Saudi’s startup ecosystem: a powerhouse in the making

The global pandemic may have caused the economy to contract, but the Kingdom’s startup ecosystem is looking more robust by the day.

Saudi’s startup ecosystem is set to boom in the coming years – after all, the Saudi Vision 2030 mandates a thriving entrepreneurship ecosystem to increase SME GDP contributions from 20% to 35% by 2030. Startup growth isn’t only going to happen by 2030 but according to the International Monetary Fund’s January 2021 forecasts, Saudi’s GDP is set to increase by 2,6% this year, which can only bode well for the startup sector.

Riyadh is well on its way to be the Middle East’s tech startup powerhouse. Along with Vision 2030 prioritising entrepreneurship and SMEs, venture capital fund Saudi Technology Ventures (STV) has found that a combination of strong demand for tech products, successful Saudi-made tech solutions, as well as an increased presence of incubators and venture capital, have all contributed to the flourishing – and eventual booming – of a tech startup ecosystem.

STV also predicts that Saudi venture capital investments will grow from $50 million in 2018 to $500 million each year by 2025. Case in point: Saudi start-ups such as Nana Direct, an online grocery platform, and KAUST startup UnitX, an AI start-up, secured $18 million and $2 million in investor funding respectively just last year.

The STV report adds that almost 70% of MENA venture capital investments happened in the UAE during their 2019 study, yet it’s Saudi Arabia that was – and is – emerging as the largest startup market in MENA. This is due to its economic power and that its market allows startups to scale exponentially, as well as ease of starting a business.

Saudi startups are on an upwards trend – and there is backing at the highest level

When the global pandemic hit in 2020, the Saudi government created a $1 billion stimulus package to support more than 500 SMEs in the industrial sector: this was due to Covid-19, as well as a shifting of focus from oil to the manufacturing and industrial sectors.

Notably, startup development is one of the top priorities in Saudi’s Vision 2030: its second pillar aims to stimulate and diversify the economy by focusing on SMEs and entrepreneurs. Startups have also been bolstered by massive government funding and support initiatives, such as $19,2 billion being pumped into a stimulus package for the private sector (with a major focus on SMEs), as well as the setting up of a venture capital and private equity-targeted investment fund, loaded with $1,1 billion. The 2030 vision also plans to launch a network of incubators, accelerators, and workspaces in Saudi, as well as boosting SME financing at banks.

The General Authority for Small and Medium Enterprises (or Monsha’at) was also established by the Saudi government in 2016 to develop and support SMEs and startups. Monsha’at’s support includes helping with access to funding and enabling national entities to collaborate with SME and startup role players. Monsha’at launched a new Academy Program for Innovation and Entrepreneurship for Scaling Up Enterprises in December 2020; it runs until March 2021 and involves 50 SMEs. It aims to turbo-charge their efficiency and best business practices (to date, the authority has supported more than 250 SMEs).

Tech innovation is at the front and centre of Saudi’s startup ecosystem

The global pandemic has accelerated digital transformation in the MENA region, and Saudi is seeing its impact, with digital payments and greater investment in AI and mobile, all coming into focus. A hyper-digital world calls for more digital innovations, and Saudi startups are gaining traction.

Fintech startups are focusing on the increased demand for digital payments, and the likes of credit scoring technologies and AI-enabled Arabic language chatbots are a major focus, while all startups will be able to leverage the Saudi Data and Artificial Intelligence Authority (SDAIA)’s DEEM, the largest government data cloud in MENA, that was launched in October 2020. Also launched in the same month, is the National Strategy for Data & AI (NSDAI), that aims to make Saudi a global leader in AI and seeks to attract $20 billion in investments by 2030, as well as boost ecosystem development.

Big things are already happening in the Saudi startup sector – just look at Salla, Saudi’s startup answer to Shopify with all-Arabic infrastructure and total revenues up to $346 million, or e-learning startup Aanaab, which provides courses and training in Arabic for teachers across the Middle East. Noon Academy, Unifonic… the list goes on.

To realise Vision 2030, the development of a thriving startup ecosystem is needed and Saudi seems to be on track: policies are in place, there’s funding and support, and there’s a market that allows for rapid scaling up.

Most importantly, people – who have the drive and self-belief to be entrepreneurs – are needed, and Saudi isn’t short of an entrepreneurial spirit, either. According to the 2019/2020 Global Entrepreneurship Monitor report, 82% of Saudi adults knew someone who has started a business, and 83% believed that they possessed the right skills and knowledge to get their own business off the ground.