In the heart of the Middle East, Saudi Arabia’s economy is thriving, bolstered by its strategic position, robust economy, and governmental incentives. These advantages are attracting a plethora of investors eager to support the Kingdom’s startups and entrepreneurs.
Management consulting expert Houssem Jemili noted that Saudi Arabia leads the MENA region in technology investment, with expenditures roughly 2.5 times higher than the nearest competitor and demonstrating consistent annual growth.
“Saudi Arabia boasts a sophisticated and varied array of funding partners, including government entities and programs, significant investment funds, and venture capitalists. These groups facilitate both direct and indirect financial support to startups and entrepreneurs,” Jemili stated.
The Kingdom’s position as a pivotal tech hub in the area is strengthened by a substantial domestic market that demands tech products and services.
Economist Talat Zaki Hafiz remarked that Saudi Arabia’s status as the largest regional economy—accounting for over a third of MENA’s GDP and ranking 16th among G20 nations—has significantly influenced its ascent as a tech hub.
“Saudi Arabia’s technology strategy is driven by ambitious objectives and action plans that focus on attracting leading international tech companies to enable the creation of major tech projects,” Hafiz explained.
Saudi Arabia’s technological progress is highlighted by its ascension in the Global Innovation Index 2023, where it is ranked 48th out of 132 economies, improving from 51st and 66th in the preceding two years.
Jemili sees innovation as a critical driver of economic development, with the Kingdom making strides across various sub-indices of the Global Innovation Index that measure innovation inputs and outputs.
In the category of high-income economies, Saudi Arabia holds the 41st spot, reinforcing its burgeoning tech hub status. Furthermore, its fifth-place ranking among North African and West Asian economies emphasizes its growing regional influence.
Since the unveiling of Vision 2030 in 2016, Saudi Arabia has concentrated on tech industries and the digital economy, recognizing the importance of digital commerce in the modern age. Hafiz pointed out that with a young, tech-savvy population, the Kingdom’s e-commerce sector is expected to reach $15 billion by 2025, with online sales constituting a significant portion of this growth.
The LEAP conference in Riyadh, which concluded with over $12 billion in agreements, is a testament to Saudi Arabia’s increasing prominence in technology and innovation localization.
Jemili remarked on LEAP’s efforts as a nexus for the Kingdom’s tech and innovation ecosystem, fostering community and collaboration among various stakeholders.
Strategic investments in research and development, supportive policies, and an energetic startup environment contribute to Saudi Arabia’s digital prowess. Vision 2030 and the Digital Government Authority are laying the foundation for a tech-advanced future.
The presence of international tech giants in Saudi Arabia is indicative of the country’s thriving technology and innovation landscape. These corporations provide startups with essential infrastructure, including software labs, production studios, and cloud credits.
Massive investments by global tech companies underscore Saudi Arabia’s appeal as an investment destination, with Microsoft and Oracle committing billions to establish cloud regions in the Kingdom.
According to Jemili, the Kingdom’s integration of technology into the traditional economy is progressing well, with Vision 2030 emphasizing a shift towards tech transformation.
The government’s initiatives to promote innovation extend to the regulatory domain, with the establishment of regulatory sandboxes and fintech hubs. These platforms allow startups and tech companies to test new products and services in a regulated environment, balancing compliance and innovation.
Jemili highlighted the importance of a structured regulatory system that is mature, growth-oriented, and navigable. Predictable regulations that foster innovation and ease of doing business are crucial for gaining the trust of businesses and investors.
He also emphasized the need for a “phygital center of gravity,” which offers physical and digital support to new entrepreneurs and foreign startups in the Kingdom.
With over 1,600 startups supported by venture capital firms, Saudi Arabia’s startup landscape is diverse and poised for global leadership in technological innovation.
Hafiz underscored the Kingdom’s advancements in digital industries, citing its high ranking on the World Bank Group’s GOVTECH Maturity Index for 2022.
Several startups, such as those in the Saudi Unicorns Program, exemplify Saudi Arabia’s dedication to fostering entrepreneurship and nurturing local talent.
“The Saudi Unicorns Program offers a comprehensive suite of services to help high-growth tech companies reach unicorn status, aligning with Vision 2030’s objectives to enhance the local GDP,” Jemili stated.
Startups like Lean Tech, Mrsool, Quant, and Mozn are at the forefront of Saudi Arabia’s tech ecosystem, embodying the Kingdom’s innovative spirit.
As Saudi Arabia continues to invest strategically and support its startup ecosystem, it is well on its way to becoming a digitally empowered leader. The Kingdom’s collaborative approach, talent cultivation, and embrace of emerging technologies signal promising momentum for the future of technology and innovation.
Jemili cited a Magnitt report, which identified the Kingdom as the top market for venture capital funding in the MENA region, securing over $1.38 billion in investments in 2023. This marks the second consecutive year of billion-dollar-plus VC funding for Saudi Arabia.
“With improved livability, ease of doing business, and the maturation of funding institutions, Saudi Arabia is set for continued success,” Jemili concluded.
Hafiz closed with a note on the economic landscape, stating that the Kingdom faces no major economic obstacles in establishing a tech ecosystem, thanks to supportive leadership and a young, internet-savvy population that is driving the creation of an excellent tech ecosystem.