Role Angel Investors Play In Saudi Arabia Start-Up Industry
Last Updated on November 9, 2023 by newseditor
Whether it comes in the form of venture capital or angel investing, the fact remains that every start-up company or entrepreneur needs investors to finance their business idea. This is especially vital for the rising start-up industry in Saudi Arabia, which is particularly keen on boosting its financial and technology sectors.
Who are Angel Investors?
Angel investors provide financial backing for a start-up or small business venture in exchange for equity or convertible debt. They could be wealthy private persons who fund companies from their net worth. An angel investor could be a friend or family of the entrepreneur or a professional investor.
Why Saudi Arabia’s start-up industry needs Angel investors
The Kingdom’s Vision 2030 launched several initiatives within the country that seek to stabilise economic growth. In this way, as start-ups that provide financial and technology solutions are emerging, the need to source for finance is paramount. Angel investors play a crucial role in encouraging the growth and sustenance of start-ups in Saudi Arabia. Although the Kingdom is open to facilitating the development of the start-up ecosystem, especially in the financing of the industry, the role angel investors play still stands out.
Firstly, they provide the needed opportunity for start-ups to grow without the added pressure of sourcing funds. This allows the companies to improve their businesses to a point that they can stand on their own.
Secondly, they offer risk capital to the start-up industry to aid economic growth and increase innovative practices. The wealth from angel investing leads to the rise of more companies, and the cycle keeps going.
Thirdly, every company financed by angel investors that survives leads to job creation and more distribution of wealth. This encourages a boost in the start-up industry, especially in raising more funds outside the angel group.
Fourthly, professional angel investors can meet like-minded investors, encouraging more ideas and opportunities available in the start-up industry. They can learn together what kind of companies to invest in, the metrics to identify for a potentially profitable company, etc.
Lastly, since angel investors finance companies that are still undervalued, the investment capital does not have to be paid back if the business fails. However, when these companies make a profit, the investors can gain by either acquiring equity or selling their shares to other investors. Therefore, both angel investors stand to gain from the agreed-upon investment structure.
Without angel investors, the start-up industry of Saudi Arabia might not be on the trajectory it is on now. The benefits they offer outweigh both venture capital and loans from a bank. As the country continues to grow and favourable policies are created for start-ups to thrive, it is only time before the industry becomes a leader in the Middle East.