Behind early-stage’s dominance of Saudi’s VC landscape: Early-stage investment’s dominance of Saudi Arabia’s VC scene is a natural phase for the ecosystem’s evolution, which is currently focused on seeding innovation and backing new founders.

We sat down with venture capitalist and ecosystem builder Ahmed Al Thukair (LinkedIn) and CEO of Tech Invest Com Hussein Attar (LinkedIn) to dive into the undercurrents of the country’s VC scene.

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IN CONTEXT- Early-stage investments dominated Saudi Arabia’s VC landscape, comprising 89% of all transactions — the highest proportion among top MENA markets. Later-stage activity remained nascent, with Series A transactions accounting for 6% and series B for just 4% of the total.

The scarcity of late-stage agreements is a matter of timing, not a lack of capital, Al Thukair said, noting that the ecosystem is still “producing its first generation of scale-ups,” meaning the investment pipeline simply needs more time to mature. “We’re in the ‘build phase,’ and the ‘scale phase’ is just around the corner,” Al Thukair added. In addition, thanks to Vision 2030 “fueling entrepreneurship at the grassroots level,” we’re seeing more first-time founders, incubators, accelerators, and angel investors — all feeding the early-stage segment, he said.

The current market’s skew towards early-stage startups is a correction from the 2021-2022 “high-valuation cycle,” where many startups “raised large amounts at high valuations and then struggled,” according to Attar. As a result, cautious investors now favor early-stage startups at better valuations, while later-stage firms face tougher scrutiny, needing clear paths to IPO or profitability.

The leap from seed to series A is often the most difficult stage or the “valley of death” for startups, according to Al Thukair. During this transition, investor expectations shift from a product’s potential — a strong team, a promising idea, and initial traction — to a scalable business model proven by clear unit economics, retention data, and acquisition channels.

At the series B stage, investors aim to “fuel scale,” shifting their focus to whether a company’s growth is “repeatable, efficient, and defensible,” Al Thukair said. They assess revenue quality, unit economics, go-to-market strength, and organizational maturity — ultimately asking, “Can this business scale sustainably, or is it still in the hacking phase?”

Talent is the “biggest challenge for startups” moving beyond series A, which struggle to offer competitive compensation compared to government positions, Attar said. Senior hires, in particular, face a “money now vs. money later” tradeoff between high salaries elsewhere and potential equity gains at startups. As these firms scale, the shortage of experienced leadership in the Kingdom and rising governance demands have pushed some to open offshore offices in London, India, Pakistan, or the US to access needed expertise.

Securing large later-stage funding is now increasingly hinging on a company’s IPO potential, Attar said, noting that recent successes like Jahez have made public listings the narrative investors want. This marks a shift away from acquisitions, which, once upon a time, were the “dominant discussion.”

Where cautious capital is flowing: Investors are deploying cautious capital by “leaning toward follow-on rounds in proven early-stage winners” and demanding “sharper founders, clearer problems, and faster validation” for new ventures, Al Thukair said. This contrasts with a slowdown in late-stage funding, which now shuns “growth for the sake of growth” in favor of well-vetted, return-generating, IPO-bound firms that are often backed by major financial institutions — as risk-averse investors tend to “follow the banks.” Attar also sees funds flowing mainly into venture debt — an option that offers exposure to startups without equity risk.

Al Thukair calls it a “healthy reset,” with capital flowing more thoughtfully and with greater discipline — ultimately benefiting the ecosystem in the long run.

IN CONTEXT- The Kingdom’s VC funding jumped 116% y-o-y in 1H 2025 to USD 860 mn, spread across 114 agreements, up 31% y-o-y and beating the 1H 2022 peak of 97 transactions. The rebound reversed slowdowns seen in the first halves of 2023 and 2024, driven by a record 70 agreements in 1Q 2025 and a 3.2x rise in 2Q funding y-o-y.

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