Saudi Arabia is rapidly emerging as a leading destination for startup exits in the Middle East and North Africa (MENA) region, challenging the UAE's historical dominance in this space. This transformation is being driven by the kingdom's economic diversification efforts, robust venture capital growth, and maturing startup ecosystem.
While the UAE still leads with approximately 60% of all regional exits, Saudi Arabia's share has grown substantially from 12% in 2021 to 20% in recent years, despite its venture market only being active for about five years[1].
The kingdom's expansive Vision 2030 initiative, booming economic growth, and strategic investments in entrepreneurial infrastructure are creating favorable conditions that are not only attracting startups from across the region but also facilitating successful exit pathways through both mergers and acquisitions (M&As) and initial public offerings (IPOs).
The MENA startup ecosystem has historically been dominated by the UAE as the primary hub for both startup growth and successful exits. The UAE has traditionally accounted for approximately 60% of all exits in the region, establishing itself as the preferred destination for entrepreneurs seeking to scale their businesses and eventually secure profitable exits[2]. However, this dynamic has been shifting noticeably in recent years, with Saudi Arabia steadily gaining ground in the regional exit market.
In 2022, the MENA region witnessed 57 startup exits through M&As, representing a 30% increase from the previous year[5]. While the UAE led with 23 homegrown startups being acquired, Saudi Arabia recorded 8 startups exiting, placing it 3rd behind Egypt with 14 exits[5].
What makes this particularly significant is that Saudi Arabia's venture capital ecosystem is relatively young compared to its regional counterparts, having only been truly active for about five years. Moreover, the kingdom's rapid rise as an exit market is even more impressive considering that startups typically require an average of 7 years to reach exit maturity[2].
Saudi Arabia's share of exits in the MENA region has increased from 12% in 2021 to 20% in recent years, demonstrating remarkable growth in a short timeframe. The kingdom witnessed nine exits in one recent reporting period, accounting for 21% of the MENA region's M&A transactions and securing the second position after the UAE[2].
What's particularly noteworthy is the increasing role of Saudi companies as acquirers. In 2022, Saudi-based companies completed 15 acquisitions, significantly up from just four in the previous year[5]. This marked increase reflects growing confidence and capability within the Saudi business ecosystem to execute strategic acquisitions.
Saudi Arabia's emergence as a key exit market for startups is intrinsically linked to its broader economic transformation agenda, primarily driven by Vision 2030. This ambitious initiative aims to diversify the economy away from oil dependence, create jobs, and attract high-skilled talent into the kingdom[3].
The Saudi market has demonstrated impressive economic vitality, expanding by 8.7% in one recent year, the highest growth rate among all G20 countries[4]. This robust economic performance provides a fertile environment for startup growth and creates favorable conditions for exit opportunities.
As part of Vision 2030, small businesses are expected to account for more than one-third of Saudi Arabia's GDP by 2030[4]. This strategic emphasis on entrepreneurship and small business development has led to substantial investments in building entrepreneurial infrastructure, which in turn has fostered the emergence of numerous innovative startups[3][6].
A key aspect of Vision 2030 is the empowerment of entrepreneurs, particularly in high-growth sectors like technology. This has created a positive environment for startups specializing in payments, lending, FinTech, and other emerging fields. The kingdom's focus on developing the technology sector has contributed significantly to the rapid maturation of its startup ecosystem[3].
Saudi Arabia's startup ecosystem has been maturing quickly and dramatically, with 87% annual growth in the number of startups (2017-22)[7], ranked first in regional venture funding activities in 2023, amassing an unprecedented $1.38 billion in capital[8]. This maturation is creating a more robust environment for both startup growth and successful exits.
In recent years, Saudi Arabia has experienced a significant surge in venture capital investments. At the LEAP 2023 event in Riyadh, 9 funds totaling $2.4 billion were announced specifically to drive startup growth. Furthermore, venture capital funding in Saudi startups increased by 72% in 2021 and 2022, amounting to $987 million across 144 deals[3].
What distinguishes Saudi Arabia's venture capital landscape is that most funding is sourced locally, with a particular focus on supporting early-stage rounds for firms specializing in payments or lending[3]. This local funding ecosystem creates a more sustainable growth path for startups and potentially smoother exit processes.
Saudi Arabia has created an increasingly favorable environment for business formation and growth. According to the Global Entrepreneurship Monitor (GEM) report, 90% of respondents agreed that starting a business in Saudi Arabia was easy, positioning the country at the top among surveyed economies. Additionally, 80% of respondents identified opportunities to start businesses due to changes brought about by the pandemic[3].
The kingdom's young, tech-savvy population with a strong appetite for digital services makes it particularly attractive to investors, creating a dynamic market for innovative startups[3]. This demographic advantage contributes to both startup growth and exit potential.
Saudi Arabia is witnessing an expansion in exit opportunities for startups, with both M&As and IPOs becoming increasingly viable paths.
Some of the most significant exits in Saudi Arabia include Tabby's acquisition of Tweeq for an undisclosed amount, and Riyadh-based FinTech startup Rasan, which raised $224 million from its initial public offering on the Tadawul exchange in June[2].
Another standout example is the online food delivery startup Jahez, which was listed on Saudi Arabia's secondary market, Nomu, in 2022, achieving a market valuation of $2.4 billion[2].
While M&As continue to be the most common exit route, industry experts anticipate that the kingdom's IPO space will become an increasingly viable path for startup exits in the region[2]. This diversification of exit pathways enhances the overall attractiveness of Saudi Arabia as an exit market.
More startups are strategically relocating to Saudi Arabia in preparation for exits. For instance, fintech startup Tabby, valued at $660 million after its January funding round, announced a shift of its headquarters from Dubai to Riyadh as it prepares for an initial public offering on the Saudi exchange[4]. This trend indicates growing confidence in Saudi Arabia's exit market potential.
Economic uncertainty in various parts of the MENA region is driving entrepreneurs to relocate their businesses to Saudi Arabia, bypassing traditional hubs like the UAE[4]. This migration is contributing to the kingdom's growing prominence as an exit market.
Entrepreneurs from the region are being lured to Saudi Arabia by economic incentives and access to a relatively young market with money to spend[4]. The kingdom's economic boom and supportive policies for small businesses create an attractive environment for startups seeking growth and eventual exits.
AstroLabs, a Dubai-based ecosystem builder, has supported approximately 450 businesses in establishing operations in Saudi Arabia since 2018. Recently, there has been a noticeable trend of more startups coming from Egypt, Jordan, Pakistan, and even the UAE[4]. This regional business migration enriches Saudi Arabia's startup ecosystem and expands its potential exit market.
Saudi Arabia has undertaken significant regulatory reforms to create a more predictable and stable business environment, making it easier for startups to establish, scale, and exit successfully.
The Kingdom has streamlined business operations through digital licensing platforms and revised foreign ownership laws, reducing bureaucratic hurdles for startups. These measures enhance efficiency and provide greater clarity for entrepreneurs and investors navigating the market[7].
Programs such as the Entrepreneurship License enable non-Saudis to launch and operate startups in Saudi Arabia, attracting global talent and fostering a more competitive ecosystem. Additionally, government-backed initiatives like the Saudi Arabian General Investment Authority (SAGIA) and Vision 2030 have introduced policies that support innovation, making Saudi Arabia a favorable destination for entrepreneurs[9].
The Kingdom is home to some of the largest sovereign wealth funds in the world, such as the Public Investment Fund (PIF). These funds are aggressively investing in new technologies and startups, both domestically and across the region, to capture value and drive long-term growth. Their deep pockets and strategic vision make Saudi Arabia an attractive exit destination, offering the liquidity and scale that early-stage investors and entrepreneurs seek.
Saudi Arabia's emergence as a key exit market for startups in the MENA region represents a significant shift in the regional entrepreneurial landscape.
Driven by its ambitious Vision 2030 initiative, robust economic growth, and strategic investments in entrepreneurial infrastructure, the kingdom is creating a favorable environment for both startup growth and successful exits.
The increase in Saudi Arabia's share of regional exits in just a few years, despite its relatively young venture market, signals the kingdom's growing importance in the MENA startup ecosystem.
As more Saudi startups reach exit maturity and the ecosystem continues to develop, industry experts anticipate a further increase in exit opportunities through both M&As and IPOs.
[1] MAGNiTT. 2023 Saudi Arabia Venture Capital Report.
https://magnitt.com/research/2023-saudi-arabia-venture-capital-report-50907?utm_source=chatgpt.com
[2] The National. Why Saudi Arabia is emerging as key exit market for start-ups. Oct 2024.
https://www.thenationalnews.com/business/2024/10/27/why-saudi-arabia-is-emerging-as-key-exit-market-for-start-ups/
[3] Forbes. Saudi Arabia Takes A Major Leap Into A High-Tech Future. Feb 2023.
https://www.forbes.com/sites/markminevich/2023/02/28/saudi-arabia-takes-a-major-leap-into-a-high-tech-future/
[4] The Circuit. Saudi Arabia is a growing alternative for Mideast startups seeking new home. Oct 2023.
https://circuit.news/2023/10/12/saudi-arabia-is-a-growing-alternative-for-mideast-startups-seeking-new-home/
[5] Wamda. A breakdown of Mena exits in 2022. Feb 2023
https://www.wamda.com/2023/02/breakdown-mena-exits-2022
[6] Entrepreneur Middle East. A Look At How Saudi Arabia's Vision 2030 Has Spurred Entrepreneurship In The Kingdom. Apr 2023.
https://www.entrepreneur.com/en-ae/starting-a-business/a-look-at-how-saudi-arabias-vision-2030-has-spurred/449440
[7] Roland Berger. The Rise of Entrepreneurship in Saudi Arabia: A Transformative Landscape. Apr 2023.
https://www.rolandberger.com/en/Insights/Publications/The-Rise-of-Entrepreneurship-in-Saudi-Arabia-A-Transformative-Landscape.html
[8] Arab News. Saudi Arabia startup ecosystem raises $1.38bn in 2023. Jan 2024
https://www.arabnews.com/node/2441066/business-economy
[9] Inspirenet. Why Saudi Arabia is Becoming a Key Exit Market for Startups in the MENA Region. Nov 2024.
https://www.inspirenet.com.sa/why-saudi-arabia-is-becoming-a-key-exit-market-for-startups-in-the-mena-region/