In the last few years, startups have become some of the most popular types of businesses in the world, including in Saudi Arabia, which is one of the most developed states in the Middle East and where the procedure of starting a company resembles in many ways that in Western countries.
Among the activities Saudi startups can develop, there are those related to industries like research and development, and fintech, as these activities have an innovative approach which is one of the most important characteristics of a startup.
The creation of a startup in Saudi Arabia is not complicated, as the process implies registering one of the common business forms available under the local legislation.
Below, our company registration agents in Saudi Arabia explain the main steps for opening a startup business. Our immigration lawyers in Saudi Arabia can help entrepreneurs who want to move here and create startups.
What to consider before launching a startup in Saudi Arabia
While in terms of registration there are no differences between Saudi startups and other businesses, especially when it comes to the legal requirements that need to be met. However, the differences rely on:
- the fact that the startup implies having a thorough business plan given its innovative character,
- it is also recommended for the company to follow a well-established business model which has the potential to attract as many investors as possible,
- it has an innovative character which in some cases it implies meeting certain requirements and addressing specific markets or demands,
- such a business is usually created by one or more young entrepreneurs who need to gather money for their projects,
- the money is usually obtained through crowdfunding, seeding, angel investors, and loans.
These are general lines that can characterize a startup in Saudi Arabia, however, if you want to create such a business, you can decide on other types of activities.
How to register a Saudi startup company
The company formation procedure of a startup in Saudi Arabia is completed the same way as for a business with any other activity and it implies:
- choosing a business form,
- registering the company,
- setting up its bank account,
- registering it for taxation,
- applying for the necessary licenses.
When it comes to the most employed business form for Saudi startups, the limited liability company and the private limited liability company represent the two suitable options for such a venture. However, compared to other countries, it should be noted that the local legislation imposes specific share capital requirements for each of the two entities.
For the first one the minimum amount required is 100,000 SAR (around 26,000 USD) is required, while for the second one, the share capital requirements are substantially higher.
As mentioned earlier, A Saudi startup implies transforming an idea into a project that has a high demand on the market and that has not been implemented before, hence its innovative character and this is one of the reasons important financial contributions are required. These can be obtained through crowdfunding platforms. The good news is that the project can be presented on different platforms and thus obtain the necessary financial support.
Our accountants in Saudi Arabia also provide services for startups.
The startup ecosystem in Saudi Arabia
According to the US-Saudi Business Council, in the past few years, Saudi startups have become quite popular thanks to the foreign direct investment inflow registered by the country, but also to the implication of the government of supporting such initiatives.
Among the projects that had the highest rate of success, the following sectors had most of the benefits:
- delivery of goods,
- financial services technology (fintech),
- online education.
If you are interested in immigration to Saudi Arabia and want to set up a startup company in Saudi Arabia, these are just a few of the industries you could operate in.
In numbers, investment in Saudi startups rose to 95 million USD in the first half of 2020 alone, which was double the amount obtained the previous year by such businesses. Out of these, 67% of the funds were obtained by e-commerce companies.
We also invite you to watch a video on how to create a startup in Saudi Arabia:
Foreign investments in Saudi Arabia
The last few years were very good for the Saudi economy, as:
- in 2019, Saudi Arabia was the 3rd busiest startup market in the Middle East and North Africa (MENA) region,
- in terms of foreign direct investments (FDIs), these increased by 7%, reaching 4.6 billion USD in 2020,
- Saudi Arabia ranked 12th in the Venture Capital Availability index in 2020,
- it also ranked 24th in the 2020 World Competitiveness Yearbook.
If you want to open a startup in Saudi Arabia, please contact our local specialists for support. You can also rely on our immigration lawyers in Saudi Arabia for guidance in relocation matters.