Saudi tech founders want to IPO, but at least half of them aren’t ready for it

Just over three-quarters of 30 Saudi founders surveyed by Endeavor and SVC are pursuing a public listing within the next two to three years — and as you’d expect from a cohort of Saudi founders, they’re looking at Tadawul for their exit.

There are two problems with that: Founders themselves are candid that they’re not yet structured to go public — that they lack the plumbing they need to succeed as publicly traded companies. And going public on Tadawul won’t do anything to improve their international prospects.

It’s easy to chalk up the preference for going public in Riyadh as a sign of domestic market maturity. That’s what the boosters on Saudi Twitter will tell you, and they’re not wrong. But listing at home comes with limitations: Saudi IPOs are tapping domestic capital. International growth investors, the ones who set the price for tech listings in mature markets, aren’t part of the equation.

What’s happening: Tadawul’s upgrades have seen inflows from passive funds, but emerging-market fund managers aren’t taking big positions in the Saudi market, which is anchored by domestic institutions — and where, for a generation, momentum has come from the chatter of retail investors.

Saudi tech IPOs aren’t doing their job

Saudi venture-backed IPOs come to market at a pre-IPO valuation of USD 545 mn — more than 2.5x the median across peer markets (India, Brazil, Indonesia, South Korea, Turkey, Hong Kong), the report notes. On valuation per USD invested, the Kingdom returns USD 3.10, fourth among that group. Capital intensity is high too: USD 215 mn per VC-backed company on average, second only to Brazil.

But the gap between pre- and post-IPO valuations is just 6.99%. You can try to read that as pricing discipline, but what it means in practice is that companies aren’t raising much new capital at listing. That’s a problem for high-growth tech, where the IPO is supposed to fund the next phase, not just mark a milestone or give founders and early backers the chance to cash out some risk.

Governance is the other blocker. Around half of the firms surveyed admit their corporate structures don’t yet meet listing requirements — they fall short on (or entirely lack) everything from risk management frameworks and independent board oversight to dedicated IR and legal leadership. The report’s framing is sharper than the usual: founders need to treat IPOs as transformational rather than transitional — you don’t bolt on governance the quarter before you list.

Only five VC-backed IPOs have hit Tadawul since 2020. That means the so-called alumni network that compounds in mature markets — founders mentoring founders, recycled capital, repeat listings — barely exists. There’s no Saudi equivalent of the Careem or PayPal mafias, and those are the types of multiplier that the report points to as the prize over the next cycle.

And there’s not much sense in focusing on the baby bourse: Nomu, Saudi’s parallel market, has gone from nine listed companies in 2017 to roughly 125 today. The growth in absolute terms is real, but Nomu listings are less liquid and relatively few companies have yet made the leap from the baby bourse to the big show.

With more than 80% of Saudi VC funding at the early stage, there’s time for this all to work out — but the answer will be hard work for management teams and regulators alike, and a lot less time spent talking about what you’re doing “for the ecosystem.”