egypt.

Saudi Arabia may be relatively new on its entrepreneurial and digital economy journey, but the Kingdom's laser focus on developing a strong entrepreneurial ecosystem has helped startup activity grow, and quickly. Historically, Saudi Arabia has always trailed the UAE and Egypt's startup ecosystems, but this changed in 2021, when Saudi Arabia became #2 in the Arab world in venture funding raised. Saudi strengthened its second place positioning in 2022, pulling further away from Egypt, and closing in on the UAE.

Image courtesy Lucidity Insights.

Saudi Arabia's startup funding has skyrocketed in 2022, growing more than 20x in five years to reach $1.2 billion across 57 disclosed deals (out of 90 total deals); 2018 funding hovered at $50 million across 54 disclosed deals (out of 71 total deals). This also means that the average deal size in Saudi has grown substantially from <$1 million per deal in 2017, to an average of over $20 million per deal in 2022. It is a remarkable feat for Saudi startups to have raised more than US$ 1 billion in 2022, given that it took the United Arab Emirates, the reigning startup capital of the Arab world, nearly a decade of fostering startup activity in Dubai to break the $1 billion ceiling in 2021. This speaks to the speed of change and growth in Saudi's startup ecosystem, driven by the calibre of startups emerging in Saudi Arabia and their ability to scale across the Kingdom and beyond.

It isn't just the volume of funding being raised in the Kingdom that is growing. Ticket sizes across rounds have grown substantially over the past four years. The average seed round has increased at 30.5% compound annual growth rate (CAGR) 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 increased at 37.2% CAGR since 2017 from an average of $5 million to averaging $23 million in 2022. Late-stage investments, which was a category that was largely inexistent in 2017, have grown the most, showing over a 100% CAGR since 2019. While there has been only one disclosed Series C round in each of 2019, 2021, and 2022, what is encouraging is the value of funding has increased more than 8x from $20 million in 2019 to $170 million in 2022.

Considering that four out of the top 10 funded startups in Saudi in 2022 were fintech companies, and that the top two -Tamara and STC Pay- each raised more than $200 million, it comes as little surprise that fintech emerges as the most funded sector in the Kingdom. This is a trend seen around the globe, as fintech is considered the backbone infrastructure from which many other tech industries can commercialize and receive digital payments. From e-commerce to restaurant tech and delivery aggregators, fintech is always involved.

Image courtesy Lucidity Insights.

Fintech has experienced tremendous growth in 2022; the number of registered and licensed fintech companies operating in the Kingdom grew from 80 to 147 startups. These 147 fintech companies that are licensed only represent 30% of all fintech companies present in the kingdom. In August 2022, Tamara, a buy-now-pay-later platform that allows users to pay in installments, raised $100 million in a Series B round, bringing the total funds it has raised to over $215 million, and making it the most funded fintech startup in the Kingdom, surpassing STC Pay, which raised $200 million in November 2020.

Unlike other industries that are still facing some obstacles with funding gaps, there are investors that fund fintech startups at every stage in the Kingdom today. As the top 10 most funded Saudi startups (based on publicly disclosed figures) shows, fintech and foodtech are the two largest broad sectors pulling in the most capital in the Saudi startup ecosystem.

Learn more about the Saudi startup ecosystem by checking out 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.