Saudi startups look beyond equity as venture debt gains traction

Riyadh — Saudi Arabia’s startup sector is increasingly supplementing equity with venture debt and private credit as the kingdom deepens its capital markets under Vision 2030. According to Wamda’s 2025 MENA Venture Investment Report, the Kingdom attracted around $5 billion in startup funding across 211 deals in 2025, and market participants say founders are combining equity, venture debt and hybrid structures to support growth while limiting dilution.

“What we are seeing now is the evolution of the capital stack in Saudi Arabia. Businesses are no longer relying on a single funding route, but are combining equity, venture debt, private credit and other solutions depending on their stage of development and operational needs,” Georges Kakos, partner at PwC Middle East, told Arab News. “This mix of funding sources is becoming both a strategic advantage and a risk mitigant as the Saudi investment landscape continues to expand.”

Context and market drivers

Industry observers point to a combination of regulatory change, government and semi-government initiatives, fintech innovation and expanding private-credit markets as drivers of the shift. Kakos said founders are now more strategic in their approach to capital, “increasingly using venture debt and other financing tools to support growth while maintaining flexibility and balanced ownership structures.”

Startups in sectors with clearer revenue visibility — notably fintech, SaaS, logistics and digital marketplaces — are among those most likely to consider debt. “Many startups across sectors such as fintech, SaaS, logistics and digital marketplaces now have stronger revenue visibility and clearer operating strategies, making alternative funding solutions like venture debt increasingly practical,” Kakos said. He added that venture debt is being used to bridge funding rounds and help firms achieve higher valuation milestones.

• Examples of regional companies that have used debt productively, cited by industry, include Tabby, Tamara and erad.
• Nuwa Capital, where Stephanie Nour Prince is a partner, sees debt as best deployed to scale proven unit economics rather than to extend runway in lieu of equity.
• PwC warned that venture debt requires disciplined cash-flow management and strong repayment capacity even as it offers investors a more structured exposure to high-growth firms.

Stephanie Nour Prince, partner at Nuwa Capital and chairperson of the Middle East Venture Capital Association, told Arab News: “The companies that have used it best regionally, like Tabby, Tamara, erad, have done so to scale unit economics that were already proven, rather than to extend runway in lieu of equity. That is the right use case.” She added: “For our portfolio, we view debt as an instrument that compounds returns on the equity we have already deployed: it lets companies finance the parts of the business that should not be funded by venture dollars in the first place.”

Outlook

Despite the optimism, Prince warned that supply constraints remain a hurdle. “The constraint today, however, is supply. There is still no critical mass of dedicated venture debt providers in the Kingdom or regionally, for that matter,” she said, noting that regulatory clarity and faster approval processes will influence how quickly new capital allocators enter the market. Kakos said the next phase of Vision 2030 would further strengthen entrepreneurship and private-sector growth, and that a broader mix of financing options would continue supporting innovation as Saudi capital markets mature.