Data Management Platform, Magnitt, revealed that Saudi Arabia has achieved landmark success by securing the top position in venture capital funding in the Middle East and North Africa region by 52% in 2023.
Experts warn that Saudi Arabia may not be able to sustain the costs of audacious investments based on a high degree of risk, particularly in light of the drop in oil prices. These concerns, according to specialized economic platforms, could undermine this accomplishment.
Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and other financial institutions.
Experts believe that Saudi Arabia’s Vision 2030 initiative, which encourages the adoption of new, small, and emerging projects, is the cause of the country’s high venture capital investment percentage.
Following the announcement by Saudi Finance Minister Mohammed Al-Jadaan that he was delaying some Vision 2030 projects due to inflationary pressures, many investors and businesses were in a state of fear and confusion, hoping that Mohamed bin Salman (MBS) would honor his word.
The Kingdom of Saudi Arabia has a high-risk financial portfolio, which implies that there is a chance to make large profits, particularly in the area of audacious and daring investment; however, this percentage of investment should in no way surpass 5%, and the presence of advisors is the only thing that ensures investors’ safety. Due to the high salaries of consultants, this puts a strain on startup companies that are not financially stable despite their extensive experience and understanding of economic and market conditions.
Furthermore, Saudi Arabia needs to prepare competent local cadres to handle this kind of investment and the companies operating in it, something it has not done yet, in order to sustain its success rate in obtaining venture capital investments.
Vision 2030 and the concept of investing in the Kingdom are also threatened by the fact that, as of right now, the majority of MBS’s vision’s investments are in entertainment, which experts believe does not attract capital even though it occasionally boosts domestic travel. Major and emerging corporations, on the other hand, prefer environments that guarantee their right to invest and ensure their success and continuity away from the pressures of corruption and a fragile economy.
