CAIRO: Saudi businessmen are showing prominence and courage in strengthening economic growth through innovation and entrepreneurship.
The Middle East region is witnessing unprecedented growth in the establishment of small and medium enterprises along with a shift towards entrepreneurship with Saudi Arabia setting an example for a blossoming ecosystem of start
Entrepreneurship in the Kingdom and the region has changed significantly over the years with founders demonstrating exceptional skills in venture funding, accelerating, and scaling.
In an exclusive interview with Arab News, Saud Alsabhan, vice governor of entrepreneurship at Saudi Arabia’s Small and Medium Enterprises General Authority, also known as Monsha’at, said that the Saudi entrepreneurial ecosystem has developed its own logic.
“In the last six years, we have seen unprecedented growth in our own business ecosystem, institutionally and organically. With nearly a million SMEs across the country, more than 90 percent of adults today see entrepreneurship as the right career move,” he added.
The Saudi government supports private institutions targeting startups to further increase investment and engagement in the ecosystem.
Alsabhan added that Saudi entrepreneurs now have access to lending mechanisms as well as development programs, accelerators, and incubators.
The development of knowledge and programs showed significant effects on venture capital investment as Saudi startups raised $980 million in the first three quarters of 2022, an increase of 108 percent compared to 2021, according to a Monsha’at report.
“Our Monsha’at Academy, for example, has already developed more than 20,000 trainees in better SME capacities, while our Mazaya platform, which helps SMEs optimize costs, has helped more than 48,000 beneficiaries,” Alsabhan explained.
He added that the Kingdom has also witnessed startups supporting SMEs such as Nawafth, an online consulting services app; Tomoh 2.0, a company that evaluates SMEs; and Fikra, a platform that pushes businesses to develop better public services.
“Add to this the strong and ambitious financing mechanisms provided by other institutional actors, and it is no exaggeration to say that there is no better time to be a small and enthusiastic business in Saudi Arabia,” Alsabhan said.
The founder of Kuwait’s largest online marketplace 4Sale, Tarek Sakr, told Arab News exclusively that Saudi Arabia is leading the growth of entrepreneurialism in the region but expects a fall in venture funding in 2023.
FAST FACTS
• Knowledge development and programs show significant effects on venture capital investment as Saudi startups raise $980 million in the first three quarters of 2022, an increase of 108 percent compared to 2021, according to a report on Monsha’at.
• The Kingdom has witnessed startups supporting SMEs such as Nawafth, an online consulting services app; Tomoh 2.0, a company that evaluates SMEs; and Fikra, a platform that pushes businesses to develop better public services.
• The founder of Kuwait’s largest online marketplace 4Sale, Tarek Sakr, said that Saudi Arabia is leading the growth of entrepreneurialism in the region.
“Countries like Saudi Arabia are leading the growth of entrepreneurialism in the region, and these are the markets where I see entrepreneurial knowledge in practice – from the start of the idea to the successful exit.”
He added: “Saudi Arabia stands out because of the government and sovereign wealth fund that develops impressive support schemes for entrepreneurs and systematically encourages new business projects, trying to ease the journey of each chance.”
Sakr explained that entrepreneurs in 2022 showed their resilience after global economic crises such as inflation and the Russian-Ukraine war which in turn made startups focus more on generating revenues instead of public relations exercises.
“In recent years, founders in the Middle East have experienced some obstacles in fundraising, following a clear path set by investors to get the funding they desire. With this ‘ cheap money’ came an increased focus on presenting your startup in the right light – and marketing became as important, or even more important than building the business,” said Sakr, describing the venture-funding space before 2022.
As venture funding is largely driven by acquisitions and mergers, Sakr explained that the region’s startup ecosystem is considered a more attractive investment opportunity but “the tide has changed.”
“My prediction is that the fund in 2023 will not continue to increase the rates seen in recent years. The tangible reason for that is the lack of exits in sufficient numbers to continue the excitement,” explained he.
He added that future investments in startups will be “smart money” with additional conditions and due diligence attached.
Sakr further explained that in order to further expand the ecosystem and avoid falling, startups should have access to traditional loans instead of relying on investors for funding.
“Today, for most early technology startups, venture capital funding is more feasible than receiving a loan from a bank, due to strict due diligence requirements,” he added.
Alsabhan believes that internationalizing the entrepreneurial ecosystem is a way to improve the startup space.
He explained that most of the products and innovations are built outside the Kingdom even though the Saudi population is educated and young.
“At Monsha’at, and throughout the government, we want to redirect some of that intellectual and entrepreneurial trend by inviting more investors, entrepreneurs, innovators, and creative individuals to invest in their time, resources and ideas in Saudi Arabia,” added Alsabhan.
In addition, global venture capitalists are also excited about the start-up space in the region, especially in Saudi Arabia, but urge entrepreneurs to be more careful in collecting funds and starting a business while the ecosystem began to grow.
Igor Ryabenkiy, CEO and managing partner of AltaIR Capital, an early-stage global venture capital firm, gave some tips for entrepreneurs to avoid a bursting bubble.
Ryabenkiy advises ambitious startups to avoid getting stuck in local markets and seek global expansion from the start.
“When the founders of the startup decide to build a global company, it is important to express their idea to users, investors, and the market and create a strong strategy to go to market. We also suggest the hire international professionals with technological and business expertise,” he told Arab News exclusively.
Ryabenkiy further explained that when it comes to fundraising, startups need to be selective about the investors they bring to the table and look for industry knowledge as opposed to cash value.
