Saudi Arabia recently revealed its first locally-made smart chip along with a series of tech initiatives worth over $1.2 billion in partnership with 10 global tech giants. This step is a natural byproduct of the country’s digital transformation. A potent mix of top-down institutional support and bottom-up creative vigor is propelling Saudi Arabia to the helm of regional tech and entrepreneurship.
Thanks to this synergy, the Kingdom is rapidly emerging as a hub of innovation and tech-centric development – a transition made possible by the sector’s central role in Vision 2030, its economic efficacy, and most importantly, its intrinsic value as a vehicle to empower the country’s youthful majority.
The link between the social innovation and national development has never been more explicit: raising the current contribution of SMEs to GDP from 20 percent to 35 percent by 2030 is listed as a top priority.
Recent sector-wide developments reveal the magnitude of this commitment.
Saudi Arabia is the Middle East’s largest economy, with a gross domestic product (GDP) of more than $790 billion and a population of 34 million, of which nearly two-thirds are under the age of 35. These figures suggest massive potential for a thriving tech scene - the Kingdom and its youth are leveraging this asset accordingly.
In 2020 alone, the Kingdom raised a record $152 million in VC funding, with a 55 percent increase in total funding from the MENA region exclusive to Saudi startups. More recently, this year saw record-breaking investment inflows into Saudi startups: the value of capital raised in the first half of 2021 accounted for 14 percent of MENA venture capital funding and 21 percent of the region’s venture capital transactions. The uptick was two-fold: an increase in the volume and quality of start-up investments as well as an increase in the quantity of angel investor groups and venture capital funds.
Funding is only one part of the equation, as strides in digital infrastructure are proving equally impressive: according to the IMD Smart City Index for 2020, Riyadh rose from 71st place to 53rd in one year for digital infrastructure. Most recently, Saudi Arabia has been ranked first in the Arab world and 22nd globally in the Global Artificial Intelligence Index - over the next 15 years, investment in AI is projected to add 12.5 percent to the country’s GDP.
This last year saw Google sign a $10 billion agreement with oil giant Aramco to set up cloud infrastructure in the country for the first time; Huawei is set to open its largest flagship outside of China in Riyadh; Chinese technology and retail giant, Alibaba, began an anticipated $500 million investment program in the country. These figures programs provide a clear signal: global tech is confident in the Kingdom’s potential as an emerging hub of digital innovation and entrepreneurship.
In line with Vision 2030, the Saudi government has set aside new funds to be allocated to SMEs through Monsha’at (Saudi's General Authority for Small and Medium Enterprises), the Saudi Venture Capital Company (SVC), the Social Development Bank and others. While Monsha’at eliminates administrative, regulatory, technical, procedural and informational obstacles faced by the sector, SVC directly invests in the country’s startup scene with a fund worth $1.33 billion.
Beyond relevant entities, key regulations have been amended to specifically support entrepreneurs. Major developments include the entrepreneurial license initiated by the Saudi Ministry of Investment (MISA), Venture by Invest Saudi - an initiative to attract international VCs and their portfolio companies – and friendlier regulatory frameworks for company registration that allow international VCs to expand within the Saudi ecosystem.
As far as impact is concerned, the Saudi tech transformation extends far beyond quantitative metrics and indices. The pervasive opportunities offered by the sector are transforming how young Saudis think about success, failure, social impact, and where they stand vis-à-vis national development.
Historically, the career progression for many young people in the Kingdom followed a relatively predictable path: graduate from college, land a lifetime job at a large organization or the public sector, and then retire. That path no longer cuts it. Today, young Saudis are acutely aware that this generation is uniquely positioned to shape the future of the Kingdom and are venturing out –- and excelling - in the unpredictable, but fundamentally rewarding, world of entrepreneurship.
This was certainly the case for Mohammed Aldhalaan and Aziz Alsaeed, co-founders of Noon Academy, the fastest growing edtech company in the MENA region. With more than 7 million registered students from Egypt, Jordan, Kuwait, India, and Pakistan, Noon Academy secured over $13 million in a bridge funding round last year.
The entrepreneurial shift we see today is a trail of success blazed by an earlier generation of visionaries, whose entrepreneurial verve was responsible for the likes of Hungerstation, Mrsool, DokkanAfkkar, Unifonic and others.
Equipped by the vision and resources from the top-down, young Saudis view entrepreneurship as a means through which they can actively participate in both youth empowerment and national development. Startups represent an indispensable vehicle to channel young Saudis’ creative potential, ambition, and fervent passion to see their nation thrive. The need for economic diversification is faced with an equally vigorous will to rise above its limitations – through entrepreneurship, this generation of Saudis have found an opportunity for every challenge.