The launch of the "ZYA" fund, with a capital of 300 million Saudi riyals as a strategic partnership between the Cultural Development Fund and Merak Capital, represents the first institutional investment response aimed at driving the growth of the fashion sector in the Kingdom and bridging its financial gaps, which is the strategic transformation whose launch details we covered in our previous coverage.
At Mansooj, and out of our commitment to keeping pace with the transformations taking place in the Saudi fashion industry, we directed our inquiries directly to the management of the Cultural Development Fund and in coordination with the managing partner Merak Capital to present to you in this article an analysis explaining the fund's operational mechanism and the actual requirements for investment readiness.
Our analysis was based initially on a review of the official metrics announced by the fund in the international press (WWD); which summarized the aspiration to inject capital targeting growth-stage companies across the entire value chain of the sector, contributing in the long term to reducing the 7 billion dollar annual imports by enabling local manufacturing and logistics, and raising the contribution of the fashion and beauty sector to the GDP to 40 billion dollars by 2029.
The ZYA fund works to enhance the access of promising companies in the sector to investment opportunities. All investment opportunities are subject to comprehensive evaluation and study processes according to investment and commercial standards that include business readiness, growth potential, and sustainability. The program focuses on companies operating in fashion and accessories design and production, supply chain development, and e-commerce, including cosmetics, perfumes, and jewelry.
Why the Investment Focus on Modest Fashion, Perfumes, Beauty, and Jewelry?
The selection of these four categories was based on financial and cultural pillars that ensure investment returns and potential for international scalability, which are the spaces where local identity intersects with commercial growth opportunities. In the modest fashion sector, the fund sees a qualitative opportunity to link local cultural expression with a globally scalable product, converting Saudi cultural uniqueness into an exportable competitive advantage. As for the perfumes and cosmetics sectors, they are characterized by exceptionally high consumer loyalty rates, in addition to the flexibility of production and distribution models and their capacity for rapid scalability and reaching a larger consumer segment. The same applies to jewelry, where high barriers to entry impose a natural protection against rapid imitation and allow for premium pricing that ensures sustainable returns.
This categorical focus is supported by market figures that place the Kingdom in the lead, as it alone accounts for approximately 40% of the total fashion industry in the Gulf region. With the sector's targets to reach a total contribution of fashion and beauty to the GDP of 40 billion dollars by 2029, the investment bet is clearly heading toward the categories that lead the luxury sector, which are expected to constitute at least 15% of this total value.
If the Investment Priority is Directed Toward Brands, Where Do Enablers Fall Inside This Equation?
When looking at the distribution method of the fund's capital, we see that there is a clear desire to inject substantial investments capable of creating a structural shift in the targeted companies. In our dialogue with the fund's management, the priority was decided in favor of brands, which will carry the heaviest weight of this portfolio. Conversely, the fund's scope extends to include the enablers sector across the entire value chain, starting from manufacturing and logistics down to e-commerce platforms.
With the Fund's Preference for the "Growth Stage" and Avoiding the Risks of Early Stages, Does It Require a Minimum Annual Revenue for a Brand to Be Deemed Eligible for Funding?
The fund adopts a holistic evaluation model that goes beyond requiring a fixed minimum annual revenue, examining the reality of the entire commercial ecosystem without reducing it to a specific sales figure. Under this approach, the funding decision centers on identifying commercial maturity metrics as an indicator of the brand's scalability, specifically: revenue stability and its upward growth, the quality of the customer base and repeat purchase rates, and the clarity of the actual profitability path.
These indicators turn into a self-testing tool by which the brand examines its operational reality before taking the investment step: does demand continue after the initial launch momentum fades? Are sales moving within a context of stable growth or a fluctuating pattern? And is the administrative capacity operationally qualified if the volume of business doubles?
If This Commercial Maturity Is Achieved, How Is the Timeline of the Partnership Mapped and What About the Exit?
The fund operates according to private equity mechanisms with a specific target timeline within a phase during which the company is financially and operationally re-engineered in preparation for expansion.
Upon the maturity of the partnership, future exit options are distributed between two primary paths depending on the company's readiness and market conditions: such as mergers and acquisitions through selling shares to strategic investors and luxury conglomerates seeking regional expansion, or an initial public offering by listing and trading the brand's shares on the Saudi financial market (Tadawul or Nomu).
After the Financial Injection, What Is the Strategic Value and Facilities Provided to Brands by the Alliance Between the Cultural Development Fund and Merak?
The partnership between the Cultural Development Fund and Merak Capital is not limited to providing capital alone, but extends to supporting target companies through investment and administrative expertise that contributes to enhancing their readiness for growth and expansion. This path is reinforced by a board of directors that combines institutional influence and international expertise; chaired by His Excellency the Deputy Minister of Culture, Hamed Fayez, with the membership of the CEO of the Cultural Development Fund, Majed Alhugail, who serves as Vice Chairman of the ZYA Fund Board, alongside the CEO of the Fashion Commission, Burak Cakmak, the Founder and CEO of Merak Capital, Abdullah Altamami, and Ravi Thakran, Chairman of Turmeric Capital and former CEO of LVMH Asia. This diversity grants Saudi brands direct access to high-level strategic guidance and an international network of relationships specialized in the fashion sector.
Conversely, this link to the Cultural Development Fund and the Fashion Commission provides an opportunity for integration with the core ecosystem of the sector, as it facilitates utilizing various support programs, ensures the positioning of targeted brands within the cultural agenda of the Kingdom, and enhances their presence at major national and international events, accelerating the building of their commercial and cultural weight on both regional and global levels.
From the Reality of Your Review of Opportunities, What Are the Most Prominent Gaps That Hinder the Maturity of Local Brands and Prevent Them From Qualifying for Investment?
Despite the commercial success of many Saudi brands, the greatest obstacle lies in transitioning from the mindset of managing a locally successful brand to building a sustainable and scalable enterprise, and the fund diagnoses this obstacle into three critical operational challenges.
The first is the talent gap and the absence of administrative readiness, where the current leadership team may be excellent for managing the brand at its current size, but lacks the necessary experience to lead operations on a larger scale, manage large-scale logistics, and handle multi-market expansion, which requires supporting these companies with specialized executive and financial talents.
The second is inventory and supply chain management, which is the critical area that forces itself forward during expansion, as this routine procedure quickly transforms under the pressure of doubled demand into the decisive driver of the company's profitability or an obstacle to its sustainability.
The third is the absence of a digital infrastructure for data systems and real-time performance reports, without which decision-makers are unable to take calculated expansion steps based on numerical indicators rather than personal estimates, especially when managing multiple and simultaneous sales channels distributed between direct-to-consumer, e-commerce, and wholesale marketplaces.
The "ZYA Fund" outlines the features of the new era for the Saudi fashion sector, and from the reality of our continuous discussions with a wide spectrum of designers and brand owners in the local market, it is clear that what the industry needs most today lies in bridging the administrative skills gap and building executive leadership, as artistic excellence and design aesthetics represent only the starting step, while attracting institutional capital requires placing the administrative structuring at the forefront of priorities before requesting investment.
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