Venture Capital Practices in Saudi Arabia: The Views of Investors

ABSTRACT This study examines how venture capital (VC) investors in Saudi Arabia evaluate, negotiate, and support entrepreneurial ventures in a rapidly developing yet institutionally young setting. Drawing on 21 semi‐structured interviews with 24 investors, it offers rare insight into VC practices in the Middle East. Saudi VC funds adopt globally recognizable structures—two‐tier decision‐making and rigorous due diligence—but their operations are shaped by local institutional and cultural dynamics. Deal sourcing relies heavily on personal networks and referrals, reflecting the emphasis on trust in Middle Eastern entrepreneurial finance. Valuation practices are pragmatic: multiples and the venture capital method dominate, while discounted cash flow models are rarely used. Valuation is less of a technical exercise than a negotiated process influenced by bargaining power, founder credibility, and sectoral context. Non‐financial factors, especially founder quality, team cohesion, and interpersonal trust often outweigh financial metrics in investment decisions. Beyond financing, Saudi VCs provide mentorship, strategic advice, and access to networks, taking on developmental roles within the entrepreneurial ecosystem. The findings extend prior literature by showing how VC adapts to emerging institutional contexts, where cultural norms of trust and networks shape investment behavior and where VC firms act as both financiers and ecosystem builders.