How Tech Startups in Saudi Arabia Can Survive the 2022 Funding Downturn
Last Updated on November 13, 2023 by Ameer Hamza
With the end of the year rapidly approaching, many Gulf countries have been recording downturns and have had to lower their index posting. Unfortunately, Saudi Arabia is not an exception to these recent happenings. The government has had its stocks falling, and investors worry that inflation rates will break the ceiling and lead to recession. This downturn has also affected tech startups, as investors are slightly stifled from directing their funds into the startups. The section below analyzes how tech startups can survive or make the most out of the funding downturn.
Three Crucial Ideas for Saudi Arabia’s Tech Startups to Survive in 2022
Traditionally, budgeting for startups is used for pitches and valuation. However, tech startups must build strategic value budgets to evaluate current holdings and prospects with funding downturns. Of course, the budget must account for the worst-case scenarios. A good budget helps to put things into perspective, giving an idea of the company’s liquidity and helping locate the company’s cost drivers. Saudi Arabia has always stood out for its Venture Capital investments, and the company even has an annual program where tech startups can present ideas. Now that there is a downturn, it is easy for companies to get carried away by the status quo, and they may not see the need to implement the budgeting strategy. However, if done correctly, budgeting is a good way to change the tide of the downturn in the country.
- Budget Cuts
It is not enough for startups to derive budgets and valuations. They must take it a notch higher and make certain cuts to maximize the funds without sacrificing quality. These cuts can range from project costs to research, development, and advertisement costs. For the time being, Saudi Arabian companies can also look into out-staffing or outsourcing techniques. In this case, they get less for more as they expend little funds in return for quality services. This method has been proven foolproof for other countries and worked well for startups during the Covid-19 pandemic.
- Adaptative Funding
It is well known that many tech startups in Saudi Arabia derive their primary funding from venture capital. However, this dependency can be too risky when a general funding downturn occurs. Thus, looking for other funding avenues would be great for tech startups to tackle funding problems. Tech startups can look into angel investments or philanthropic offerings by non-profits and interested individuals. These sources are particularly brilliant when the startup addresses a core societal problem such as climate change.
Indeed, the current economic downturn is unexpected in light of previous economic analyses. Although Saudi Arabia has made several efforts to achieve equilibrium by seeking to reduce volatility in the oil market, it may take a while for the country to move out of the downturn. Tech startups need not be sitting ducks during this period. A good way to begin action is by implementing the strategies above effectively.