Saudi start-ups secured lion’s share of funding in 2023 as companies shift base to kingdom

Start-ups in Saudi Arabia recorded a sharp increase in funding last year, as the kingdom continues to attract more companies to set up their regional headquarters.

Investment in the country’s start-ups, including debt financing deals, increased by 160 per cent, while debt-free investment rose by 47.7 per cent, start-up data platform Wamda said in a report.

In total, start-ups in the kingdom raised $2.3 billion from 145 deals last year.

“Government efforts to ease regulations and build an attractive start-up hub in Riyadh are paying off, with an increasing number of start-ups from across the region relocating their headquarters to Saudi Arabia, in a bid to gain access to capital and the region’s largest market,” the report said.

Saudi Arabia’s regulation requiring foreign companies to set up regional headquarters in the kingdom or risk losing out on government contracts came into effect this year.

While companies with foreign operations not exceeding 1 million Saudi riyals ($266,000) can operate in the kingdom without local headquarters, the regulation does grant benefits, such as tax exemptions, to those based in the country.

The kingdom is also heavily investing in start-ups as part of its Vision 2030 agenda to diversify its economy away from oil.

While the UAE has historically accounted for the majority of the Mena region’s so-called mega deals – those with funding of more than $100 million – last year, start-ups from the kingdom accounted for four out of the five of such deals in the region, the Wamda report found.

They include Tamara (which raised $340 million), Tabby ($200 million), Floward ($156 million) and Nana ($133 million). FinTech platform Tabby moved its headquarters to Riyadh in November last year.

Egypt’s MNT Halan, which raised $260 million, was the other mega deal recorded last year.

Overall, start-ups in the Mena region raised $4 billion in 2023, up 1.7 per cent annually, although half of the funding came from debt financing, the report said.

Outside of the $1.77 billion funded through debt, the total amount raised was $2.25 billion, a drop of about 35 per cent compared to 2022.