Saudi Arabia Surpasses UAE in Venture Capital Funding in the Middle East

Last year, Saudi Arabia outpaced the United Arab Emirates in venture capital investments, raising $1.4 billion, a 33% YoY increase. Magnitt, a Dubai-based VC data platform, attributes this growth to the government's innovation focus and investments from sovereign funds like SVC, Jada, and Sanabil. Notably, fintech transactions involving Tabby and Tamara contributed to the kingdom's emergence as a top 5 player in emerging market finance.

Founder and CEO of Magnitt, Philip Bahoshy, notes the remarkable expansion of Saudi Arabia's VC ecosystem, highlighting the entry of two new unicorns headquartered in the kingdom. The monarchy's venture capital initiatives, though later than other MENA nations, have demonstrated significant success, with anticipation for further developments in 2024.

Despite global economic challenges leading to a 25% drop in MENA region funding to $2.6 billion, Saudi Arabia's Public Investment Fund actively supports the VC sector. The $700 billion company, through Sanabil and a $1 billion fund of funds, encourages diversification of the economy and job creation, aligning with the broader vision for the region.

However, MENA's overall funding decline is attributed to decreased global demand for venture capital, rising inflation, and oil output restrictions. Foreign and domestic investor withdrawals have been notable, with only 366 investors supporting MENA businesses in 2023. Despite early Silicon Valley interest, just 45% of investments originated from outside the MENA region.