Riyadh, February 20, 2023, SPA -- HRH Prince Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince, Prime Minister and Chairman of the Council of Economic and Development Affairs, has announced the establishment of the Strategic Office to Develop the Northern Borders Region. The office aims to increase the level of development in the cities and governorates of the region, and enhance the quality of life of citizens and visitors of the region through investing the economic, natural and historical elements there, and in its strategic border location as one of the gates to the Kingdom of Saudi Arabia.

The office will be responsible for launching quality initiatives and projects that contribute to creating an attractive investment environment, with a view to achieving great development and an economic revival, and create employment opportunities for citizens in a way that boosts sustainable development goals. The office will also be tasked with coordinating government institutions efforts to boost development in the Northern Borders Region, setting up mechanisms based on which development is going to take place, measuring the performance of government institutions, and making use of the potential and natural resources in a way that enhances the economic and social aspects in the region, before establishing a development commission in the region.

The establishment of the office is part of several other strategic offices and development commissions in different regions of the country, following the example of similar commissions and offices across the Kingdom of Saudi Arabia that have realized big successes in implementing their tasks under the direct supervision of HRH the Crown Prince, which reflects his keenness to achieve sustainable development in all regions, to make them attractive to domestic and foreign investments, and boost tourism, and political, economic, cultural, and sports aspects to benefit all citizens, and create a prosperous economy and vital society in an ambitious homeland in realization of the Saudi Vision 2030.

The office focuses on taking advantage of the exceptional potential of the region and its cities, as well as investing in its natural, tourist and historical heritage, in order to increase its contribution to the national economy and create an environment that attracts domestic and foreign investments, which will play a role in diversifying citizens' sources of income. The office will also contribute to creating more job opportunities for the citizens of the region. It will also address any difficulties or obstacles hindering the utilization of the economic elements of the governorates' agricultural, tourism, heritage and entertainment projects.

The Northern Borders Region, situated on an area of 133,000 square kilometers, is home to 400,000 people, contributes SAR27 billion to the Kingdom's GDP, and is desertic in nature, full of valleys and plains. It houses a large reserve of phosphate that is equivalent to 7% of the global phosphate reserve, and one of the world's largest reserves of natural gas, in addition to having several phosphate industries that offer great opportunities for the manufacturing industries.

--SPA

15:52 LOCAL TIME 12:52 GMT

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Riyadh, February 13, 2023, SPA -- In line with The Human Capability Development Programs objectives - one of the programs of Vision 2030 - King Salman Global Academy for Arabic Language (KSAA) has launched Saudi Arabia’s first “Language Immersion” project with short-term educational programs for Arabic for Specific Purposes (ASP) learners. The project will help students develop their communication skills by engaging with Saudi society, learning about Saudi culture and traditions, and practicing the language in its native environment. It also aims to boost cooperation with relevant global organizations through various language learning programs.

The Language Immersion programs deliver several ASP tracks, including Arabic for Culture Purposes and Arabic for Tourism Purposes, backed by various activities and excursions that enhance the learning process.

KSAA will offer the "Arabic for Tourism Purposes" track during the first quarter of 2023 in Jeddah, targeting tourists looking to explore the Saudi touristic and archaeological sites by exposing them to the Arabic language through a cultural context and enhancing their language and communication skills via language immersion activities.

The "Arabic for Culture Purposes" track will be launched in the 2nd quarter of 2023 in Jeddah and will cater to international students who are studying Arabic as a foreign language at universities or language centers abroad and are interested in learning Arabic in its native environment.

To commemorate the launch of the program, KSAA is offering learners the opportunity to join one of the two tracks for free, with the tuition, accommodation, and commuting expenses fully covered.

--SPA

14:50 LOCAL TIME 11:50 GMT

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Riyadh, January 12, 2023, SPA -- The venture capital report in the Kingdom of Saudi Arabia revealed that 2022 saw a record investment of SAR 3.701 billion ($987 million) in Saudi startups, recording a growth of 72% compared to 2021.

The report, issued yesterday by MAGNiTT, which is a platform specialized in venture capital data in startups, supported by Saudi Venture Capital Company (SVC), confirmed that although 2021 was a record year for venture capital in the Kingdom, 2022 saw unprecedented growth, where the value of venture capital in the Kingdom registered a new record.

The Kingdom of Saudi Arabia achieved the highest growth rate of venture capital in 2022 compared to other countries in the Middle East and North Africa. The Kingdom was able to maintain its position as the second largest market in terms of venture capital among countries in the region in 2022, accounting for 31% of total investments in the region, compared to 21% in 2021.

The Kingdom of Saudi Arabia also registered a new record of 104 investors in 2022, where the number of investors went up by 30% compared to 2021, while the Kingdom recorded double the number of exit deals for startups in 2022 compared to 2021 with a total of 10 exit deals.

CEO and board member of SVC Dr. Nabeel Koshak said: the Kingdom of Saudi Arabia’s achievement of an unprecedented growth in venture capital is the result of launching several government initiatives that stimulate venture capital and startups as part of Saudi Vision 2030, in addition to the emergence of increasing numbers of influential investors from the private sectors and innovative entrepreneurs.

He added: We, at SVC, are committed to continuing to stimulate investors in the private sector to provide support to startups and small and medium sized enterprises to become able to quickly grow, which will lead to diversifying the national economy and realizing the targets of the Saudi Vision 2030.

--SPA

14:25 LOCAL TIME 11:25 GMT

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2022 was another strong year for the region’s startup ecosystem. Forbes reports that MENA’s 50 most-funded startups raised around $3.2 billion in 2022, up 6.7 percent from 2021. The UAE led the pack, with 18 startups that represented 30.1 percent of the total funding. Saudi Arabia was a close second, representing 29.6 percent spread across 12 firms.

UAE-based agri-tech solutions firm Pure Harvest Smart Farmsalone raised $387 million. As can be expected, fintech continued to dominate with 21 companies receiving $1.3 billion between them. The UAE’s Tabby and Saudi Arabia’s Tamara were the top fintech names, raising $275 million and $216 million, respectively.

The UAE has become an entrepreneur’s haven with the UAE leadership committed to continually making it the most futuristic, world-class interconnected infrastructure with access to a diverse, multi-talented talent pool with mechanisms to funding available across the UAE. Abu Dhabi, in particular, has established itself as a global hub for entrepreneurship. Each change by authorities and regulators reflects the times and seeks to shield new businesses from regional and global externalities.

The tech industry, as we know, has undergone many changes of late and can see many more on the horizon – hybrid work and rampant platform adoption being two examples of the former and the Metaverse being an example of the latter. And let us not forget that the tech industry is not immune to the prevailing economic headwinds that have knocked so many other businesses off course.

As we head into 2023, here are the top trends we predict will have a significant impact on the MENA region’s entrepreneurial ecosystem.

Given the economic outlook, startups will feel inclined to raise capital and better manage their spending. That entails having their costs sync with an accurate growth projection. Resilient founders will need to understand the extent of their runway to optimise their budgets and cut costs on new hires and marketing spending unless it’s vital for growth. Founders will focus more on building sticky products that their users need by going back to the core, concentrating more on the tech, and enhancing the customer’s experience.

On the other side of the credit crunch is the investor. What is going through their mind? While some bulls remain, the uncertainty of recent years is bound to have brought out the bearish side in most. In 2023, we can expect closer scrutiny of valuations. This will be a time for founders to show investors more than just an inflated valuation – to craft a compelling narrative that encourages reinvestment without compromising founders’ ownership in their companies.

There is no doubt that unit economics are one of the most influential factors that investors look at when making investment decisions. This year, founders will have to demonstrate the viability of their business model and how they will generate profits from it. They will need to zoom in on their customer acquisition costs, lifetime value, churn, and retention rates. Investors will favour companies with favourable unit economics early on and seek startups that clearly understand their metrics and the reasoning behind their numbers.

Although it may be difficult for early-stage entrepreneurs to achieve this goal, they can create accurate projections of their potential metrics by conducting market research and analysing their competitors to provide investors with an understanding of their potential.

In 2023, the UAE will host the 28th Conference on Climate Change (COP28). Global attention will be focused on the country, its leaders, and its companies. It is expected that startups in the sustainability space will receive a great deal of attention, and companies with a strong environmental story will attract funding from venture capital firms and venture capital funds that have a net-zero agenda of their own. Environmental sustainability is becoming increasingly critical for governments, consumers, and employees.

Increasingly, laws and regulations related to sustainability are being enacted in many regions. VCs will become more interested in investing in sustainable startups to meet this demand and potentially tap into new markets and opportunities. It is also possible for startups that do not follow any sustainable standards to change by understanding their environmental impact, setting clear objectives, and implementing sustainable practices to positively impact the environment.

Well-funded startups can fail. Case in point: FTX. Expect 2023 to be the year investors recoil from hype and focus more on industries that can drive real impact. The crypto world that gave a welcoming home to FTX is not the only FOMO-encumbered segment. Distorted market signals can be found everywhere. Investors are now likely to laser in on industries rather than individual hero tales. Fintech is a proven prospect, but others that have done well in the face of regional economic jitters are healthcare, agritech, real estate, and edtech.

We often talk of the business-friendly environment in the UAE, and changes in legislation continue to ease the journey for startups. Because of this, the UAE is becoming more and more attractive as a location for global and regional HQs. ADGM has established clear regulations that support companies with expanding their companies to the UAE.

In addition, ADRO was established to assist new residents in relocating and integrating into the UAE’s culture and society. They currently provide smart services for golden visa applications that is becoming extremely attractive to founders.

Investors have an opportunity to guide foreign-owned businesses through setting up shop in Abu Dhabi and taking advantage of local freedoms, thus enriching the national business climate, and paving the way for local B2B firms to benefit from more customers.

The mentorship of startups in the UAE is unparalleled. Support functions here steer business leaders towards the right trends, the right contacts, and the right programmes. It is important for founders to be equipped with the right preparation and mindset to anticipate any changes. However, there is every reason to believe that 2023 will be another year of growth and success.

According to data gathered by Sortlist, startups in MENA raised $323.7m in 66 separate deals in June of this year, with investors in the US being the most active foreign investors.

Giving cities a score out of 10 based on a matrix of its own creation Sortlist scored Riyadh top of the list at 7.92.

The Sortlist report said: “Riyadh, Saudi Arabia, proves to be the best MENA city for startups.

“Average broadband speeds of 94.64 Mbps are higher than most, and literacy rates are standing at 95%. Riyadh also has one of the highest happiness ratings in MENA and an electricity cost of just 4.2 p/kWh”.

The superfast broadband speeds available in Dubai make it stand out as an attractive proposition for startups in the Middle East.

“Dubai has a massive internet download speed of 189.07 Mbps, larger than any city in the UK and MENA on this list,” said the Sortlist report.

“Perfect for hybrid working and working with international clients and employees, fast internet like this is sure to boost efficiency in those crucial early stages of a business.

Kuwait City took third spot, with cheap electricity and high literacy rates seen as key factors.

“Kuwait has an exceptional literacy rate of 96% and a very low electricity price of just 2.5 p/kWh. Pairing this with a very decent broadband speed of 149.37 Mbps suggests that Kuwait offers the perfect environment for a budding business, however, the office rent is a little high at $370 per month,” said Sortlist.

Last place in the list was Tripoli, Libya. Although it benefits from relatively cheap electricity and office rental costs, extremely unreliable Internet speeds and relatively unhappy workers on the Sortlist happiness score make it unsuitable for a startup in the Middle East.

Dubai’s ambition to be a key place for startups in the Middle East has seen many entrepreneurs launch in the city. The UAE was dubbed the future of startups in the Middle East when Toronto firm ConvertX moved its headquarters to Dubai in response to the UAE’s coronavirus response and the city’s ‘unique’ opportunities.

UAE-based fintech startup YAP is in talks with a clutch of investors – global as well as from the Middle East venture capital (VC) funds – for raising $20 million funding.

The investment is for mainly financing the digital banking venture’s expansion plans in Africa and South Asia.

Marwan Hachem, founder and Group chief executive officer of YAP, confirmed to Arabian Business that the venture is currently tapping investors for another round of capital raising.

Financial technology (fintech) is set to play a key role in Saudi Arabia’s economic and financial development. Over the past couple of years, the kingdom has taken a series of steps to introduce policies and initiatives to develop an ecosystem that not only boosts the domestic financial sector but also competes against other fintech ecosystems.

On Sept. 29, the Saudi Central Bank (SAMA) announced that it permitted a number of companies to offer Open Banking Solutions — a digital method enabling customers to securely share financial data with third parties — in its Regulatory Sandbox, a platform open to fintechs and financial firms to test new digital solutions before launching on the market. These companies include Wally Global Arabia, Sanam Aliliddikhar for Information Technology, Istishraf Al-Bayanat for Financial Technology and Spare Arabian Financial Company.

This came after SAMA announced the licensing of two payment financial technology companies — Arab Sea Financial Company and Fatoraah — to provide payment services for e-commerce in the kingdom. The latest licensing brings the number of licensed payment companies in the country to a total of 21, in addition to five companies that obtained "in-principal approval,” according to a SAMA statement.

The latest licensing follows an update by SAMA to its Framework Regulatory Sandbox at the end of August. The updated framework allows flexibility by enabling financial institutions as well as local and international startups to apply anytime throughout the year rather than applying at a specific time.

In June, Saudi authorities announced and approved the kingdom's FinTech Strategy Implementation Plan, which is the fourth pillar of the Financial Sector Development Program (FSDP). The FSDP seeks to create a diversified and efficient financial services sector to support the development of the national economy, diversify its sources of income and stimulate savings, finance and investment.

The FinTech Strategy aims to position the kingdom as a global leading center for fintech and increase the sector’s contribution toward the gross domestic product to 13 billion Saudi riyals ($3.46 billion) by 2030. Among the strategy’s key commitments is to increase the number of fintech companies operating in the kingdom to 230 by 2025 and 525 by 2030. In addition, it aims to increase the share of non-cash transactions (digital transactions) to 70% by 2025.

Ivo Detelinov, partner at Oryx Fund, a MENA-focused fund that invests in early stage technology startups, said that in addition to the fintech strategy, the kingdom has introduced a number of regulatory policies and initiatives to advance the industry. These include the SAMA Open Banking Policy, the Payment Services Law, the Capital Markets Authority (CMA) Financial Technology Experimental Permit Instructions, supported by the SAMA Regulatory Sandbox, the CMA FinTech Lab and FinTech Saudi.

The FSDP’s FinTech Strategy objectives and timelines are ambitious and wide-reaching. However, Saudi Arabia has encouraging characteristics that make it an attractive destination for fintechs and startups.

The kingdom’s population of 35 million is the largest in the Gulf Cooperation Council and has a median age of 31.5 years. The youthful Saudi population is also one of the most interconnected in the world with internet and smartphone penetration rates of 98% and 92% respectively. This is set to increase in the years to come.

Anna Zeitlin, legal director at PwC Legal Middle East and director of Fintech, believes that there are opportunities in three business areas: payments, buy-now-pay-later and digital banking services.

Others like Ibrahim Alhejailan, partner at Plus Venture Capital, told Al-Monitor that all sectors within fintech have their own set of opportunities and challenges, and the biggest opportunities lie in the lending component.

“Companies are continuously looking for alternative lending solutions other than banks. Fintechs in this space are able to make quicker decisions and automate a big part of the process. The business model for lending is quite straightforward, where money is made from fees and/or interest,” said Alhejailan.

A fintech policy analyst familiar with the Saudi ecosystem, who requested to remain anonymous, said that non-financial sectors are also embracing and entering the fintech space. He said sectors including real estate, tourism and hospitality are getting involved in fintech, which opens new opportunities in embedded finance.

While Saudi Arabia’s fintech sector presents opportunities for entrepreneurs, venture capital investors and consumers, analysts note that there are specific, long-standing challenges that continue to hinder the market’s full potential.

Zeitlin said that finding skillful talent and recruitment might be the main challenge faced by fintechs in Saudi Arabia. She said that a recent PwC Hopes and Fears Survey found that 58% of Saudi Arabia respondents feel that their country has a shortage of people with the necessary skills.

“This challenge is not only present in the kingdom, but rather a reflection of a global trend in the wider technology industry,” said Zeitlin. “Acquiring talent acquainted with fintech concepts who can design and develop digital financial solutions requires an understanding of both the market and the customers' needs, which doesn’t come easily.”

Similarly, Muhannad Ebwini, founder and CEO of HyperPay, a Riyadh-based payment platform, said that his biggest challenge is always finding and recruiting digital talent to design, develop and enhance digital financial services.

“This requires relevant experience and the skill set to match, plus an ability to understand customer needs,” he said. “Sometimes it’s hard to find the right person.”

He added that the evolving regulations and public policy as well as the customer testing process, which can lead to higher operating costs, also pose potential challenges.

Another challenge is the involvement of incumbent Saudi banks and financial institutions in the fintech space.

“Traditional banks are adopting fintech solutions that could compete with the new startups,” said Alhejailan. “They have the financial power to withstand crises and are more likely to survive.”

He added that despite a supportive regulatory environment, there are still tight regulations, with only a few startups receiving full licenses to operate. He said SAMA and the CMA are still quite conservative.

Tarek Fadlallah, chief executive officer at Nomura Asset Management (Middle East), said that although the current framework is supportive, regulations have historically been geared toward standard commercial banks.

“[It is] not clear that they are flexible enough to accommodate small firms with limited capital and modest operations,” he told Al-Monitor. “Fintech has a lot of potential in the kingdom, but authorities will be cautiously supportive unless it causes systemic risks or disrupts existing banks too quickly.”

Driven by Saudi Arabia’s unprecedented growth in its startup ecosystem, the Kingdom’s venture capital funding increased by 72 percent last year compared to 2021 with investments reaching $987 million across 144 deals, according to MAGNiTT.

However, the leading startup and venture capital data firm cautioned that, as global economic uncer- tainty and investor fatigue rises, the venture market might be most vulnerable to taking a hit.

In an interview with Arab News, Philip Bahoshy, founder of MAGNiTT, said he believed that venture funding will begin to see a decrease in growth rate this year but Saudi companies will compensate via mergers and acquisitions.

Rise in M&A activities

“We will continue to see a record number of M&A activities,” he said. “Companies that are unable to raise funds will potentially merge and well-funded companies, specifically in Saudi Arabia, will look for inorganic growth by acquiring companies in other geographies.”

M&A activity is also driven by exits and initial public offerings as Bahoshy stated Saudi companies will start to go public in the local market more than in other Middle Eastern countries.

“Well-funded companies in Saudi Arabia that are supported through government initiative funds are likely to become acquirers of startups, than being acquired,” he added.

In 2022, the Middle East and North Africa region saw 17 M&A compared to 41 in 2021 while Saudi Arabia alone witnessed 10 M&A transactions last year compared to five the year before, a 100-percent increase. “I anticipate a country like Saudi Arabia that has very specific government initiatives, support for startups, and fund of funds will continue to deploy capital and grow year on year,” Bahoshy reiterated.

Bahoshy went on to say that international companies and corporates will also start to make acquisition moves in the region because of low valuations.

Bahoshy added that other geographies in the MENA region will witness a slight decline in funding activity driven by two main reasons: the lack of liquidity and geopolitical challenges.

“When you compare 2022 to 2021, you see a slowdown in that aggressive growth, driven by parallels to global economics where increased inflation has driven to increase interest rates, a slowdown in the public markets transpiring into lower valuations, and a slowdown of liquidity in the private markets, not completely dissimilar to what’s been seen at a global level,” he further explained.

Growth in Saudi venture markets

Saudi Arabia managed to grow when leading venture markets in the region witnessed a downfall in investments in 2022 like the UAE’s 20 percent year-on-year decrease in funding.

Bahoshy explained that Saudi Arabia’s rise in these tough times was mostly powered by government focus on startups and the support provided by funds and companies which will also decide the Kingdom’s continued growth.

“It is very much driven by how many companies will be raising $50 million, $100 million, $150 million and being able to raise that level of capital in this challenging economic environment that we’ll see that growth year on year,” he added.

Industry prospects

In 2022, the financial technology sector, also known as fintech, was the industry of choice for investors attracting almost 25 percent of the total startup investments in the Kingdom. Bahoshy expects fintech to continue to dominate the funding space in Saudi Arabia with the launch of financial develop- ment initiatives and the activation of open banking.

“As a standout industry in 2023, I anticipate it will remain financial services, however, what you do tend to see is in this type of environment, the software as a service enterprise solutions industry remains extremely appealing for investors,” he stated.

Bahoshy added that sustain- ability, healthcare and educa- tion will be growing sectors in the upcoming year as these sectors are ripe for disruption and development.

Last year, edtech, short for educational technology, saw a 2,000-percent increase in funding year-on-year while information

technology solutions witnessed an 819-percent increase, according to MAGNiTT’s 2022 report.

Upcoming trends

As the region opens up to the world, more international investors are putting their cash in companies and startups that are making the ecosystem more attractive.

Last year, international investors made almost 44 percent of all investments in the Kingdom with Emirati investors making 16 percent and US-based funds amounting to 11 percent.

Bahoshy anticipates the international investor trend to grow even further as more countries will direct their capital into Saudi Arabia and the region.

“I expect there to be a slowdown from international investment in our region from the US and potentially Europe,” Bahoshy stated. “However, I predict regions like Southeast Asia, Japan, China, now that the COVID restrictions have been removed and travel has been eased, to direct their capital into Saudi Arabia and the region given there is a natural affinity for our region.”

He added that as the region is rich with sovereign wealth funds more capital will be deployed from the Middle East to global and local entities.

Bahoshy believes that 2023 will be a tough year for the startup ecosystem given global economic uncertainties but added that the market will start to pick up pace by the first quarter of next year.

“Effectively for the next six to nine months, I think that it’ll be a real slowdown in investment activity, which will continue into the end of the year, and that the pickup will only happen in the first quarter of 2024,” he said.

Moreover, the slowdown in investment activity is set to hit late-stage and early-stage ventures but it will not have much of an impact on series A-stage startups.

“The sweet spot that we anticipate is in the series A or late seed stage, that’s a ticket size between $1 million and $5 million of investment because it’s not super early, where it’s risky. Companies are likely to have shown product market fit and have had to focus on monetization, if not positive unit economics,” Bahoshy explained.

https://www.arabnews.com/node/2253711/business-economy

Saudi Arabia’s startup ecosystem is beginning to thrive as new and increasingly larger investments into young Saudi companies continue to mount.

The latest is Saudi B2B ecommerce marketplace Sary, which announced that it has raised $30.5 million in a Series B round led by VentureSouq.y. The round was also joined by Silicon Valley’s Rocketship.vc, STV, and returning investors Raed Ventures, MSA Capital, and Derayah VC. It takes Sary’s total investment raised so far to over $36 million, making it one of the best funded startups in Saudi and the best B2B ecommerce marketplace in the region, according to MenaBytes.

Sary’s announcement comes almost simultaneously as a record announcement from Saudi startup Retailo, which closed a $6.7 million seed investment round on Thursday, the largest seed capital raised by a Saudi startup.

These announcements pile on to a record first quarter for Saudi startups, which raised $76 million in the first quarter of 2021, a 137.5 percent increase on the previous quarter’s fundraising total of $32 million.

Last month, a 9-month old Saudi startup, Tamara, raised $110 million in a Series A round led by leading global payment processor Checkout.com. And, Gazal, a Saudi Arabia-based micromobility startup, raised $2 million in a seed funding round led by angel investors and family offices.

The increasing number of venture investments in new, homegrown Saudi companies is indicative that efforts to transform the Kingdom’s economy away from oil are starting to pay off.

“The government’s push towards entrepreneurship is evident in the number of startups that have emerged in Saudi Arabia over the past few years. We are seeing more deal flow in the country and larger ticket sizes,” Triska Hamid, editorial director of Wamda, told Arab News in April.

Meanwhile, some other non-Saudi based startups are raising money to expand in the Kingdom.

“The year has started with a positive sign for startups and VCs. Lots of international investors are looking into the Saudi market, so lots of prosperity I think is coming on this year and we are going to witness a good number of the deals as well,” Amal Dokhan, who was one of the Kingdom’s first female venture capitalists (VCs) and recently joined Californian venture capital firm 500 Startups as a partner, told Arab News last month.

https://www.sustg.com/startup-ecosystem-in-saudi-arabia-begins-to-thrive/

A flat tire and a six-hour nighttime wait for roadside assistance inspired the creation of Saudi Arabia’s leading roadside technology app. Morni uses a network of over 33,000 service providers to offer roadside assistance to more than 1.2 million customers in the Kingdom and across the region.

“As the largest market in the Middle East, Saudi Arabia still has an undiscovered wealth of untapped potential, making it one of the region’s most exciting startup markets,” Abdullah Al Yahya, Morni’s cofounder and CTO, says.

Despite decreasing entrepreneurial activity in other parts of the world, Saudi Arabia’s support for entrepreneurship and diverse business sectors is fueling an expanding startup ecosystem. Its fastest-growing sectors include tech, fintech, and especially e-commerce, which is predicted to surpass $13 billion in value by 2025, according to a report conducted by Boston Consulting Group and Meta.

One of the Kingdom’s most successful tech startups, MRSOOL, began with a conversation at a café between two friends, Naif Al-Samri and Ayman Al-Sanad, who imagined having a brother in every city to help with errands. MRSOOL pioneered the on-demand service-fulfillment model in Saudi Arabia and the region, establishing a major customer network through a chat-based ordering system that lets users request any kind of delivery service and then lets couriers bid for the jobs, ensuring a fully scalable and self-regulating model.

“If I’ve learned one thing throughout my journey, it’s that you should never give up on your business idea if it feels right and you’re truly passionate about it,” says Al-Sanad, cofounder and CEO of MRSOOL. “You’re sometimes only a split second away from walking away and missing the opportunity—or persevering and seeing your dreams come to fruition.”

A Supportive Startup Ecosystem

Saudi Arabia’s startup successes largely result from sweeping reforms across key economic sectors that are unlocking new markets, boosting entrepreneurial ambition, and opening avenues of innovation.

These reforms are driven by Saudi Vision 2030, the Kingdom’s long-term plan to diversify the economy, whose goals include increasing small businesses’ contribution to GDP from 20% to 35% and boosting foreign direct investment from 3.8% to 5.7%.

Saudi Arabia’s Small and Medium Enterprises (SME) General Authority, Monshaat, designs initiatives that promote a culture of entrepreneurship and sets policies and standards in the SME sector.

Monshaat also organizes the Kingdom’s global start-up and SME forum, Biban, which fosters tangible opportunities by uniting local and international entrepreneurs, investors, and government officials to collaborate and share insights.

Among the opportunities this year at Biban 23 is the Entrepreneurship World Cup (EWC), one of the world’s biggest and most diverse startup pitch competitions and support programs. Since its inception, more than 400,000 entrepreneurs from 200 countries have registered.

Bucking Global Trends

Saudi Arabia is bucking global trends in entrepreneurial investment. Venture capital funding levels have soared year-over-year, with investment in Saudi startups growing by 72% in 2022 to a record high of $987 million.

The Kingdom’s small business sector gains in 2022 also match a boom in the regional startup ecosystem. The expansion of the SME sector in the Middle East and North Africa (MENA) region reflects a growing talent pool, advancements in technology infrastructure, consumer adoption, and macroeconomic and regulatory reforms.

MENA’s 50 most-funded startups raised around $3.2 billion in 2022, up 6.7% from 2021. In 2021, entrepreneurs struck three “mega-deals,” worth over $5 million; in 2022, there were seven.

Where Your Business Needs to Be

This evolution overcomes challenges entrepreneurs face in other innovation hot spots, such as troubleshooting market problems, gaining access to capital, hiring the right talent, and building brand awareness.

“The unique combination of Vision 2030, the public sector’s role in creating a highly supportive business environment, and an evolving entrepreneurship culture that has inspired a community mindset is developing a landscape where the initial hardships of starting a business can be overcome,” says Saud Al-Sabhan, Deputy Governor for Entrepreneurship at Monshaat.

“Starting a new business in Saudi Arabia today,” he says, “means having good access to the guidance, mentorship, and financial support you need to help your company succeed.”

https://hbr.org/sponsored/2023/02/how-saudi-arabia-is-fostering-a-supportive-startup-ecosystem

The Saudi Arabian startup ecosystem has experienced rapid growth in recent years. With the combined value of the sector surpassing $11 billion in 2022, Saudi Arabia is a significant emerging player in global tech. With 1,031 startups and scaleups operating in the country, the future of technology in Saudi Arabia looks very promising.

In 2022, in a year when many other countries were experiencing a slowdown in the tech sector, Saudi-based startups raised $972 million in funding, which represents a 1.5x increase from the previous year.

When compared to other local and global ecosystems counterparts, Riyadh ranked amongst the top 10% of performers in the Rising Star Index as well as performing 2nd best globally in the Early Stage VC growth category amongst other Rising Star ecosystems.

One factor contributing to the fast growth of the tech ecosystem in Saudi Arabia is the government’s strong support for innovation and technology. The LEAP23 conference, which took place in the country last week, announced investments of more than $9 billion to support future technology and startups.

The conference highlights the significant potential of the tech sector in Saudi Arabia, and the investments announced to demonstrate the confidence of investors in the future of the industry.

The Saudi tech ecosystem has also been benefiting from the Saudi Unicorns program, a nationwide program that provides state support to high-growth technology companies to reach unicorn status.

We’ve identified 35 companies so far that have benefited from this program which can be explored in the list below.

The fast growth of the tech ecosystem in Saudi Arabia has also been driven by the increasing demand for technology in the country. With the rise of e-commerce and digital transformation, businesses are looking for ways to leverage technology to improve their operations and better serve their customers.

In terms of top-funded industries, Fintech startups in Saudi Arabia have generated over a third of total VC investment since 2018 (36%) followed by Foodtech and Transportation related startups that make up a combined (43%) of VC investment in the country.

According to Dealroom.co data, some of the biggest capital venture funding rounds in the region include three separate rounds exceeding the $100M sum: a $100M Series B round into Tamara (August 2022), a $100M Series C round into TruKKEr (September 2022) and the largest round to date, $170M Series C round into Foodics (April 2022)

These large funding rounds are indicative of the growth potential of the technology sector in the region and the increasing interest of investors in the region. In 2022, the Saudi tech ecosystem experienced a record-setting year in terms of VC investment, with Saudi startups raising just shy of $1B for the year.

The fast growth of the tech ecosystem in Saudi Arabia is a result of government support, the availability of talent, and the increasing demand for technology solutions. The announcements at the LEAP23 conference and the emergence of late-stage funding rounds indicate a serious emerging player in the global startup ecosystem.

State and private companies from Saudi Arabia have been boosting their outbound campaigns as investment becomes the country’s favoured tool for soft power in the Middle East and Islamic world.

Foreign investment from both state-owned and private companies in Saudi Arabia totalled a record $22.6bn in the first 11 months of 2022, up from $2.2bn over the same period in 2021, according to fDi Markets. The Public Investment Fund (PIF), the country’s sovereign wealth fund, deployed $20.3bn in 2022 — up by 448.6% from a year earlier, research from Global SWF has found.

Strategy change

These rising levels of foreign investment signal a change of tack in the way Saudi Arabia uses its financial resources to increase leverage over the region, and the Muslim world as a whole.

Since the 1970s, Saudi Arabia has poured billions into targeted countries through central bank deposits or loans but in certain countries, like Lebanon, this has not always resulted in greater influence. Still, Saudi’s development role in the Middle East and Islamic world is notable, and its aid given to Muslim-majority countries dwarfs that flowing into Christian-majority countries in Asia and Africa, according to figures from the Saudi Fund for Development (SfD), cross-referenced with statistics from the Pew Research Center, a nonpartisan, US-based think tank focussed on social issues, public opinion and demographic trends.

One notable example of this changing strategy is Pakistan.
On January 10, Saudi prince Mohammed bin Salman instructed the country to look into increasing its investments in “the sisterly Islamic Republic of Pakistan”
from a previously announced figure of $1bn to $10bn, according to the Saudi Press Agency.

Madiha Afzal, fellow in the foreign policy programme at the Brookings Institution, says that Saudi Arabia has “long come to the help of its friend, Pakistan, bailing it out of its troubles”. The difference now, she adds, is that Saudi Arabia has said that it “is changing its model, seeking investments instead of giving loans, and requiring reforms in return”.

Testament to that is the fact that while outbound investment is rising, the SfD has recorded a fall in signed loan agreements, according to latest figures, dropping from a total of almost SR4bn ($1bn) in 2017 to SR$281m in 2021.

Power play

Neil Quilliam, associate fellow in the Middle East and North Africa programme at the UK’s Chatham House, notes that now “the Saudis want to play a bigger diplomatic role” and want “to invest to build that influence”.

This comes as the country plays catch up with other Gulf states, such as the UAE, which has extended its influence across the region to Pakistan, India and notably Israel, he says.

The PIF announced last year it will invest $24bn through investment companies in six Arab states: Bahrain, Iraq, Jordan, Oman, Sudan and Egypt. The fund is targeting sectors including infrastructure, real estate, mining, manufacturing and financial services. Elsewhere, Gulf sovereign wealth funds have been increasing their investments amid market uncertainty.

Attaching strings

During the World Economic Forum held between January 16 and 20 in Davos, Switzerland, Mohammed al-Jadaan, the Saudi finance minister, said that the country was “changing the way we provide development assistance”.

“We used to give direct grants and deposits without strings attached and we are changing that. We are working with multilateral institutions to actually say we need to see reforms,” he said on January 18.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, says that this is in line with the government’s objective to play a more developmental role. “Saudi has been shifting its aid in the region to be more reforms-led. It’s no longer ‘no strings attached’; they need to see results,” she points out.

https://www.fdiintelligence.com/content/news/saudi-arabia-switches-to-overseas-investment-to-boost-influence-81934