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Arab News
02-05-2025
- Business
- Arab News
Think local: How startups can successfully expand into Saudi Arabia's fast-growing market
RIYADH: Saudi Arabia's rapidly expanding market presents lucrative opportunities for startups, but successful entry requires careful planning and a deep understanding of the local landscape. Industry experts told Arab News that companies looking to expand into Saudi Arabia must focus on key factors such as securing regulatory approvals, ensuring financial stability, hiring the right talent, and adapting to the local culture. By prioritizing these elements, businesses can establish a strong foothold in one of the Middle East's most lucrative markets. Regulatory landscape Regulatory compliance is one of the primary hurdles for startups entering the Saudi market. While the country is actively fostering entrepreneurship and foreign investment, businesses must follow strict licensing and legal requirements. Mohammed Al-Zubi, managing partner and founder of Nama Ventures, emphasized the need for startups to thoroughly understand and prepare for regulatory processes. 'While Saudi Arabia is opening up to startups, businesses must secure the right MISA (Ministry of Investment) licensing, sector approvals, and legal structures. Many founders underestimate the process and should plan accordingly,' Al-Zubi said in an interview with Arab News. Failing to navigate these regulatory frameworks can lead to operational delays, legal complications, or financial penalties. Mohammed Al-Zubi, managing partner and founder of Nama Ventures. Supplied Paula Tavangar, chief investment officer of Injaz Capital, echoed this, noting that 'compliance with Saudi-specific regulations, including licensing, Saudization requirements, and sector-specific rules, is also essential from day one.' She emphasized that while Gulf Cooperation Council countries may appear similar, 'successfully entering the Saudi market has its own very unique economic landscape, regulatory environment, and consumer behavior.' The Ministry of Investment has streamlined processes to encourage foreign investment, but businesses must still comply with industry-specific guidelines and labor laws, including Saudization policies, which mandate hiring a certain percentage of nationals from the Kingdom. Beyond legal compliance, establishing local credibility is crucial. Saudi businesses often prefer working with entities that demonstrate a long-term commitment to the market. Tavangar stressed that 'building an on-the-ground presence in Saudi Arabia is not optional — it's central to gaining traction.' She added that 'Saudi stakeholders generally prefer working with companies that are physically present, engaged locally, and committed to contributing to the Kingdom's Vision 2030 goals.' The regulatory framework is evolving to attract foreign startups, with the Saudi government offering multiple incentives to support early-stage businesses. 'The Saudi government actively supports foreign startups through initiatives like the National Transformation and Development Program, which can assist with relocation logistics and business setup,' Tavangar said. This means startups should not view Saudi Arabia as a short-term expansion play but rather as a core component of their growth strategy. Paula Tavangar, chief investment officer of Injaz Capital. Supplied Financial preparedness Expanding into Saudi Arabia requires significant financial resources. From securing office space to investing in marketing and hiring local employees, the costs can add up quickly. Startups must assess their financial stability before making the move, ensuring they have the necessary capital to sustain operations during the initial stages of expansion. Tavangar pointed to the financial realities of entering the Kingdom. 'Financial readiness is key. Costs associated with setting up in Saudi — such as obtaining a foreign investment license through MISA, setting the entity, renting office space and hiring local talent — can add up quickly,' she said. Setting up operations in the Kingdom comes with significant financial obligations that startups must prepare for. These include licensing, incorporation costs, and office rental, which can be partially offset through available public initiatives. 'There are multiple low-cost co-working space options in addition to free spaces through accelerator programs,' Tavangar noted. She also highlighted the importance of leveraging public-private support schemes. 'Again, NTDP has a program that can sponsor 50 percent of employee salaries for the startups that require the support,' she said, underscoring the need for early-stage companies to budget carefully and align with available national resources. In an interview with Arab News, Ahmed Mahmoud, CEO of DXwand, a startup that has recently expanded to Saudi Arabia, stressed the importance of financial resilience. 'A startup should have strong financial stability, consistent revenue growth, and a proven market presence. It should be well-funded with enough capital to sustain operations for at least a year after expansion,' he explains. Mahmoud encourages startups to evaluate their expenses closely and tailor their pricing models to remain competitive within Saudi Arabia's evolving market landscape. 'To succeed in Saudi Arabia, startups must carefully assess their unit economics and cost structures. A strong balance between customer lifetime value and customer acquisition cost is crucial for long-term profitability,' Mahmoud said. Other financial considerations include managing operational expenses such as office leases, logistics, and employee salaries. Localization costs — such as translating marketing materials into Arabic, adapting services to cultural preferences, and ensuring compliance with local regulations — should also be factored into financial planning. Talent acquisition One of the challenges of expanding into Saudi Arabia is finding and retaining the right talent. Al-Zubi advises startups to take a strategic approach to talent acquisition. 'While Vision 2030 initiatives are fostering a skilled workforce, specialized tech and startup talent can still be limited. Startups should leverage local hiring programs, university partnerships, and experienced regional hires,' he said. Hiring Saudi nationals is not only a regulatory requirement in certain sectors but also a competitive advantage. Local employees bring market insights, cultural understanding, and access to networks that can help businesses establish stronger connections. 'Founders should hire local leadership, engage with stakeholders, and spend time in-market. Remote operations rarely succeed in Saudi Arabia,' he explains. Market localization Saudi Arabia is a relationship-driven market where trust and personal connections play a significant role in business success. Startups that fail to adapt to local consumer behavior and cultural expectations may struggle to gain traction. Al-Zubi highlights the importance of cultural adaptation. 'Startups must localize offerings, marketing, and operations to fit local consumer behavior. Strong local partnerships can accelerate trust and market entry,' he said. Mahmoud also underscored the importance of branding and culturally relevant marketing strategies. 'Localization isn't just about language — it includes pricing models, payment preferences, and customer experience. Businesses that invest in culturally adapted services enhance trust and engagement,' he noted. Tavangar emphasized that 'the local context is very important' adding: 'While in the UAE we observe very successful implementation of business models that worked in the west, Saudi Arabia has a different business environment, very tailored to the local demand and culture.' Strategic partnerships Establishing partnerships with local businesses, distributors, and investors can accelerate market entry and growth. Saudi companies prefer working with brands that demonstrate commitment and credibility, and forming strategic alliances can help startups gain that trust. 'Building local partnerships with investors and distributors isn't just helpful — it's a game-changer. It boosts credibility and makes market entry smoother,' Mahmoud said. Tavangar added: 'A local partner who has 'skin in the game' can significantly aid in navigating both the cultural and business landscapes.' Ahmed Mahmoud, CEO of DXwand. Supplied Leveraging digital transformation As Saudi Arabia accelerates its digital transformation, startups leveraging advanced technologies like artificial intelligence, automation, and cloud infrastructure are well-positioned to gain a market advantage. The Kingdom's investment in smart cities, fintech, and e-commerce presents opportunities for tech-driven companies to scale quickly. Mahmoud highlights the importance of embracing technology as part of a long-term strategy. 'With Saudi Arabia going through a rapid digital transformation, there's a huge opportunity in e-commerce and fintech, both of which align with Vision 2030's innovation goals,' he said. Additionally, businesses that set up a regional headquarters in the Kingdom can benefit from government incentives, including potential tax breaks and funding support. By taking a long-term approach and investing in local partnerships, cultural adaptation, and digital innovation, startups can position themselves for sustainable growth in one of the Middle East's most dynamic economies. As Al-Zubi said: 'Startups that immerse themselves in the market, build strategic partnerships, and adapt to Saudi dynamics will find the most success.'
Arab News
05-04-2025
- Business
- Arab News
How early-stage startups build for public markets
RIYADH: For startups aiming to go public, the path from early-stage to initial public offering is marked by critical transitions that simultaneously test the founders and the business itself. While many young companies achieve rapid initial traction, only a select few manage to scale sustainably and navigate the complexities of public markets. Investors who specialize in early-stage funding play a crucial role in shaping a startup's foundation, ensuring that it is built for long-term success rather than short-term growth. 'The journey from early-stage to IPO isn't linear. It's a series of hard transitions that test both the founder and the business,' said Mohammed Al-Meshekah, founder and general partner of Outliers, an early investor in Saudi Arabia's Tabby, now valued at $3.3 billion and on track for an IPO. 'The startups that make it aren't just chasing trends; they're solving real problems with deep, contrarian insights that others overlook,' he said in an interview with Arab News. Identifying IPO-ready startups Early indicators of a startup's potential to reach the IPO stage often lie in the strength of its founding team, market opportunity, and ability to scale efficiently. Mohammed Al-Zubi, managing partner and founder of Nama Ventures, which backed Saudi unicorns Salla and Tamara — both preparing for IPOs — believes that leadership resilience is one of the most defining factors. 'The most critical factor is the founding team — their complementary skill sets, resilience, ability to adapt, and long-term vision define the company's trajectory,' he told Arab News. 'Markets change, challenges arise, but strong leadership ensures a startup can navigate uncertainty and sustain growth,' he added. Beyond leadership, Al-Zubi emphasized the importance of market opportunity and execution. 'Companies that successfully go public are solving large-scale problems with high demand and room for expansion,' he explained. 'A startup must not only show early traction but also demonstrate an ability to scale efficiently.' Financial discipline is another critical factor in determining whether a startup can reach the IPO stage. The journey from early-stage to IPO isn't linear. It's a series of hard transitions that test both the founder and the business. Mohammed Al-Meshekah, founder and general partner of Outliers 'Investors and public markets look for companies that can balance aggressive growth with financial stability,' Al-Zubi said. Al-Meshekah agreed, saying: 'The real test isn't early traction, but instead whether the company can transition from hacking value to scaling growth, then from growth to real profitability.' He warned against chasing vanity metrics or unsustainable growth, stressing that 'those who navigate these shifts deliberately are the ones that go the distance.' According to Al-Meshekah, a startup that is truly ready to scale 'isn't forcing growth; it has customers pulling the product, a repeatable engine for acquisition, and a clear path to sustainable unit economics.' Founders who succeed are not just fixated on their solution but are 'obsessed with the problem,' he said. The Outliers' founder added: 'They adapt relentlessly, attract top talent, and shift from scrappy execution to scaling with precision.' Al-Zubi believes that the startups that reach IPO 'embed financial discipline, governance, and strategic decision-making from the early days.' He added: 'The best founders don't just raise capital; they surround themselves with investors who challenge their thinking, push them toward scalability, and help them anticipate challenges before they arise.' While leadership, market fit, and financial discipline lay the groundwork for a potential IPO, Al-Meshekah argued that the role of venture capital extends far beyond funding. 'VCs too often think their value lies only in capital and advice. But advice is cheap, and capital is a commodity,' he said. 'Effective venture capital is not simply placing bets; they truly shape a startup's foundation with active, hands-on partnership at the most critical moments.' Furthermore, Al-Zubi explained that venture capitalists who were once founders hold even greater value because they have the right empathy. Navigating key inflection points on the path to IPO As startups mature, they encounter critical inflection points that shape their ability to scale and eventually go public. These moments require strategic adjustments, from shifting organizational structures to strengthening financial discipline. Venture capital firms play a crucial role in guiding founders through these transitions, ensuring that their companies evolve in a way that supports long-term growth and IPO readiness. 'The first major inflection point is shifting from finding product-market fit to scaling effectively,' Al-Meshekah said. He said that many startups get early traction, but that real scale comes only when there is genuine demand pulling the product. 'At this stage, the right investors are in the trenches with founders as thought partners in their go-to-market motion, customer retention strategy, and organizational structure to build an effective growth engine,' Al-Meshekah added. Beyond early scaling, startups must transition from founder-led operations to structured organizations capable of managing complex growth. 'What worked at 20 employees won't work at 200,' Al-Meshekah said, adding: 'This is where hiring, leadership structure, and internal processes become make-or-break factors. A strong investor helps founders recruit exceptional leaders, align incentives, and avoid cultural dilution as the company grows.' Al-Zubi said that the first critical stage is post-seed and early growth, where founders must transition from proving product-market fit to building a repeatable, scalable business model. 'This is when foundational decisions on hiring, expansion, and customer acquisition set the stage for long-term growth,' he said. Al-Zubi explained that the next major inflection point comes in the scaling phase, when companies move from early-stage agility to structured, process-driven growth. 'This is where operational efficiency, governance, and financial discipline become key,' he said. 'If a company isn't thinking about these factors by this stage, its ability to scale beyond a certain point is limited.' As companies approach an IPO, the emphasis shifts toward financial sustainability and governance. 'Many companies sprint toward scale without ever proving they can operate efficiently at scale,' Al-Meshekah said. 'At this stage, founders optimize margins, strengthen capital discipline, and shift the business model toward long-term value creation. Investors focus on bringing institutional governance and institutional processes.' Al-Zubi agreed that IPO readiness is not just about preparing financial statements in the final stages but about embedding public-market discipline early. 'Startups that integrate strong governance and financial transparency early on find this transition far smoother than those that scramble to meet public market expectations,' he said. 'IPO readiness isn't about a single moment — it's about how a company has been built from Day 1.'
Arab News
09-02-2025
- Business
- Arab News
Saudi Arabia transforming into ‘center of gravity' in regional tech space: expert
RIYADH: Saudi Arabia is quickly becoming a dominant force in the regional technology ecosystem, establishing itself as the 'center of gravity' for startups in the Middle East, according to an industry expert. In an interview with Arab News during the LEAP 2025 Tech Conference, Mohammed Al-Zubi, founder of Saudi early-stage venture capital firm Nama Ventures, stated that the rapid evolution of the event is a reflection of the momentum in the sector. 'The amount of progress we've made from LEAP 23, 24, 25 — it's phenomenal,' he said, adding that the impact of the event is mind-boggling. 'Minister Al-Swaha was on stage — the level and magnitude of the announcements are really mind-boggling,' he added. He emphasized that the Kingdom is now a regional leader in investment, deal flow, and overall market growth. 'If you look at all the reports, Saudi Arabia today is leading on all metrics.' Prioritizing teams over ideas As an early-stage firm, Nama Ventures focuses on investing in strong founding teams with complementary skill sets and clearly defined roles. Al-Zubi described the company's investment approach as having two key components: a micro-level evaluation of the team and a macro-level assessment of the idea. 'As they say in real estate—location, location, location—here, it's team, team, team,' he explained. He stressed that Nama Ventures typically avoids investing in solo founders unless they have an exceptionally strong track record. 'We typically don't invest in solo founders unless the pedigree speaks for itself,' Al-Zubi said. Instead, the firm looks for teams with clear role clarity and complementary skill sets, ensuring a balance between execution, operations, and sales. 'So it can't be, you know, two sellers coming together. We want to see the seller, the doer, and the operator,' he explained. While Nama Ventures is willing to take risks related to execution, it steers clear of risks associated with unproven business prototypes. The firm prefers to invest in established business models rather than entirely new concepts. 'We don't mind what we refer to as copycats,' he said. 'We think about taking a model that works very well, innovating, and localizing it for this part of the world makes sense.' The firm is particularly interested in startups that can adapt existing successful business models to the MENA region while minimizing risks. AI across all industries While Nama Ventures remains broadly sector-agnostic, it is naturally inclined toward industries with strong transactional components. 'Although we say we are sector agnostic, in reality, we don't add much value if it's a gaming or content company,' Al-Zubi noted. 'We like and favor transactional stuff. Show me a product or service in exchange for a riyal.' This focus has led the firm to invest more heavily in fintech, proptech, and other sectors with clear revenue streams. Artificial intelligence is another critical element in the firm's investment thesis, not as a standalone category but as an embedded technology across various industries. 'Today, we don't think of AI as a separate model. We want to see AI embedded in fintech. We want to see AI embedded in proptech. We see AI embedded in entertaintech,' he said. Al-Zubi emphasized that startups that fail to integrate AI into their operations risk falling behind. 'If you have not taken advantage of AI today, you are a generation behind, and you're in the playground with a broken leg,' he added. Nama Ventures has incorporated AI tools to enhance its investment process. The investment approach Al-Zubi highlighted that Nama Ventures differentiates itself by taking a highly involved approach to supporting its portfolio companies. The firm does not act as a passive investor but instead plays an active role in guiding founders, leveraging its entrepreneurial experience. 'The beauty about this asset class is there is no such thing as an investor— you have to be a value-add investor by definition. We're not silent financial investors. Part of our role is to provide value-add,' he said. He pointed to Nama's experience as a key differentiator. 'We've walked the talk. We say we are technologists that became technology managers, that became entrepreneurs, that failed and succeeded, that became angel investors, and then fund managers,' he explained. 'I always joke and say, if you have not had a moment where you look into the ceiling worrying about payroll as a founder, you should not be writing checks for early-stage founders because you lack that entrepreneurial empathy.' Nama Ventures also helps its portfolio companies navigate the complexities of fundraising. 'We do a lot of heavy lifting on structuring the rounds in itself,' Al-Zubi said. 'A lot of the time, although we're on the buy side—we're investing—we're really helping them out, almost like a sell-side advisory, in terms of helping them think about the deal and the terms.' He emphasized the importance of ensuring that founders understand the agreements they are entering. 'We love that our founders are educated and sophisticated because it makes for a better long-term relationship.' The firm's technical expertise also sets it apart from other investors. 'We're geeks. We've been on the console, we've written code,' Al-Zubi said. 'If you want to be a tech investor and don't have a tech affinity, I think that's a disadvantage.' This hands-on technical knowledge enables Nama Ventures to assist startups in building their tech teams and optimizing their technical infrastructure. 'We're known as the fund that can help you find your CTO (chief technology officer) or connect you and help you with your tech stack.' An unconventional LP base Unlike many venture capital firms that raise funds from institutional investors or sovereign wealth funds, Nama Ventures opted to build its first fund primarily through high-net-worth individuals and family offices. 'We opted for Fund I, which is not typical. We didn't raise from sovereigns, we didn't raise from institutions,' Al-Zubi said. 'We went the high-net-worth family office route, and we enjoy a very healthy LP (limited partners) base.' Nama's investors see the firm as a vehicle for accessing early-stage opportunities while managing risk. 'We've got 63 LPs that have partnered with us, and we've become their feeder fund,' Al-Zubi explained. Many of these family offices understand that early-stage investing can be highly risky and challenging to diversify on their own. 'A lot of the family offices come and say, I really should not be doing early-stage pre-seed and seeds. It's too risky, I'm going to lose money, I cannot diversify—let Nama be my diversification engine. Let them uplift that deal flow, and I'll cherry-pick their winners and co-invest with them.' This approach has allowed investors to invest in leading technology companies at such an early stage. Al-Zubi referenced startups like Tamara, Salla, and Calo, which are all Nama portfolio companies on the path to initial public offerings, with some currently crossing $1 billion in valuations. KSA's support for startups Al-Zubi believes Saudi Arabia's support for the startup ecosystem is unmatched globally. Having spent time in the Silicon Valley, London, and the Middle East, he argued that the Kingdom's government-led initiatives are unparalleled. 'I would argue that Saudi Arabia today has an unparalleled support and incentive plan for the tech startup ecosystem,' he said. 'The coopetition between the government entities, whether it's NTDP (National Technology Development Program), whether it's MISA (Ministry of Investment of Saudi Arabia), whether it's MISK—it's incredible. It really is incredible.' He sees the Kingdom's multi-layered approach to economic development—attracting global tech giants while nurturing early-stage startups—as a key driver of long-term growth. Just act Al-Zubi encourages aspiring entrepreneurs to take the leap and start their own businesses, highlighting that the experience of building a startup is an invaluable learning opportunity. 'My advice is just do it. You don't have to have all the answers—you have to figure it out along the journey,' he said. 'Even if you do an entrepreneurial endeavor and fail, you are so much more interesting for the next job. You're probably going to get your boss' boss' job because you've spent a year, 18 months being a domain expert in that field.' He urged founders to embrace iteration and adaptability. 'We have a saying: if you're still on the same business model 18 months from launching, something is actually wrong. You cannot be that right,' he said. 'Keep pivoting and iterating till you get more product-market fit before you run out of cash.'
