Corporate Venture Capital in the GCC

The rise of CVC in the region

In recent years, venture investments in the GCC have surged dramatically, with capital invested growing at a remarkable compound annual growth rate of 24% over the past five years. The venture capital invested in the GCC has more than quadrupled to reach US$2.5bn in 2022. While 2023 marked a modest downturn with the figure easing to US$2.1bn, this still represents a substantial level of investment, underscoring the resilience of the region's entrepreneurial ecosystem. Compared to other markets, the downshift was comparatively low, and a steady long-term upward trend is clearly observable.

The growth has been led by investments into startups with headquarters in the UAE and KSA, which together constitute more than 90% of the total deal amount in the region in the last five years.

Since 2017, there has been also a notable growth in capital deployment by corporations, with a CAGR of +18%. This surge has seen capital deployed by corporate investors rise from approximately US$111mn in 2017 to US$300mn in 2023, representing an almost threefold increase. What is notable, especially in 2023, is the fact that in contrast to the whole VC market in GCC, the volume of CVC investments continued to grow, indicating the growing importance of this source of capital for the region.

 Key pillars and success factors of setting up a CVC unit

To ensure that the establishment of a CVC unit is successful, companies should focus on the three pillars of ‘Strategy’, ‘Structure’ and ‘Operations’ and lay the right foundation from the very beginning.

Way forward: The value of investing into open innovation

Innovation is no longer optional for companies, but mandatory in order to remain relevant and be at the spearhead of market developments. For national and international startups, attracting corporate investors from the GCC can be an ideal partnership to expand and further professionalise their business activities in the region. Corporate venturing activities are an essential way to get access to innovation besides internal R&D activities. Furthermore, when corporate venturing activities are performed on the base of a customised target operating model, a well-balance between risk and to be expected strategic plus financial return can be achieved.

It is clear that Corporate Venture Capital is on the rise and will enable GCC economies to accelerate its growth and will be an essential cornerstone for the overall forward development of the region.