State Of The Startups: Saudi Arabia Marches Forward But Challenges Remain

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The number of entrepreneurship support organizations—such as funds, coworking spaces, incubators, and accelerators—in Saudi Arabia has nearly tripled from 13 to 36 between 2011 and 2015, according to The Kingdom of Saudi Arabia: Status of the entrepreneurship ecosystem report released by Wamda Research Lab (WRL).

These entities include funding organizations (30%), events (17%), business support (15%), incubators and accelerators (14%), university/technology parks (12%), and coworking/fab labs (12%).

In addition, non-governmental organizations and funding institutions are also offering mentorship, training, and capital for entrepreneurs, the report said.

Support organizations are located in Saudi Arabia’s four major cities: Riyadh (54%), Jeddah (29%), Eastern province (10%) and Makkah (8%).

Riyadh and Jeddah are more advanced in terms of entrepreneurship support networks and initiatives, the study found.

Makkah and the Eastern province are more focused on creating specialized centers within universities to support entrepreneurship, the report found.

Most entrepreneurship support programs, including Kafalah, Riyadh Taqnia Capital, SMEA, STC Ventures and Wa’ed, are run by the government or big corporations, the study found.

Money, money, money

Among sectors, e-commerce, media, healthcare, cleantech, and edtech offer larger opportunities for startups in the kingdom, according to the report.

In the next 20 years, the Saudi government plans to spend $109 billion on solar energy infrastructure to increase its share from renewables to one-third, the report said.

This engagement offers startups multiple opportunities, including smart home energy management, industrial internet (to monitor and analyze energy consumption data), and water desalination.

While opportunistic abound for startups in the Kingdom, entrepreneurs are still facing various challenges, including regulations and bureaucracy, and access to funding.

Most funds in Saudi Arabia offer between $0.1 million and $2 million in the seed stage for around 10% to 20% equity stake but not much is available for growth needs.

Saudi Aramco Energy Ventures, which offers $5-10 million over two to three rounds of financing, leads the pack in terms of the funding size.

Saudi Arabia is the region’s biggest market and the most populous country in the GCC.

It also has one of the highest average incomes per capita in the region, besides being ranked third globally when it comes to smartphone penetration.