Comprehensive Startup Due Diligence Checklist for Startups in KSA

Culture of Startup in KSA

As a result of several government efforts targeted at realizing the Saudi Vision 2030, the Kingdom of Saudi Arabia\’s venture capital business is rapidly increasing. There are more such initiatives to foster entrepreneurship than ever before.

Venture Capital – Key Highlights

  • By 2021, the number of startups in Saudi Arabia had climbed by 270 percent, while the number of deals had increased by 54 percent over the previous year (2020).
  • In 2021, a large number of investors, both MENA, and non-MENA, have supported Saudi-based enterprises.
  • H2 2021 was a record half-year with most VC deals closed and funding was collected more than half the year before.

The total rate of startup activity in Saudi Arabia increased dramatically from a bird\’s eye view. Furthermore, Saudi Arabia had the highest level of market confidence, with 80% of people seeing the outbreak as a chance to start a business.

Need for Due Diligence of Startups for the investment prospects:

 The rising number of startups in Saudi Arabia signals the growing need of proper due diligence services in order to channel the funds towards the financially and commercially viable startups. Due diligence is used by a potential investor to determine whether the acquisition fits into his broader strategic strategy. Investing in a startup is an inherently risky venture; as a result, it is strongly encouraged that a potential investor does a thorough investigation of the startup in question.

Potential Benefits of Due Diligence for Startups

 Despite the fact that due diligence is often performed by investors to reduce their risk, it can also assist the firm in being inspected. Due diligence will provide an objective and complete review of the startup\’s current state, as well as a thorough explanation of its strengths and shortcomings for the startup.

  • Early-stage startups may lack adequate business planning or have overly ambitious burn rates and cash-flow projections. Due diligence can help identify these concerns as well as find unexpected dangers or product misalignments that you may not have been aware of before.
  • Due diligence for startups may appear to be a daunting task. It\’s crucial to remember, though, that it\’s a regular, if not necessary, aspect of any venture capital agreement.

 Venture Capitalists/Private Equity investors need to have the below-indicated considerations in mind while doing due diligence.

  • People and Key Management
  • This one is the most important question, who is steering the ship that the organization is considering investing in?
  • To comprehend the major actors, DD Specialists want to start with an organization chart.
  • Inquire about current and expected headcounts by function and location. DD Expert wants to acquire their professional biography for senior leadership — consider work history, age, tenure, former jobs, promotions, and more.
  • Ask for a complete picture of wages and benefits, including copies of important employment contracts and benefit plans. Inquire about overviews of incentive stock plans as well.
  • Finally, discuss any major employee relations issues (past or current), as well as data on workforce turnover.


Tiny Owl – This food-tech company intends to benefit all stakeholders in the food ecosystem, including restaurant owners, employees, suppliers, and customers. Tiny owl went on a recruiting spree as the number of orders per day increased, and they employed staff quickly to meet their high growth ambitions. However, the company did not expand as expected.

 Financial Details

  • Now it’s time to dig into the financial details. Are smart financial practices happening at this organization?
  • Usually, it involves pouring over financial reports and accounting records. It’s all about how the company looks on paper – considering balance sheets and profit & loss statements.
  • Determining the true value of a company is an important part of determining how to shape a fair investment offer – understanding the current liabilities and revenue is a key part of this.
  • With regards to capital structure, DD Specialist should be gathering information such as a list of all stockholders/angel investors with their respective shareholdings, details of debt instruments if any with the key terms and conditions, so on and so forth.
  • Consider financial projections, in particular, get the quarterly financial projections for the next couple of years, revenue forecast by product type, major growth drivers and prospects, risk assessment, scenario analysis with regards to prices and other market variables, the rationale for projected capital expenditures, depreciation and working capital arrangements.
  • At last, get the details about the schedule of financing for equity, warrants, and debt (including date, investors, dollar investment, percentage ownership, implied valuation, and current basis for each round).


Anki – Anki aimed to integrate robotics and IoT into children\’s toys and games. They ceased operations due to a failed round of financing (Lack of Funds).

  • Risk Compliance and Governance
  • Many business owners find it difficult to stay in compliance with government rules, especially when laws exist without clear standards. The goal here is to figure out what kind of legal issues the corporation faces.
  • Investors seek to minimize their risk and avoid investing in a firm that is in financial trouble. They will be better able to predict future hazards if they understand the legal consequences of the transaction and existing legal protections.


Leap Transit – It was a private bus service primarily based in San Francisco. They didn\’t comply with the San Francisco’s Transport regulations, which ultimately made them halt their operations.

  • Legal Matters
  • Lastly, look into the legal side of things, in particular, Intellectual Property (Copyrights, Licenses, Trademarks), New Regulations, Environmental Concerns, Insurance coverage details, and similar details.


Koinex – It works on the basis of a peer-to-peer exchange architecture, which allows potential buyers to submit bids and sellers to set \’asks\’ for the cryptocurrency they want to trade. All government-regulated exchange platforms and banks were ordered by the central bank to halt trading with cryptocurrency-related entities and to prohibit such transactions.

 Operational Assessment

  • Quality is directly influenced by the structure used to complete the work. The team will be able to scale while being efficient if they create clear processes that aren\’t too heavy. If given more time, every process will fail, thus it\’s critical that the team has a mechanism to reflect on them and improve them over time. This is what agility is all about.
  • Many entrepreneurs struggle with the discovery, shape, and definition of their products. It is critical that they construct the proper

structures/products/service lines.


GoZoomo – The company attempted to close the information asymmetry gap by offering peer-to-peer pre-owned car transactions. They couldn\’t provide automobiles with consistent prices depending on their condition, model, and features. They only sold 20 cars out of every 100 that were examined, which was not viable. The country\’s buy-and-sell automotive market was still developing and would take some time to mature. Customers would often want a particular model, but when they checked the pricing of a similar model on other marketplaces other than Zoomo, they found that it was often cheaper.

 How Insights can assist the new startups?

 Our professional consultants work with the Private Equity/Venture Capitalists & Founders for the valuation of startups, financial due diligence, Business Plan/Information Memorandum, Teasers, & Corporate Governance to create impact, whilst supporting a business to achieve exceptional performance and above-average returns.

  • We are helping the clients to grow at each stage of the business lifecycle.

 Types of Due Diligence:


Financial due diligence: Assessment of financial health where financial statements, assets, debts, cash flows, and projections are looked at.
Legal due diligence: Assessment of a company’s legal liabilities, including partnerships and licensing agreements.
Intellectual property due diligence: Assessment of a company’s intellectual property including patents, copyrights, and trademarks.
Information technology due diligence: Assessment of a company’s IT infrastructure and cybersecurity risks.
Human resources due diligence: Assessment of a company’s workforce, including the overall benefits, salaries, and bonuses.
Operational due diligence: Business Model, Operating Model, Assessment of a company’s operational risks and opportunities, Timing Risk, Execution Risk & Product Risk.
Market due diligence: Assessment of the market size, share, and potential trajectory to ensure the deal makes strategic and financial sense.


Courtesy Due Diligence Services in KSA

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