As Saudi Arabia’s startup ecosystem flourishes, many companies are setting their sights on a new milestone: going public. This shift from private to public markets presents both opportunities and challenges for the Kingdom’s entrepreneurs.
The traditional exit strategy of acquisitions is giving way to initial public offerings (IPOs) as more startups reach the scale necessary for public listing. This transition, however, requires a significant shift in mindset and operations.
“Early-stage practices like rapid decision-making and aggressive growth often don’t align with public market expectations,” says Mohammed Al-Meshekah, founder of Outliers, an early investor in Tabby, a startup now valued at $3.3 billion and IPO-bound.
Al-Meshekah emphasizes the importance of early preparation: “Successful transitions involve tightening financial controls, ensuring clean reporting, and focusing on sustainable unit economics well before going public.”
Mohammed Al-Zubi of Nama Ventures, which backed unicorns Salla and Tamara, agrees. “Building with IPO-level governance from the start is crucial,” he states. This includes proper financial structures, compliance frameworks, and leadership teams capable of managing a public company.
Regulatory challenges also loom large. Many existing frameworks were designed for traditional industries, not fast-growing tech startups. Al-Meshekah suggests that evolving these regulations could position Saudi Arabia as a leading destination for high-growth IPOs.
Investor alignment plays a key role in smooth transitions. Al-Zubi notes that startups backed by long-term partners focused on disciplined growth tend to fare better in public markets.
The shift towards IPOs as an exit strategy marks a significant change in the Saudi startup landscape. Just five years ago, acquisitions were the primary path to liquidity. Now, late-stage startups are actively preparing for public listings, with companies like Tamara and Salla leading the way.
However, the journey doesn’t end at the IPO. The transition from a private to public company brings new challenges, including pressure for short-term results. Early investors often play a crucial role in helping companies maintain their long-term vision while adapting to public market demands.
As Saudi startups navigate this new terrain, they must balance financial discipline with innovation. Those who successfully make this transition are poised to unlock new levels of growth and establish themselves as leaders in the global market.
