RIYADH: Amid a record-breaking surge in venture funding and a wave of regulatory reforms, Saudi Arabia is drawing global attention for its ambitious push to build a vibrant startup economy. 

The Kingdom’s entrepreneurial landscape is being reshaped thanks to the work of Saudi Venture Capital, a subsidiary of the National Development Fund, and incubation support from the Small and Medium Enterprises General Authority, known as Monsha’at.

With government capital underwriting much of the early momentum, the challenge now lies in translating that support into private-sector-driven sustainability, with some market observers cautioning against confusing rapid growth with long-term sustainability. 

“The long-term sustainability of this support will depend on continued private-sector participation and market-driven investment flows,” Philip Bahoshy, CEO of MAGNiTT, told Arab News in an interview. 

He accepted that sovereign-led investment vehicles have played a foundational part in catalyzing early-stage innovation, saying: “Saudi initiatives like SVC and Monsha’at have played a critical role in expanding access to capital, fostering entrepreneurship, and developing the broader startup ecosystem.” 

Bahoshy cited SVC’s strategy of acting as a fund-of-funds as a key mechanism for increasing market liquidity, alongside new instruments such as venture debt and private equity.

These tools are designed not only to finance startups but to build institutional depth across the capital stack. 

Beyond financial capital, the initiatives have emphasized ecosystem development through mentorship and education. 

“Another key pillar is their focus on education — whether they be in-person events or the content they share through sponsorships like MAGNiTT — to educate the market,” Bahoshy added.

Monsha’at, he added, has expanded its support through physical incubators and SME-focused regulatory facilitation, helping reduce barriers for company formation and early operations. 

Capital drives diversification

For Said Murad, senior partner at Global Ventures, these efforts are not just supportive — they are catalytic. 

“SVC has invested in 54 private capital funds that invested in over 800 startups and SMEs via $3 billion in AUM (assets under management). This has resulted in entrepreneurship growth and economic diversification,” the venture capitalist told Arab News in an interview. 

Murad added that this flow of capital has had knock-on effects beyond startups, helping to “drive jobs and economic growth” across sectors and enabling venture firms like his to back “emerging technologies across platforms built by exceptional founders.” 

In assessing sustainability, the venture community is looking for more than just headline investment totals. 

Bahoshy pointed to a broadening of sector focus as a positive indicator. “Indicators of sustainable growth include diversified sector investment, rising follow-on funding rounds, and an increasing number of successful exits,” he said. 

MAGNiTT’s recent report with the National Technology Development Program, he noted, shows Saudi Arabia outperforming the wider Middle East and North Africa region on follow-on investment metrics — evidence of startups moving successfully through the funding pipeline. 

Murad emphasized deal activity and capital market maturation. “Achieving a record number of deals in 2024 (178), which was 31 percent of MENA’s total deal number, reflects positively on activity,” he said. 

He also cited the growing pipeline of exits and public listings, saying: “More than 50 IPO applications are currently under review by the regulator and the exchange, showing further momentum in the Saudi market.” 

The increase in mergers and acquisitions transactions — up 17.4 percent year on year — suggests the market is entering a phase of consolidation and liquidity, which is critical for long-term investor confidence, he stated.  

Still, the pace and scale of state-backed capital injections have prompted some caution. 

“Concerns about government-driven funding inflating valuations remain,” Bahoshy warned. 

He stressed the need to monitor startup profitability, organic market demand, and the inflow of non-government capital to guard against artificial inflation.

In his view, sustainable ecosystems are those where “startups demonstrate strong unit economics” and attract both domestic and international private capital. 

Murad agreed that macroeconomic indicators must be matched with real operational progress. 

“From an investor’s perspective, distinguishing between real market development and an overheated ecosystem requires a mix of macroeconomic signals and sector-specific insight,” he said. 

Those metrics include gross domestic product growth, employment contribution, and non-oil revenue gains. 

At a sectoral level, fintech remains a bellwether. “In fintech, for example, sustained growth in digital payment adoption, rising financial inclusion, and tangible collaboration between fintech and incumbent banks signal structural integration rather than hype,” Murad explained. 

On the structural side, Saudi startups face a different set of challenges as they scale regionally and globally. 

While local capital and infrastructure offer a strong base, market fragmentation across the MENA region presents real operational hurdles. 

“Key challenges include regulatory differences, talent mobility constraints, and fragmented market demand,” Bahoshy said. 

In particular, sectors such as fintech and health tech often require jurisdiction-specific compliance, which can stretch the resources of scaling companies. 

Murad underscored the importance of localization and talent strategy in overcoming those barriers. 

“Startups operating in sectors such as fintech or health tech may find it particularly difficult to navigate differing compliance standards and approval timelines,” he said, adding that hiring local talent is often critical. 

“Our portfolio company Rabbit, a hyperlocal e-commerce platform, has made the recruitment of local employees a key part of its Saudi market entry strategy,” said Murad. 

Despite these headwinds, both Bahoshy and Murad see a strategic shift toward long-term market integration. 

“Saudi startups are increasingly positioning themselves as regional leaders within MENA,” Bahoshy said, with many expanding into the UAE, Egypt, and other Gulf Cooperation Council markets. 

Murad added that founders are building their businesses “with scalability in mind,” and are “leveraging the Kingdom’s strong capital base, infrastructure, and Vision 2030 momentum to compete across borders.” 

Next growth phase

Ultimately, the next phase for Saudi Arabia’s startup ecosystem will depend on how effectively it balances public ambition with private execution. 

While Vision 2030 provides a powerful narrative and institutional backing, sustained impact will be measured by market maturity, depth of innovation, and the ability of startups to solve real problems across borders and sectors. 

As Saudi Arabia’s startup ecosystem transitions from state-backed momentum to market maturity, investors and policymakers are shifting their focus from funding volume to long-term value creation. 

This next phase will test whether startups can scale beyond subsidized growth and become embedded drivers of innovation across sectors and borders. 

“What often matters most is on-the-ground visibility: how embedded startups are in daily life, how their products are solving real problems, and how much institutional trust they’ve earned,” said Murad. 

That visibility — whether in finance, healthcare, or logistics — is increasingly seen as a litmus test for lasting impact. 

Startups that succeed in the Kingdom are now expected to meet regulatory standards, address market needs, and contribute to non-oil GDP. 

Murad pointed to the fintech sector, where startups are not only attracting investment but also becoming integral to the financial system through collaboration with banks and the adoption of digital infrastructure. 

He noted that alignment with national priorities, like those in the Financial Sector Development Programme, helps reinforce sector-wide progress. 

Regional expansion remains an important strategic goal, but the road to cross-border growth is uneven. 

Bahoshy pointed out that as Saudi startups expand into nearby markets, they encounter challenges such as varying regulations, limited movement of skilled talent, and inconsistent consumer demand across the region.

To mitigate these challenges, firms are increasingly investing in local knowledge and partnerships rather than applying one-size-fits-all models.

RIYADH: Saudi Arabia’s Tadawul All Share Index closed lower on Thursday, falling 164.08 points, or 1.49 percent, to end the session at 10,840.94.

Trading turnover on the main index reached SR5.34 billion ($1.42 billion), with only 14 stocks recording gains while 238 declined.

The Kingdom’s parallel market, Nomu, also saw a downturn, losing 425.57 points, or 1.56 percent, to close at 26,798.14. A total of 28 stocks advanced while 63 retreated. The MSCI Tadawul 30 Index slipped 13.42 points, or 0.95 percent, to finish at 1,392.04.

SEDCO Capital REIT Fund emerged as the session’s best performer, with its share price rising 0.88 percent to SR6.85. Fawaz Abdulaziz Alhokair Co. followed with a 0.71 percent gain to SR19.84, while Tihama Advertising and Public Relations Co. rose 0.67 percent to SR15.10.

On the downside, Al-Omran Industrial Trading Co. recorded the steepest loss, falling 9.15 percent to SR26.30. AYYAN Investment Co. dropped 7.35 percent to SR12.60, and Al Taiseer Group Talco Industrial Co. declined 7.26 percent to SR40.85.

On the announcements front, the Saudi National Bank announced plans to issue US dollar-denominated notes under its Euro Medium-Term Note Program.

According to a Tadawul filing, the issuance will be conducted through a special purpose vehicle and will be offered to eligible investors in Saudi Arabia and globally.

The bank has appointed Abu Dhabi Commercial Bank PJSC, DBS Bank Ltd., Emirates NBD Bank P.J.S.C., Goldman Sachs International, HSBC Bank plc, J.P. Morgan Securities plc, Mashreqbank psc, and Mizuho International plc as joint lead managers and book-runners.

SNB Capital Co., SMBC Bank International plc, and Standard Chartered were also mandated. The proceeds from the offering will be used to enhance Tier 2 capital, support general corporate purposes, and advance SNB’s strategic goals.

Final terms of the issuance will be determined based on market conditions. SNB shares edged up 0.14 percent to close at SR34.70.

Meanwhile, Yaqeen Capital Co. announced it has deposited proceeds from the sale of fractional shares following a recent capital increase. A total of 308 shares were sold, generating SR3,451.76, with an average price of SR11.23 per share. The proceeds have been distributed to eligible shareholders via their investment-linked accounts.