Tech-focused Saudi VC (venture capital) firm STV is establishing a new Shariah asset class with a US$100 million ‘callable equity’ fund that provides seed money to start-ups, in return for stakes in the companies that the owners can buy back later.
Called NICE – for its ‘non-dilutive investment in callable equity’ – this fund is among the innovations of Saudi finance borne out of a combined public-private sector will to reshape the Kingdom’s commerce and tech landscapes, STV General Partner Ihsan Jawad shared with IFN Investor.
“NICE is the first instrument of its kind that I can say produces, or promises, a regular income stream to investors in high-growth companies.”
NICE was launched on the 1st May 2025 under the auspices of Saudi technology as well as capital market regulators and backed by prominent local bank SAB Invest – STV’s partner in the project.
Under NICE, investors purchase equity in a start-up at a discount, with the expectation that the owners of the company will buy back those shares over a predetermined period, typically five years with semi-annual options, at a pre-agreed price.
This contrasts with the longer lock-in periods typical of VC funds. The structure hinges on the investee companies’ success and desire to avoid dilution by repurchasing the shares.
Unlike debt, Ihsan stressed that the buyback is solely at the company’s discretion, meaning there are no covenants or mandatory repayment schedules.
Friendlier than venture debt
NICE’s model, Ihsan argued, makes it more “founder-friendly” than venture debt, which often comes with restrictive conditions.
“It’s their call to buy back,” Ihsan said, referring to the start-ups. “It’s not our put,” he added, emphasizing the absence of a mandatory repurchase obligation, a key distinction from debt financing.
In practice, STV is attempting to create a new asset class that sits between traditional VC and debt. With this path, NICE offers a Shariah compliant way for investors to gain exposure to high-growth tech, along with the potential bonus of more frequent returns and less restrictions in funding.
The innovation in the offering lies in the ‘callable equity’ structure, designed for regular buybacks and income generation within Islamic finance principles.
Ihsan said NICE is particularly suited for tech start-ups with subscription-based B2B models and predictable recurring revenue.
The focus on revenue stability is driven by the need to facilitate regular buybacks and returns, distinguishing NICE from VC funds with broader mandates that might invest in companies with more lumpy revenue streams.
Bridging the old and new in Shariah finance
Unlike traditional VC funds that typically offer returns only upon exit – which can take eight to 10 years – NICE is structured to potentially provide investors with regular income through the semi-annual buyback mechanism, provided the portfolio companies choose to exercise this option.
This aims to bridge the gap between long-term equity investments and income-generating assets.
Ihsan said NICE Fund 1 – the first in a planned series – was positioned to open a new path for the Kingdom’s tech ecosystem.
STV, with over US$1.3 billion under management, plans to invest Fund I in 15 to 20 companies, focusing on subscription-based B2B tech firms that offer more predictable revenue streams. The fund is targeting returns in the high teens for its investors.
Ihsan said the NICE concept aligned with the desire of both the Saudi National Technology Development Program (NDTP) and the Capital Market Authority in wanting to see more private sector participation in innovation.
“The NTDP was one of the first to recognize a gap in the growth capital stage of the tech ecosystem in Saudi Arabia and value the importance of non-dilutive capital.
“They were quite courageous and innovative to back a new structure such as NICE and to bring it out to the market.” While the initial fund will be focused in the GCC region, Ihsan said STV has ambitions to take NICE globally with future funds, potentially expanding beyond the Middle East once a track record is in place.
