Investment market will be recovered in the beginning of 2024 in Saudi Arabia

The investment platform for startups in the Middle East ) MAGNiTT) said  that  ” Venture capital financing in the Kingdom increased by 72 percent last year compared to 2021 with investments amounting to $987 million across 144 deals.”

However, "MAGNiTT" warned that with growing uncertainty in the global economy and investor fatigue, the venture capital market may be more vulnerable.

 Philip Bahushi, founder of MAGNiTT, said he believes project finance will start to see a decline in the growth rate this year, but that Saudi companies will compensate through mergers and acquisitions.

• Rise in M&A activities

Philip Bahushi adds “We will continue to see a record number of mergers and acquisitions activity". “Companies that are unable to raise funds will likely merge and well-funded companies, specifically in Saudi Arabia, will look for inorganic growth by acquiring companies in other geographies.”

 He explained that “Mergers and acquisitions are also being driven by exits and initial public offerings, that more Saudi companies will start going public in the local market than in other Middle Eastern countries”.

He added, “Companies that are well-funded in Saudi Arabia and that are supported by government initiative funds are more likely to become acquiring startups, rather than being acquired.”

In 2022, the Middle East and North Africa region witnessed 17 mergers and acquisitions compared to 41 in 2021 while Saudi Arabia alone witnessed 10 mergers and acquisitions deals last year compared to five mergers in the previous year, an increase of 100 percent. 

•support for startups

Bahushi expected that “a country like Saudi Arabia that has very specific government initiatives, support for startups, and funds of funds, will continue to employ capital and grow year after year”.

•Growth in Saudi venture markets

Saudi Arabia managed to grow when the leading investment project markets in the region witnessed a decrease in investments in 2022 such as a 20% decrease in financing in the UAE on an annual basis.

Bahushi explained that the rise of Saudi Arabia in these challenging times has been mostly driven by the government's focus on start-ups and the support from funds and corporations that will also decide the continued growth of the Kingdom.

he added "It's very much driven by the number of companies that are going to raise $50 million, $100 million, $150 million and the ability to raise that level of capital in this challenging economic environment that we're going to see that growth year over year".

 As the region opens up to the world, more international investors are putting their money into companies and startups that make the ecosystem more attractive.

Bahoshy believes that 2023 will be a difficult year for the startup ecosystem given global economic uncertainties, but added that the market will start to recover by the first quarter of next year.