How Much Can the Venture Capital Industry Grow in Saudi Arabia by 2025? (STV)

Summary

• Venture capital investments in Saudi Arabia could grow tenfold from $50 million in 2018 to $500 million annually by 2025.p.2
• Achieving this growth trajectory would result in a cumulative investment of $2 billion in Saudi Arabia between 2019 and 2025.p.2
• Saudi Arabia represented 35% of total MENA GDP in 2018, but attracted only 9% of regional VC investments, equivalent to $50 million out of a potential $235 million.p.6
• Capital allocation in Saudi Arabia is expected to shift toward later-stage investments, with early-stage venture funding decreasing from 25% of total VC in 2018 to 15% in 2025.p.7
• Large regional exits, such as Souq.com for $580 million and Careem for $3.1 billion, have helped validate venture capital as a viable asset class in the region.p.10
• The Saudi government spends 25% of its total budget on learning and development to help address the shortage of technical talent.p.13

Key insights

1. VC investments in Saudi Arabia grew at a CAGR of 90% between 2015 and 2018 across approximately 90 ventures.p.3
2. To reach $500 million in annual investments by 2025, the Saudi VC industry needs to maintain an average yearly growth rate of 40% from 2018 to 2025.p.2
3. Between 2019 and 2025, STV estimates that $350 million will go to early-stage ventures and $1.6 billion to later-stage investments in Saudi Arabia.p.7
4. Key VC financing mechanisms like convertible notes, simple agreements for future equity (SAFEs), and Employee Stock Ownership Plans (ESOPs) remain unenforceable under current Saudi law.p.12