Arab News, Sat, May 04, 2024 | Shawwal 25, 1445
Saudi startups raised $3.3bn in last 10 years, says report
Saudi Arabia:
Startups in Saudi Arabia saw massive growth
during the last decade raking in $3.3 billion in venture capital funding,
according to a report issued by MAGNiTT.
The data platform, in its “10 Years Saudi Arabia
Founders Report” sponsored by Saudi Venture Capital Co., provides an in-depth
analysis of the backgrounds, experiences, and expertise of founders.
“MAGNiTT initially published a report on founders
in the MENA VC ecosystem in 2018, focusing on uncovering the DNA of successful
entrepreneurs in the region. Today, in partnership with the Saudi Venture
Capital Co., we present a comprehensive report on the founders of the top 200
funded startups in the Kingdom over the last ten years,” said Philip Bahoshy,
CEO and founder of the platform.
“By shedding light on founders’ experiences in the
Saudi ecosystem, we aim to dispel myths around founders, empower aspiring
entrepreneurs looking to establish their ventures in the Kingdom, guide
government decision-makers in shaping policies conducive to innovation, and
provide invaluable intelligence to investors seeking opportunities in the
region,” he added.
SVC CEO Nabeel Koshak emphasized the remarkable
growth and dynamism in the Saudi startup landscape.
“The Kingdom’s strategic initiatives, driven by
the Saudi Vision 2030, have laid a solid foundation for innovation,
entrepreneurship, and investment. As a result, we have seen a surge in startup
activity, with a growing number of ambitious founders seizing opportunities and
driving innovation across various sectors,” he said.
“The goal of the report is to provide
policymakers, government officials, and investors with insights and data to
inform strategic decisions and policies to further nurture the startup ecosystem
for the next 10 years,” Koshak added.
A decade of funding
Compiling data from the 200 Saudi-based startups,
which collectively raised a total of $3.3 billion from 2014 to 2023, the report
highlighted that 44 percent of these startups were launched by teams with two
founding members, who together secured 53 percent of the total funds.
He further stated that with the significant
support for innovation, the Kingdom is set to witness the emergence of more
unicorns.
In contrast, startups founded by a single
individual accounted for 30 percent of the funded startups but only captured 15
percent of the funding in the last decade.
Notably, 36 percent of the 400 founders analyzed
had at least 10 years of work experience before launching their respective
startups.
The report also indicated a trend toward
entrepreneurship among less experienced founders, with 66 percent being
first-time startup founders and only 30 percent with previous regional startup
experience.
It revealed a significant gender disparity in the
VC landscape within Saudi Arabia, with male founders comprising 94 percent
of the total 400 individuals, while female founders accounted for only 6
percent.
This gender gap is considerably wider than the
global norms, where, according to research by Startup Genome conducted between
2016 and 2022, the average proportion of female founders in an ecosystem was 15
percent.
Additionally, only 7 percent of solo founders were
female, and there were no recorded startups with two or more female
founders only.
However, as the number of founders per startup
increased, so did gender diversity, albeit slightly. In startups with three
founders, 18 percent were of mixed gender, while in startups with four or more
founders, the figure was 12 percent.
Furthermore, 91 percent of male-only founded
startups claimed 98 percent of total funding. Conversely, 3 percent of
female-only founded startups accounted for 0.4 percent of the total funding.
Founders' education
The report further delved into the education
qualification of founders revealing that 55 percent in the Kingdom had attained
at least a bachelor’s degree.
In terms of technical development, 59 percent of
founders had technical education backgrounds, highlighting science, technology,
engineering, and mathematics.
Thirty-nine percent of founders held degrees in
business, contrasting with the global average of 19 percent, according to an
Endeavor Insight study.
Over half of the 400 founders obtained their
degrees internationally, while 22 percent held both international and local
degrees.
King Saud University, King Fahd University of
Petroleum and Minerals, and King AbdulAziz University were among the most common
institutions for startup founders.
Seven of the top 10 universities of Saudi founders
that raised funding were public institutions.
The top international schools of Saudi founders
had Stanford and Harvard among the top choices, mirroring global trends.
Professional experience
Despite fintech being the most funded sector, only
7 percent of founders had experience in finance, and 18 percent in banking,
which is lower compared to the 48 percent with backgrounds in information
technology.
Additionally, even fewer founders, only 12
percent, had experience in e-commerce, despite this industry accounting for the
highest share of deals, 20 percent, closed by the top 200 Saudi startups.
The report also revealed that 36 percent of the
founders in Saudi Arabia are skilled professionals with over 10 years of
experience before starting their businesses.
Notably, Saudi Aramco was the most common previous
employer among the funded founders, with 7 percent having worked there before
launching their startups.
Furthermore, McKinsey and Microsoft were among the
top 10 companies where the 400 founders covered in this report had
previously been employed.
The majority of these founders held significant
leadership roles, with 31 percent having served as a founder, co-founder, or
board member. Only 4 percent originated from entry-level positions.
The report also pointed out: “While Saudi Arabia
has witnessed several serial entrepreneurs, 66 percent of founders in the last
decade were first-time founders,” indicating a vibrant and growing
entrepreneurial ecosystem.