News

General Catalyst Makes First Investment Into Saudi Arabia

General Catalyst, a Silicon Valley venture capital company, has made its first investment in Saudi Arabia.

General Catalyst Makes First Investment Into Saudi Arabia

It is known that the mentioned financial injections were made through the startup Lean Technologies, which operates in the space of the fintech industry. This startup has closed a Series B round worth $67.5 million.

General Catalyst currently manages $30 billion in assets. This firm backs such major US technology companies as Snap, Stripe, and AirBnb.

Bain Capital Ventures, Stanley Druckenmiller’s Duquesne Family Office, and Arbor Ventures also participated in Lean Technologies’s fundraising round. As of today, the total amount of funding for this startup, based in Riyadh, is more than $100 billion. The relevant information is contained in the official statement of the company, which was published last Sunday, November 10.

For three investors, including General Catalyst, Stanley Druckenmiller and Bain Capital, participation in the mentioned fundraising round was the first experience of making financial injections into Saudi Arabia.

Lean Technologies chief executive officer and co-founder Hisham Al-Falih, during a conversation with media representatives, said that the specified investments are evidence of a huge vote of confidence in the growth trajectory that Saudi Arabia is moving along, and signal the country’s potential over the next decade.

Riyadh is currently making progress in the implementation of its Vision 2030 concept in the practical plane. In this case, it implies a set of measures and actions that form the strategy of the country’s efforts to diversify the economic system. Within the framework of the relevant concept, the goal is to reduce Saudi Arabia’s dependence on oil as a factor in economic growth and the overall development of the state. Riyadh is striving to generate new sources of positive momentum. In the context of these efforts, priority is given to industries based on advanced technologies. Riyadh is interested in generating new jobs. Saudi Arabia is also striving to form new industries for a predominantly young workforce.

Riyadh is currently demonstrating a massive commitment to raising foreign capital and direct investment. Also, in this case, there is a desire to ensure a high level of employment at the local level, knowledge transfer and training, and the development of various sectors of the economy.

Hisham Al-Falih stated that fintech plays a major role in the mentioned evolution. In his opinion, much larger amounts of investment are needed to deepen the technological stack, expand payment solutions, scale data services, and move forward within the framework of partnerships with regional banks, with the support and enablement of central financial regulators. He also noted separately that over the past three to five years, the region’s growth has been phenomenal. At the same time, Hisham Al-Falih underlined that there is still so much more room for the corresponding dynamic.

According to the information contained in the report by McKinsey & Company, in 2022, revenue from the activities of the fintech industry in the Middle East and North Africa was fixed at $1.5 billion. Also, in this report, the forecast was separately mentioned, according to which the mentioned indicator next year may increase to reading in the range from $3.5 billion to $4.5 billion. Hisham Al-Falih stated that the revenue from fintech in the specified region is less than 1% of banking revenue. At the same time, in more mature markets such as the United States and the United Kingdom, the corresponding indicator is in the range of 4% to 5%.

Hisham Al-Falih stated that the mentioned region is lagging behind what could be achieved in terms of income from fintech and the participation of this industry in the economy. At the same time, he noted that against the appropriate background, a wind behind sales and motivation to keep building tools, symbolic picks, and shovels, to enable bold innovators to achieve their dreams are being formed.

Lean Technologies, as part of its activities, specializes in providing financial infrastructure that ensures secure data sharing between bank accounts and apps. This startup is regulated by Abu Dhabi Global Markets in the United Arab Emirates. Lean Technologies is currently working on facilitating A2A (account-to-account) payment transactions. In this case, it means financial operations for transferring funds directly between two bank accounts. Within the framework of the appropriate technological practice, there is no need for the participation of intermediaries, such as payment processors or credit card networks.

In a press release published by the startup on Sunday, it was noted that Lean Technologies cooperates with major local clients such as the state telecoms firm of the United Arab Emirates e& and ride-hailing super app company Careem. The total financial volume of processing of operations performed by startup clients is more than $2 billion.

In Saudi Arabia, Lean Technologies has launched its data solutions within the framework of the regulatory sandbox of the central bank of the country. The mentioned solutions have had an impact on customers in various industries, including insurance, lending, and marketplaces. In this case, the startup verified almost 1 million bank accounts. The relevant information is contained in the press release of Lean Technologies.

Data from Monsha’a, Saudi Arabia’s General Authority for Small and Medium Enterprises, indicates that in the period from 2018 to September of the current year, fintech startups in this country raised venture capital investments worth more than $1.84 billion.

KPMG reported in September that last year alone, fintech companies from the mentioned state raised $791 million. This figure is 231% higher than the result recorded in 2022.

Data from Monsha’a also shows that the number of fintech startups in Saudi Arabia has reached 216 since the launch of the Fintech Saudi initiative in 2018. The total number of employees of these startups is more than 6,500 people. Saudi Arabia also intends to establish 525 new companies in the fintech sector by the end of the current decade.

Neeraj Arora, managing director at General Catalyst, said that the company is excited to partner with Lean Technologies. He also noted that over the past five years, the mentioned startup’s team has demonstrated a deep commitment to solving the unique needs of local merchants, earning tremendous customer loyalty. In his opinion, Lean Technologies has a chance to become a pivotal force stimulating the region’s growth by building the fintech infrastructure layer for local businesses.

It is known that the financing received by the startup will be used to expand the range of Pay-by-Bank and Open Banking offers. Lean Technologies plans to expand its product suite and strengthen partnerships across the region.

The startup’s main competitor, Tarabut Gateway, raised more than $50 million in total funding, including $32 million in Series A last year.

So far, the fintech industry cannot be described as a large-scale driver of economic growth in the Middle East. At the same time, the prospects that the corresponding state of affairs will be formed in the future are significant and belong to the category of probabilities of a high level of realism. In general, the global fintech industry is currently on an active development trajectory. This is a natural process from the point of view of the logic and specifics of the tendency of global digitalization, which is what can be called a characteristic feature of the current historical moment.

As we have reported earlier, Revolut Seeks to Expand Into UAE and Saudi Arabia.

Serhii Mikhailov

2957 Posts 0 Comments

Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.