Lack of funding, talent shortage hold back Saudi scale-ups: report

Lack of funding and talent shortage are two key challenges facing small-to-medium-sized companies (SMEs) in Saudi Arabia, according to a recent report by Strategy& and Endeavor, an entrepreneur mentorship provider based in New York.

"Companies struggle to get financing because the private equity and venture capital communities are not well developed. There are still few bank funding options. As a result, entrepreneurs rely on family/friends and family business funds for financing," the report said.

It, however, pointed out that the Ministry of Finance’s Kafala Program is seeking to address this problem by increasing commercial banks’ funding of SMEs.

Another challenge facing scale-ups is sourcing of the right talent, as Saudi nationals still prefer the security and salaries of the public sector, which forces many scale-ups to hire expensive expatriates.

In order to build up the local talent pool, the Prince Mohammed bin Salman bin Abdulaziz Foundation (MiSK), has launched several programs, in partnership with global players, to provide training opportunities for Saudi citizens in different fields.

According to the report, Saudi Arabia was ranked “below average” on a “scale-up readiness” index, which evaluates the maturity of the scale-ups ecosystems in five MENA countries such as Egypt, Jordan, Lebanon, Saudi Arabia, and the United Arab Emirates.

The UAE topped the index as the leading country in the region for scale-ups.

Scale-ups are defined as SMEs with proven business models on the verge of a phase of rapid growth in revenue or staff numbers. Typically they account for five percent of a country’s SMEs.