The startup ecosystem in Saudi Arabia secured $1.38 billion in funding in the year 2023.

In 2023, Saudi Arabia emerged as the leader in regional venture funding activities for its startup ecosystem, securing an unprecedented $1.38 billion in capital. This achievement marked the Kingdom's dominance in venture capital funding in the Middle East and North Africa, surpassing the $1 billion milestone for the first time. The data comes from MAGNiTT's Saudi Arabia FY2023 report, showcasing a 33 percent increase in funding compared to the previous year's $987 million, indicating robust growth. Additionally, Saudi Arabia's share of total venture capital funding in the MENA region rose significantly from 30 percent in 2022 to 52 percent in 2023.

The MAGNiTT report also highlighted the consistent growth of Saudi Arabia's venture capital sector since 2019, with a notable compound annual growth rate of 86 percent in 2023. Mega rounds, individual funding deals exceeding $100 million, played a crucial role, with the Kingdom attracting $879 million in such deals, emphasizing strong investor interest.

In terms of sectoral breakdown, the fintech sector in Saudi Arabia experienced remarkable growth, securing $704 million, a 181 percent increase from the previous year. Notable fintech "unicorns," Tabby and Tamara, received substantial funding, each reaching valuations over $1 billion. Tabby, a "buy now, pay later" platform, relocated its headquarters to Saudi Arabia, aligning with plans for an initial public offering in the Kingdom. The e-commerce sector also witnessed robust performance, raising $428 million, a 153 percent growth compared to the previous year.

Despite a 20 percent decrease in the number of deals, Saudi Arabia accounted for 26 percent of all transactions in the MENA region, dominated by early-stage startups (81 percent of deals). The Kingdom recorded stable exit numbers, with 9 acquisitions during the year. Initiatives like the Makken Fintech program and efforts by the Saudi Venture Capital and Private Equity Association aimed at sector development were noteworthy.Looking at the broader MENA region, the overall funding landscape experienced a 23 percent year-on-year decrease, amounting to $2.6 billion in 2023. Saudi Arabia surpassed the UAE in country-specific funding, with the UAE ranking second. Egypt and Morocco displayed varying trends in capital deployment, while fintech and e-commerce remained the most sought-after sectors regionally. In terms of venture capital firms, UAE-based Chimera Capital led in capital deployment, followed by Saudi Arabia's STV and Shorooq Partners.

In the final quarters of 2023, the MENA region witnessed a significant funding period, with $1.19 billion raised, largely driven by substantial funding rounds for Tabby and Tamara. The first quarter marked the highest number of deals, totaling 141.

Country-specific funding revealed Saudi Arabia's leadership, with $1.38 billion, surpassing the UAE, which recorded a 45 percent year-on-year decrease with $691 million. Although the UAE had the highest number of deals in the region, totaling 158, this marked the first time Saudi Arabia outpaced the UAE in funding.

Egypt experienced a reduction in capital deployment, with its startups raising $378 million, a 30 percent drop from the previous year. Meanwhile, Morocco made notable progress, entering the top five with $81 million raised, reflecting a 193 percent increase from 2022.

Fintech and e-commerce continued to be the most sought-after sectors in the region, securing $1.27 billion and $502 million in funding, respectively. Regarding venture capital firms, Egypt's Flat6Labs, the US' 500 Global, and UAE's Shorooq Partners led in the number of deals. In terms of capital deployment, UAE-based Chimera Capital topped the list with $260 million, followed by Saudi Arabia's STV with $128 million, and Shorooq Partners with $98 million.