Saudi startups tap venture debt as equity slows and IPOs stall

Why debt is back in vogue

Founders are pulling in venture debt as equity investors get choosier and dilution stings more. As Stride Ventures partner Fariha Ansari put it, "With equity investors becoming more selective, and founders more protective of their cap tables, we are seeing companies raise debt alongside their next equity round instead of holding it in reserve as a fallback."

Nearly a dozen venture firms cite the US-Iran war, which began in February, as a key source of uncertainty driving caution. The shift fits a global trend. According to a report from Runway Growth Capital and PitchBook, US venture debt hit an all-time high of $69 billion last year, and Runway's founder David Spreng says the product has moved "from the margins to the core" of startup finance.

Who is lending and where the money is going

Stride, one of the earliest overseas venture debt outfits to set up in the kingdom, has put about $90 million to work in Saudi deals since entering the market roughly a year ago. The firm plans to invest more than twice that amount over its initial two years in Riyadh and anticipates wrapping up no fewer than two additional transactions before year end. Recent transactions include Aramco-backed construction tech company BRKZ. As BRKZ's founder and CEO Ibrahim Manna said, "Our approach has always been to match the right type of capital to the right business need, rather than favoring one over the other."

Debt options are widening beyond venture lenders. Raqamyah, a Saudi debt-crowdfunding platform, has arranged up to $107 million in financing this year - twice its 2025 tally. Since it opened 18 months ago, Erad has seen financing requests exceed $1 billion. And Sharaf Sharaf of Ajeej Capital's Amplify Growth Fund noted that borrowing lets founders finance growth while postponing equity rounds so they don't suffer valuation markdowns.

Smart investors explore new tools to refine ideas and preserve long term upside. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

The slowdown behind the shift

Per Magnitt data cited by Bloomberg, Saudi VC fundraising fell by nearly one-third to $1 billion during the first nine months of 2026 after a standout 2025. That contrasts with the United Arab Emirates, where the tally increased by almost 20% to above $1.6 billion. The investor mix is shifting as well: overseas investors put the least capital in three years into the Middle East and North Africa during this window, while domestic backers stepped up.

The exit backdrop is another headwind. Saudi Arabia's regulator hasn't approved any fresh listings on the main market since April, and despite banks warning that the tweaks could make going public more difficult, it is pressing ahead with IPO reforms. Abu Dhabi based Plus VC's founder and managing partner Hasan Haider said capital is concentrating in later stage deals, leaving early stage startups with fewer equity options.

He added that caution among investors has stretched VC fundraising timetables, shrinking the available capital for new wagers and slowing startup rounds. Nuwa Capital and Sadu Capital shared similar views, though Nuwa has closed six deals since February. Even with the dip, Saudi fundraising levels remain among the highest of the decade.

What this means for investors

In plain English: more Saudi startups are using loans to keep growth moving while delaying equity rounds that could compress valuations. If you track exposure to the region, watch the balance of debt versus equity in deal structures, whether later stage rounds keep attracting capital, and if IPO reforms eventually open the listing window.

Learning how emerging technologies can improve decision making helps investors stay confidently prepared. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.