A new report from STV, a leading Middle East venture capital firm, highlights the incredible acceleration of Saudi Arabia’s technology ecosystem while sounding an alarm on a critical bottleneck threatening its future growth. While the Kingdom has successfully deployed approximately $5 billion in venture capital and produced nine unicorns in the last five years, a significant gap in local growth-stage funding could stifle its ambition to become a global technology hub.
A Tale of Two Realities
The Saudi tech scene is experiencing unprecedented momentum, driven by Vision 2030’s strategic focus on innovation. The influx of nearly $5 billion in VC funding has reshaped the landscape, creating a fertile ground for startups to scale at a global pace. However, the STV report, “Mind the Gap,” argues that despite this success, the Kingdom is operating well below its full potential when measured against GDP benchmarks for both unicorn creation and venture capital deployment.
The Unicorn Powerhouse
Saudi Arabia has firmly established itself as the epicenter of high-value startups in the region. Of the 14 unicorns that have emerged in MENA, an impressive 65% are based in the Kingdom. The pace of creation is also accelerating, with half of the region’s unicorns appearing in just the last two years. This track record proves the ecosystem’s ability to nurture and build globally competitive companies, attracting investors who now view Riyadh as a primary destination for innovation.
Identifying The Bottleneck
The core issue identified by the report is a structural imbalance in the funding landscape. While early-stage capital has seen significant traction, the crucial scale-up phase remains critically underfunded. There is a healthy and growing pipeline of high-potential ventures ready for their next stage of expansion, but the capital required to fuel this growth is lacking. STV estimates that a staggering $16 billion is needed to fully exploit the potential of this pipeline.
The Case For Native VCs
To close this funding gap, the report calls for a substantial expansion in the number and scale of Saudi-native growth-stage VC funds. The argument is that local investors possess the deep-seated expertise, invaluable networks, and nuanced understanding required to identify and champion the most promising local tech ventures. Without a robust cohort of domestic growth-stage investors, the ecosystem risks losing its most promising scale-ups and, consequently, its momentum. Fueling these native funds is presented as the critical step to unlocking the next wave of Saudi unicorns and solidifying the Kingdom’s position on the world stage.
About STV
STV is one of the largest technology venture capital firms in the Middle East and North Africa. It backs and scales the region’s most ambitious and disruptive technology companies.
Source: STV
