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Arab News
11 hours ago
- Business
- Arab News
Where the money is flowing: AI, agritech, and fintech set to lead Saudi venture capital ecosystem
RIYADH: Saudi Arabia's venture capital ecosystem is entering a pivotal phase of growth, fueled by a surge in domestic and international investment targeting sectors aligned with the Kingdom's Vision 2030. Agriculture tech, fintech, artificial intelligence, and clean energy are emerging as key pillars of this transformation, driven by regulatory reforms, demographic shifts, and a rising global investor appetite. The country's ambition to become a regional innovation hub is drawing sustained capital inflows, placing it at the center of the broader emerging venture market investment narrative. Domestic ambition shapes sectoral disposition Said Murad, senior partner at investment firm Global Ventures, cited Saudi Arabia's high food import dependency and its ambitions to boost domestic production as key in drawing funds to the Kingdom. 'Agritech and climate-related technologies will certainly contribute to the next phase of investment growth,' he told Arab News in an interview. Complementing this trend, Philip Bahoshy, CEO of MAGNiTT, pointed to fintech, AI, clean energy, logistics, and advanced manufacturing as areas expected to dominate future funding. 'These sectors align with Vision 2030's push for economic diversification and digital transformation,' he told Arab News, with health tech and deep tech also gaining traction due to increasing research and development support and regulatory tailwinds. AI, in particular, is emerging as a dominant investment theme in the region. According to MAGNiTT's 2025 predictions, the sector is set to double its share of venture capital funding in emerging venture markets this year, following a surge of high-profile deals in 2024. 'AI was the main driver of investment activity both in the private and public markets in the US and other mature markets in 2024,' the platform noted, referencing data from PitchBook. In the first nine months of 2024, AI accounted for 41.3 percent of US venture capital funding. In Saudi Arabia, this momentum is reflected in deals such as Intelmatix's $20 million Series A round and Amazon Web Services's planned data center investment, both signaling the Kingdom's rising stake in the global AI landscape. MAGNiTT also cited broader geopolitical and commercial developments in the AI space, including chip export agreements, as indicators of the sector's rising importance in the region. 'Based on our proprietary data, we expect AI funding to double in 2025 due to increased investor attention to innovative AI startups,' the company stated. Beyond AI, Global Ventures' investment in Iyris, an agritech company spun out of King Abdullah University of Science and Technology, illustrates the potential of local innovation to address long-standing structural challenges. 'Iyris is positively disrupting agricultural practices for mid-to-low-tech farmers, particularly in hot climates,' Murad said. The startup launched the National Food Production Initiative in 2023, partnering with SABIC and Red Sea Global to establish a sustainable farming project in Bada, Saudi Arabia, aimed at regenerating unproductive land and enhancing food security. Fintech remains another strong area of interest, supported by a digitally connected population and a push toward financial inclusion. 'With 98 percent internet penetration and 97 percent smartphone adoption among the 18-to-78-year age group, the Kingdom has one of the world's most digitally enabled populations,' Murad said. He views this as a key enabler for innovation in financial services, both consumer-facing and enterprise-driven. Focused sectors, broad appeal Capital inflows into Saudi Arabia are being driven not only by sector performance but also by global institutional interest in the region. According to MAGNiTT, firms including BlackRock, Golden Gate Ventures, and Polen Capital have already established offices or acquired licenses in the Kingdom, the UAE, or Qatar. Others, including General Catalyst and the BRICS Investment Fund, have made their investment debuts or launched dedicated MENA-focused funds. 'In 2025, we expect even more investors and asset managers to set up offices in the EVM regions, particularly Saudi Arabia and the UAE,' MAGNiTT stated, attributing this to the region's 'friendly business-enabling environment.' Deal flow in the Kingdom has grown across all funding stages. 'Saudi Arabia saw a surge in pre-seed and seed-stage funding,' said Murad, noting that demand for later-stage capital is increasing as startups validate their models and seek international expansion. Supporting this trajectory is a growing exit pipeline. In 2024, Saudi Arabia completed 42 initial public offerings, ranking seventh globally in capital raised. 'This growing pipeline of exits signals the increasing maturity of the country's capital markets and reinforces the long-term viability of its venture ecosystem,' Murad added. As international capital intensifies, local venture firms are adapting their strategies to remain competitive. 'Regional players active in the market will understand local nuances, ultimately providing a competitive advantage,' Murad said. He emphasized that investors offering operational support and showcasing portfolio success stories will be best positioned to attract international limited partners. The Kingdom's regulatory environment is increasingly seen as a strength in the region's venture capital narrative. 'Government initiatives and the regulatory framework are geared to venture capital firms investing in startups in a secure, forward-thinking, and robust environment,' Murad said. Still, he cautioned that strong business fundamentals remain essential. 'The need for entrepreneurs to have strong, sustainable business models with good unit economics is as necessary as ever,' said the Global Ventures partner. Despite global uncertainties, Saudi entrepreneurs may be better equipped than most to navigate a challenging macroeconomic environment. 'At Global Ventures, we refer to the 'adversity advantage'— a natural upside for regional entrepreneurs who are used to working with, and around, resource scarcity,' Murad said. 'This has empowered them, by design, to build businesses more resilient and adaptable to challenges,' he added.
Arab News
04-03-2025
- Business
- Arab News
Saudi Arabia's private equity deals soar with $2.8bn in investments in 2024
RIYADH: Saudi Arabia's private equity market reached $2.8 billion in total investments across 15 transactions in 2024, maintaining its billion-dollar scale despite a slowdown, according to MAGNiTT's latest report. This represents a 27 percent year-on-year decrease from $3.9 billion in 2023, signaling a shift in capital allocation amid evolving economic conditions. The number of private equity deals also dropped significantly, falling 60 percent from 37 transactions in the previous year. This decline follows three consecutive years of growth from 2020 to 2023, during which the market saw a compound annual growth rate of 67 percent. Factors such as higher interest rates, inflationary pressures, oil price fluctuations, and regional geopolitical tensions played a role in the slowdown observed in 2024. Philip Bahoshy, CEO of MAGNiTT, told Arab News that the Saudi private equity market had experienced 'significant growth' between 2020 and 2024, with investment value surging from $215 million in 2020 to a peak of $3.9 billion in 2023. '2024 saw a 27 percent year-on-year decline in investment value and a 60 percent drop in transaction volume, driven by a market recalibration toward higher-quality, mid-market growth opportunities over large-scale buyouts,' he said. Despite the overall market contraction, growth-stage private equity transactions emerged as the most active segment, accounting for 67 percent of total deals in 2024, up from 43 percent in the previous year. In contrast, buyout transactions, which dominated in 2023, experienced a sharp 76 percent decline, with their share of total PE deals dropping from 57 percent to 33 percent. This shift reflects a growing investor preference for expansion-stage companies with strong scaling potential, rather than control-focused buyouts. Investment value trends further underscore this transition. While buyouts still represented the largest share of PE capital at 82 percent in 2024, they saw a significant 39 percent year-on-year decline, totaling $2.3 billion. Conversely, growth-stage investments, though representing a smaller 18 percent of total PE investment value, experienced a notable surge from just 1 percent in 2023. This suggests a shift toward minority and expansion-stage investments in the deal mix. Philip Bahoshy, CEO of MAGNiTT, forecasts that Saudi Arabia's PE market will stabilize over the next five years, evolving from the extreme volatility of 2020-24 into a more mature and steady investment landscape. 'In a forward look, several factors will impact the PE landscape, like increased institutional participation, as sovereign wealth funds like PIF will continue to anchor PE investments alongside a growing number of regional and international LPs (limited partners),' he said. Sectoral breakdown Saudi Arabia's PE market in 2024 was significantly driven by sector-specific trends, with the telecom and communications industry capturing the largest share of total investment value. The sector attracted $2.3 billion in PE investments, accounting for 81.8 percent of total PE funding. This surge was largely fueled by a major buyout transaction involving Telecom Towers Co., underscoring continued investor confidence in the Kingdom's telecommunications infrastructure. Beyond telecom, the sustainability sector emerged as the second-largest recipient of PE investments, securing $225 million, or 8 percent of total PE funding. Healthcare followed with $190 million, representing 6.7 percent of the total, benefiting from both PE growth transactions and buyouts, with $188 million specifically allocated to PE growth investments. Transport and logistics secured $83 million, or 2.9 percent, while financial services saw the least investment activity among the top five sectors, attracting $17 million, or 0.6 percent. Despite telecom leading in total investment value, the industry transaction volume told a different story. The food and beverage sector was the most active in terms of deal count, registering three transactions, all of which were buyouts. Healthcare also recorded three transactions, split between two PE growth deals and one buyout. Financial services and transport and logistics each saw two transactions, representing 13.3 percent of total PE activity. Education, though smaller in terms of funding, accounted for one transaction, making up 6.7 percent of total PE deals. The overall distribution of PE transactions in 2024 reflected a strategic shift toward sectors aligned with Saudi Arabia's Vision 2030 goals. While buyout investments dominated in terms of capital allocation — capturing 82 percent of total PE funding — PE growth transactions accounted for nearly half, or 47 percent, of overall deal activity across key industries. This trend suggests a growing investor appetite for mid-market and expansion-stage companies, particularly in sectors such as sustainability, healthcare, and financial services. Philip Bahoshy emphasized that sectoral diversification will play a pivotal role in shaping the future of Saudi Arabia's PE market. 'Telecom, healthcare, and financial services remain dominant, while emerging industries like sustainability and logistics will likely attract increased capital,' he said. The continued participation of sovereign funds, regulatory enhancements, and foreign investment are expected to further solidify these trends, paving the way for a more stable and mature PE landscape in the coming years, he added. 'Furthermore, regulatory maturity and market depth, whereby reforms and Vision 2030 initiatives drive transparency and foreign investment, will enable the ecosystem to allow smoother exits and secondary markets,' he said. Deal sizes Transaction sizes also reflected this changing landscape. Deals in the $10 million–$200 million range remained the primary driver of Saudi Arabia's PE market, although their share fell from 72 percent in 2023 to 58 percent in 2024. Meanwhile, the proportion of transactions over $200 million rebounded to 29 percent in 2024, from 14 percent in 2023. Investment landscape 'Saudi Arabia's investment ecosystem is transforming strategically, driven by Vision 2030, regulatory enhancements, and increasing institutional participation,' Bahoshy said. He noted that private capital, spanning PE, venture capital, and venture debt, is playing a complementary role in shaping the investment landscape. While PE focuses on scaling mature businesses, VC remains a critical driver of early-stage innovation, particularly in fintech and e-commerce. Saudi VC funding peaked at $1.3 billion in 2023 before moderating to $750 million in 2024, while venture debt is emerging as an alternative financing tool for startups. As Saudi Arabia's investment ecosystem matures, the interplay between PE, VC, and alternative investment vehicles will be key in sustaining long-term economic diversification and capital efficiency. 'As PE matures and M&A activity rises, VC-backed startups will have better liquidity options, strengthening the investment cycle,' Bahoshy said. The country's recalibrated approach to PE signals a shift toward a more measured and strategic capital deployment strategy, positioning the market for long-term stability and growth. 'Saudi Arabia's investment landscape is evolving into a multi-layered ecosystem where PE drives scale, VC fosters innovation, and alternative investment vehicles provide liquidity and diversification,' Bahoshy said. 'The interplay between these verticals will be essential in sustaining long-term economic diversification, capital efficiency, and investor confidence,' he added.
Bloomberg
27-02-2025
- Business
- Bloomberg
MAGNiTT: PE Deals Set For Comeback In MENA
Philip Bahoshy, Founder & CEO of MAGNiTT says the private equity market in the Middle East and North Africa could be set to start positioning for a "long-term rebound" this year. Bahoshy speaks with Bloomberg TV's Joumanna Bercetche on Horizons Middle East and Africa. (Source: Bloomberg)
