Entrepreneurs in Saudi Arabia aiming to secure venture capital funding are being urged to prioritize building defensible business models over simply pursuing popular sectors, according to a senior investment official at Sharaka Capital. Latifa BaNasr, a partner at the Saudi investment firm, emphasized that founders should focus on deeply understanding neglected market problems and developing sustainable economics rather than entering widely favored areas like fintech or artificial intelligence without clear differentiation.
Saudi Arabia’s venture capital landscape has seen a strong concentration of investment in specific sectors, notably fintech. An analysis by Saudi Venture Capital covering 2018 through November 2025 showed fintech attracted nearly $4 billion, with payment solutions representing roughly 72 percent of that total. Data from MAGNiTT further indicated that fintech accounted for 80 percent of capital deployed in the first quarter of 2026, even though gaming led in deal count during the same period.
BaNasr cautioned against founders chasing sectors merely for their size or current popularity. She stressed the importance of “founder-market fit,” where entrepreneurs have firsthand experience and insights into the industry and its unmet challenges. She advised that founders should seek out overlooked subsegments capable of developing into viable markets, rather than focusing on broader categories defined solely by large spending pools.
In fintech specifically, BaNasr noted high competition in payments and robo-advisory services, identifying financial infrastructure and embedded finance as areas of greater interest for Sharaka Capital. The firm is also exploring opportunities in vertical Software-as-a-Service, applied artificial intelligence, cybersecurity, property technology, and gaming monetization. For AI startups, BaNasr highlighted the necessity of leveraging technology to establish genuine competitive advantages rather than using AI as a marketing label.
Beyond sector choice, BaNasr pointed to the need for startups to validate repeatable economic engines that demonstrate consistent customer value and potential for growth. She emphasized that successful ventures show measurable advantages that strengthen over time, rather than products or services with diminishing returns. A key quality Sharaka Capital looks for in early-stage founders is the ability to learn quickly and exhibit intellectual humility, traits that help leaders navigate challenges, pivot strategies, and build stronger teams.
BaNasr also discussed post-investment governance, noting that boards can sometimes become ineffective if they focus only on status updates and administrative matters instead of addressing core problems and strategic decisions. Investors should critically assess whether companies require improved board processes, specialized coaching, or targeted support. She warned against risks introduced by investor actions, such as overdependence on a single major customer that could lead to revenue concentration.
Highlighting trends in the Kingdom’s startup ecosystem, BaNasr pointed to a growing presence of experienced founders. A Saudi Venture Capital report on 400 local entrepreneurs found that 36 percent had over a decade of professional experience, reflecting a maturing market with more serial entrepreneurs and seasoned operators.
BaNasr further advised that companies should build their businesses initially in their largest domestic market before expanding regionally or internationally. Starting locally allows founders to engage directly with customers and better understand market dynamics. Businesses developed outside Saudi Arabia often require additional time and resources to adapt to local consumer preferences and regulatory environments.
Sharaka Capital currently manages two venture funds, its first fully invested since 2019 and the second launched in 2025. The firm has backed multiple startups and is actively seeking seed and Series A stage founders across the Middle East and North Africa, while also looking to involve growth-capital investors and support companies building secondary market solutions and liquidity platforms.