By: Shaimaa Ibrahim 

Entrepreneurs always look for financiers to launch their innovative projects or accelerate the growth of their startups. A venture studio, or startup studio, recently emerged as an attractive option for entrepreneurial founders.

What is a venture studio?

A venture studio takes a more hands-on approach as it provides a wealth of resources to support its startup portfolio, including marketing knowledge, innovative technologies, financing, and more. In addition, a venture studio involves a team of marketing experts, business developers, and technologists.

Thus, a venture studio could contribute to launching new businesses successfully and accelerating the startup’s success and growth.

Importance of Venture Studios

The strategy of venture studios is based on implementing and operating projects with several entrepreneurs at the same time, instead of working with one startup, to split up costs and risks.

A venture studio has extensive expertise in managing technology projects using the latest practices, while experts establish business models that come up with innovative ideas to establish startups that meet the needs of the market.

The venture studio not only attracts talented entrepreneurs to lead startups but also follows up the startup’s business. 

How venture studios work

The venture studio’s team primarily finds innovative ideas that suit startups, tests them to ensure they are applicable, and performs market analyses. Then, the team converts these ideas into operating businesses and designs a prototype that could be improved later. 

Following the successful launch of businesses, the venture studio allows startups to work independently and seek funding to expand and grow.

Benefits of Venture Studios

Venture studios provide plenty of advantages, including:

• Reducing risks that might face startups, notably those related to finding co-founders, increasing capital, and reaching customers.
• Boosting startup’s success journey.
• Launching several startups in a short period, compared to traditional methods.
• Launching a diverse group of startups across various industries and technologies, allowing studios to diversify their portfolio.
• Creating a sustainable and scalable business model.
• Enhancing innovation and creativity.

Translation: Noha Gad

By: Phil Sheridan, CEO at Berkshire Hathaway HomeServices Gulf Properties 

A new phenomenon is emerging in Dubai that is reshaping the city’s real estate sector. Owing to the country’s burgeoning digital currency market, and buoyant real estate sector, a growing number of younger digital currency traders are flocking to the emirate’s shores and converting their digital assets to invest in the city’s property market. This article explores the connection between the trend of currency trading and the thriving real estate market in Dubai among younger investors, underscoring the role played by the United Arab Emirates (UAE) in facilitating this modern financial shift.

The Gateway to Digital Currencies

At the heart of this trend is the UAE's progressive stance towards digital currencies. Dubai, a city renowned for its architecture and luxury lifestyle, has become a sanctuary for digital currency traders and investors worldwide. The city's welcoming regulatory environment and the government's forward-thinking policies have fostered a fertile ground for digital asset trading. 

Thanks to the initiatives such as the Dubai Blockchain Strategy and the Emirates Blockchain Strategy, for example, several Dubai banks are now using the blockchain system to enhance security and facilitate digital currency transactions. In 2022, Dubai also established the Dubai Virtual Assets Regulatory Authority (VARA), a regulatory body dedicated to overseeing and protecting virtual asset transactions. Government measures like setting up digital currency zones and providing regulations have boosted investor confidence. As a result, many investors are converting their digital assets into physical assets such as property, thanks to the flexibility offered by UAE’s financial eco-system. 

Real Estate, as a Preferred Investment Choice

Why does real estate stand out as an investment option? Dubai’s real estate market offers stability that digital currencies simply can't match. While digital currencies can offer high returns, the risk is also great. That’s not to say that Dubai’s property market does not offer high returns also. Statistics suggest that the volume of transactions in Dubai’s property market grew by 66.3 percent, while their value grew by 72% in 2021, in contrast to 2020, demonstrating the growth of the sector.[1]

If that weren’t enough reason, the fact that property has long proven to be a safe bet for investments during times of high inflation is yet another reason to invest in the city’s property market. According to Euromonitor International, the inflation rate for the UAE in 2022 was 5%. This contrasts with double-digital inflation rates across much of Europe during the same timeframe. Plus, putting money into property is not only about financial safety. For investors, it’s also a way to claim a slice of one of the world’s most attractive cities to live in worldwide, widely known for its safety, cosmopolitan nature, and quality of living.  

Global transactions and real estate deals

One advantage of digital currencies is their ability to streamline transactions. In terms of real estate investments, this means that investors can avoid additional charges usually levied by traditional banks, as well as further losses due to exchange rates. The immediate nature and transparency of transactions adds to the appeal making it easier for younger individuals to invest confidently in Dubai’s real estate market, fueling the city’s growth and financial appeal. 

Looking ahead

Looking ahead it is evident that virtual currencies will play an ongoing and growing role in shaping Dubai’s property landscape. The UAE’s dedication to creating an environment conducive to digital currencies, combined with Dubai’s reputation as a luxurious real estate hub, indicates that this trend is not temporary but rather an integral part of the city’s economic strategy. With digital currencies reshaping transactions, Dubai’s forward-thinking nature adds to the dynamism of the real estate market and ensures its future growth. As such, digital currency traders can rest assured that choosing Dubai’s property market to invest in is a smart decision to protect their future investments. 

Shaimaa Ibrahim 

The short-term rental market in Saudi Arabia has witnessed rapid development throughout the past few years. Silkhaus is a cutting-edge prop-tech startup that aims to revolutionize and develop the short-term rental scene in the kingdom and the Middle East. It provides an integrated set of services that meet the needs of guests and landlords. 

Silkhaus plans to expand its business in the Saudi market in the coming period. Therefore, Sharikat Mubasher had an interview with Sabine El Najjar, VP Commercial & General Manager of Silkhaus Saudi Arabia, to discuss future plans, and share with us her expectations for the future of the short-term rental market in Saudi Arabia, and its leading investment opportunities.

What services does Silkhaus provide to real estate owners to manage their properties, and what distinguishes it from traditional rental methods?

Silkhaus is a cutting-edge proptech startup dedicated to revolutionising short-term rentals across the Middle East. Founded in 2021, Silkhaus equips property owners to monetise their assets as short-term rentals with the opportunity to earn 20-40% more than regular long-term rentals. 

With Silkhaus, once landlords partner with us, we take care of every element, including furnishing, marketing the apartments, securing customers and even maintaining the units. Landlords have access to our advanced landlord portal that gives them full and real time visibility of bookings and earnings. Since our model is extremely flexible, landlords can also choose to book their apartment for their own use and can sell their units vacant on transfer with a minimal notice period, unlike with long term leases.

Today we partner with individual property owners as well institutional investors who own dozens of residential units. All together, our managed asset base exceeds $120 million in value, and we operate in three cities across two markets.

Last January, Silkhaus closed a Pre-Series A round, can you provide us with more

details of this round? How could this investment boost your expansion plans?

The pre-series A round is testament to the fundamentals of our business and the backing we have received from Partners for Growth. With our business growing by more than double in 2023, we chose to not dilute equity, but opted for debt financing instead. This allows us to stay well capitalised while remaining extremely focused on how we want to grow our business. 

In terms of our plans, the round is to fuel our entry into Saudi Arabia. This means we need to invest extensively in developing our technology for the local market, hire the right talent and build a large network of landlords. 

What are Silkhaus’s future expansion plans in the Saudi market?

Saudi Arabia is currently our first expansion outside the UAE. We have spent the last 6 months on regulatory set-up, talent onboarding and landlord discussions. We’ve had a successful lead generation campaign that has attracted interested landlords and investors alike. In fact, we see a large demand for short-term options as the Kingdom faces a shortage of hotels and high-quality accommodation. While KSA is attracting significant investment in the real estate and hospitality sector, it will be some time until that supply becomes available. That is why we are working with landlords to upgrade their properties to give guests a world-class experience. From our soft run, we’ve seen the appetite for Silkhaus properties grow. Right now, we remain focused on on-boarding more landlords and ensuring that we are contributing to the vision of the Kingdom for the hospitality and tourism sector. 

How do you see the future of the short-term rental market in Saudi Arabia, and what

about the investment opportunities in this market?

Globally, the short-term rentals market is worth over $100 billion and in the Middle East, the sector is still in the early stages of growth. For Saudi Arabia, this means there’s a significant opportunity in developing this industry, as well as creating jobs for local talent. 

In 2023, Saudi Arabia saw$74 billion worth of real estate deals completed. A lot of these will be deployed towards managing the shortages faced by visitors. As Saudi Arabia attracts global tourists for business and leisure, and with a number of major events scheduled, including the FIFA World Cup in 2030, we anticipate a major demand for short-term rentals. This will be a key driver in attracting investments into the real estate sector, while also generating strong returns for property owners. From our day-to-day conversations with industry veterans, we’ve also seen an interest from large developers that were historically more traditional to enter this space

In your opinion, how will digital technologies support the short-term rental market in the Gulf region, and Saudi Arabia in particular?

Technology is at the core of what we do, whether you’re a guest or a landlord. For guests, technology is embedded in every part of their journey, from discovery and booking, to check-in using digital locks all the way to our digital concierge service and our in stay strategic partners that are embedded into our offering for a seamless customer experience.

For landlords, Silkhaus leverages technology to provide end-to-end property management solutions for short-term rentals, managing every aspect from bookings to distribution and from operations to the guest experience. With this, landlords do not need to get involved in the day-to-day operations of their properties, but still have complete visibility of its management. 

Our technology powers short-term rentals and has attracted real estate owners ranging from institutional entities with mass holdings to individual retail owners with single apartments.

Shaimaa Ibrahim

Imitator entrepreneurs start their businesses using others’ business ideas as inspiration but work to refine them to be implemented in a new different market. They always aspire to provide better products and services than those provided before to achieve more profits.

Imitator entrepreneurs are a combination of innovative and hustler entrepreneurs; they come up with innovative ideas to develop products, do not stick to the terms set by other people, and have a lot of self-confidence.

By imitating successful business ideas of innovative entrepreneurs, the imitator entrepreneur faces fewer risks, gains more profits, leverages existing consumer demand, and provides products and services that have already proven to be successful.

Furthermore, imitator entrepreneurs can learn from the successes and failures of previous entrepreneurs, and find brand-new ways to refine services and products.

Advantages of Imitator Entrepreneurs

Imitator entrepreneurs can 

  - Easily refine a business idea rather than coming up with completely new ideas.

  - Easily benchmark their performance with the original idea.

  - Learn and avoid mistakes that were made by the originator.

  - Repeat successful entrepreneurial businesses.

  - Do precisive market research and analysis.

Disadvantages of Imitator Entrepreneurs

 - Their ideas are always compared to the original idea.

 - They always have to keep refining ideas and play catch-up. 

Translation: Noha Gad

Shaimaa Ibrahim

One of Saudi Arabia’s ambitions is to become a global fintech hub. For this aim, the Kingdom enhanced the regulatory framework and developed competencies of the fintech sector, in addition to increasing the number of fintech companies in the Kingdom. 

BwaTech is one of the fintech companies licensed by the Saudi Central Bank (SAMA) to provide financial services, enabling corporates that deal with more than one bank to implement several banking processes through one platform.

In this regard, Sharikat Mubasher held an interview with Hashem Al Hekail, Co-Founder and CEO of BwaTech, to learn more about the role of the fintech sector in fostering small and medium-sized enterprises (SMEs) in alignment with the futuristic Vision 2030.

Al Hekail also showcased the products provided by BwaTech to enhance the entrepreneurship ecosystem in Saudi Arabia and highlighted the promising investment opportunities available in the Saudi fintech sector.

What are the services provided by BwaTech to foster the fintech sector in Saudi Arabia? and what are the products that BwaTech offers for SMEs?

Entities and corporates of different sizes usually have multiple banking relationships and we, at BwaTech, provide advanced tech products to enable them to conduct their transactions with different commercial banks safely and seamlessly online via one platform, instead of using the e-portal of each bank. We offer a full suite of products, notably:

Cash Management

This product enables corporates to consolidate their cash balances and transactions with different banks in one interface, in addition to processing various payments and transfers across all banks in a secure and efficient style.

Letters of Guarantees 

This product automates the full life cycle of the Letter of Guarantee (LG) and enables corporates and banks to exchange LG actions online. It offers quick delivery of LG from the issuing bank to the beneficiaries and allows beneficiaries to release or confiscate an LG issued in its favor online, in addition to identifying existing transactions and LGs between both parties. 

This product currently serves large corporates and entities that receive massive numbers of LGs, but it will serve SMEs that request issuing LGs once SAMA issues related legislation and standards.

It is worth noting that all services are provided via the Bwa Business platform either through the website and the applications or through the application programming interface (API) that links the corporate’s internal system to the platform. 

How does the Bwa Business platform enhance corporates’ financial digital transformation?

Earlier, customers had to visit the bank’s branch to finish their transactions, but later on, most banks enabled customers to complete their financial transactions through e-portals.

However, corporates having multiple banking relationships found it difficult to deal with several portals featuring different standards and requirements. Hence, BwaTech provided inclusive portals to tackle these challenges.

The inclusive portals are considered the second wave of the digital transformation following the emergence of digital portals for each separate bank.

In regards to the question, the unified portals are a kind of digital transformation for both banks and corporates as banks will focus mainly on attracting deposits and funding rather than investing in digital portals. Meanwhile, fintech companies will be responsible for developing digital portals and services that provide access to financial services. 

Can you please share more about the importance of integrating Saudi corporates with banks and how this enhances the business sector?

Each corporate has its own system to manage its resources. While implementing any financial transaction, the corporate finds it necessary to process the transaction through two procedures; its systems and banks, and both require a group of employees to prepare and approve the transaction. Additionally, errors may happen as the transactions are being recorded in the corporate’s systems separately from the bank.  

Through electronic integration, the transaction is recorded only once either in the corporate’s systems for payments or in the bank’s system for deposits. In both scenarios, systems electronically align with each other to record the transaction, saving too much effort and reducing errors. The electronic integration also enables the corporate to have all financial statements available immediately in its systems, raising the operational efficiency of its businesses.

On the other side, electronic integration is an expensive and complicated process that requires specific expertise and becomes more complicated when the company needs to integrate with several banks. Here appears BwaTech’s role in facilitating this process as the corporate only needs to connect with BwaTech to be integrated with all banks without any extra effort. 

How do you see the future of open banking in Saudi Arabia?

The Saudi banking sector is evolving and SAMA promotes open banking to explore potential opportunities to provide new products and services, increase competitiveness, and facilitate the entry of fintech companies

Open banking is the system of allowing access and control of customer banking and financial accounts through third-party applications. Looking at the services provided by the National Information Center (NIC) to individuals, it became easy for banks to have the customer’s permission online, thus, I believe these services will boom in the individual sector. 

In contrast, dealing remotely with corporates in general, except for one-person companies, is not as easy as individuals as corporates find some challenges in opening accounts and building banking relationships. Therefore, developing a centralized system is crucial to facilitate ascertaining the reliability and validity of required documents as well as the corporates’ representatives.

The efforts of the Ministry of Commerce and the Federation of Saudi Chambers to tackle such challenges are remarkable, however, more is needed in regard to the corporates’ representatives and their specialties. I urge the ministry to launch an initiative to fill this gap in collaboration with SAMA and the NIC.

Can you please share more details about BwaTech’s achievements in 2023 and its plans for 2024?

We primarily focused on building the systems infrastructure, developing some products, and obtaining necessary licenses, but in 2023 we started launching our services.

Our LG ecosystem yielded good results as it facilitated paperless communication between the bank and the beneficiary, which accordingly attracted most banks to join the LG ecosystem that BwaTech manages.

In 2024, BwaTech's plans include broadening clientele and launching some new products. 

What are the company’s future plans and investments in Saudi Arabia? and do you plan to expand businesses beyond the Kingdom?

We target expanding our products. For instance, the LG product is planned to cover the field of document accreditation locally and globally, in addition to other services related to accounting and payments.

We are currently working on launching a new product licensed by the Capital Market Authority (CMA), through our subsidiary, to distribute investment and real estate funds. We also plan to partner with other service providers to offer integrated services to our customers.

Expanding our footprint beyond the Kingdom is on the cards, but it is better now to focus on the Saudi market.

How do you evaluate the performance of the Saudi fintech sector in 2023 and what are the main challenges the sector faces?

The performance of the Saudi fintech sector is promising; it provides valuable products and services and strives for more. 

The Kingdom became a destination for local and foreign entrepreneurs as well as distinctive initiatives, backed by the endeavors of regulatory and supervisory entities to foster the sector. However, the sector faces a lot of challenges notably the high cost at the beginning with zero returns.  

In your opinion, what are the promising opportunities in the Saudi fintech sector?

There are several promising opportunities to develop innovative banking solutions through open banking, leveraging cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and blockchains. The cybersecurity and data protection fields also enjoy a lot of opportunities to develop new methods to detect fraud and prevent cyberattacks.

What do fintech startups in the Kingdom need to thrive? and how do entrepreneurs contribute to realizing Vision 2030’s objectives?

They need a set of elements: reliable cloud services, data security services, big data analytics, and AI, in addition to regulatory sandboxes and laws that stimulate their growth and attract investors.

Government entities and regulatory organizations are working together to provide a robust framework that stimulates innovation and bolsters the fintech sector.

Entrepreneurs can also contribute to realizing Vision 2030’s goals by providing groundbreaking ideas and solutions that enhance digital transformation, improve the user experience, and meet market needs. Similarly, startups participate in creating new jobs and developing human capabilities, in alignment with Vision 2030’s localization goal.

How do weigh the Kingdom’s efforts to bolster the fintech sector and boost digital transformation?

Fostering the fintech sector is one of the key goals of Vision 2030 and the concerned entities in the Kingdom spare no effort to achieve this goal and drive digital transformation. For instance, SAMA and CMA launched a sandbox to explore innovative technologies and provide the necessary support to nurture innovative entrepreneurs, in addition to introducing regulations that facilitate their businesses.

Nor can we forget the pivotal role of Fintech Saudi to provide entrepreneurs in this promising sector with the guidance, consultancies, and support they need.

Moreover, the Ministry of Communications and Information Technology is a key player in enhancing the growth of fintech startups.

Translation: Noha Gad

Shaimaa Ibrahim

Hustler entrepreneurs are willing to work hard and put in a constant effort more than innovative entrepreneurs. They often start small and work towards growing a bigger business with hard work rather than capital, unlike innovative entrepreneurs.

This type of entrepreneurs usually studies all project-related factors including the investments, the project’s resources, and the risks they might face throughout their journey toward achieving all planned objectives.

Characteristics of hustler entrepreneurs

Hustler entrepreneurs are fond of unlocking opportunities to grow and broaden existing ideas; they work hard to create such opportunities rather than waiting for them.

A hustler entrepreneur is an enthusiastic business-oriented individual who is always prepared and dutiful and never lacks self-discipline or follow-through. Hustler entrepreneurs tend to be very focused and will get rid of all forms of distractions, favoring risks over short-term comfort.

Failure is not an option for hustler entrepreneurs. They always go for their goals to grow their projects even though it takes a long time to realize their ambitions, unlike other entrepreneurs

Advantages of being a hustler entrepreneur

• Diligence and constant hard work.
• Dedication and commitment.
• Facing risks boldly.

Disadvantages of being a hustler entrepreneur

Hustler entrepreneurs just work harder and are willing to get their hands dirty; they often do not see the value of raising capital opposite to working harder. 

Translation: Noha Gad

Shaimaa Ibrahim

Entrepreneurship is the ability and readiness to develop, organize, and run a business enterprise, along with any financial uncertainties to make a profit. The entrepreneurship ecosystem could play a crucial role in bolstering the economy of any country.

There are different types of entrepreneurs based on the way they manage businesses as well as their characteristics and motivations. This includes the innovative entrepreneur; an individual who comes up with a brand-new idea that could be turned into innovative products in the market.

Who is the innovative entrepreneur?

Innovative entrepreneurship is the practice of establishing new businesses based on innovation and cutting-edge technology, along with strategic planning and effective implementation.

An innovative entrepreneur is a person who can turn innovative ideas into real businesses and projects while adopting new methods and marketing strategies. This type of entrepreneur usually inspires others.

Characteristics of innovative entrepreneurs 

The innovative entrepreneur must be: 

• Passionate and eager to learn, innovate new ideas, and make a positive impact.
• Resilient to adapt to expected uncertainties, understanding that risks are integral to the business journey.
• Able to find out-of-the-box ideas and overcome challenges and obstacles with different perspectives.
• Aware of the importance of ongoing learning to keep pace with the ever-changing business environment.
• Have a clear long-term vision.

Challenges Facing Innovative entrepreneur

• Securing adequate capital to turn an idea into a real business.
• Taking a long time to bring an idea to life.

Advantages of being an innovative entrepreneur

Being an innovative entrepreneur has several advantages, notably:

• No fierce competition when starting your project.
• Being the sole person responsible for setting the rules for the business’ growth.
• Having full ownership of the company’s shares. 

Translation: Noha Gad

Kholoud Hussein  

Dubai and Riyadh-based venture capital firm Nuwa Capital is an investment platform aims to redefine the relationship between founders and capital by providing a progressive founder-centric approach to invest in emerging markets.

Sharikat Mubasher meets Khaled Talhouni, the Managing Partner of Nuwa Capital, to know more about Nuwa Capital’s main objectives in enhancing the entrepreneurship ecosystem in the MENA region, share insights on the targeted startups over the coming period, and discuss the company's future expansion plans in Saudi Arabia.

What are Nuwa Capital’s main objectives?

Nuwa Capital is an investment platform focused on investing in the innovation and entrepreneurship ecosystem MENA and Turkey. Primarily we invest in founders building companies that are reshaping their industries and solving for large and systemic problems in our economies. 

Through our $100 million fund (Nuwa Venture Fund I), we support early-stage startups to build successful businesses in the markets they operate in, while also exploring growth opportunities in regional markets. 

We are sector agnostic and have made investments across various sectors including foodtech, new age commerce, and fintech. 35% of our investments have been in Saudi headquartered companies. 

How does Nuwa Capital help grow startups across the Middle East?

The concept of building bridges is fundamental to how we operate. As investors, we want to see startups from the region, not limit themselves to just their home markets, but expand across the region and beyond.  The region’s startup ecosystem is at a stage where we need to scale beyond borders and we believe that we are on the cusp of seeing our founders go from the Middle East to the world. 

We don’t focus only on investments, but on building thriving businesses that can reshape the economies they operate in. Beyond capital, our portfolio companies benefit from our Value Creation offering where we provider founders with subject matter expertise through dedicated subject matter experts in technology, product, recruitment, marketing etc to unlock growth potential and streamlined operations

Lastly, we explore ways to create value for our Limited Partners (LPs) and startups by enabling opportunities for them to benefit from each other.

How about the company’s business in Saudi Arabia?

We not only have our roots in Saudi Arabia, but the majority of our portfolio is based there. We are anchored by a number of Saudi based institutions, corporates and high net-worths/family offices

In 2024 we have plans to aggressively deploy capital from our $100 million fund and Saudi startups are on the top of our list. We will also explore opportunities for follow-on investments in our existing portfolio as they continue to scale both regionally and locally in KSA

Who are Nuwa Capital’s top startups in Saudi Arabia? And who are the targeted startups over the coming period?

We’ve invested in a number of companies in Saudi Arabia including such companies as Eyewa, Calo, Raqamyah, Edfa Pay, Speero and others. Besides that a number of our startups are leveraging our local expertise to make their entry into Saudi Arabia, the region’s largest economy.

Founders at all stages recognise the significant growth opportunity in the Kingdom, aligned with its economic diversification agenda and the leadership’s vision to shape a digital economy. 

While we can’t disclose startups we plan to invest in over the coming period, we can tell you that we remain extremely bullish on the market. Beyond early stage investing, we have recognised significant gaps in capital availability for Series B and beyond companies. Growth stage funding remains a major challenge across the region and Saudi Arabia will attract bigger deals in 2024 as valuations moderate and investors seek new exit paths. 

What are the company’s plans for 2024? And what are the expected investments?

Since our launch in 2020, we’ve deliberately focused on early-stage companies and did not rush into making investments. This was due to rising valuations and unsustainable business models in the market. Today we have approximately 60% of our fund to be deployed and in 2024, you’ll see us being much more active in the market. 

We’ve also been analysing the gaps in the market with regards to capital flow. Across the region, data shows that the largest investments are made in early-stage companies. Growth stage businesses on the other hand have limited access to funding, given that there are few players who write bigger cheques. While we already make follow-on investments in existing portfolio companies, we will also explore later stage investment opportunities. 

Lastly, 2024 for Nuwa Capital will be about building bridges. How can we as a firm, take regional startups, into new markets. This includes helping innovative companies enter Saudi Arabia, while taking Saudi entrepreneurs to the region and the rest of the world. True growth can be achieved only by scaling in new markets and we are well positioned to unlock this for our portfolio. 

What are the challenges facing Nuwa Capital in the Saudi market? Is there a plan to have a branch in Saudi Arabia?

We do have a presence in KSA through our partners in Alfaisaliah Group and a team on the ground in the kingdom.

Does the Saudi startup ecosystem see a paradigm shift?

There’s never been a more exciting time to startup in Saudi Arabia. This is primarily because of the environment that the leadership has enabled. Today it’s much easier to set up a business, attract talent and build for large regional problems from Saudi Arabia. It’s no surprise that Saudi Arabia attracted the most startup capital in the last year. 

In terms of a paradigm shift, we believe that more founders will start to move to the Kingdom. We are also seeing the emergence of Saudi national talent, including women, whether they are fantastic coders or world-class operators who can build thriving businesses. 

Furthermore, thanks to partners such as SVC and Jada fund of funds, Saudi attracted the highest amount of venture capital in the MENA market for the first time since records have been created. This is a critical milestone in the development of both the Saudi and regional ecosystem

What are the Saudi sectors that might witness a growth in startups over the coming period?

Fintech is one sector where we expect to see a number of opportunities. The Central Bank has set up a world-class system to allow for fintech founders to build new products for the market. We are excited about the digitalisation of financial services in the Kingdom, whether it is for everyday transactions, investments or just regular savings. 

As technology seeks to transform large traditional industries, real estate and property is another one where we’ll see change. The Kingdom has a significant gap in housing and hotel availability to manage the influx of new residents, business visitors and tourists. This is where startups like Silkhaus are working to build the short-term rentals sector. 

We also expect to see growth in SaaS businesses as entrepreneurs build solutions for local challenges. Similarly next gen commerce businesses like Eyewa and Homzmart will thrive as consumer spending increases and the overall economy continues to grow. 

Shaimaa Ibrahim

Startups often opt for funding rounds to raise more capital by selling some shares for investors to get off the ground and expand their businesses in the market. In turn, investors acquire part of the startup’s ownership and revenues.

Startups at different stages can raise funding rounds. There are five types of rounds depending on the startup’s maturity stage, types of investors, and the purpose of the round:

Pre-seed round

This stage typically refers to when a company's founders get their business off the ground after coming up with ideas and conducting a feasibility study. At this stage, the most common funders are the founders themselves or business incubators.

Pre-seed startups must have a clear vision and revenue forecasts. 

Seed round

The seed round is the first official equity funding stage. Investment funds and angel investors are the most likely to participate in this round as they provide funding in exchange for some of the company’s shares.

Series A 

Startups often raise Series A rounds to secure larger funding to accelerate their business growth and reach more customers; meanwhile, the investor targets injecting investments into innovative startups to gain more profits.

Participants in the Series A rounds usually include crowdfunding firms, investment funds, and business clubs.

Series B

By this stage, the company will probably have a higher valuation than before and aspires to expand its presence and tap into new markets. 

Companies usually dedicate the proceeds to carry out searches and analyses as well as marketing campaigns. 

Participants in the Series A rounds are likely venture capital (VC) firms. 

Series C

A Series C round is required when a company is ready to go for rapid growth with proven success in the market. Companies usually raise this type of round to seize larger market share, make acquisitions of competitors, or for major expansions.

Through Series C rounds, companies can secure massive capital from investment banks, equity firms, and investment funds.

Translation: Noha Gad

Shaimaa Ibrahim

Startups depend on various sources to secure the necessary funding for their businesses, notably the angel investors who play a crucial role in the startup ecosystem. 

An angel investor is an individual who provides funding for startups at a very early stage, once or in a consecutive manner, in exchange for equity or ownership in the company.

Along with the financial backing, angel investors often provide mentorship and support entrepreneurs to grow their startups.

What angel investors provide for startups?

Angel investors can support startups in different ways, including:

• Securing funding to grow.
• Providing necessary support, expertise, and consultancies about business management.
• Helping entrepreneurs make decisions to enhance their competitiveness. 
• Unlocking cooperation opportunities with potential partners and reaching new customers.
• Enhancing the startup’s credibility to attract potential investors and partners.

Types of angel investors

There are several types of angel investors who foster entrepreneurs, notably:

• Family and friends: Many entrepreneurs first turn to their family and friends when seeking funding for their business; however, this type does not provide entrepreneurs with the expertise they need to get off the ground.
• The Domain Angel: investors in this category are usually operating executives who have spent their entire careers in a specific industry or sector.
•  The Angel Investor Group: this category comprises individuals who provide support for small startups or entrepreneurs.
• The Fellow-Entrepreneur Angel: this type includes entrepreneurs who provide funding for other junior entrepreneurs.
• The True Believer Angel: this type includes investors who hear a startup’s story, instantly believe, and want to immediately invest in spite of the financial risks.

Translation: Noha Gad

Shaimaa Ibrahim

Saudi Arabia started 2024 with a bright economy ahead by activating the Regional Headquarters (RHQ) Program which mandates foreign firms to have a regional headquarters in Saudi Arabia to start or expand their businesses in the Kingdom.

The program aims to boost foreign investments in the Kingdom and enhance its non-oil economy, in alignment with Vision 2030’s objectives to diversify the national economy, raise foreign direct investments (FDI) contribution to the gross domestic product (GDP) to 5.7%, and increase the net value of FDI inflows to hit SAR 388 billion annually.

Supervised by the Saudi Ministry of Investment (MISA) and the Royal Commission for Riyadh City, the RHQ Program targets alluring global firms to establish their headquarters in Saudi Arabia, transforming the Kingdom into an attractive investment destination that provides distinctive advantages and services.

Targeted sectors 

Saudi Arabia owns several pull factors for investors and foreign capitals that positioned the Saudi economy as the largest in the Middle East and North Africa (MENA) region and the eighteenth-largest in the world. 

According to the Saudi Minister of Investment Khalid Al-Falih, 180 global firms obtained licenses to establish their headquarters in Riyadh, surpassing the Kingdom’s goal to attract 160 global firms by the end of 2023.

The minister affirmed that this achievement was due to the Kingdom’s stable economy and strategic location, in addition to its unique competencies.

In a related context, the leading business expansion platform in the MENA region AstroLabs successfully accelerated expansions of more than 600 global and regional firms to the Kingdom.

AstroLabs’ CEO Roland Daher affirmed that global firms working in various sectors increasingly aspire to expand in the Saudi market, especially the multinational ones and those achieving annual revenues of more than $1 billion.  

He further noted that the number of firms that expanded their businesses in the Kingdom has doubled in one year.

The RHQ Program targets attracting firms in several sectors, including infrastructure, logistics services, advanced industries, and digital services. The Kingdom also enjoys massive investment opportunities in many sectors notably retail, real estate, tourism and entertainment, event organization, and other professional services, such as banking and tax consultancies

Tax incentives

The Saudi Ministry of Investment (MISA) added a 30-year tax relief incentive package to the RHQ Program, in coordination with the Ministry of Finance and Zakat, Tax, and Customs Authority (ZATCA) to streamline the process for multinational firms establishing their RHQ in Saudi Arabia.

The incentive package includes a 0% rate for corporate income tax (CIT), withholding tax (WHT) on dividend payments from RHQ to its foreign parent entity, WHT for payments to related parties, and WHT for services payments to non-resident unrelated parties necessary to carry out RHQ activities as defined in the tax rules.

Economic impact

The RHQ Program is expected to have a significant economic impact on all sectors as well as the products and major services provided in the Kingdom with local content. This accordingly will enhance the competitiveness of the Saudi market and transform Riyadh into a global business hub and a destination for international economic entities.

Last January, the General Statistics Authority (GASTAT) announced that the total FDI stock in Saudi Arabia recorded SAR 762 billion by the end of 2022, while the FDI inflows into the Kingdom reached SAR 123 billion.

GASTAT also revealed that the Kingdom recorded a significant growth in the net FDI flows in 2022 with net flows amounting to SAR 105 billion.

Furthermore, the total FDI inflows into the Kingdom hit SAR 17 billion during the third quarter (Q3) of 2023, while the net FDI flows touched SAR 11 billion in the same quarter.

According to the CEO of the Royal Commission for Riyadh City Fahd Al-Rasheed, the RHQ Program is forecasted to add around SAR 67 billion (almost $18 billion) to the national economy, in addition to creating 30,000 new jobs by 2030.

It is worth noting that Saudi Arabia plans to attract 480 global firms to establish their regional headquarters in the Kingdom by 2030.

Job opportunities

The RHQ Program will provide numerous jobs for Saudi youth across new sectors, enhancing the Kingdom’s non-oil economy. Additionally, the regional headquarters will bring the best global expertise to the Kingdom, enabling Saudi talents to improve their skills and gain experience.

The Kingdom is also expected to recognize its goals to achieve sustainability and enhance citizens’ quality of life as Riyadh is anticipated to be among the top 10 economies in the world, notably after selecting Saudi Arabia to host Expo 2030 and the 2029 Asian Winter Games. Hosting these mega events will attract more global firms to the Kingdom to participate in such events and will also create several job opportunities.

Green Projects 

The National Investment Strategy and the Saudi Green Initiative target injecting SAR 150 billion to encourage the private sector to invest in green initiatives and projects in Riyadh.

Recently, the Kingdom started using clean energy, green hydrogen, and solar panels as part of its endeavors to become an eco-friendly country, paving the way for global firms to invest in the Kingdom.

Logistics services

Moreover, the RHQ Program will enhance the Kingdom’s position regionally and globally as it will elevate land, maritime, and air transportation, boost airports’ efficiency, and enhance tourism and entertainment sectors. Additionally, the global firms will be able to contribute to the logistics ecosystem through the 12 ports established across the Kingdom. 

Translation: Noha Gad

Kholoud Hussein 

A simple agreement for future equity (SAFE) is defined as a financial instrument first offered in 2013 that has gained popularity in the startup ecosystem, particularly among early-stage companies.

SAFEs do not represent a current equity stake in a company. Instead, the SAFE terms must be met before you receive this stake. A SAFE is usually triggered when a specific amount of funding is met. 

How SAFEs Work?

Since being created in 2013 as a popular fundraising option, it has been used among early-stage startups, as a more straightforward and faster alternative to equity financing or convertible notes.

Startups use SAFEs to receive funding without determining a valuation or issuing equity immediately. Investors invest in the startup, but rather than getting shares right away, their investment converts into equity only once a predefined triggering event occurs.

Benefits of a SAFE

SAFEs have several benefits for both the startup and the investor. For both parties, the most significant advantage is their simplicity. Those benefits are: 

1. SAFEs are typically shorter and less complex than traditional equity or debt financing documents.
2. SAFEs often have customizable terms that can be tailored to fit the specific needs of the startup and its investors.

Benefits for Startups 

Startups often struggle with accurate and fair valuation in their early stages. SAFEs let them postpone this challenge until a later funding round, usually when more information is available to determine the company’s worth. This can prevent founders from undervaluing their company early on.

Further, early-stage funding rounds can lead to significant equity dilution for founders. SAFEs can be structured to lower this dilution compared with traditional equity financing, enabling founders to keep more control over the company.