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Why Saudi Arabia could soon rival Dubai for fintech funding

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Saudi Arabia is witnessing “exciting growth” when it comes to funding fintech start-ups, according to Muhammed Mekki, founding partner of AstroLabs, which has been developing the digital ecosystem in the Middle East for the last seven years.

AstroLabs was the first international business incubator licensed in the kingdom and partnered with Saudi Arabia’s Ministry of Investment (previously SAGIA) in 2018, making it a partner of choice to support businesses expanding into the country.

Muhammed Mekki told Arabian Business: “Right now it’s the market that I’m seeing have the most exciting growth relatively. I think Dubai remains the epicentre in terms of number of deals, size of deals and the underlying maturity of the start-up ecosystem, but there’s no doubt that Saudi is sprinting forward, really propelled by this combination of a compelling, deep, local market that’s hungry for tech-enabled solutions; along with a new fuel of venture funding that’s blossomed in the last year or two.”

Muhammed Mekki, co-founder of AstroLabs

To date, AstroLabs has helped more than 60 companies enter the Saudi market, with a combined value of over $5 billion.

These include Checkout.com, one of the most valuable global fintech businesses, Bayut, the UAE’s largest online property portal, and AKQA, renowned global design and innovation agency.

“It’s been interesting because we always thought Saudi was the most underserved and highest potential in the market, from back when we started in 2013,” said Mekki.

“The raw talent, the size of the market, the consumer excitement for digital products, all these things were there but for some reason, it never did take off. It was actually quite a late bloomer, given the fact that they’re sitting on the most exciting economy in the region and there is a high level of internet connectivity and a high level of usage of cutting-edge products,” he added.

According to Global Media Insight, from a population of 34.54 million in Saudi Arabia, 32.23m are active internet users, with 72.38 percent active social media users. The average daily time spent on the internet in the kingdom is seven hours and 46 minutes.

Mekki said: “A lot of people cite the fact that Saudis are among the most, on a per capita basis, engaged on social media platforms, that consume You Tube and other content on mobile. They’re off the charts on a lot of these indicators, which one would assume would translate into a really booming local start-up scene.

“But somehow those things never connected. One of the reasons for that was the funding ecosystem in the market was non-existent for a long period of time. Although funding was available, risk capital that’s interested in early stage companies, was not available.”

However, that has since “changed dramatically”, according to Mekki, with large-scale funding available right down to angel networks and early stage funders.

That has prompted AstroLabs to launch setupinsaudi.com, the first centralised online source of curated, up-to-date information on setting up a 100 percent foreign-owned entity in the kingdom.

Setupinsaudi.com lists a 16-step setup process, detailed information on requirements and offers a dedicated specialised operations team in Riyadh to manage end-to-end processes for businesses, making their expansion journey seamless and hassle-free.

“What we hope is, when anybody is making this big decision, opening up a new entity, a subsidiary, that there is a centralised resource that has another layer of information for them to make the right decision,” said Mekki.

“There is this window for a much broader set of companies to be able to come in, as long as you’ve been operating for a year, have audited financial statements and are a service-type company that’s looking to enter into Saudi. It’s never been easier,” he added.