Tech entrepreneurship

ecosystem in the
Kingdom of Saudi Arabia
2018

Commissioned by
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2 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 3
Preface
The digital era represents a fundamental shift in attracting both domestic and global interest Google
In has
our view, thecommissioned thispreconditions
inputs that form the study to for For the
Based onpurposes of thiswe
our assessment, study, entrepreneurs
identified leading and
in the global economy, pushing the limits of in the tech entrepreneurship ecosystem, success and the resulting outputs feed
identify improvement areas in policies each other
andin emergent countries in tech entrepreneurship,
are those individuals focused on building putting
a
innovation and redefining the boundaries of countries which fail to make broader reforms an iterative process, which determines the health
regulations, which affect tech entrepreneurship of the
rapidly scalable business venture with thethe
USA, Singapore, Israel and UK at the top of aimlist.
a tech entrepreneurship ecosystem. Factors such as Identifying successful countries provided a filter for
global trade. Innovations have never before in education, good governance and an in the Kingdom of Saudi Arabia (KSA), as part of innovating, improving or transforming the
the quality, connectedness, and efficiency of a tech selecting best practices as well as setting performance
been faster paced, more widespread, or entrepreneurship supportive business of a six country study that includes Turkey, the given way of doing things. The entrepreneurship
entrepreneurship ecosystem – which we refer to as the indicators that aspiring countries such as Turkey can
scaled more quickly to become billion-dollar environment risk falling behind.2 Russian Federation,
inputs – create SouthforAfrica,
the conditions Nigeria,
sustainable and
success.
domain in our definition includes the ‘startup’
use to assess their status, identify improvement areas,
“unicorns”. Over the last 15 years, the ICT the Unitedeffectiveness
Meanwhile, Arab Emirates (UAE). tangible results
in generating and ‘scale-up’ phases
and apply approaches offitthe
that thebusiness lifecycle
nature of their own
sector as a backdrop to innovations and digital such as growth, employment, the creation of wealth where companies
ecosystems. experience high growth
advancements has grown its share from just along with further innovation – the outputs – cultivates a in revenues and employees while validating
To put Turkey’s status in context, we have compared
1.3% of the global economy to 3%, and is set stronger ecosystem by attracting more of the required their value proposition. Furthermore, our
input and output indicators for Turkey against a peer
to grow even more.1 inputs. This holistic perspective is reflected in the efforts specifically address technology-driven
set of countries with comparable development stages,
framework we used to assess tech entrepreneurship entrepreneurship
similar characteristics,– those endeavors
or geographic with
proximity.
Nations which nurture a digital and innovation- success. technology-enabled business models and a
In the final stage of the study, we conducted extensive
based culture have pioneered the global focus on hyperconnectivity between networks,
primary research in Turkey to complement the desk
shift toward knowledge-based industries people, businesses, things, and hardware.
research. Whereas the desk research served to
and have enjoyed extraordinary wealth (and, develop the structure of the tech entrepreneurship
job creation) while transforming the way Using these definitions, we began with
ecosystem and identify current initiatives that are
people live and do business. This shift is made a comprehensive research of existing
in place to cultivate it, we gained insights and
possible by substantial tech entrepreneurship literature
understoodtothe identify
contextfactors that indicate
and impacts tech
by conducting
activity within a supportive environment that entrepreneurship
bespoke research with success,
ecosystemgrouping them into
participants,
features both government and private sector nine components. Some of these components
together with Girişimcilik Vakfı (Entrepreneurship
contributions. Initiatives of leading countries explain the The
Foundation). strength
policyof the ecosystemthat
recommendations thatare
are now regarded as best practices for part of this tech
supports reportentrepreneurship,
are suggestions from and
theothers
Turkish
entrepreneurial
point community
to the results for further policy initiatives
achieved.
aspiring nations that want to create a similar
that will help strengthen the development of the tech
impact, and the global conversation around
In our view, the inputs
entrepreneurship ecosystemthatinform the
Turkey.
regulation and innovation policies is framed
preconditions for success
In total, we interviewed and the outputs
25 stakeholders that
(representing
around their practices.
result
different components of the ecosystem), spanning to
feed each other in an iterative process
Countries that are more reliant on determine
public the health
and private as wellof asainstitutional
tech entrepreneurship
and individual
manufacturing or natural resources are eager ecosystem. The quality, connectedness
perspectives. The full list of participants is presented in

to capture a bigger share of the expanding andAcknowledgments

the efficiency of thesection.
tech entrepreneurship
digital economy. In order to deliver on ecosystem, which we refer to as the inputs,
these aspirations, they are exploring ways to create the conditions for sustainable success.
Meanwhile, effectiveness in generating tangible
transform the fundamentals of their economic
results such as growth, employment, creation
structures and to deploy more resources to
of wealth along with innovation - the outputs
cultivate competitive tech entrepreneurship
- cultivate a stronger ecosystem by attracting
ecosystems. The establishment of high-impact
more of the required inputs. This holistic
tech entrepreneurship as a sustainable source
perspective is reflected in the framework we
of employment is especially critical for those
shaped to assess tech entrepreneurship success.
nations with young populations and a need for
new sources of job creation. 1
1 Selvam, M.
Selvam,
Industry:
M. and
and Kalyanasundaram,
Kalyanasundaram, P. P. “Global
“Global IT/IT
IT/IT Enabled
Enabled Services
Services and
and ICT
ICT
Industry: Growth
Growth && Determinants.”
Determinants.” http://globalbizresearch.org/Chennai_
http://globalbizresearch.org/Chennai_
Symposium/conference/pdf/C549.pdf
Symposium/conference/pdf/C549.pdf (accessed
(accessed September
September 27,
27, 2017)
2017)
Given the importance of strong fundamentals 2 World Bank. “Digital Dividends.” http://www.worldbank.org/en/publication/
2
World Bank. “Digital Dividends.” http://www.worldbank.org/en/publication/
wdr2016 (accessed
wdr2016 (accessed September
September 27,
27, 2017)
2017)
3 Schumpeter, J. 1942. Capitalism, Socialism, and Democracy. New York: Harper
3
Schumpeter, J. 1942. Capitalism, Socialism, and Democracy. New York: Harper
&
& Bros.
Bros.
4 Global Entrepreneurship Monitor (GEM) Global Report 2016/17, Global
4
Global Entrepreneurship Monitor (GEM) Global Report 2016/17, Global
Entrepreneurship Research
Entrepreneurship Research Association
Association 2017
2017

4 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 5
Based on our assessment, we identified
leading and emergent countries in tech OC&C’s framework for assessing tech
entrepreneurship, putting the USA, Singapore,
Israel and United Kingdom at the top of the entrepreneurship success
list. Identifying successful countries provided
a filter to select best practices as well as FIGURE I: TECH ENTREPRENEURSHIP ECOSYSTEM STRENGTH AND RESULTS ACHIEVED FEED EACH
set performance indicators that aspiring OTHER FOR GREATER SUCCESS
countries such as KSA can use to assess their
status, identify improvement areas, and apply TECH ENTREPRENEURSHIP ECOSYSTEM RESULTS OF TECH ENTREPRENEURSHIP
approaches that fit the nature of their own Market
Financial Skilled Talent Networks
ecosystems. Capital $
$ Potential
$
Economic Innovation
To put KSA’s status in context, we have also Contribution Creation
compared input and output indicators for Culture Regulations ICT Infrastructure
KSA against a peer set of countries with
comparable development stages, similar
characteristics, or geographic proximity.

In the final stage of the study, we conducted Describes the INPUTs necessary Indicates the OUTPUTs
extensive primary research in Saudi Arabia to cultivate thriving tech entrepreneurship generated by tech
to complement the desk research efforts. entrepreneurship
Where the desk research served to develop
the structure of the tech entrepreneurship ECONOMIC INNOVATION
ecosystem and identify current initiatives that FINANCIAL CAPITAL SKILLED TALENT CONTRIBUTION CREATION
are in place to cultivate it, we gained insights • Grants/subsidies • Educational • Size of tech e-ship • Innovation
and understood context and impact by • Individual investors foundations – Revenue created by tech
entrepreneurs
– Crowdfunding • Skills development – Number of startups – Number of
conducting bespoke research with ecosystem – Share in GDP
– Angel investors – schools, courses, innovative products,
participants, together with Wamda. The – Personal networks programs • Workforce – process,
policy recommendations that are part of • Venture capital – on the job training employed in tech
entrepreneurship
– business models
• Public funding • R&D and innovative introduced in the
this report are the recommendations of the skills • Growth rate country in a given
• Corporate – Revenue, Number year
Saudi entrepreneurial community for further investment (CVCs • Attracting local
• Value creation
and M&A) talent to tech
policy initiatives that will help strengthen the • Securities market entrepreneurship – Market cap, Unicorns
development of the tech entrepreneurship • Debt financing • Acquiring • Global reach
international talent – Share of int’l revenues
ecosystem in KSA. – Number of int’l
operations
NETWORKS CULTURE REGULATIONS
In total, we interviewed 27 stakeholders • Mentors and coaches • Society’s attitude to • Ease of doing
representing different components of the • Accelerators / entrepreneurship business
incubators
ecosystem, spanning public and private as • Diaspora networks • Entrepreneurial • Compliance
aspirations and
• International linkages • Trading across
well as institutional and individual perspectives. appetite
borders
• Events • Promotion of role
The full list of participants is presented in the • University-industry models / success
• Digital policies
contributor acknowledgments section. partnership stories • Government R&D
• Tech transfer offices • Media coverage of policies
• Physical clusters entrepreneurship
– Co-working spaces
– Technoparks

ICT INFRASTRUCTURE MARKET POTENTIAL

• Accessibility and • Digital literacy /

affordability of readiness
Internet (mobile / – individual use
fixed ) – cloud migration
• Cloud & data – digitization of gov’t
services
center experience
• Domestic market size
– B2B
– B2C
– Public procurement
• Local market
efficiency
• Internationalization

6 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Source: Literature Research, OC&C analysis Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 7
Tech entrepreneurship
ecosystem - Inputs
The tech entrepreneurship ecosystem and its Benchmarks demonstrate a superior level of FIGURE II: TECH ENTREPRENEURSHIP ECOSYSTEM FRAMEWORK
components constitute the inputs in OC&C’s network development that is characterized by
tech entrepreneurship success assessment. the availability of entrepreneurial networks, Market
startup associations, accelerators, incubators, Financial $ Skilled Talent Networks
Potential
One definition of an entrepreneurial co-working spaces, technoparks, etc. There Capital $
ecosystem is: $
are stronger innovation linkages between
academia and the private sector such as joint-
“a set of interconnected entrepreneurial venture/strategic alliance deals and industry-
actors, organizations (e.g. firms, venture university collaborations.
capitalists, business angels, banks), institutions Culture Regulations ICT Infrastructure
(universities, public sector agencies, financial In the best-practice countries, there is a higher
bodies) and entrepreneurial processes individual risk appetite, coupled with cultures
(e.g. the business establishment, growth, that are more supportive of entrepreneurship.
levels of ‘blockbuster entrepreneurship’, It is easier and less bureaucratic to start and
number of serial entrepreneurs, degree of run companies as an entrepreneur, and the
sell-out mentality within firms and levels of risk of failure is better managed. Source: OC&C analysis
entrepreneurial ambition) which formally
and informally coalesce to connect, mediate Supportive digital policies – laws related
and govern the performance within the local to data flow, cybersecurity, data privacy,
entrepreneurial environment” 5 IP protection, etc. – and strong innovation
capacity steered by governments’ R&D
OC&C’s Tech Entrepreneurship Ecosystem policies provide a sturdy backbone for the
Framework (Figure II) presents the attributes ecosystem. Open foreign trade policies Role of the government in strengthening the tech
outlined above, and the way in which they enable these countries to globalize their entrepreneurship ecosystem
interact and influence one another. Seven businesses.
distinct components, working together, While there are many actors involved in the In benchmark countries, the shift to
provide the environment necessary to Another fundamental differentiator is reliable ecosystem, the role of government warrants knowledge-based industries has happened
generate successful tech entrepreneurships. fixed and mobile internet infrastructures dedicated focus. Government policy is able via both favorable policies to support
at affordable prices. Digital policies that to touch all entrepreneurial actors and the development of each contributing
Best-in-class countries are able to offer equity support cross-border data flows lead to higher components of the ecosystem: resource component of the ecosystem and greater
funding sources in greater volume and variety utilization of efficient, cost-effective global providers, entrepreneurial connectors within funding by governments committed to high-
(i.e. business angels, venture capital firms, cloud services. the ecosystem, and the entrepreneurial growth firms.6 Governments have played a
and government investment funds). Deep and
environment of the ecosystem. Government leading role in successfully facilitating the
efficient stock markets and the high frequency Lastly, leading countries possess sizable
contribution is important for its direct tech entrepreneurship ecosystems through
of deals make the entrepreneurial challenge market potential; those that don’t have a
impact on the ecosystem through the their impact on all seven components of the
financially worthwhile and are instrumental market that is large enough are globally
creation of favorable terms and the provision ecosystem.
in drawing in more resources – in terms of oriented in their endeavors from the
of incentives for high-growth startups.
funding, skilled talent, and support – into the beginning. In the domestic market, consumer
Moreover, governments exert their influence
ecosystem. digital literacy is of great importance as
on all components to create a constructive
consumers are then more likely to try new
These countries have a larger number of environment and facilitate interconnectivity
digital products, thus creating attractive
highly skilled employees and a labor force between components.
market conditions for B2C companies. In
created by education systems and talent addition, advanced markets are efficient and
attraction initiatives that support tech competitive, with minimum barriers of entry
entrepreneurship. These ecosystems are for businesses.
characterized by a greater pool of scientists,
engineers, and research universities that foster 5
Mason and Brown, Entrepreneurial Ecosystems and Growth Oriented
a culture of innovation. Entrepreneurship, OECD LEEP Program and Dutch Ministry of Economic Affairs 6
Global Entrepreneurship Monitor, Global Report 2016/2017
workshop paper, The Hague, Netherlands, Jan 2014
http://www.oecd.org/cfe/leed/entrepreneurial-ecosystems.pdf
8 (accessed October 2, 2017)
Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 9
Executive summary
2030 elevates this goal on the country’s
agenda with its focus on startups, technology 1. Financial $
transfer, empowering women and building
human capacity. Accordingly, the National
capital $ $
Transformation Plan has allocated SAR 4.4
The Kingdom of Saudi Arabia at a glance Results of Tech Entrepreneurship – Outputs
billion (USD 1.2 billion) to be divided amongst
Saudi Arabia is the largest economy in the Saudi Arabia’s tech entrepreneurship outputs nine ministries and quasi-government entities
MENA region with a GDP of USD 646 billion suggest that the country’s ecosystem is nascent to establish the fundamentals that will lead to
and oil and gas are indispensable sources of and has significant scope for growth. The level change.
income – this sector constitutes about 50% of of contribution from knowledge sectors to the The KSA government mobilized substantial
GDP and 80% of public revenues.7-8 The global economy is very low. The prevalence of tech Our review of the KSA tech entrepreneurship financial resources to jump start the movement
decline in the price of oil beginning in 2014 has startups is also low, and currently this sector ecosystem, which involved the participation in tech entrepreneurship. The equity funding
adversely affected the country’s fiscal surpluses is considered to be a consumer rather than of key stakeholders, highlighted four areas of needs of the Saudi tech ecosystem are mainly
and challenged the sustainability of the welfare a creator of digital technology and services. focus: served by government-backed funds, either
state, in which close to 70% of the country’s There have not been significant exits valued deployed as seed stage capital by accelerators
workforce are employed in the public sector. over USD 100 million and none of the existing • Recent regulatory reforms in the country and university programs or matching investments
tech scale-ups are valued in excess of USD 1 billion. have focused on relieving the roadblocks by venture capital firms. The Saudi authorities
SMEs make up a small proportion of the to developing tech entrepreneurship. made available a USD 1 billion (SAR 4 billion)
economic activity in KSA, contributing about Innovative output generation in the country is a Increasing the pace of enacting and ‘fund of funds’, along with a number of
20% to GDP. Unemployment among Saudi development area for both established sectors as enforcng rules would accelerate activity additional public funds and financing programs.
nationals is around 12.8%, but youth, who well as tech entrepreneurs. Saudi entrepreneurs, and build momentum in the ecosystem. The most prominent corporations of the Saudi
comprise about half of the population of 32 nevertheless, have high-growth aspirations business world have taken an active role
which is a big asset. As the ecosystem matures, • Burgeoning entrepreneurial activities are by initiating tailor-made funding programs
million, face a more difficult challenge, as the
tech entrepreneurship can be a remedy for oil supported by a few, albeit well-structured, and established corporate venture arms to
public sector which has traditionally been the
sector dependency and overreliance on public institutions and programs, considering provide the much needed early- stage funding
main employer of university graduates has the size of the market. The incubators/
become overcrowded. Between the ages of employment. investments. The total funds available for SMEs –
accelerators, co-working spaces and directly or indirectly to tech entrepreneurs – are
20 to 29, unemployment is 29% and that’s affiliated entrepreneurship programs
The output performance comparison of KSA valued at USD 3.3 billion, yet, actual investments
for a relatively well educated, market-ready need to increase in number to create
against the benchmark set can be found on page 22. going into Saudi tech startups, up to USD 5
workforce.11 Looking into the future, redefining more knowledge-sharing and networking million, are concentrated on the seed stage and
job market dynamics in KSA is a top priority KSA tech entrepreneurship ecosystem overview – opportunities. deal flows are moderate.
considering that for every person due to exit Inputs
the workforce (aged 55 to 59), there are 2.15 • The young ecosystem needs to emulate The number of private VC firms is currently
people (15 to 19 years old) due to enter it. The tech entrepreneurship ecosystem in the best practices on several fronts in insufficient to meet the equity financing needs
Kingdom is at its early stages, yet it is dynamic order to cultivate a productive tech of the rising number of tech startups. However,
The Crown Prince Mohammed bin Salman nevertheless. Tech entrepreneurship activity entrepreneurship culture. The international there is notably a great deal of activity
presented Vision 2030 in 2016, a multifaceted is spread among the cities of Riyadh, Jeddah, linkages that would foster these underway to tackle the hurdles impeding VC
grand scheme that provides the blueprint for and Thuwal. Software-as-a-Service (SaaS) and exchanges and dissemination of knowhow, establishment, aiming to expand coverage
reorienting the national economy to a more e-commerce are the main focus of tech startups. financial capital and skills have not yet across a wider range of investment stages.
diversified, private-sector led structure. These These focus sectors are in line with the infancy been fully forged.
plans are reinforced by the creation of the of the ecosystem, since most of the startups Angel investment is still nascent in Saudi,
world’s largest sovereign wealth fund, with an adopt business models that have proven • The Saudi business culture mainly as high-net-worth individuals are not active
estimated asset size of USD 2 trillion, which successful in other markets. Startups springing revolves around public or large corporate investors in tech entrepreneurship; their
will be deployed to transform the economy and from King Abdullah University of Science and employment. In addition, the technically investment history is brief and limited to
create employment.10 Technology (KAUST) in the Thuwal region differ skilled workforce is not large enough to a small number of transactions. However,
in profile, since this university is a prominent, meet the demands of knowledge-based aspiring angel investors are forming networks,
Entrepreneurship, especially involving advanced research institute, creating more sectors. Excelling in tech entrepreneurship developing a greater deal of interest, and
technology, is a cornerstone of Vision 2030 deep-tech-driven business endeavors. will require cultural adaptation at all levels enhancing their knowledge and understanding
and a critical lever for achieving goals such There is a very strong political commitment of the ecosystem. of tech entrepreneurship endeavors.
as finding new sources of economic growth to developing a solid science, technology
and employment. Numerous public authorities The larger players in the corporate realm,
and innovation base in the Kingdom that will especially family-owned conglomerates
and quasi-government entities have allocated spur new entrants into the private sector in
considerable resources to help develop the managing portfolios, are just beginning
the Saudi economy. Beginning with the 2002 to get acquainted with tech-enabled
entrepreneurship ecosystem in the country. National Science, Technology, and Innovation entrepreneurship. Their engagement needs
Policy, the country began to develop five- year to expedite developments, as investors or
plans that ultimately aim to transform KSA
into a knowledge-based economy. Vision
10 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 11
strategic partners, in order to facilitate the equipping its future workforce with competitive completed post-graduate level education. At create the network effect needed for tech
integration of tech entrepreneurs in the private skills and global exposure. KSA has the fourth the moment, only 5% of tech startups were entrepreneurship clusters to flourish.
sector. largest scholarship student body studying founded by women in KSA compared to 25% in
abroad following China, India, and South the Levant.
SMEs lending by banks is one of the lowest in Korea.
the MENA region – c. 5%– and public officials are
working to improve debt financing options for There have been sizeable investments in
startups. expanding research and innovation capacity at
3. Networks
local universities. King Abdullah University of
4. Culture
Parallel to its development stage, there has Science and Technology (KAUST), founded in
not been a strong emphasis on exit plans and 2009, is one the most advanced, state-of-the-
routes in the Kingdom’s tech entrepreneurship art science and technology graduate schools in
ecosystem. There is no track record of successful the world. The school has the second highest
exits to be used as models and to signal wealth endowment (USD 10 billion) after MIT and has
creation opportunities to all stakeholders.The
a unique profile with its co-ed, international Engaging in private endeavors and tech
primary stock exchange in KSA, Tadawul, which
student body that is recruited by a scouting team. entrepreneurship are new concepts in the For generations, talent has been concentrated
is mostly accessible to large corporations and
country and there is a growing need to easily in public roles in KSA, working at a slower pace
sizable, established institutional investors was KSA’s fundamental challenge, however, is to access network facilities, training programs, while receiving generous compensation. This
recently deregulated to grant access to foreign transfer talent to private-sector employment
coaching and mentorship. According to a survey work culture has been passed down and, as a
investors. In order to increase capital access for and to tech entrepreneurship. A recent survey
small cap SMEs, the Capital Market Authority conducted by Arabnet, entrepreneurs perceive result, Saudi youth today have high expectations
among university and vocational school and search for employment in high-paying jobs.
(CMA) created a secondary market, Nomu, in a lack of mentorship support as posing the
students revealed that over half of the pool
2017. biggest obstacle after financing.
still preferred to work for the government, A study by Riyadh’s King Saud University found
even after announcements were made Aspiring tech entrepreneurs are, in general, that 80% of Saudis polled in the capital stated
about prospective cutbacks in civil service less ready for idea conceptualization than their they would rather wait for a government job
2. Skilled Talent recruitment. About 15% of those surveyed international counterparts and accelerators/ than work in the private sector. The drive to
expressed an interest in entrepreneurship, incubators are educating and filtering hundreds promote private-sector employment, especially
while only one in one hundred considered that apply through boot camps prior to official entrepreneurship, demands a radical shift in
private sector employment.25 A number of programs. The sheer number of applicants the mindset of the young as well as that of
entrepreneurial training programs have been to accelerator/incubator programs indicates their communities. It is worth noting that an
launched by leading universities and the SMEs an overwhelming demand to learn and get entrepreneurship appetite is growing, especially
Authority (Monsha’at) to develop an appetite among those who have had international
involved in entrepreneurship that cannot be
for tech entrepreneurship. exposure during their studies or careers.
met with the existing supply.
A healthy tech ecosystem depends on a large
pool of qualified potential founders and Ecosystem participants believe that the quality Systematically addressing cultural elements
Leading corporations are active in setting
employees with superior skills in technology of the technical workforce is comparable to around loyalty compared to merit and
up training and support programs to build
development and entrepreneurial drive. international standards, but their numbers performance, becoming comfortable
the infrastructure needed for the transition
Educational foundations are considered key to are not adequate to meet growing demand. with failure, long-term orientation, and
to entrepreneurship. These programs are
raising an analytically skilled generation that is Only 0.9% of total FTEs in Saudi Arabia are collaboration, such as forming partnerships at
important but are not designed to bring
adaptable to knowledge-based employment. considered digital talent which is below the schools and extracurricular training programs,
together the business world – public and private
The standard KSA education system does not 1.7% average for the Middle East region.17 will contribute to the creation of a flourishing
– to engage in joint solution development as
encourage critical and innovative thinking. It is considered very difficult to entice well- entrepreneurship culture.
collaborators with tech startups.
Elementary school education in the country, educated, experienced talent without making
in terms of math skills, is relatively weak in them partners in the company’s future but Connections with the international The presence and celebration of successful
comparison to some of the frontier countries stock options are not available in KSA. In terms entrepreneurship community beyond the national tech entrepreneurs will serve as role
in knowledge-based sectors. The value of of accessing global talent, the introduction of models in the ecosystem while re-shaping
GCC do not exist. Establishing a stronger
hard work and academic accomplishment, the highly anticipated entrepreneurship visa general cultural beliefs. Increased publicity
international support network will offer the
necessary for entrepreneurial success, are not in December 2017, which is believed to be the and promotion of entrepreneurship is already
next stage of training programs that are not
yet emphasized in schools and universities. key to resolving the current talent bottleneck, paying off, as is evident from the growing
yet widely available locally for burgeoning
will enrich the ecosystem. number of applicants to accelerator programs.
tech entrepreneurship. Industry and university
In tertiary education however, there have been collaborations have been formed and Tech
notable schemes designed to grant access to Tech entrepreneurship is also considered to In order to shape the latter stages of building
be a potential avenue to increase women’s Transfer Offices are being established at select
world-class higher education for Saudi nationals. credibility and trust between the tech
participation in the labor force from its universities.
KSA has offered one of the most generous entrepreneurs and the business community it is
national overseas scholarship schemes since current standing of 8%. Saudi women tend crucial to create partnerships and relationships
Ongoing government plans and programs
2005, the King Abdullah Scholarship Program, to be academically qualified and many have with investors.
that aim to bring technology companies
12 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia
to Saudi Arabia are expected to eventually
Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 13
 puts cash constraints on tech ventures in the cutting-edge technology and knowledge in concerns about accessing global cloud
5. Regulations early stages. KSA services. The established business sector in the
Kingdom, on the other hand, has been notably
Entity structures accommodating foreign KSA’s plans to increase purchases of locally reluctant to adopt cloud. The reasons cited
investment and shareholding are LLCs, which produced military equipment to at least are lack of clarity as to the benefits, concerns
fall short in a number of features that equity 50% of total spend have positively affected over data sovereignty, the lack of cloud-related
investors demand in deal making. Specialty R&D projects in the defense sector. The regulations, the absence of national cloud
courts that can handle the specifics of new ecosystem participants believe that this policy strategies, and limited visibility of the long-term
deal structures have not been introduced to will encourage civilian tech entrepreneurship cost impact.
The legal system in KSA is based on Shari’a the system. Winding down failed operations is in the country. The government is also
law and its interpretation by clerical judges. a lengthy process, and regulations related to collaborating to increase the level of ICT and In principle, KSA is interested in managing
The scope and content is not standardized bankruptcy and protection of minority rights in heath sector R&D in the country. public cloud in the country rather than overseas
and there is low reliance on judicial insolvency have not been addressed. and shows a willingness to invest in building the
TRADING ACROSS BORDERS necessary infrastructure for it.
precedents. In matters related to labor,
DIGITAL POLICIES
commercial and corporate law, royal decrees KSA is part of the GCC Customs Union
(Nizam) supplement the Shari’a but, they are Digital businesses are a new area for Saudi established in 2003. However, the union does
subordinate: regulations rather than laws. and the regulations in place to govern not operate as a single market like the European
different aspects of the sector are not up Union. Member states apply a Common
7. Market potential
In light of the increased importance of
to international standards. A number of Customs Law (2015) and a Unified Customs
rejuvenating the private sector, these
regulations enacted in the 2000s broadly set Tariff with a standard customs duty rate of 5%.
regulations are being revisited by the
the boundaries of technology and internet- Application of the GCC Customs Law, however,
relevant authorities. There have been
related businesses such as the Competition reportedly varies in each member state.
numerous interventions and amendments to
Law (2004), the Trademark Law (2002), the
accommodate the needs of entrepreneurs.
Copyright Law (2003), the Patent Law (2004),
While enactment has been swift, especially
the Electronic Transaction Regulation (2007), The Saudi market is the largest in the GCC in
in the last two years, they take effect slowly
the Telecommunication Act, and the Anti- terms of population and consumer spend.
at the execution level. Nevertheless,
in order to reach global standards in
Cybercrime Law (2007). 6. ICT infrastructure Saudi tech entrepreneurs are mainly focused on
capitalizing on the local market potential. Plans
regulatory frameworks that will support Saudi Arabia’s Communications and for expansion beyond boarders are scarce and
tech entrepreneurship, more changes Information Technology Commission (CITC) tend to be focused on the region.
are necessary. These changes need to be maintains control of content on the Internet
integrated and holistic in design to deliver the and conducts filtering. CITC lifted the ban Saudis are avid social media users. They are
highest impact. on Skype, WhatsApp, and other messaging regarded as the key target market for digital
applications in September 2017. content providers and online advertisers in
BUSINESS PROCEDURES Beginning in the early 2000s, the Saudi the region. An overwhelming 95% of Saudis
CITC advocates developing a strong cloud government took significant steps to improve consume entertainment from neighboring Arab
Shareholder nationality impacts the capital
services industry in Saudi Arabia as a key part ICT infrastructure. The country has become the states while 40% of the content is generated in
requirements and licensing procedures,
of creating a developed digital infrastructure largest and fastest growing ICT market in the KSA. YouTube consumption is the highest per
significantly increasing the time employed
to support Vision 2030. Cloud service region as a result of these efforts. Today, KSA’s capita in the world.
and capital necessary to start a business in
providers need to obtain one of the available population is highly connected, 91% use the
KSA. Company incorporation procedures
licenses in order to operate in the country and internet, and 73% have smartphones.41 It ranks Online sales to Saudi Arabia were estimated at
involve multiple steps spanning different
government entities only work with providers 7th in the world on households with internet USD 8.7 billion in 2017, projected to grow to
federal and local public agencies that are
that possess local hosting infrastructure. access. Mobile broadband is the main means USD13.9 billion by 2020. 56 B2C e-commerce
handled separately. Currently, it takes about
of internet access in KSA and the infrastructure across all product categories was valued at
17 days to establish a company in the GOVERNMENT R&D POLICIES and costs – though more expensive in USD 6.1 billion, but domestic e-commerce
Kingdom. In 2017, the Ministry of Commerce
comparison to a number of benchmark is still nascent, at SAR 5.2 billion (USD 1.4
and Investment (MOCI) introduced a one-stop Domestic resources allocated to R&D were
countries - are considered acceptable by users. billion), amounting to only 0.8% of total retail
shop, Miras, which physically and digitally 0.80% of Saudi’s GDP in 2015. This is a huge
Saudis spend 4.1 hours per day on the internet sales in the country. 57 The Public Investment
brought all related public offices together improvement compared to ten years ago
on average, using their PCs, and Saudi Arabia is Fund forecasts the ratio will increase to 2.4% by
to provide easy access and to simplify when expenditure on R&D was merely 0.1% of
the third highest ranking nation when it comes 2020.12
the process. Continuous improvements GDP. Looking forward, the Public Investment
will streamline procedures and speed up to spending time on the internet using a mobile
Fund announced plans to spend SAR 210 A large share of cash on delivery (48%) is
the process. Renting an office space is a device (3.8 hours) after Brazil and Thailand.53
billion (USD 56 billion) over the next three perceived as the major barrier to domestic
prerequisite for establishing a company, which years to contribute to the localization of Tech entrepreneurs do not voice particular e-commerce adoption due to the operational
challenges it poses.
14 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 15
Building trust in cashless payments systems and – friendly. Many interviewees believe that Conclusion
establishing a clear set of rules on consumer inclusion in public procurement programs The Kingdom of Saudi Arabia has embarked
rights protection would serve to increase would be an effective way for government to on a bold national change management
e-commerce adoption in the Kingdom. support entrepreneurs and strengthen their program with the announcement of Vision
Availability of transparent, periodically ability to do business with the private sector. 2030 by the Crown Prince Mohammed bin
published market data and an improved Salman. The aim is to calibrate the country’s
logistics infrastructure will contribute to the Policy playbook designed to strengthen the
economic model to carry its growing young
growth of tech-enabled consumer businesses. tech entrepreneurship ecosystem
population into the future. Championing tech
Insights into the KSA tech entrepreneurship entrepreneurship in the country is an ideal way
Besides B2C opportunities, sources indicate
ecosystem and suggestions by ecosystem to meet these change ambitions.
health, education, clean energy, and
municipality services as top fields that can participants led to the articulation of a series Saudi public authorities have dedicated
provide B2B opportunities for startups. of policy recommendations that can be significant financial resources to meeting the
However, eligibility criteria for public and considered to foster a strong ecosystem. vision’s targets. The government’s ongoing
corporate procurement programs are not task right now is to modify the established
considered SMEs – i.e. tech entrepreneurship These recommendations are grouped under structures and mode of operation on multiple
four main headings: fronts in order to maximize the effects of
POLICY RECOMMENDATIONS DESIGNED TO STRENGTHEN THE KSA TECH ENTREPRENEURSHIP ECOSYSTEM committed resources and deliver the expected
results. In order to cultivate a prosperous tech
INCREASE SECTOR ATTRACTIVENESS ALIGN REGULATIONS AND INVEST IN BUILDING TECHNICAL POPULATE THE NUMBER OF entrepreneurship ecosystem, the regulatory
FOR SKILLED TALENT, INVESTORS DIGITAL POLICIES GOVERNING AND ENTREPRENEURIAL SKILLS SUPPORT NETWORKS TO MAKE
AND COMPANIES BOTH TECH E-SHIP WITH GLOBAL BEST OF YOUTH TECH ENTREPRENEURSHIP
framework needs to be aligned with the
DOMESTIC AND FOREIGN PRACTICE FLOURISH requirements of the sector and with global
best practice. It is necessary to put increased
emphasis on meticulous and timely execution
Transform available financial Harmonize commercial
with continuous monitoring and updates.
Emphasize upgrading Streamline and coordinate
power to professional codes and digital STEM skills at primary and all public support programs Creating formal and informal linkages with
"smart money" by adopting policies with secondary schools under a single secretariat best-practice ecosystems and experienced,
best venture capital practices well-accepted global to better guide the effort
benchmarks
international talent will expedite the learning
process for Saudi ecosystem participants.
There is a need to populate a variety of
Incentivize high net worth
individuals and local sizable Synchronize business Introduce coding and Create linkages with other support networks to draw in more aspiring
businesses to take part procedures and other technology classes ecosystems that offer best tech entrepreneurs to private ventures.
in developing tech requirements of multiple to education curricula practice applications and
proven programs Most important of all, the government and
entrepreneurship authorities
its officers should continue spearheading
the cultural mindset shift necessary to
Establish clear paths Expedite implementation Work with educational Increase number of create more scope and acceptance for tech
and enforcement of institutions to prepare and
to wealth creation for
decrees and policies to launch extracurricular
incubators/accelerators entrepreneurship in the Saudi community.
entrepreurs and entrepreneurial and to provide training
investors build momentum in personel development opportunities With these efforts, the Kingdom’s ample
the ecosystem programs resources and inherent market dynamics, the
burgeoning tech entrepreneurship ecosystem
Cultivate a diverse skill Ease establishment of is poised to become a regional powerhouse.
Train civil servants physical clusters/ co-working
talent pool to boost tech Promote early success
who are entrusted with the stories to create visible spaces to facilitate informal
entrepreneurship activity
implementation of the new role models for youth knowledge and expertise
and bring in new solutions
laws and rules sharing
to the market

Provide investment
incentives in strategic,
technology driven
industries to entince global
blue-chip companies

Legend

FINANCIAL CAPITAL SKILLED TALENT NETWORKS CULTURE REGULATIONS ICT INFRASTRUCTURE MARKET POTENTIAL

Details of the recommendations can be found on page 67.

16 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 17
Table of contents Table of figures

Kingdom of Saudi Arabia at a glance 20 Figure 1. Macroeconomic indicators for KSA 20

Results of tech entrepreneurship - Outputs 22 Figure 2. Global competitiveness index scores for KSA 20

KSA tech entrepreneurship ecosystem overview 26 Figure 3. Profile of Top 50 tech startups in KSA ecosystem 26

Figure 4. Major actors within the KSA tech entrepreneurship ecosystem 27

Insights into ecosystem components 32
Figure 5. Vision 2030 - A plan to shape Kingdom's future 28
1. Financial Capital 32
Figure 6. Budgets allocated to different entities for National Transformation Plan 29
2. Skilled Talent 40
Figure 7: Average equity investment ticket size in the region (2013-2015) 33
3. Networks 46
Figure 8. Total funds available for SME and tech entrepreneurship funding 35
4. Culture 50
Figure 9. Seed round velocity 36
5. Regulations 54
Figure 10. Number of investors per million urban population 36
6. ICT Infrastructure 61
Figure 11. VC investment magnitude 38
7. Market Potential 63 Figure 12: SME loans share in total bank loans 39

Policy playbook designed to strengthen the tech entrepreneurship ecosystem 67 Figure 13. TIMSS Math scores for 10-year-olds 40

Conclusion 74 Figure 14 Software Engineer Salaries: 45

Acknowledgements 75 Figure 15. Success rate of entrepreneurs from the region who wanted to scale into KSA 45

Appendix 76 Figure 16. Notable support services provided by established companies to tech entrepreneurs 47

Figure 17. Accelerator density 48

Disclaimer 79
Figure 18. University/industry research collaboration 49

Figure 19: Days required to start up a company in the MENA region 54

Figure 20. Ease of doing business, taxes and bureaucracy 57

Figure 21. Mobile/Fixed broadband penetration and costs 62

Figure 22. Cloud migration of companies 63

Figure 23. Digital economy drivers 64

Figure 24. Transition to cashless payment for online commerce in KSA - PayTabs 65

Figure 25: Potential industries and areas where Saudi tech entrepreneurship might make a difference 65

Figure 26. Policy recommendations designed to strengthen the KSA tech entrepreneurship ecosystem 67

18 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 19
The Kingdom of Saudi Arabia The unemployment rate among Saudi nationals
stands at around 12.8%.11 Unemployment
among the young is a more pressing issue;
than Dubai in size that will be totally based
on technology. The initial ground breaking is
planned for 2019 and the first phase is to be

at a glance of Saudis aged between 20 and 29 that are

in the workforce, 29% are unemployed.11 The
traditional employer of university graduates in the
completed by 2025. The geographic location
of the city is a short drive away from Jordan’s
resort town of Aqaba and will be linked by a
Founded in 1932, Saudi Arabia is the largest The global decline in the price of oil in 2014 country has been the public sector, which is now bridge to Egypt and Sharm el-Sheikh. It is also
economy in the MENA region with a GDP valued has adversely affected the country’s revenues considered to be overcrowded. About half of the envisioned to serve a more efficient, globally
at USD 646 billion. The Kingdom is home to two and fiscal surpluses. This deterioration put population of 32 million in the country are below connected economic zone isolated from the
significant cities in Islam, Makkah and Madinah. a constraint on public finances, with the 30 years old and this demographic structure is a ongoing market inefficiencies in the country.
Saudi Arabia is an absolute monarchy and government’s budget balance yielding a deficit concern for the future job market. In Saudi Arabia, Some of Softbank’s Vision Fund’s portfolio
the Holy Qur’an and Sunnah (the traditions of as opposed to the surplus that the country has for every person aged 55 to 59, those due to exit companies will also be physically represented
Prophet Muhammad) comprise the country’s grown accustomed to.10 The economy grew the workforce, there are 2.15 15 to 19 years olds in the city.10
constitution.7 moderately in 2016 and contracted somewhat due to enter it.
in 2017. These circumstances challenged the The government is estimating that GDP
Saudi Arabia plays an active role in the sustainability of the welfare state (close to 70% Against this backdrop, 2016 witnessed the growth will rebound to 2.7% in 2018. The
Organization of Petroleum Exporting Countries of the country’s workforce is employed in the unveiling of Vision 2030, engineered by the authorities are optimistic and they are
(OPEC) and is a major producer of oil and public sector). Crown Prince Mohammed bin Salman. This pushing forward the country’s transformation
natural gas. The country is also home to an multifaceted plan calls for a major economic plans and increasing government spending
estimated 22% of the world’s proven oil reserves. overhaul, paving the way for the reorientation to record highs of SAR 978 billion (USD 261
7,8
Oil and gas are indispensable sources of of the Kingdom’s economy away from fossil- billion) in 2018.15
income – they constitute c. 80% of budget FIGURE 2. GLOBAL COMPETITIVENESS INDEX fuel-powered, state- driven growth, to a more
revenues, 50% of gross domestic product (GDP) SCORES FOR KSA, 2016 diversified, private-sector led economic model.
Score (1-7) Rank (138)
and 85% of earnings generated by exports. 8-9
Global Competitiveness Index 4.8 29 Vision 2030 promotes entrepreneurship,
FIGURE 1. MACROECONOMIC INDICATORS Institutions especially involving technology, as a critical
FOR KSA, 2016 The quality of legal and administrative 5.1 24 lever for achieving goals in finding new sources
framework that regulates interactions
Value Rank (192) between government, firms and people
of economic growth and employment. Saudi
authorities recognize the importance of SMEs for
Infrastructure
GDP 646 B 20 diversifying the economy and want to leverage
(USD)
Existence of extensive and efficient
infrastructure to supply required 5.1 31 their higher job creation potential and have,
services therefore, initiated a number of initiatives to
GDP per capita Market Size support their growth.12 The target is to raise the
55 K 12 contribution of SMEs to the economy to 30% by
(PPP adj. USD) 5.4 14
Size of the economy
the year 2030.
7
GASME. “Brief Introduction of Saudi Arabia”. http://www.globalsmes.org/
Population 32 41 Macroeconomic environment news/index.php?func=detail&detailid=1061&catalog=20&lan=en&search_
(millions), 2016 These plans are reinforced by the creation of keywords
Stability of the economy
4.7 68 the world’s largest sovereign wealth fund, with 8
Saudi Arabia Facts and Figures, OPEC (http://www.opec.org/opec_web/
Rate of population aged an estimated asset size of USD 2 trillion that en/about_us/169.htm)

15-19 over those 2.15

“Doing Business in KSA- A tax and legal guide” September 2015, PwC
9

Goods market efficiency will be deployed to transform the economy

aged 55-59 and create employment.10 In 2017, through its
(http://taxsummaries.pwc.com/ID/Saudi-Arabia-Overview
Intensity of local competition, ease of
doing business, tax rates, imports ratio
4.6 41 10
“Sun, Sea and Robots: Saudi Arabia’s Sci-Fi City in the Desert”, Glen Carey

and buyer sophistication in a country

main sovereign wealth fund PIF, Saudi Arabia et al, October 26,2017, Bloomberg
SME contribution 20% committed USD 45 billion over a five-year period Labor Market Statistics, 2017 Q2, General Authority for Statistics (https://
11

to GDP, 2016 Source: World Economic Forum

to Japan’s Softbank Vision Fund. Softbank’s USD
www.stats.gov.sa/sites/default/files/labour_market_2017_q2_2.pdf)
12
The Public Investment Fund Program (2018-2020)14 Gulf News. “Dh300b
93 billion Vision Fund plans to invest in a number projects in UAE to spur knowledge economy”. http://gulfnews.com/
news/uae/government/dh300b-projects-in-uae-to-spur-knowledge-
Consumer expenditure of technology sectors with varying degrees of
43% Due to the structure of the economy, SMEs economy-1.1623814 (accessed December 15, 2017)
as a % of GDP equity stake, considering companies at different 13
“Softbank-Saudi tech fund becomes world's biggest with $93 billion of
account for a small proportion of economic development stages13-14 These investments are capital”, Andrew Torchia, Reuters, May 20,2017 (www.reuters.com/article/

Stock market cap

activity in KSA, contributing about 20% to GDP. envisioned to serve the Kingdom’s interest in
us-softbank-visionfund-launch/softbank-saudi-tech-fund-becomes-worlds-

69% The slow growth of SMEs in the Saudi business

biggest-with-93-billion-of-capital-idUSKCN18G0NP
as a % of GDP obtaining access to foreign technology and
14
“SoftBank Plans Up to $25 Billion in Saudi Investments “, Dinesh Nair
environment has been attributed to several diversifying into new industries.
et al, Bloomberg, November 15,2017, www.bloomberg.com/news/
articles/2017-11-15/softbank-is-said-to-plan-up-to-25-billion-in-saudi-
Stock market traded
challenges, most notably limited access to investments-ja146fd5

as a % of GDP 47% financing. Softbank, in return, will be investing up to USD

15
“Saudi Arabia's announced its largest budget ever in a major effort
to reshape its economy”, 20 Dec 2017, CNBC (https://www.cnbc.
15 billion in KSA’s new city Neom on the Red com/2017/12/20/saudi-arabia-2018-budget-mohammed-bin-salman-
Source: IMF, World Bank, Global Entrepreneurship Monitor, announces-big-spending.html)
Euromonitor, AT Kearney, Economist, World Economic Forum, Sea coast.14 Neom is planned to be built from
Kingdom of Saudi Arabia scratch, as a state-of-the-art smart city, larger
20 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 21
The results of tech The Kingdom of Saudi
entrepreneurship – Arabia vs. benchmark
Outputs countries
Saudi Arabia’s tech entrepreneurship outputs TECH STARTUP PREVALENCE IN A COUNTRYa Tech startup longevity
(1=highest, 0= lowest)
PER MILLION URBAN POPULATION
suggest that the country’s ecosystem is nascent
and has significant scope for growth. IRELAND (IE) 337 0.30
ISRAEL (IL) 214 0.49
Among its global and regional peers, Saudi SINGAPORE (SG) 176 0.68
Arabia’s output performance indicators reveal UNITED STATES (US) 160 0.48
that tech entrepreneurship in the country is UNITED KINGDOM (UK) 122 0.53
at its infancy, exhibited by the very low tech LUXEMBOURG (LU) 101 0.62
startup prevalence in the country coupled with INDIA(IN) 92 0.59
the non-existence of significant exits valued NETHERLANDS (NL) 76 0.67
over USD100million. The country is largely UNITED ARAB EMIRATES (AE) 40 0.68
a consumer rather than a creator of digital GERMANY (DE) 34 0.68

technology and services. Evidence of this is the KOREA (KR) 20 0.32

20 0.41
low uptake of domain names reserved for the CHILE
TURKEY (TR) 16 0.16
country (ccTLDs). In Saudi Arabia, this is below
CHINA (CN) 12 0.57
two per 1,000 people whereas it reaches 330
MALAYSIA (MY) 11 0.77
ccTLDs per 1,000 people in the Netherlands
SOUTH AFRICA (ZA) 10 0.36
and around 165 in the UK. This is in contrast to
RUSSIA (RU) 6 0.42
the country’s high social media penetration.

ECONOMIC CONTRIBUTION
16

JAPAN (JP) 4 0.61

In parallel, the levels of contribution from EGYPT (EG) 4 0.48
knowledge sectors to the economy are low. NIGERIA (NG) 3 0.60
SAUDI ARABIA (SA) 2 0.76
As has been highlighted in Vision 2030,
innovative output generation in the country is
a development area for established sectors as NUMBER OF EXITS OVER USD 100M
2012-16
well as for tech entrepreneurs. All in all, Saudi
entrepreneurs have high-growth aspirations UNITED STATES (US) 1,946
which is a major asset. As the ecosystem UNITED KINGDOM (UK) 215
65
matures, tech entrepreneurship can be a remedy GERMANY (DE)
49
for single-sector dependency and over- reliance CHINA (CN)

on public employment. INDIA (IN) 40

ISRAEL (IL) 37
NETHERLANDS (NL) 33
IRELAND (IE) 20
JAPAN (JP) 16
SINGAPORE (SG) 15
RUSSIA (RU) 7
KOREA (KR) 6
TURKEY (TR) 6
SOUTH AFRICA (ZA) 6
CHILE (CL) 4 Other countries in scope of tech
EGYPT (EG) 4 entrepreneurship study

LUXEMBOURG (LU) 4
NIGERIA (NG) 3
16
Cybercrime and the Digital Economy in the GCC Countries” , Chatham
House, June 30 2017 (https://www.chathamhouse.org/sites/files/ UNITED ARAB EMIRATES (AE) 2 Note: The definitions of the output
indicators can be found in the appendix
chathamhouse/publications/research/2017-06-30-cybercrime-digital- MALAYSIA (MY) 1 a. Density shows proportional values among
economy-gcc-hakmeh.pdf) ecosystems. Scales are only comparable
SAUDI ARABIA (SA) 1 within each indicator

22 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 23
 ENTREPRENEUR’S GROWTH ASPIRATION SCOREb INNOVATIVE OUTPUT DENSITY
A scoring based on percentage of entrepreneurs with a sophisticated growth strategy aspiring The abundance of knowledge creation and intangible assets in a country (out of 100)
to grow at least 50% in the next 5 years and attract VC funding (1=highest, 0=lowest)
75 69 67
1.0 1.0 1.0 1.0 61
60 60
0.8 0.8 0.8 0.8 0.8 57
0.7 0.6 0.6 54 52
0.5 0.5 0.5 0.5 47
0.4 0.4 0.2 0.2 43 38 38
0.1 29 28 27 27 25 22
19 18

AE JP SG US IE SA IL CL TR UK DE CN ZA NL LU EG RU KR NG IN MY
ECONOMIC CONTRIBUTION

INNOVATION CREATION
30.7 N/A N/A 30.7 36.7 5.3 22.1 34.2 48.1 28.4 21.5 26.7 27.6 17.2 21.7 25.4 18.7 21.6 N/A 5.2 8.2

HIGH JOB CREATION EXPECTATION (% OF ENTREPRENEURS) KR CN DE NL LU UK US JP IL TR IE SG RU CL ZA MY IN AE SA EG NG

Other countries in scope of tech entrepreneurship study

ABILITY TO CREATE GLOBALLY RECOGNIZED CONTRIBUTION OF KNOWLEDGE SECTORS

“UNICORNS”c TO THE ECONOMY ENTREPRENEURIAL INNOVATION CREATIONd
Technology start-ups with over USD 1 billion valuation in benchmark countries ICT & High-tech exports, international data flows and Rate of entrepreneurs involved in new product or service creation
IP receipts (1=highest, 0=lowest)

Benchmark country set

57%
45% 40%
0 37% 33% 33% 31%
278 1,174 30% 30% 29% 28% 27% 25% 23%
0.33 22% 13% 5%
4%

$ 0.67

Total Total value 1

number (USD B)
CL LU IE US UK KR TR IL NL CN IN AE DE EG ZA SA RU MY

- -
Other countries in scope of tech entrepreneurship study

d. Some benchmark set countries are not shown due to data availability
Note: The definitions of the output indicators can be found in the appendix
b. A scoring based on percentage of entrepreneurs with a sophisticated growth strategy aspiring to grow at least 50% in the next 5 years and attract VC funding Source: OC&C analysis based on World Bank, GEM, GEDI, Crunchbase, INSEAD, McKinsey, CB Insights
c. Unicorns in tech-related categories are taken into consideration

24 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 25
 KSA tech entrepreneurship
FIGURE 4. MAJOR ACTORS WITHIN THE KSA TECH ENTREPRENEURSHIP ECOSYSTEM

ecosystem overview
The digital economy, constituting the proven to be successful in other markets. As
digital share in private consumption, private the ecosystem gears up, there will be a shift
investment, government expenditure, and toward high-tech and big-data domains.
imports and exports is estimated to account A similar reasoning can also explain the
for 3.8% of GDP in Saudi Arabia. The share dominance of B2C startups, which mostly offer
of the digital economy in the USA and the online retailing platforms or marketplaces
EU’s GDPs is estimated to be 8 and 6.2%, to consumers. It should be noted that
respectively, indicating substantial scope for tech startups spun off from King Abdullah
growth for tech entrepreneurship in KSA.17 University of Science and Technology (KAUST),
which are located in King Abdullah City of
Though the tech entrepreneurship ecosystem Science and Technology (KACST), engage
in the Kingdom is at its early stages, it is highly in commercialization of advanced research,
dynamic. Software-as-a-Service (SaaS) and hence they are more sophisticated than other
e-commerce startups are the main focus of ecosystem players and mostly offer B2B
tech startups. These sectors are in line with solutions.
the infancy of the ecosystem, since most of
the startups adopt business models that are

a. Startups that are founded after 2010 and have technology-related businesses
Source: Startups Watch, Crunchbase, Teknosektor, Ministry of Science, Industry and Tech., Idema, Doğru Tercihler, Banks Association of Turkey, Council of Higher Education, ICTA

The Kingdom’s first move towards developing The outlined national science and technology
FIGURE 3. PROFILE OF TOP 50 TECH STARTUPS IN THE KSA ECOSYSTEM a base for science, technology, and innovation policy goes hand in hand with Vision 2030
was the Royal Decree of 1985, directing (see Figure 5) which focuses on startups,
Business Model Breakdown Location Breakdown Sector Breakdown KACST to propose a national policy. KACST technology transfer, empowering women
Social thus began developing the National Policy and building human capacity. The vision
Mixed Content
Platform for Science and Technology in collaboration encourages developing a strong foundation.
Others 2%
Riyadh
(VGM) SaaS & IaaS with the Ministry of Economy and Planning. As a subcomponent of Vision 2030, the
8%
C2C 16% B2C 18%
Advertising The policy was approved by the Council of National Transformation Program (see Figure
2% & Big Data 8%
Ministers in 2002, embodying the Kingdom’s 6) allocates budgets to different entities to
44% Thuwal 42% High Tech 8% vision and its fundamental strategic plans, enable the transformation throughout the
10% 42%
building the Saudi knowledge society and Kingdom set out in the Vision.
38% 14% knowledge-based economy.18
B2B 30% Marketplace
18% The National Science, Technology, and
Innovation Plan consists of four five-year
Jeddah plans designed to realize certain strategic
e-retail
objectives:

• First national plan (ended in 2014):

To establish infrastructure for science,
technology and innovation in the Kingdom.
• Second national plan, (2018): The Kingdom
to become a pioneer in the field of science,
technology and innovation in the region.
• Third national plan (2023): To become a
leading country in science technology and
innovation in Asia.
17
Digital Middle East: Transforming the region into a leading digital economy” Digital McKinsey, October 2016
18
www.kacst.edu.sa/eng/stip/Pages/Science-Technology-Innovation-Policy • Fourth national plan (2028): To join
developed science, technology, and
innovation countries and transform into a
knowledge-based economy.
26 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 27
FIGURE 5. VISION 2030 - A PLAN TO SHAPE KINGDOM'S FUTURE FIGURE 6. BUDGETS ALLOCATED TO DIFFERENT ENTITIES FOR NATIONAL TRANSFORMATION PLAN

Source: Vision 2030, Public Investment Fund Program

Source: Arabnet The Quarterly Issue 11 | Winter 2016

28 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 29
In our review of the Saudi tech The incubators/accelerators, co-working Best-practice sharing can take place in The lack of an adequate, high-quality Saudi
entrepreneurship ecosystem, carried out spaces, and affiliated entrepreneurship multiple settings made possible by a series technical workforce does not support a fast
with stakeholder participation in the form of programs need to increase in number to create of interventions. The missing linkages growing tech entrepreneurship ecosystem as
roundtable discussions and interviews, four more knowledge-sharing and networking with other international ecosystems are the most readily available skill sets in KSA are
major areas for improvement were frequently opportunities. one improvement point that can facilitate related to conventional business skills. The
highlighted: information exchange between authorities, more technical, knowledge-based skills are not
Formal accelerator/incubator programs agencies, and entrepreneurs. Secondly, prevalent and the education system needs to
Roadblocks to developing the tech provide business premises, advice, networking granting freer mobility for foreign tech adjust accordingly to fill this gap.
entrepreneurship ecosystem have been the opportunities and initial equity finance. entrepreneurs and related talent would
focus of recent regulatory reforms in the Informal clusters provide physical proximity upskill the domestic market by bringing Increasing participation of women in the tech
country. The increased pace of enactment and that facilitates collaboration and access to in best practices. Accordingly, being able entrepreneurship domain will also bring a
enforcement would accelerate activity and resources and knowledge. Clustering speeds to access international VCs, funds, and transformation to the business culture in the
build momentum. up the ability of startups to discover market accelerator programs at home would country.
opportunities, launch new ventures, achieve jumpstart the whole ecosystem and elevate
Tech entrepreneurship in Saudi Arabia benefits market validation, and tap into the labor standards. In addition, the private sector –
from being at the center of the Kingdom’s market. especially the multinationals that engage in
strategic economic plans for a sustainable university partnerships and open innovation
future. The ingredients needed to create a tech For KSA’s market size and the density of practices in other markets – would be another
entrepreneurship hub are mostly present, such network, institutions are low compared to important contributor to developing the
as being the biggest market in the region, the more evolved ecosystems. Burgeoning KSA tech entrepreneurship ecosystem by
availability of financial capital, a young and entrepreneurial activities are supported bringing some of those practices to the Saudi
educated talent pool, and robust infrastructure. by a few, albeit well-structured, institutions market. Lastly, harboring large technology
and programs that have been initiated by corporations and innovative companies in
But championing entrepreneurship to drive public entities and established state-owned the country would serve the community in
economic growth is a new endeavor for KSA. enterprises. multiple ways.
Therefore, the existing rule of law that governs
commercial life is not totally aligned to cater Ecosystem participants indicate that the Excelling in tech entrepreneurship will
to the needs of high-impact, technology-led number of such programs and physical require culture adaptation at all levels of the
entrepreneurship. There have been a number clusters need to be populated in the country, ecosystem.
of Royal Decrees and policy changes designed in line with its growth aspirations. These will
to move toward an open market structure be instrumental in dissemination of a new Saudi business culture mainly revolves
where private initiatives can thrive. Ecosystem perspective, business culture, and mentorship around public or large corporate
participants feel that policy advancements for aspiring young entrepreneurs. The employment. Although trade is embedded
need to move forward in a steady and programs will provide more publicity for tech in Saudi culture, pursuit of private initiatives
systematic way, with special attention being entrepreneurship and create awareness and is not a proven career path for the well-
given to their materialization in a faster and pull. In order to import expertise into the educated workforce.
more concrete manner. market, collaborations and affiliations with
cutting-edge international programs are also Developments following the announcement
In addition to enacting new laws and highlighted. of Vision 2030 created a strong movement
regulations, the alignment of different amongst regulatory bodies, the private
ministries and authorities is also considered International linkages for exchanges and sector, and aspiring entrepreneurs. However,
necessary to smooth out procedures in dissemination of knowhow, financial capital, wider penetration into society and public
practice. The application of the new rules relies and skills have not yet been fully forged. offices will take continuous reinforcement of
on clear guidance, knowledgeable executives, messages, success stories, and publicizing
and trained civil servants. At this point, the The young ecosystem needs to emulate efforts.
interviewees perceive a bottleneck where best practices on several fronts in order
clear guidelines may be missing and officials to create the conditions that would best Cultural norms about the perception of
may show reluctance to be the ones to first serve the cultivation of a productive tech failure, collaboration, and sharing of ideas
implement rules without precedent. entrepreneurship ecosystem. Because and wealth in order to grow a venture
the country has only taken up tech to its full potential need to be tackled in
entrepreneurship seriously in recent years, the entrepreneurship programs, events, forums,
interlinkages are just being made. and in schools.

30 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 31
Insights into ecosystem components
1. Financial $
capital $ $

Successful tech startups require adequate and a wider range of investment stages. Business
timely funding. Different sources of capital angel investors are forming clusters and
tailored to the needs of startups accompanied building interest and their understanding of
by guidance and support is required for tech entrepreneurship endeavors. However,
healthy growth. their investment history is short and limited
to a small number of transactions. The larger
There are five main sources of equity finance extent of the corporate realm, especially
available for entrepreneurs: family-owned conglomerates managing
• Individual investors (personal networks, portfolios, is just beginning to get acquainted
angel investors, crowdfunding) – at the with tech-enabled entrepreneurship. SMEs
seed stage. lending by banks is at low levels – c.5%–
which is one of the improvement areas public
• Venture capital – (institutional investment), officials are working on.
from seed to later stages with high return
expectations. Parallel to its development stage, there
• Public funding (grants, sovereign has not been a strong emphasis on exit
investment funds, ‘fund of funds’) – to plans and routes in the Kingdom’s tech
fill funding gaps at various stages and entrepreneurship ecosystem. There is no track
stimulate priority sectors. record of successful exits to create models
to be emulated and signal wealth creation FIGURE 7: AVERAGE EQUITY INVESTMENT TICKET SIZE IN THE REGION (2013-2015)
• Corporate investment (strategic opportunities to all stakeholders. 5.8
acquisitions, direct investment and via
corporate venture funds [CVCs]) – to
acquire industry-specific solutions, or for
corporate innovation exposure. “When we started in 2012, Average ticket size by year (USD mn)
2013 2014 2015
• Initial Public Offerings (IPOs) – in the local Saudi ecommerce startups were
and foreign stock exchanges that also
signal success to a wider audience.
comparable in size to Souq.com.
Currently, the equity funding needs of the But, Souq was able to raise so
2.5 2.5 2.5
Saudi tech ecosystem are mainly served by much more as a company based 2.2
government-backed funds leveraging one 1.9
of two main delivery mechanisms. The first outside Saudi, their last round 1.4
is providing grants or seed stage capital before Amazon acquired them 1.1
0.9 1.0 1.0
deployed by accelerators and university 0.7 0.6 0.6
programs. The second, through matching was about USD 250 million. 0.3
funds of investment arms of country’s leading
state or quasi-state corporations. Since 2014 we received only USD KSA UAE Lebanon Jordan Egypt

The number of private VC firms is currently

650 thousand, that was it and it is No, of deals 19 22 18 30 52 55 10 21 34 20 30 24 31 26 6
Total deal
limited but, there is a lot of activity to establish not just us.” – Muhammad Arrabi - value (USD M)
36 56 13 33 114 139 6 29 31 5 17 23 77 152 6
the right conditions to multiply their numbers
and expand their activity and coverage over CEO, Ecommerce Sea Source: Arabnet – The State of Digital Investments in MENA

32 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 33
The government has put in place a number - The Saudi Public Investment Fund (PIF) Leading corporations of the KSA are engaged FIGURE 8. TOTAL FUNDS AVAILABLE FOR SME
of programs and initiatives to funnel funding established and funded a technology in corporate venturing with various mandates. AND TECH ENTREPRENEURSHIP FUNDING
(NON- EXHAUSTIVE)
into the tech entrepreneurship ecosystem. investment arm: TAQNIA.21 The • The most prominent, locomotive
• The Saudi government has demonstrated company established Riyad TAQNIA corporations of the Saudi business world
its clear intention to vitalize tech Fund (RTF) worth USD 133 million, in have taken an active role in developing
entrepreneurship in the Kingdom by partnership with Riyad Bank’s Riyad tech entrepreneurship in the country. Saudi
mobilizing sizable financial resources to Capital. RTF invests in growth and early- Aramco, STC, Mobily and MBC Group have
stage local and international technology all initiated tailor-made funding programs
jump start the movement.
startups. VC’s investment committee are and established corporate venture arms to
provide much needed early-stage funding
• The Council of Ministers issued a decision experts from around the world and they
investments.23
in 2016 to establish a “fund of funds” to review the opportunity pipeline.
invest in private equity, venture capital,
- Saudi Aramco’s entrepreneurship
and seed capital funds on a commercial - The Small and Medium Enterprises center Wa’ed provides grants of around
basis, with the aim of supporting and Authority (SMEA, Monsha’at) has USD 27,000 (SAR 75,000) and loans of
incentivizing SMEs investments. The fund initiated Centennial Fund to offer profit up to USD 1.3 million (SAR 5 million).
is about USD 1 billion (SAR 4 billion), and
free finance up to SAR 5 million to
aims to support those funds that will invest - Wa’ed Ventures, established in 2011,
in SMEs in Saudi Arabia for a period of 15 support youth starting their small and
is a USD 200 million VC fund that has Source: Wamda Research “The KSA: Status of the entrepreneurship ecosystem”, Wamda,
to 20 years.12 medium-sized projects. The authority a mandate to make seed to growth
Bloomberg, Deal Street Asia, Arabian Business, PRLOG, Palico

also announced the establishment of stage investments to create jobs in

• Several other public funds have been
a VC fund targeting startups valued at Saudi Arabia and support economic Seed and early-stage fund needs are
established in the country by different
USD 750 (SAR 2.8 billion) in addition development. The VC has invested in mainly deployed through accelerators or
authorities. These resources are
to an indirect funding source valued at 22 startups since its establishment public university run programs that are
entrusted and managed by professional either backed by public institutions or large
organizations. USD 426 million (SAR 1.6 billion).22 offering up to USD 5 million per transaction.
corporates.
- Takamol Holding19, as a part of their - STC has two venture capital funds: • All leading universities in KSA have
mission to support employment STC Ventures, established in 2012, established entrepreneurship centers
creation and transformation, match focuses on the GCC, MENA, and Turkey. that include investment funds as well as
STV is a technology VC fund, valued to accelerator programs. Universities are
funds through becoming a guarantor
USD 500 million, investing exclusively in leveraging these two vehicles to promote
between the VCs and the banks, entrepreneurship, provide guidance, as
Musharakah program.20 the digital sector.
well as early equity investment to tech
- Mobily Ventures focuses on ICT, startups.
media, and entertainment covering the
- The private research university KAUST
MENA region as well.
established funds for early-stage
- MBC ventures invests in ICT and investments in high-tech startups with
media startups in the MENA region values ranging from USD 200 thousand
“Government sovereign capital being used to create fund-of-funds then to USD 2 million. The university is
offering USD 500,000 for 10% to 20%
recruiting experienced VC teams both locally and internationally who have equity. supported by government grants.
experience working in the region in order to deploy that capital in a smart
• The investments of these VCs in tech - Umm Al Qura University’s Wadi
way. That is a great way to drive economic diversification, create high-paying entrepreneurship are mostly in early- Makkah has a venture capital fund
jobs and build a generation of entrepreneurs who will create a future wave of stage reaching USD 5 million in equity which specifically targets startup
innovative start-ups.” – Kemal Farid - Managing Director, Bluevine Ventures contribution for around 20% stake in the companies springing from the
business. University.

19
Takamol Holding is a newly established semi-government holding company operating under the umbrella of the Ministry of Labor. The company’s mission is to
transform the Saudi labor market by launching sustainable projects and activating partnerships between the public and private sector.
“Musharakah” is a joint enterprise or partnership structure with profit/loss sharing implications that is used in Islamic finance instead of interest-bearing loans.
20

Musharakah allows each party involved in a business to share in the profits and risks.
21
TAQNIA: (The Saudi Technology Development and Investment Company) was established in June 2011 by Royal Decree to localize technology in Saudi 22
“The launch of four initiatives supporting the Saudi SME sector”, December 14, 2017,
Arabia and commercialize outputs of R&D centers. TAQNIA invests in technology – local and international - that contributes towards Saudi Arabia’s economic Wamda (www.wamda.com/2017/12/launch-initiatives-supporting-saudi-sme-sector)
diversification. TAQNIA tries to target projects with characteristics of technology transferability, strategic relevance, profitability, and alignment with local R&D 23
The KSA: The status of the entrepreneurship ecosystem, June 2017, Wamda
efforts, value chain, synergy creation, and economic impact. Research

34 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 35
• Public entities and large corporations also FIGURE 10. NUMBER OF INVESTORS PER MILLION a member is active, invests, and identifies they are granted a certificate: SAR 5
back universities in these initiatives while URBAN POPULATION entrepreneurs to be considered by the million asset, SAR 40 million turnover,
running their own funding activities though network. having a CPA certificate or a masters
venture firms and their own accelerators. in finance or passing CMA1 exam, at
• There is no formal registry of membership least 2 years’ experience in the field or
• Ecosystem participants stress that while or certification of angel investors in the maintaining an annual income of SAR
these funds are taking shape their country. Accordingly, there are also no 600,000 for two consecutive years.
deployment pace is not a match to the incentives to motivate angel investment
surge in the number aspiring entrepreneurs. 82 70 64 54 30 25 in tech entrepreneurship. Membership • In the Kingdom, the Ministry of Commerce
Therefore, accessing early-stage equity in the networks is also not tied to an
and Investment (MCI) and CMA rules do
investment in the ecosystem is currently at a IL IE SG LU UK US investment obligation; therefore, the actual
bottleneck. investment track record of the networks is not allow for several generally accepted
insubstantial. GP/LP structures in running a venture fund:
FIGURE 9. SEED ROUND VELOCITY - different share classes allowing for
The hurdles impeding VC establishment have
18 16 12 12 12 10 been addressed to a certain degree but, differentiated governance, commercial
17 16 12 8 there remain additional issues to settle for and downside protection rights for
4 3 minority investors such as VCs,
full-fledged VC activity at all entrepreneurial
IN NL DE AE CN MY stages.
- flexible capital call structures and
• The number of VCs in the market is not remedies to compensate the fund and
IE SG IL UK US IN adequate to meet the equity financing its investors in case of a defaulting LP,
8
needs of the rising number of tech
6 4 3 2 1 startups. It is reported that there are about - cumbersome procedures to set up
3 3 2 2 2 2 forty PEs operating in the country while a SPV for acquisition of portfolio
KR CL JP TR ZA RU there are only around 20 VCs. companies.
• The existing VCs engage in early-stage • As a result, VC funds that prefer to
LU NL AE DE MY CL
funding only; there is no growth stage maintain such structures are set up in
1 1 1 1 1 1 investment in the market. Ecosystem other jurisdictions but considered foreign
1 1 1 participants think that the number of VCs investors in KSA, thus facing substantial
EG NG SA should increase by engaging with more obstacles when registering or investing in
domestic and international parties. the Kingdom.
Other countries in scope of tech entrepreneurship study

KR ZA CN TR JP EG Note: Figure shows number of investors per million urban popula- • The requirements of starting a VC are • Capital gains realized by a non-resident
tion in each country
Source: Startup Bootcamp, Crunchbase, OC&C analysis considered to be complex and costly which investor from the sale of shares in a KSA
1 1 1
has recently been eased by Capital Market registered company are subject to 20%
Angel investment is still nascent in Saudi;
Authority (CMA) interventions. The capital capital gains tax.
high-net-worth individuals are not active
requirement for an asset management
investors in tech entrepreneurship.
company was lowered from USD 13 million • Ecosystem participants highlight that the
RU SA NG • Private investors in Saudi are considered to USD 5 million (SAR 50 million to SAR 20 deal closing process for USD 5-6 million
Other countries in scope of tech entrepreneurship study quite traditional by entrepreneurs. Most million). levels of investments - considered series
Note: Figure shows number of seed rounds per million urban
investments by high-net-worth individuals A/B stages - takes longer than in other
population in each country are in the stock market and real estate. • The definition of a “sophisticated investor” markets. It is partly an indirect result of
Source: Startup Bootcamp, Crunchbase, OC&C analysis Entrepreneurs observe that aspiring angel was also broadened to increase the the previously mentioned regulatory
investors are challenged to accept that number of eligible LPs to participate in the constraints as foreign investors seek to
a company will become profitable in 10 VC fund. invest in Saudi tech companies established
years’ time. They seek quick returns and in a jurisdiction with which they are familiar
quick capital gain in very short period of - Previously, a “sophisticated investor”
(i.e. BVI, DIFC or ADGM Company in UAE).
time. was someone or some entity that
satisfied two out of three requirements: Having a higher concentration of regional
• Two business angel networks exist in the an asset size of SAR 10 million, SAR 40 and global funds in the ecosystem will serve
country. OQal is the largest one with 340 million yearly turnover, and 2 years’ tech startups to scale up to become globally
members. Membership is by referral and experience in the field. competitive.
subject to an annual membership fee of • Entrepreneurs and investors interviewed
SAR 25,000. However, the fee is reduced if - After the revisions, if the subject indicate that making international
satisfies one of the six requirements,
36 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 37
 smart money available in the ecosystem • Against this backdrop, few early FIGURE 12: SMEs LOANS’ SHARE IN TOTAL BANK LOANS A secondary market was established to
would provide the opportunity for Saudi adopters are becoming involved in (2011, EXCEPT FOR KSA) provide a suitable public offering venue for
entrepreneurs to gain exposure to different tech entrepreneurship investment by 24 tech entrepreneurship.
players in other markets and provide establishing private VCs separate from
the guidance to grow beyond a narrow • The primary stock exchange in
their holding structure such as Raed
business definition. KSA, Tadawul, is accessible to large
Ventures. This fund invests in tech-enabled
businesses at seed and early stage that 16 corporations and sizable, established
FIGURE 11. VC INVESTMENT MAGNITUDE (2016)
may – although not a mandate – support 14 institutional investors. In 2015, the market
Total value
their portfolio in traditional sectors. was opened to foreign investors. In 2017,
(USD b)
10 the Capital Market Authority (CMA)
SG 4.5% 1.35
• The movement has to spread to the wider announced more initiatives to further
IL 4.1% 1.29 deregulate access by foreign investors.
business community to unlock not only 5 5

CN 3.1% 34.92 investment capital for startups but also 4

• In order to increase capital access for
US 2.7% 49.65 business linkages and potential acquisition small cap SMEs, CMA created a secondary
AE 1.3% 0.49 transactions. Morocco Lebanon Tunisia Jordan KSA Egypt UAE market, Nomu, in 2017. The minimum
(2017)
UK 1.2% 3.17 capital requirement in the secondary
IN 1.1% 2.59 “In the logistics area for instance, market is SAR 10 million as opposed
Source: The World Bank, SMEA
FI 0.7% 0.18 technology is advancing really fast. to the SAR 100 million requirement of
DE 0.5% 1.63 There is a convergence in the market. Exit routes are not yet obvious in the the Saudi Stock Exchange. The listing
ID 0.39 market. There is a limited number of M&A requirements are also kept less stringent.
0.4%
Big companies are struggling to adopt deals, mostly among larger firms, and the The new market also allows listed
ES 0.4% 0.45
0.38
new technologies. New guys may start primary capital market is also accessible companies to move up to Tadawul after
BR 0.2%
0.22 killing the old easily in a few years. to institutional investors interested in trading for at least two years on Nomu.
KR 0.2%
established businesses.
ZA 0.1% 0.03 Big companies cannot survive without - There are only nine companies
PL 0.1% 0.05 acquiring smaller, tech-enabled • Exits are crucial for the completion of the currently registered in the market
startup lifecycle and the sustainability and the trade volume is at low levels -
NG 0.1% 0.02
companies” – Omar A. Almajdouie - of the ecosystem. Efficient markets for
TR 0.1% 0.05 around SAR 300 million.
Founding Partner, Raed Ventures public offering, M&A, secondary sales, and
RU 0.1% 0.07
alternative markets are important pathways - As of 2018, The CMA announced
SA 0.0% 0.01
to return capital to investors and provide plans to open the secondary market to
0.00 liquidity to entrepreneurs.
RO 0.0% foreign investors.
CL 0.0% 0.00
SMEs lending in the Kingdom is at very • Tech entrepreneurship activity is in its
• Interviewees suggest collaborations
0
Per mille (‰) of GDP
5
low rates. The government has launched a early stages and not many endeavors have
with international stock exchanges, such
program to promote debt financing to SMEs. reached the maturity to contemplate an
Other countries in scope of tech entrepreneurship study as NASDAQ, will also create a clearer
Financial institutions have not considered exit strategy. Most investors forecast that
Source: Crunchbase, OC&C analysis • path and generate appropriate support
developing their SMEs lending arms they will be able to exit in 7 to 10 years,
systems for Saudi tech entrepreneurs.
prior to Vision 2030. Companies with a in the form of a PE or strategic buyout.
Family-owned conglomerates are starting Nevertheless, the path and options are not
USD 5 million asset base are considered
to engage in the innovation economy as visible in the ecosystem which would be an
small enterprises, companies below this
investors. Examples need to increase in underlying concern for venture investors.
threshold are overlooked.
order to facilitate the integration of tech
entrepreneurs into the private sector. • The transformation plan is encouraging
• Family-owned holding companies financial institutions to increase the share
are involved in mainstream sectors. of loans to SMEs from around 5% to 20% of “Money is there, but how you structure it and how you offer it is a problem. If you
Involvement in technology-enabled their total portfolios by the year 2030.24 solve that problem, more entrepreneurs will have access to funds.”
businesses as a differentiator of existing
businesses or a diversification of portfolio • The SMEA, together with the Saudi – Amal Dokhan - Director, Babson Global Center for Entrepreneurial
companies is not a generally observed Industrial Development Fund, has initiated Leadership, MBSC
trend. a loan guarantee program – Kafalah – de-
risking small scale businesses for banks by
• Beside the holding portfolio most guaranteeing a percentage of the funding.
family offices are also looking for more
conservative asset classes within KSA, “KSA Innovation Economy: Tech Startups 2017”, Arabnet The Quarterly, Issue No15,
24

mainly in real estate as investment Winter 2017

opportunities.
38 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 39
 However, intellectually gifted students are - The third and final five-year plan of the • The school is working on projects to
2. Skilled Talent identified through a national exam conducted program, which kicked off in 2015, tightens increase the entrepreneurial aptitude of
by the Giftedness Agency. These students the rules of eligibility for the scholarship its researchers while they innovate. The
demonstrate greater STEM skills and receive including a stipulation that the institution KAUST entrepreneurship center offer an
special education where their expenses are enrolled in must be in one of the world’s elective course on entrepreneurship and
covered by the state. The SMEA has recently top 50 academic programs in their field innovation where students are challenged
launched a summer camp program for 100 or top 100 universities. The recipient must with coming up with a commercial solution
male and 100 female gifted students to expose also maintain a minimum GPA. to an idle IP that is then presented to
A healthy tech ecosystem relies on a large pool them to entrepreneurial and technological companies for evaluation.
of qualified potential founders and employees skills. • Renamed as the “Your Job First, and Then
with superior skills in technology development Your Scholarship” stage, this new five-year • Unlike advance ecosystems in tech
and entrepreneurial drive. This, in turn, relies on For the past decade, the Saudi government plan ties scholarships to predetermined entrepreneurship, academics are not
a strong educational foundation in STEM as well has been paying special attention to increasing jobs aiming to resolve the employment allowed to engage in private endeavors
as business knowledge. Besides the skills taught the reach and penetration of higher education. challenges of earlier recipients. while in service. Releasing these conditions
in formal education, others must be learned via Today, there are 36 universities in KSA, ten of Beneficiaries of the scholarships will could also contribute to commercialization
employment or experience, requiring the private which are private. There are also 41 private become public companies who, in return, efforts of research and innovation.
sector’s participation to provide training. colleges offering degree programs. There have will guarantee public jobs for the recipients
been notable schemes to grant access to world- of the scholarships. KSA’s fundamental challenge is to transfer its
Educational foundations are considered key class higher education for Saudi nationals. The
to raising an analytically-skilled generation existing talent to private-sector employment
gross tertiary enrollment ratio in the country has There has been vast investment to expand and to tech entrepreneurship.
adaptable to knowledge-based employment. risen from a mere 30% to 55% between 2005 research and innovation capacity and there
Elementary school education, in terms of math and 2014 for both sexes.23 However, continued is also a focused effort to increase the • The private sector accounts for about 40%
skills, is relatively weak in comparison to some efforts to increase the employment of Saudi commercial applicability of the IPs. of the economy, however, most of the
of the frontier countries in knowledge-based nationals in the country and recent tightening
sectors. workforce – c. 70%– have been employed
of the education budget by around 12% • King Abdullah University of Science and by the state in well-paid jobs that do not
The standard KSA education system does have resulted in implications for some of the Technology (KAUST), is a state-of-the-art, fully capitalize on their potential. Public
not ecourage critical and innovative thinking. outstanding programs.26 model graduate school founded in 2009 sector jobs account for 45% of total
The value of hard work and academic that is working toward advancing scientific government spending and the aim is to
accomplishment, necessary for entrepreneurial In tertiary education, KSA offers one of the research, innovation and technology.
most generous national overseas scholarship reduce it to 40% by 2020 by reducing the
success, are not yet emphasized in schools and The highly competitive institution has a
schemes, rendering its forthcoming size of civil service by 20%. 28
universities.25 co-ed, international student body that is
workforce equipped with competitive skills recruited by a team of scouts. The school - To counterbalance the effects of the
and global exposure. has the second highest second highest
FIGURE 13: TIMSS MATH SCORES FOR 10-YEAR-OLDS, policy change Vision 2030 calls for
2015 endowment in the world (USD 10 billion) creation of 450,000 new private sector
SG
• In 2005, The Custodian of The Two
Holy Mosques' Overseas Scholarship after MIT. jobs 25
KR Program, also known as the King Abdullah
Scholarship Program, was launched. - KAUST is recognized by the global The business culture, particularly in public
•
JP
The program covers full tuition, medical community for having the fastest sector, is predominantly based on longevity
RU growing research and citation records of service which is associated with years
insurance, a monthly stipend for living
IE expenses, and annual round-trip airfare spent in office rather than output, merit,
in the world. It is also renowned for the
UK for undergraduate, graduate, and doctoral quality of its research output. qualifications or leadership skills. This is
candidates studying abroad. in stark contrast to what is sought for and
US - The research university has a diverse appraised by the private sector and hence
NL - KSA was ranked fourth largest international research partnership constitutes the biggest obstacle to the
DE
in terms of students enrolled in a network with other institutions around transformation plan.
scholarship program studying abroad the world. They also have several
ES following China, India, and South programs to collaborate with industry
TR Korea. Saudi Arabia also had the partners in open innovation.
CL
highest rate of students studying
abroad relative to its population 26,27
AE
SA - In 2015, a total of 200,000 students
were supported by the program, 25
“Laura El-Katiri,”Saudi Arabia’s Labour Market Challenge”, 06 July,2016, HBR
ZA
estimated to be 90% of all the Saudi (https://hbr.org/2016/07/saudi-arabias-labor-market-challenge)
26
“Saudi Arabia cuts funding for students abroad”, 26 Feb,2016, CNN
300 Average score on Maths (2015) 700 students enrolled in tertiary education (http://money.cnn.com/2016/02/09/news/saudi-arabia-students-overseas/index.html)
27
The Ministry of Education (https://www.moe.gov.sa/en/news/Pages/an74.aspx)
Other countries in scope of tech entrepreneurship study abroad.26 28
“Saudi Arabia Faces Challenge in Enlarging Private Sector”, 7 June 2016, Wall Street
Source: TIMSS, OC&C analysis Journal

40 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 41
• Even though existing ways of doing - MBSC has launched an MBA program
business cause uneasiness among the in partnership with Babson College
young who possess current skill sets and who are responsible for recruitment.
greater exposure to the global business The university is also running a
realm, taking a leap of faith in the “Signature Learning Experience”
private sector does not come naturally. class where each student needs to
A recent survey conducted by Erahad start a business project from day one
among 3,000 university and vocational and apply all the academic subjects
school students revealed that over half covered to this venture. The school also
of the pool still sought government provides funding of up to USD 15,000.
employment even after announcements
were made about prospective cutbacks - In general the universities in KSA
in civil service . About 15% expressed an are encouraged and supported to
interest in entrepreneurship while only 1% collaborate with reputable international
considered private sector employment.25 universities of their choosing to
improve the academic rigour of their
• Scholars argue that in order to bring about
programs.29
change, the public sector also needs
to systematically enforce meritocratic • SMEA (Monsha’at) is spearheading
structures and performance based establishment of extracurricular training
management in order to signal change programs to increase the entrepreneurial
and level the playing field between public capabilities in the country
and private-sector employment for the
younger generation.25 Constructive steps - The Authority has designed “capacity
have been taken along these lines with building” training programs on
the establishment of quasi-government technology and design thinking which
institutions tasked with detailing and is delivered at some universities
as workshops and also in 26 of the
execution of numerous transformation
Ministry of Commerce’s locations.
initiatives and programs. These institutions
have been attracting experienced, skilled, - They also have a customized
young talent available in the public
upskilling program that takes 50 to 100
and private sector and provides a new,
“gazelle companies” and works with
transitory reference point.29
them to find tailored solutions for their
A number of entrepreneurial training obstacles including regulations and
programs have been launched in the financing for a period of 9-12 months.
Kingdom to build an appetite for tech Participating companies are usually 3-5
entrepreneurship. years old, operate in selected sectors,
and demonstrate high growth rates.
• Leading educational institutions in
the Kingdom have created bespoke The Saudi nationalization scheme is a
entrepreneurial training programs to concrete tool to increase Saudi private-sector
increase the skills of their student body and employment rates however, greater benefits
build an appetite for tech entrepreneurship could be realized by relaxing its terms for
tech businesses
- KAUST, is working on cultivating
an entrepreneurial culture and it has • In order to improve the employment
also been a key player in enabling participation of Saudi nationals in
technology transfer and providing R&D the private sector and overcome
facilities to entrepreneurs. the unemployment challenge, the
Ministry of Labor introduced the
- The Wadi Makkah innovation center Saudi Nationalization Scheme in 2011,
of Umm Al- Qura University is partnering “Saudization” (Nitaqat system), which
with blue-chip companies such as Saudi 29
“Foreign scholarship program in for restructuring” http://saudigazette.com.sa/
Aramco, STC, Google and IBM. article/517111/SAUDI-ARABIA/Foreign-scholarship-program

42 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 43
 was redesigned in September 2017. • The well- educated and experienced FIGURE 14 SOFTWARE ENGINEER SALARIES (USD): FIGURE 15. ENTREPRENEURS FROM THE REGION WHO
According to the updated scheme, Saudi talent pool prefer employment in HackerRank
WANTED TO SCALE INTO KSA VS. ENTREPRENEURS
secure and well- paying public and Developer THAT HAVE ALREADY SCALED
private companies that employ more Index Score
than six people are required to hire a corporate jobs. They refrain from taking US 78 Want to scale into KSA

specific number of Saudi nationals. The up entrepreneurship or joining startups NL 79

Have scaled into KSA
38%

ministry also raised the requirement for an as compensation schemes are not 34%
IL 75
employer to be rated a higher tier ("high competitive, especially since stock options, 32%

LU -
green" or "platinum") to qualify for Block ownership of a stake in the entrepreneurial
DE 84
Visa approval. ventures, are not possible in KSA. These are
common vehicles used in other ecosystems UK 78 22%

• Employers in Saudi Arabia must hire to lure highly sought-after talent around the IE 76

more Saudis in order to remain eligible world. AE -

JP 92
to employ foreign workers and to avoid
• Currently, entrepreneurs indicate that -
restrictions on other services, including SA 9%
8%
they are tackling the skilled tech-talent
obtaining and renewing work permits. KR 82
gap by in-house training of local staff and 3% 3%
RU 100
• The policy, as it currently stands, inhibits outsourcing more technical aspects of
SG 87
attraction of the right talent to grow tech the business to overseas resources mostly Lebanon Egypt Jordan UAE
CL 78
entrepreneurship endeavors and become in Egypt or Jordan. The latter alternative
is said to be much more cost-effective, CN 100
competitive. The ecosystem participants Source: The KSA: The status of the entrepreneurship ecosystem,
view that adapting a more open market an important benefit for cash poor tech ZA 68
June 2017, Wamda Research

HR policy for tech entrepreneurship startups. TR 78

RU 61
companies would create more winners Employee retention is a common pain point
• In the meantime, concentrating on building MY 62
and ultimately contribute more to among tech ventures
skills in a faster manner by promoting open
domestic employment. IN 76
online courses that usually take six months
to complete as opposed to full degree
EG 69 • Business founders find it challenging to
The size of the available, high-quality 0 Annual Net Salary 120 retain employees and generally complain
programs is also cited as a plausible in USD k
technical workforce is not adequate to meet that their turnover rates are too high. The
interim solution in the interviews, until
the growing demand in the country. Other countries in scope of tech entrepreneurship study promising talent usually opt for better
the educational infrastructure aligns with
market needs Note: HackerRank Developer Index score is used as a proxy to paying and less challenging roles in public
• Ecosystem participants believe that the indicate coder skills
or larger private companies as soon as the
Source: Startup Genome, Glassdoor, Hacker Rank, OC&C analysis
quality of the technical workforce is opportunity presents itself.
comparable to international standards.
However, the size of this workforce in the The eagerly anticipated entrepreneurship
visa was recently approved. It is believed to • Some indicate they have come up with
Saudi market is believed to be too small. non- monetary benefits to hook their
“The education is changing around be the key to resolve the talent bottleneck
and enrich the ecosystem in multiple ways. employees. However, the ability to offer
- 0.9% of total FTEs in Saudi Arabia the world, and has to change in the stock options and subsidized services are
are considered digital talent which
country but, changing the entire • Ecosystem participants welcomed the most sought after improvements in
is below the average for Middle
the news in December 2017 of the the rules to support tech entrepreneurs. In
East region (1.7%), USA and EU curriculum takes time. Instead, new
3.7%17 introduction of an entrepreneurship visa. addition, potential courses on developing
paradigms such as open education The early information provided tied the enticing HR policies would also benefit
- A recent survey of tech entrepreneurs and new degrees such as visas to invitation letters from universities tech entrepreneurs.
published in Arabnet Quarterly, or incubator/accelerators. While overall
indicated that while most readily nanodegrees that takes six months
procedures were not yet clear at the time
available skill sets in KSA are related have emerged and widely adopted. of this study, there was a shared belief that
to conventional business skills, more
technical knowledge-based skills are Four year degrees to raise data importing entrepreneurs and skilled talent
not as prevalent. (i.e. development and from abroad would benefit the ecosystem
coding 11%, product design 7% and scientists is not suitable for market in terms of generating new ideas, creating
data analytics 2%) 24 and competitiveness demand, on the job training opportunities for the
local talent, and forming a greater pool
- The results are in agreement with we have to upskill existing talent of mentors to aspiring entrepreneurs
information obtained during interviews to fill the immediate gap by such and early-stage startups. The competitive
where authorities point out that by environment is thought to better local
2020 there will be a need for 200,000 paradigms and degrees” - Sami Al
data scientist in the country but current players’ standards and fulfill some
numbers are estimated to be around Hussayen, - Vice Governor, SMEA untapped areas in the market.
2,000.
44 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 45
 Leading corporations are active in the There are also reputable network events
“You won’t find many people who are inauguration of training and support and meetings that bring the ecosystem
going to leave a well-paying job with 3. Networks programs to build the infrastructure needed together where challenges are shared and
for entrepreneurial development of aspiring learning is exchanged. The turnout at these
benefits at a large company to go and youth. Corporate-led initiatives provide events is growing stronger, drawing in
join a startup with an unknown future monetary and non-monetary benefits. participants from the region and beyond.
that cannot pay as much if they don’t The composition of attendees is promising,
FIGURE 16. NOTABLE SUPPORT SERVICES PROVIDED as was the case during Arabnet 2017, which
have an incentive by way of stock was held in Riyadh in December 2017. Many
BY ESTABLISHED COMPANIES
options or owning a stake in those Healthy tech entrepreneurship ecosystems young Saudi women participated, signaling
startups. If we can solve this, we will feature a dense array of players and structures, that the business community is growing
with strong relationships between them. This accustomed to the increasing involvement
see a huge talent migration to Saudi of women in tech entrepreneurship and the
helps entrepreneurs exchange ideas, build
startups.” - Mazin Alshanbari - Director, teams, and get the resources they need to development of the economy.
TakaMol Holding grow.
Accelerators and incubators are taking
The introduction of Vision 2030 spurred the on the crucial task of educating aspiring
Tech entrepreneurship could become development of incubators and accelerators tech entrepreneurs who, in general,
a celebrated venue to increase female within the Kingdom. Notable government- are less prepared when it comes to the
participation in the economy. backed and/or university affiliated incubators conceptualization of their ideas than their
and accelerators include KAUST’s Hikma, international counterparts.
• One of the main objectives of the Vision Taqadam, Badir, 9/10ths, Wadi Makkah and
2030, is to increase the participation of • Tech entrepreneurs usually approach
Flat6Labs. 23,32 These programs reward their accelerator programs with raw ideas
women in the labor force from its current participants with grants and seed stage funding.
standing of 8% to 30%. and are subjected to a boot camp to
distill viable initiatives to be accepted to
Engaging in private endeavors and tech
• Statistically, there are as many Saudi female accelerator programs.
entrepreneurship is a new concept in the
university students as there are male. There country and there is a growing need to easily
Source: Wamda Research, MITEF, Fablab
are also about 25,000 Saudi graduate - For instance out of 500-800
access network facilities, training programs, applicants to the Badir accelerator
students. 23 About one-quarter of overseas coaching, and mentorship. According to a The highly anticipated entrepreneurship
education scholarship recipients have been visa was recently approved. It is believed to programs, 80 ideas are filtered and
survey conducted by Arabnet, entrepreneurs
women in the past 10 years.30 It has also be the key to resolve talent bottleneck and tested in a one week boot camp.
perceive mentorship support as the biggest
been indicated that Saudi women are higher gap after financing.24 Endeavor’s study of the enrich the ecosystem in multiple ways. Out of this process about 10 startups
academic achievers. New York ecosystem found that 33% of top qualify for the accelerator program.
performing startups were three times as likely These programs serve an important purpose
• There is an increasing number of well- but they are not designed to bring together - Taqadam startup accelerator runs
to have a high-quality mentor compared to
educated Saudi women occupying senior the business world – public and private – to a competitive initiation process among
startups that experienced regular growth.33
roles in public offices. However, the trend engage in joint solution development as teams from different universities
The early stage of development of the
has not fully picked up in the private sector collaborators with tech startups. Industry–tech across the country. A cohort of
KSA ecosystem means it is not possible to
or tech entrepreneurship. The proportion startup partnerships provide opportunities 600 applications are brought down
have an adequate number of experienced
of female founders in KSA is reported to be for youth to work on real case problems, to less than one-third in the initial
entrepreneurs to give back to the ecosystem.
about 5%, which is the lowest in the MENA using actual data and modifying concepts screening followed by a pre-accelerator
In an effort to expand the mentorship pool
region. In the Levant, female ownership of and products to best serve market needs. The program that further reduces the
available to the entrepreneurs, Monsha’at
tech startups has reached up to 25%. 31 incumbent, on the other hand, allows access accelerator participants to 30 startup
(SMEA) launched Fnar – an online mentorship
and advisory platform. However, attaining to innovation that will upgrade its services teams.
• The ongoing transition to expand women’s and products, thus creating a point of
involvement in social and economic life in the right kind of mentors, experienced
entrepreneurs that have launched, scaled, and competitive advantage in the market. In order “In Shark Tank, as one of the sharks,
the Kingdom could entice highly skilled, to ignite such cooperation in the ecosystem,
ambitious, and entrepreneurial Saudi exited a startup, will require time to accumulate the only participants that really
or a cross-border influx. Monsha’at launched a portal for open
women who had opted to stay abroad to innovation – Fikra (idea) - three months ago. caught my attention were apparently
launch their careers and businesses to return The portal allows for government bodies and ones that graduated from local
home. Hence, progressively addressing “Why has Saudi Arabia lost the war for talent to Dubai”, 19 September
30

large corporations to post their challenges

barriers restricting women could create
2016, Al-Arabiya English (https://english.alarabiya.net/en/views/news/mid-
dle-east/2016/09/19/Why-has-Saudi-Arabia-lost-the-war-for-talent-to-Dubai-.html)
incubators.”
31
“The state of Digital Investments in MENA, 2013-2015, Arabnet Business Intelligence and the entrepreneurs to offer solutions. The
the opportunity to fully reap the benefits 32
Nawito, Mohamed. “Promising Incubators & Accelerators in Saudi Arabia”.
winners will then be awarded with a reward or – Maha Taibeh- Consultant, Eradah
of decade long investments in building the https://www.linkedin.com/pulse/promising-incubators-accelerators-saudi-arabia-mo-
hamed-nawito contract to complete the work.
Kingdom’s female human capital. 33
Thaker, Anand. “Get a mentor or go home.” Atlanta Tech Village.
http://atlantatechvillage.com/buzz/2017/02/08/get-mentor-go-home/ (accessed
46 September 21, 2017)
Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 47
• Such an approach builds commitment scale up. GCAM is also working on an The accelerator programs will need to upgrade • When populating the number of TTOs
to the programs according to the incubator that will offer co-working space, in content and become versatile as tech in the country, better results could be
interviewees. Entrepreneurs face an intense studios and editing labs, education, entrepreneurship evolves in the country. Earlier achieved if university TTOs could be
schedule with many milestones which gets mentoring, and government services. interaction with VC funds in the programs will distinguished as centers of excellence in
them accustomed to what to expect as an also expedite later stages of networking for specific fields that match the institution’s
entrepreneur and builds momentum in • Interviewees highlighted the fact the tech entrepreneurs. knowledge and academic strength
their endeavor. license impediments around opening and also the business community and
• The current programs serve the needs of the
accelerators/ incubators and co-working economic activities in their catchment
The sheer number of applicants to spaces have been resolved and thus an existing market well. However, as the next
stage of improvement, advanced programs areas. (i.e. the cluster forming
accelerator/ incubator programs indicates increase in the number of private hubs is
should include guidance on how to scale up, around Dhahran on advancements in
an overwhelming demand to learn and get expected.
manage growth, and establish governance petrochemicals and energy). Such a
involved in entrepreneurship that cannot be
according to the interviewees. structure also provides clear addresses to
met with existing supply. FIGURE 17. ACCELERATOR DENSITY
the tech entrepreneur community leading
IE 18 • Currently, VCs are not necessarily integrated to the reduction of inefficiencies in the
• The number of Saudis developing an
interest in tech entrepreneurship is on IL 14 into accelerator networks. Closer working system.
the rise. However, the existing number of 11
relations could serve to build up the
UK
accelerators and entrepreneurship centers pipeline of companies to watch for on the FIGURE 18. UNIVERSITY/INDUSTRY RESEARCH
SG 9 part of the investors and provide earlier COLLABORATION
are not sufficient to cater to this demand.
NL 8 access to valuable smart money mentorship IL

• In addition to the establishment of US 7 for entrepreneurs. US

UK
structured programs, ecosystem AE 6 Initiatives have started to promote SG
participants believe that there is an IP commercialization in the country.
LU 6 NL
emerging need to create co-working Universities are creating accelerators and DE
spaces and clusters such as technoparks IN 5
TTOs to commercialize their technology MY
where entrepreneurs, companies, and DE 3 via entrepreneurship or in partnership with IE
supporting service providers can informally 2 JP
CL corporations.
get together, work side by side, and reach LU
out to each other easily to access knowhow TR 2 • Much of the focus of research institutes AE
and to collaborate. Physical clustering EG 1 has been on producing publications and IN
creates the best environment to develop ZA 1 delivering research and patents without ZA
ideas and partnerships to materialize linking these to commercial applications. KR
KR 1
business concepts. The country currently Today, there is a movement to increase the CN

only had a few such facilities. SA 1 RU

commercialization of innovation with a view
CL
CN 1 to creating companies and jobs. TR
• SMEA’s new initiative HUB1006 in King MY 1 - KAUST is launching Hikma, a new SA
Abdullah Economic City will provide
NG
access to professional and legal services, RU 1 accelerator program designed for
EG
workspaces, venture capitals, and NG 1 students, postdocs, and academics who
2 Extent of collaboration and idea sharing between 6
government services thus decreasing JP 1 wish to pursue the startup potential of companies and universities/research institutions

bureaucratic challenges impeding business their technology. The program is run (1=not at all, 7=to a greater extent)

0 Number of accelerators/programs 18 Other countries in scope of tech entrepreneurship study

per million urban population by the university’s entrepreneurship
Source: World Economic Forum Executive Opinion Survey 2016-
center with assistance from the KAUST 2017, OC&C analysis
Other countries in scope of tech entrepreneurship study
Technology Transfer Office (TTO).
Source: F6S, OC&C analysis
There are no established linkages with the
• Aramco is known to commission research at wider international tech entrepreneurship
“In addition to traditional incubators and accelerators, many of which are making a strong universities where the IP is co-owned by the community.
showing and offering a valuable contribution to the startup ecosystem in Saudi Arabia, I university and the company. Multiplication
of such collaborations will strengthen the • Developing connections with the wider
believe it is valuable to have working spaces specialized in helping technology startups international tech entrepreneurship
working relationship between universities
start up. An example is Astrolabs, based in Dubai. They are selective in who they invite to and industry and provide best-practice community facilitates the establishment of
join and offer startups and entrepreneurs a co-working space and community in which to examples for smaller firms. Partnerships a stronger support network for burgeoning
work efficiently, network and cooperate with other co-located businesses while receiving also lead to the emergence of tech tech entrepreneurship. It will offer the next
mentorship, training and help from industry experts in technology as well as issues that entrepreneurs who bridge the gap between stage of training programs not yet widely
commercialization and adaptation of available in the local network.
face small businesses in management, legal, and finance” - Hashim Alawadi - General
research fit for market.
Manager, Technology Investments Company
48 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 49
 Also, multinational cohorts participating
in international accelerator programs
will widen the perspectives of Saudi
entrepreneurs and encourage them to 4. Culture
look beyond solutions available to them at
home.
• Becoming more aligned with international
tech entrepreneurship practices in
regulatory and investment areas could
Entrepreneurial aspirations range from creating
increase the benefits of these interactions a better life for oneself, financial gain, the glamor
with maximum applicability of lessons at of launching a market-leading enterprise to
home. building an alternative to regular employment.
Ongoing government plans and programs Traits such as energy, self-confidence, perception
that aim to bring technology companies of failure as a learning process, ambition, and
to Saudi Arabia will, in time, create the independence are key for tech entrepreneurship.
network effect to complementing tech
entrepreneurship clusters and allowing them Cultural expectations and perceptions of
to thrive. entrepreneurship guide behavior and how
entrepreneurs receive support from the
• Interview participants believe that the community. They affect when and whether
Saudi government’s mega projects and citizens choose to use their skills in
international investment initiatives that aim entrepreneurial endeavors. Generally, in cultures
to draw global technology and innovation that support entrepreneurial behavior34:
companies to the Kingdom will create the
context that spring boarded many of the • People strive to equalize the distribution
leading tech entrepreneurs around the of power and wealth in society by taking
world. personal initiative, indicated by low power
distance scores.
- The PIF program identified sectors
that will contribute to the Kingdom’s • There is scope for individualism and less of a
economic development and preference for communal identification and
diversification: defense, industrial adherence.
transformation, entertainment, • Society at large is more competitive.
e-commerce, recycling, energy Achievement, spearheading, assertiveness
efficiency, and travel and tourism. The are celebrated traits and people expect to be
fund’s investment in large technology- rewarded materially for success.
enabled companies in these fields will
• Lastly, people in entrepreneurial cultures
have a direct impact on populating tech
feel less uncomfortable with uncertainty
entrepreneurship in respective areas.
and ambiguity. There is more acceptance
- The Kingdom is also running Giga- of nonconformist behavior and ideas to
projects that will transform the economy overcome challenges than to maintain the
and act as a catalyst for many private status quo.
businesses to thrive (i.e. Neom Project,
Red Sea Project and Qiddiya Project). Saudi Arabia is an absolute monarchy and the
population is heavily reliant on social welfare,
- Saudi Arabia is collaborating with benefiting from being a natural resource-rich
Japan’s Softbank Vision Fund to tap nation. For generations, the talent pool has
into technological advancements and been employed in the public sector, working
businesses around the world. The at a more relaxed pace and receiving generous
partnership entails drawing in some of the compensation. This work culture is well
portfolio companies to the Kingdom to established and Saudi youth – those that are
build a strong technology base that will under 25 who make up more than half of the
nurture the domestic ecosystem. population- have the same expectations as a
result.
34
Geert Hofstede - Cultural Dimensions (www.hofstede-insights.com/models/nation-
al-culture/)
50 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 51
This generation has grown up in an era in • Long-term orientation is also described • Those who are working with Saudi
which high oil prices sustained the status quo as low, mostly attributed to the normative "In Raed Ventures, 50% of the deal entrepreneurs at different levels observe
in the job market. The country’s youth have nature of the society which favors achieving evaluation is on entrepreneurs. that startup founders are hesitant to take on
high expectations and seek high–paying jobs quick results Entrepreneurs have to demonstrate partners and form winning teams which has
to attain them. However, in a market economy, • All of the above needs to be included in the potential to increase their chances of
wages will be determined by the perceived that they believe in their companies. survival and success. This is usually attributed
training at schools to mold a new set of
value of an individual’s contribution. behaviors that support entrepreneurship
We look at the dedication of to being unwilling to share potential upsides.
among future generations. In order to help entrepreneurs when investing, they Interviewees see the need to educate
A recent study published by Riyadh’s King entrepreneurs on the benefits of owning a
Saud University found that 80% of Saudis the current young labor force to transition need to dedicate themselves and work
part of something big as opposed to total
polled in the capital stated they would more easily, those traits that will help them full-time in most of the cases. We love ownership of a small business.
rather wait for a government job than work achieve personal success in the private a team of cofounders, supporting and
sector should be encouraged in both • Another reason for this behavior has to do
in the private sector.28 The call for going complementing each other.”
into private-sector employment, especially formal and informal settings. In addition, with lack of trust and the fear of theft of
widespread availability of extracurricular – Omar A. Almajdouie - Founding intellectual property. However, experienced
entrepreneurship, demands a radical shift
in the mindset of the young as well as their personal development courses and trainings Partner, Raed Ventures ecosystem players highlight that a strong
communities. As such, this must be a gradual at universities or entrepreneurship centers team with a solid plan will always make the
transformation. would be further support their transition • Wider coverage of successful tech difference in a market with similar ideas.
The appetite for entrepreneurship is growing, entrepreneurs in public campaigns and • Female entrepreneurs are perceived to be
Systematically addressing some elements of mass media builds a positive perception
the Saudi culture will contribute to creating a especially among those that have had more collaborative, open to partnering with
international exposure during their studies or of tech entrepreneurship in the national those with complementary skills, and more
flourishing entrepreneurship culture: 25,35 consciousness
careers. willing to explore options by asking more
• Saudi culture respects authority and Getting comfortable with failure is going to questions.
• Amidst the aforementioned norms,
demonstrates a high tolerance for power be the main game changer and drive more
distance and social hierarchy. In business interview participants underline that there Building credibility and trust between tech
is a visible change taking shape in the tech people to try entrepreneurship rather than entrepreneurs and the business community
settings, this attribute manifests as attempting to fit into traditional roles.
acceptance of leadership in organizational entrepreneur community. that partners or invests with them is crucial to
structures that is typically a function of • Aspiring entrepreneurs are held back by building momentum in the ecosystem.
- Aspiring entrepreneurs are more
seniority as a result of years spent in service knowledgeable about the journey fear of failure because, culturally, failing is • The older generation, which is making the
or based on other sources of influence. considered shameful. This is contradictory business and investment decisions in the
and the expectations of the investor
to the behavior of tech entrepreneurs domestic businesses or family offices, has
• At work, those in leadership positions community today than they were two
in more mature markets where failure is not yet established an understanding of
cannot be questioned and subordinates years ago. Entrepreneurs are becoming regarded a part of the learning process.
expect to be told what to do. Known paths less risk averse and more skilled. tech entrepreneurship. Some entrepreneurs
Abroad, investors are more inclined to comment that they refrain from taking a
and methods of getting things done are bet on entrepreneurs who have had failed
- There is a higher proportion of people meeting with conventional business owners
prized while the pursuit of nonconformist businesses before because they were able
alternatives is discouraged. who have had international experience or investors because they do not feel they will
and who have observed global trends to to develop an understanding of what it takes be taken seriously.
• Saudi Arabia is a collectivist society. Loyalty be emulated in order to achiever similar create a winning model.
• By interacting with entrepreneurs in more
and long-term commitment to a group successes at home. • In trusted communities and informal
supersedes individual aspirations and the informal and social settings, executives and
settings, entrepreneurs are becoming more high-net-worth individuals can observe how
need for personal achievement. Hence, in • Ecosystem participants also indicate that comfortable talking about their business
business, value to an organization is often increased publicity and the promotion of entrepreneurs operate and what they can
struggles and sharing their stories of “failure”. bring to the table.
measured in terms of loyalty and presence entrepreneurship is paying off in generating
Sharing creates opportunities to learn from
rather than merit and performance. interest evidenced by the rising number of others and opportunities to devise new • This could help to align investor and
applicants to accelerator programs. solutions from exposure to the experiences of entrepreneur expectations, increase investor
• Particularly in institutions where young
employees are increasingly becoming more The presence and celebration of successful others. tolerance for failure, and expose the more
qualified and skilled than their managers, national tech entrepreneurs will serve as conventional business community to
Learning to collaborate and form partnerships entrepreneurial trends.
adherence to the above mentioned societal models in the ecosystem re-shaping general is a common development point for young
rules result in disengagement and loss of cultural norms. Saudis that want to build winning businesses.
drive to perform.
• Role models fill a critical role in driving
• Causing shame and loss of face is dreaded society’s appreciation for entrepreneurship “We need to educate our society to accept failure. That is a major mind shift
in collectivist societies. In addition, Saudi and inspire highly skilled individuals to
culture scores high in preference to
for Saudis. The minute we see a guy who failed in one of the startups a lot of
become entrepreneurs. people don’t want to associate with him. Although this guy could potentially
avoid uncertainty, thus, job security is an
important individual motivation. These be the CEO of the next big startup. This is one of the main issues to build the
attributes play a part in resisting failure and www.hofstede-insights.com/country-comparison/saudi-arabia (accessed January 04,
35 ecosystem.” – Mansour Al-Misfer - Managing Director, Bluevine Ventures
trying new things. 2018)

52 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 53
 launched and survive. Straightforward business applicable to most tech endeavors- • In 2016, SAGIA announced a number of
procedures help drive interest to take up have to have at least 25% Saudi amendments to ease investment procedures
5. Regulations entrepreneurship. Streamlined, relaxed, and shareholding and a minimum in the Kingdom.36
digitized procedures minimize administrative contribution of SAR 20 million (USD c.5 - Documentation requirements were
efforts and allow entrepreneurs to accomplish million) from foreign shareholder(s). reduced.
more with limited resources. Tax obligations, Therefore, tech startups involved in
in terms of both time and cost, can affect a several different functions opt to set - A fast track service granting investment
startup’s growth, especially in the early years up separate entities to benefit from the licenses within a maximum of 5 days was
Tech entrepreneurship is directly and when cash flow is uneven. varying requirements. introduced and includes SMEs, which are
indirectly affected by a broad range of Regulatory and legislative practices around classified as innovative enterprises
• Irrespective of the shareholder profile,
regulations that effect its business construct business, particularly dispute resolution, serve - An option to extend the licenses for 15
obtaining a commercial license for the
(Business Procedures), operational domain to reassure both startups and their investors years
tech and innovation sectors has been a
and boundaries (Digital Policies), sources of the protection of their rights and its costs. costly and bureaucratic process for many • Since many of the tech endeavors in
of innovation (R&D), and international trade Bankruptcy legislation is also important as it entrepreneurs. the Saudi market today are outside the
opportunities (Trading across Borders). can be a significant motivator or deterrent to
- Much of the challenge is associated definition of innovative firms that have
The legal system of KSA is based on Shari’a law starting a business. registered patents, interview participants
with defining the activities of tech
and its interpretation by the clerical judges. FIGURE 19: DAYS REQUIRED TO START UP A COMPANY indicate SAGIA’s licensing procedures are
The scope and content is not standardized and IN THE MENA REGION startups to match existing codes as
many value propositions cut cumbersome and take between three to
there is low reliance on judicial precedents. An four months to conclude
intention to codify the Shari’a was announced across different functions.
in 2010 but this has not yet materialized. In
- Also, the existing definitions do not Company structures in KSA are not a match for
matters of labor, commercial, and corporate offer flexibility to account for business venture investor preferences.
law, royal decrees (Nizam) supplement the model evolution as the company grows • The Ministry of Commerce and Investment
Shari’a but, they are subordinate in rank - and validates its value proposal. (MOCI) and the Capital Market Authority
regulations rather than laws.9 do not allow for GP/LP structures leading
• Any foreign-owned entity must first
The regulations governing the establishment receive a license from the Saudi Arabian most venture funds to set up shop in other
of businesses and commercial obligations General Investment Authority (SAGIA). jurisdictions thereby putting them in the
are being revisited by the relevant authorities The authority’s licensing definitions foreign entity category
in light of the increased importance are considered very restrictive and • “Shelf companies” are not allowed in KSA,
of rejuvenating the private sector and too inflexible to accommodate the specifically for foreign investors. Those
entrepreneurship brought about by Vision evolutionary nature of the tech startup entities that consider foreign investment
2030 and the National Transformation Plan. business model. – either tech startups or VCs – and want to
In this context, the introduction of tech
Source: World Bank
- SAGIA, in partnership with KAUST, incorporate in Saudi, customarily register
entrepreneurship necessitates adoption of as Limited Liability Companies (LLCs).
introduced a new license class for
many new policies and regulations to allow innovators applicable to both local and Nonetheless, this entity type falls short in
the ventures to take root in the country. To this Shareholder nationality impacts capital international students in the Kingdom. attaining a number of features that equity
end, there have been numerous interventions requirements and licensing procedures, which investors look for in deal making:
- The country’s maturity level in
and amendments to accommodate the needs can significantly increase the time and capital - There are no share class provisions
tech entrepreneurship means that
of entrepreneurs. While their enactment has employed to start a business in KSA. most of the ventures will be local - Share dilutions are not recognized by
been swift, especially in the last two years,
• Fully Saudi owned and partially or wholly adaptations of international tech business the courts
execution is markedly slower. Nevertheless,
foreign invested companies are subject to models. Hence, using international - They cannot issue stock options
in order to reach global standards in
different procedures and requirements in examples as guidelines could expedite
regulatory frameworks that will support - They have a flow-through-tax status
the Kingdom. the process of updating license
tech entrepreneurship, more changes which creates tax obligations for
are necessary. These changes need to be - For Saudi shareholders, the categories.
shareholders from operational results,
integrated and holistic in design to deliver the minimum capital requirement for • In an effort to increase the impact of even if they have not received a payout
highest impact. company incorporation is SAR 500,000 foreign investment on KSA’s economy,
(c. USD135,000) SAGIA has introduced a program that - Double taxation for investors in the
grants special incentives and privileges funds. They are liable to pay taxes on the
A. BUSINESS PROCEDURES - The regulations permit 100% foreign- proportion of their shares in the company
to companies that fall into one of six
owned services or manufacturing the fund has invested in even though the
The ease of executing business functions predefined categories. Technology
businesses as long as are physically company already paid its taxes
drives, in part, how many startups can be companies are considered strategic and
present in KSA. However, companies
included in the list. “Innovative firms” which
involved in any type of trading – “SAGIA eases license procedures for foreign investors”, 30 March 2016, Arabnews
36

have registered patents also qualify for (http://www.arabnews.com/economy/news/902711)

54 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia these privileges36 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 55
Company incorporation procedures involve • MOCI has set up an SMEs support package FIGURE 20. EASE OF DOING BUSINESS AND
multiple steps spanning different federal and which includes an exemption from paying GOVERNMENT POLICY: TAXES AND BUREAUCRACY “We have to take actions, we have

local public agencies. for an office space for five years in King
Abdullah Economic City. (KAEC) 23. Ease of Doing Business Government Policy: Taxes
to move. Sometimes legacy can be
• Tech entrepreneurs highlight that the and Bureaucracy
procedures necessary for company • In the case exemptions, authorities SG an impediment, some government
establishment involve securing the provide the best benefits if the designated KR

approval of multiple public authorities. common office areas are in proximity or

US agencies would say ‘no, we don’t
UK
(MOCI, Chamber of Commerce, the within naturally-forming tech entrepreneur IE
need to change anything’. That has
labor office, the General Organization for clusters. DE

Social Insurance (GOSI), The Department

AE
to be changed with the Vision.” –
• Some interviewees also highlighted MY
of Zakat and Income Tax (DZIT), and the that the regulations were changed to Eamomn Mahdi Almutawa - Head
NL

Municipality). allow multiple entities to operate under

JP
RU

• The procedures and requirements of the same address. This should ease the IL of Foreign Investments Unit, Capital
CL
these different bodies are considered to establishment of co-working spaces in TR Market Authority
sometimes be at odds with each other and the country that provide both a cost- LU

there is no clear superseding construct. effective solution as well as networking CN

Entrepreneurs must deal with each opportunities for early tech startups. s that ZA
SA
authority’s procedures individually. The rely on IN
B. DIGITAL POLICIES
general inexperience of entrepreneurs in Visa and registration requirements for
EG

private endeavors is also a contributing NG

The benefits of the internet economy are
foreign-backed startups suggest a preference 0 Harder Index Score Easier 100 0 More Index Less 7
factor in the challenges cited. Bureaucracy Score Bureaucracy enormous but also give rise to growing
to draw in later stage tech companies. rvices
Other countries in scope of tech entrepreneurship study concerns around privacy, security, crime, and
• Federal institutions have been more It is regarded as cumbersome for
• Countries are listed in order of their score in respective category anticompetitive practices. Striking the right
progressive in aligning their practices with international companies, even from within Source: World Bank Doing Business, Global Entrepreneurship balance between capturing the benefits of the
market needs but municipality procedures the region, to expand into KSA if they are Monitor, OC&C analysis
internet while mitigating its potential risks has
are described as the major bottleneck that not 100% owned by shareholders who are become a challenge for policy makers around
prolong the processes. GCC nationals. In any case, the companies Venture investors are drawn to jurisdictions the world.
• The SMEA has undertaken ad hoc initiatives that want to expand into KSA must present where the rules and their enforcement can be
such as bulk registration of companies three-year financials demonstrating anticipated to mitigate risk.
where they organized an event that brought positive results to qualify for a SAGIA
all relevant parties involved in business license.
• Companies that are no longer profitable or “I think the whole world is going
functional cannot be wound down without
registration together in Riyadh and Foreign-backed tech companies in Saudi through a transformation on so many
• incurring additional liabilities and fees. It
registered 300 companies on the spot. Arabia can apply for a foreign “investor” takes up to 4 months for locals and 9-10 levels. Introducing the concept of
• The Ministry of Commerce and Investment or “general manager” visa with a support months for foreigners to wind down a failed
(MOCI) introduced a one-stop shop in letter from SAGIA. To apply for an operation. The absence of clear regulations sandbox regulation is going to be
2017, Miras, which physically and digitally “investor” visa, a company must meet one related to bankruptcy and protection of
brought all related public offices together of the following conditions:36 minority rights in insolvency is deterring a very interesting experiment and I
to provide easy access and a smoother - The company should be engaged in potential local and international investors think it is needed. We have to take
registration processes. The initiative has “innovative activities” with a valid patent from investing in Saudi registered startups.
one office in Riyadh where representatives used as part of the business. • Specialty courts have that can handle the risks anyway so if we are going
of different authorities share the same
- The company should be an exporter specifics of new deal structures have not to take a risk let’s at least take a
space. The website provides a gateway to
with the condition that the technical yet been introduced to the system. Minority
each authority’s own procedures online. more calculated one.” – Eamomn
specifications and the method of rights protection is not enforceable; many
The new concept has not yet integrated the
production must conform to the deal terms in shareholders agreements
procedures in a single process that fulfills
remain unrecognized by the courts.
Mahdi Almutaw - Head of Foreign
requirements for all and can be seamlessly approved Saudi, GCC, or international
specifications Moreover, the tendency of Saudi favoritism Investments Unit, Capital Market
completed online.
in the application of rules in case of a
Starting up a business requires the founder to - The entity must have a minimum of 50 dispute between local and foreigner Authority
rent an office space to complete procedures. workers and employ a maximum of 25% partners becomes a deterrent.
foreign labor
• The need to have a designated office to
fulfill registration requirements is a cash - The entity’s paid-in capital must not
out for many new startups that have not yet be less than SAR 37.5 million (USD 10
started to generate an income. million)

56 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 57
Digital businesses are a new area for Saudi anti-cybercrime agreements such as the • CITC lifted the ban on Skype, WhatsApp, only work with providers that possess local
and the regulations to govern different Budapest Convention.17 and other messaging applications in hosting infrastructure.46
aspects of the sector have not yet progressed - Saudi Anti-Cybercrimes Law was issued September 2017.43 C. GOVERNMENT’S R&D POLICIES
to international standards. by a Royal Decree in 2007 as well. The The Communications and Information Entrepreneurs are at the forefront of
• A number of regulations enacted in the legislation defines cybercrimes and lays Technology Commission (CITC) proposed a commercialization of innovation. Hence,
2000s broadly set the boundaries of out the penalties in order to protect regulatory approach for cloud computing in countries with high public and private R&D
technology and internet-related businesses: the information, rights of the user, the Kingdom in 2016 and solicited input from activity create more opportunities for
- Competition is regulated by the 2004 secure the safe exchange of data, and related parties. entrepreneurship.
Competition Law issued by the Royal safeguard public interest and morals. • CITC advocates developing a strong
Cybercrimes are monitored by the Domestic resources allocated to R&D were
Decree. The Competition Law aims to cloud services industry in Saudi Arabia as 0.80% of the Saudi GDP in 2015. While this
protect and encourage fair competition Saudi Communications and Information a key part of creating a developed digital
Technology Commission (CITC). In ratio is lower than in more mature ecosystems,
in the KSA markets. It also prevents infrastructure to support Vision 2030. where figures typically range from 2% to 4%, it
monopolies and merger and acquisition 2012, the Arab Cybercrime Agreement
also came into force to strengthen • The Council of Ministers decision No. 81 demonstrates a huge improvement compared
transactions that affect the markets. of 2009, sets out the framework for the to ten years ago when the expenditure on
Violating the competition law can lead cooperation between Arab nations in
combating cybercrimes and enforcing public sector’s use of cloud-based services, R&D was merely 0.1% of GDP.47 The country
to payment of a fine of a maximum of which requires government entities to host continues to be dependent on foreign
SAR 5 million (USD1.35 million)9 copyright laws.40
their websites on government networks R&D services provided for Saudi clients but
- The Trademark Law (2002), the • There are no clear regulations governing or through providers with local hosting there is a political commitment to establish
Copyright Law (2003), and the Patent Law e-commerce in the country. Interviewees infrastructure and who are licensed by local expertise. The Public Investment Fund
(2004) were updated to be compatible point out that a draft law was prepared but CITC. 44 announced plans to spend SAR 210 billion
with the WTO agreement on Trade has not yet been issued by the Council of (USD 56 billion) in the next three years to
Ministers.

- Cloud services are mostly used
Related Aspects of Intellectual Property contribute to the localization of cutting-edge
by government institutions (private
Rights (TRIPs) and the World Intellectual • The legal community comments that technology and knowledge in KSA.12
Property Organization (WIPO). It has regulatory reforms are slow and that there cloud) and SAP announced its plans
to set up a public cloud hub worth Contracting oil revenues dampened public
been noted that Saudi Arabia has one can be inconsistencies in implementation
and private spending on R&D by 2016.
of the best trademark laws in the region, and variation in the degree of USD 76 million. The National Digitization
Going forward, Euromonitor estimates Saudi
and the Saudi Customs Authority has enforcement. In a GCC cybercrime review Office aims to integrate the Cloud Hub Arabia’s R&D industry will grow by 6% CAGR
significantly stepped up its enforcement report by the Chatham House in 2017, into the planned government cloud, in between 2016 and 2021, fueled by continuing
efforts. However, Saudi Arabia is not a regional cooperation is considered to be in order to further enhance government implementation of governmental incentives
party to WIPO internet treaties.37 its infancy.17trely on
efficiency, employee productivity, and under the National Science, Technology, and
- Saudi Arabia does not have a specific Saudi Arabia’s Communications and citizen services.45 Innovation Plan (NSTIP), and growing activity
data protection legislation but, Basic Information Technology Commission (CITC) in health, ICT, and defense R&D.48

- In 2015, The Saudi Telecom Company
Law of Governance (1992) protects the maintains control over the content on the
privacy of individuals. In addition, (STC) and Cisco announced that they • King Abdulaziz City for Science and
Internet and conducts filtering.services
the Electronic Transaction Regulation, have agreed to build three new data Technology (KACST) is monitoring the
Telecommunication Act, and Anti- • According to a public survey conducted centers to streamline cloud adoption in implementation of the NSTIP. In 2016, they
Cybercrime Law provide provisions by the authority, close to half of the KSA. allocated SAR 263.2 million (USD70 million)
for data security in their respective fields. population found the implementation of to c.150 science and research projects in
• Finance institutions and healthcare
The Sharia law also warrants that an internet content filtering by the authorities health, oil and gas, water, nanotechnology,
providers are required to store data in the
individual shall be compensated if he fairly satisfactory.41 and aeronautics in Saudi Arabia.
country.
suffers loss as a result of the disclosure • Ecosystem participants believe that the • Investments in health R&D are also
• Cloud service providers must obtain one of
of his personal information by another environment could flourish more easily expected to be boosted by the
the available licenses in order to operate
party.38 with more relaxed rules on freedom of government’s plans to privatize over 2,000
in the country and government entities
- The Electronic Transactions Regulation expression. On a similar note, a 2016 Fifth health centers and c. 300 hospitals.
and its implementation rules were Era survey found that in less developed
enacted in 2007, based on the principles internet economies, 79% of 475 37
Saudi Arabia - 5-Protection of Property Rights”, export.gov, July 19 2017 (https://www.export.gov/article?id=Saudi-Arabia-protection-of-property-rights)

of UN’s International Trade Law. The international VC investors would feel more 38
“Data protection in Saudi Arabia: overview”, Practical Law, Thomson Reuters (https://uk.practicallaw.thomsonreuters.com/4-520-9455?__lrTS=20170927144527817&transitionType=-
Default&contextData=sc.Default)&firstPage=true&bhcp=1)
legislation establishes a frame of comfortable investing in countries where 39
“Saudi Arabia Law Overview: Electronic transactions”,Saudilegal (http://www.saudilegal.com/saudilaw/09_law.html)

reference to equate the electronic freedom of expression was not highly 40

Saudi Arabia Cyber Crimes Law, STA Law Blog, August 2017 (https://www.stalawfirm.com/en/blogs/view/atthack-anti-cyber-crime-law-in-saudi-arabia.html)
41
“Individuals Report ICT Survey Results,2015” CICT (http://www.citc.gov.sa/en/reportsandstudies/studies/Documents/PublicIndividualReport2015V5_En.pdf)
documents, including electronic regulated. 42 42
Matthew C. Le Merle, Alison Davis and Felix O. Le Merle The impact of regulation on Investment, Fifth Era, January 2016
43
The Verge. “Saudi Arabia lifts ban on Skype, WhatsApp, and other messaging apps”. https://www.theverge.com/2017/9/20/16340342/saudi-arabia-skype-whatsapp-snapchat-censor-
signatures to paper-based versions 39 ship-ban-lift
44
“Regulation of Cloud Computing in Saudi Arabia”, Lexology., 30 September 2016 https://www.lexology.com/library/detail.aspx?g=554d0e15-5dcd-4c23-a630-a600820b5c3b
- Saudi Arabia is not a party to global 45
ITP. “SAP to set up $76m public cloud hub in Saudi Arabia”. http://www.itp.net/612623-sap-to-set-up-$76m-public-cloud-hub-in-saudi-arabia
46
Regulation of Cloud Computing in Saudi Arabia”, Lexology., 30 September 2016 https://www.lexology.com/library/detail.aspx?g=554d0e15-5dcd-4c23-a630-a600820b5c3b
47
United Nations
58 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 48
Research and Development in Saudi Arabia”, July 2017, Euromonitor International Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 59
• R&D in the field of ICT will be both D. TRADING ACROSS BORDERS access and use of cloud computing services
supported by the government’s digital KSA is part of the GCC Customs Union, which positively correlates with the level of
transformation initiatives and also local was established in 2003 to remove customs 6. ICT infrastructure innovation in a country.
companies’ investments. and trade barriers between the GCC member Until the late 1990s, Saudi Arabia had one
• Prince Sultan Center for Defense Studies states. Nevertheless, the GCC does not of the slowest internet connections among
and Research focuses on applied research function as a single market like the European the Gulf States. The internet only became
in the defense and security sectors. Union. accessible to people living in larger cities
KSA’s plans to increase purchases of locally in 1999. Starting from the early 2000s the
The GCC member states apply a Common government took significant steps towards
produced military equipment to at least 50% Customs Law (2015) and a Unified Customs Wide penetration of high-speed internet
of total spend have positively affected R&D at affordable prices promotes the ability of fostering the ICT infrastructure. The country has
Tariff with a standard customs duty rate of 5% become the largest and fastest growing ICT
projects in the defense sector. over CIF value. The customs duties are paid the ecosystem to support rapid knowledge-
sharing and dissemination of new technologies market as a result of these efforts. Today, KSA
51

• The defense sector has historically been only once within the GCC at the original port is the major IT investor in the MENA region,
of entry. KSA allows duty-free imports for most to the wider population. It also indicates the
the springboard for tech entrepreneurship ability of the wider market to consume tech- with estimated IT spending of USD 7.5 billion
development in the mature ecosystems. goods originating from other GCC member in 2017.52
states, and member countries of the Greater enabled products and services.
Hence ecosystem interviewees believe KSA’s population is highly connected, 91%
that the government’s defense R&D policy Arab Free Trade Agreement (“GAFTA”). KSA Cloud services allow businesses, especially
does not charge export customs duties.9 tech startups, to reduce their capital use the internet and 73% have smartphones.41
will have spillover effect on the overall It ranks 7th in the world when it comes to
tech entrepreneurship ecosystem in the expenditure and IT cost structure by providing
In 2016, the GCC countries arrived at a unified hardware, infrastructure, software, and households with internet access and Saudis
Kingdom. agreement on introducing VAT in the GCC. spend 4.1 hours per day on the internet on
application requirements as a service instead
The Saudi authorities’ main push in Saudi Arabia and UAE are the only two nations of capital investments, thus increasing their average, using their PCs, and Saudi Arabia
developing the R&D backbone of the that have implemented the 5% VAT as of business agility and operational resilience.50 is the third highest ranking nation when it
country had focused on generating IP, but 1 January 2018. Under current legislation, Moreover, studies indicate that increased comes to spending time on the internet using
transformation to a knowledge economy services and products purchased from and a mobile device (3.8 hours) after Brazil and
requires attention to commercialization of the to Bahrain, Kuwait, Oman or Qatar will be Thailand.53
IP produced. considered as exports.49

• The initial mission of the research Application of the GCC Customs Law
universities and institutions established in reportedly varies in each GCC country,
the Kingdom was to increase the level of leading to discrepancies and contradictory
quality research developed in the country. practices that may affect businesses.
The main indicators of this were the
number of research papers published and • Saudi tech entrepreneurs engaged in
patents registered. e-commerce of imported goods indicate
that importation regulations, customs
• In light of the clear intention to promote practices and FDA approvals in Saudi cost
knowledge-based sectors in the economy, the business more time and money than in
most of these institutions are creating other GCC countries if you want to run bulk
programs and incentives to increase merchandise importation.
the entrepreneurial motivations of the
researchers as well as industry-academia
collaborations.

“Commerce is very fluid in this age, just like capital is fluid. KSA has to rethink
all their customs and importation laws knowing that this will have an impact
on the competitiveness of local players versus international ones. Laws have
to change where there must exist a clear economic advantage for companies
to move into Saudi. If this happens we will see big international companies 49
“VAT in the UAE and Saudi Arabia”, Lexology, December 21 2017 (https://www.lexology.com/library/detail.aspx?g=20637ded-e084-4a68-89d2-a72b39fde499)

opening offices in Saudi and big development of resources and talents in Pepper, Robert; Garrity, John; LaSalle, Connie. “WEF The Global Information Technology Report 2016 – Cross-Border Data Flows, Digital Innovation, and Economic Growth.” https://
50

www.weforum.org/reports/the-global-information-technology-report-2016 (accessed September 4, 2017)

Saudi.” – Muhammad Arrabi - CEO, Ecommerce Sea Alturise, Fahad Mohammed. “Developing and Testing Policy for Effective Use of ICT in Saudi Arabian Universities”. https://flex.flinders.edu.au/file/e5ea5f75-51aa-4219-bdfc-
51

d19f5694efc0/1/Developing-and-Testing-Policy-for-Effective-Use-of-ICT-in-Saudi-Arabian-Universities.pdf
52
Alturise, Fahad Mohammed. “Developing and Testing Policy for Effective Use of ICT in Saudi Arabian Universities”. https://flex.flinders.edu.au/file/e5ea5f75-51aa-4219-bdfc-
d19f5694efc0/1/Developing-and-Testing-Policy-for-Effective-Use-of-ICT-in-Saudi-Arabian-Universities.pdf
53
“Media (R)evolutions: Time spent online continues to rise”, March 01 2017, The World Bank, (https://blogs.worldbank.org/publicsphere/6-2016-media-revolutions-time-spent-on-
line-continues-rise)
60 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 61
 FIGURE 21. MOBILE/FIXED BROADBAND PENETRATION AND COSTS term cost impact. Also, a general shortage in building the necessary infrastructure
Penetration Costs of qualified staff able to handle the for it. Last year, the Saudi Ministry of
AE 22.3 55.4
transition to cloud computing transition Communication & Information Technology
8.3 33.2
SG is a major reason behind organizations’ together with SAP announced plans to set
88.0 19.1
JP reluctance. 54,55 up a public cloud hub with USD 76 million
38.1 16.3
US investment over four years.45
KR 6.0 36.0 • Among local enterprises that have
NL 13.4 36.3 adopted cloud in the Kingdom, there is a
preference for private over public clouds.
UK 7.6 12.6
7. Market potential
IE 5.1 46.1 Sector experts foresee that as Saudi
LU 37.0 30.3 organizations are pushed to become more
DE 12.0 42.5 efficient and agile in their systems, the
IL 13.9 29.8 cumulative benefits of the public cloud will
MY MY 19.7 25.0 eventually win over current concerns.
RU 12.0 23.9
• In principle, KSA opts for managing The addressable market size for tech startups
CN 8.0 31.8
the public cloud in country rather than in a country is a function of the national
CL 9.8 41.7
overseas and shows a willingness to invest economy, digital literacy, and readiness
SA 37.7 80.3
TR 9.8 16.8 of customer groups and consumer habits
FIGURE 22. CLOUD MIGRATION OF COMPANIES
ZA 17.4 28.9 affected by internet/mobile coverage as
EG Mobile Fixed 10.4 22.6 US well as the propensity to try new products
NG broadband
NG
broadband
21.1 63.4
DE and services. Other factors such as access to
IN 14.1 23.4 corporate customers and internationalization
IL
0 200 opportunities define a startup’s growth
Mobile/Fixed broadband subscribers per Mobile broadband prices Fixed broadband prices
100 capita (500MB, PPP USD, 2015) (sub-basket, PPP USD, 2015) NL opportunities.
SG The government can impact the size of the
Note: Countries are listed in order of mobile and fixed broadband penetration
Source: International Telecommunications Union, OC&C analysis UK market with increased fast-speed access,
consumer protection and competition rules by
CL
Mobile broadband is the main means of While Saudi tech entrepreneurs are building public confidence in online services,
JP and especially directly via procurement
internet access in KSA and the infrastructure comfortable using international cloud
and costs are considered acceptable by users. services, established businesses are reluctant IN programs and policies.
to transition to cloud computing solutions.54 MY Saudis are avid social media users. They are
• Saudi internet users rely on the mobile regarded as the key target market for digital
RU
internet infrastructure, both on their • Existing rules and regulations are not content providers and online advertisers in
mobile devices and at home with routers. restrictive of the use of international ZA
the region. An overwhelming 95% of Saudis
The existing infrastructure and the pricing cloud services by private consumers. Tech KR consume entertainment from neighboring
– albeit more expensive in comparison to entrepreneurs do not voice particular Arab states while 40% of the content is
CN
a number of benchmark countries - do not inhibitions in accessing global cloud generated in KSA. YouTube consumption is the
cause concern for innovation, startups, and services. EG
highest per capita in the world. The average
their growth prospects. • The established business sector in the NG Saudi internet user watches three times more
• A fiber broadband network is not widely Kingdom, on the other hand, has been TR videos on YouTube compared to an average
available in KSA. Only 5% of residences notably reluctant to adopt cloud. The UAE or USA user.23
AE
use fiber at home as a means of accessing reasons behind this are a lack of clarity Online sales to Saudi are estimated to be
the internet. Of those who use fiber as to the benefits, concerns over data SA
USD 8.7 billion in 2017, growing to USD13.9
networks, 80% subscribe to 20-25 Mbps sovereignty, the lack of cloud-related 0 Index Score 10
billion in 2020.56 The market is expected to
Less Migration More Migration
connection bandwidth.41 regulations, the absence of national cloud to Cloud to Cloud outgrow UAE in line with its demographics.
strategies, and limited visibility of the long- B2C e-commerce across all product categories
Other countries in scope of tech entrepreneurship study

Note: Cloud migration represents the tendency of migrating was USD 6.1 billion and it is expected to
traditional IT budgets to cloud platforms, thus measuring grow to USD 9.4 billion by 202057 Domestic
demand for public cloud services
Source: Huawei Global Connectivity Index, OC&C analysis
e-commerce on the other hand is still nascent,
“For tech companies ICT infrastructure might be the strongest point.” – with SAR 5.2 billion (USD 1.4 billion)
Hanouf Al-Ajmi - Entrepreneur Select and Growth Manager, Endeavor 54
Alsanea, Majed “Factors Affecting the Adoption of Cloud Computing in Saudi Arabia’s Government”, 2015, (https://pdfs.semanticscholar.org/f59c/3fece4a4ca22fad12d12c066e-
b41afcb8950.pdf)
55
Buller, Alicia, “Saudi Arabia could warm to cloud computing, so long as regulation and connectivity keep pace “, Computerweekly.com, 29 April 2016, (http://www.computerweekly.
com/news/450294175/Saudi-Arabia-could-warm-to-cloud-computing-so-long-as-regulation-and-connectivity-keep-pace)

62 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 63
amounting only to 0.8% of total retail sales • A higher proportion of Saudi Arabia’s adult FIGURE 24. SAUDI TECH STARTUP ADDRESSING FIGURE 25: POTENTIAL INDUSTRIES AND AREAS
in the country. The Public Investment Fund population remains unbanked, compared TRANSITION TO CASHLESS PAYMENT FOR ONLINE WHERE SAUDI TECH ENTREPRENEURSHIP MIGHT
COMMERCE IN KSA - PAYTABS MAKE A DIFFERENCE
forecasts this percentage will go up to 2.4% by to high-income nations around the world, at
2020.12 69.4% and 94%, respectively.59
• Cash on delivery (48%) is the main method
of payment for online purchases in the
FIGURE 23. DIGITAL ECONOMY DRIVERS, 2016 Kingdom. Credit card payment is about PayTabs bis a company co-owned by Saudi
34% and other e-payment methods Aramco Entrepreneurship Ventures (Wa’ed),
and the startup plans to contribute to the
Large, young, dynamic
Total 15-35 aged
population population
are used for 1% of all e-commerce e-commerce potential of MENA region by
population 32 M 11 M transactions.57 Trust is the most cited factor offerin payment-processing solutions that
for this behavior among the consumer can be integrated easily
Broadband community which also explains the higher
High broadband subscription
penetration - especially use of credit and debit cards at collection
mobile 24 M rather than paying with them online.41
Considerable online Number of • Building trust in cashless payments systems
168 20 20 M
shopper rate in the Internet shoppers
and establishing a clear set of rules on currencies countries funding
region 11 M consumer rights protection would serve accepted
to increase e-commerce adoption in the
Highest smartphone
Smartphone users
Kingdom. The company aims to stimulate the market
penetration in the
73% demand by addressing the one of the major
world Availability of transparent, periodically problems of entrepreneurs, which is collecting
published market data and improved logistics payment online

Low mobile shopper Mobile shopper infrastructure will contribute to the growth of
ratio compared to value share tech-enabled consumer businesses. PayTabs offer a broad range of services that a business
smartphone penetration 19%
needs, including online payment, e-invoicing, and
Credit card
• Public access to reliable, accurate, and online payment security and fraud protection
One of the highest penetration systematically collected data is said to be
credit card penetration Source: PayTabs, Crunchbase, About Payments, PR Newswire, Al Arabiya
across the region 46% limited in Saudi Arabia. This is perceived
as a constraint on identifying business
Source: IMF, CITC, Euromonitor, MCIT, Statista, Payfort, Eshopworld opportunities based on advancing into data The Saudi market offers many B2B
analytics-driven business propositions. In opportunities in fields where the government
Smartphone penetration is very high and two- order to be able to use such technologies, is seeking more private-sector involvement. Source: PayTabs, Crunchbase, About Payments, PR Newswire, Al Arabiya

thirds of online shoppers use a smartphone entrepreneurs need to partner with large
for their purchases. corporations that may be collecting data • There are a number of strategic fields Eligibility criteria for public and
for their own operations. However, these where the Saudi government is cutting corporate procurement programs are not
• Mobile commerce is thought to have great partnerships are not easily established in down public spending in favor of private- considered friendly to SMEs including tech
potential in KSA, as well as in the GCC as a the market. sector involvement to introduce new entrepreneurship.
whole. technologies, increase the quality of
• The logistics of third parties are considered services, and foster efficiency. Health, • Many interviewees believe that public
- While travel services and mobile less established than international education, clean energy, and municipality procurement programs are one of the
applications account for the highest counterparts. The rise of e-commerce services are among the key fields that can most effective ways for governments to
share on mobile spending, widespread demands a stronger backbone that can provide opportunities for startups. support entrepreneurs, providing them
electronics purchasing indicates higher supply warehousing, transport, and
• Ecosystem participants foresee that with sizable business contracts that
penetration opportunities for other handling services. In order to meet demand
tech entrepreneurs working on big-data strengthen their ability to do business with
physical commerce categories as the from tech companies, incumbent logistics
analytics, gamification, optimization the private sector.
solutions mature in the market.58 operators need to expand and modernize
technologies, clean-tech, and water • Established companies – either state-
A preference for cash on delivery for their distribution network. They should
desalination technologies will be sought owned or private – have not revised
the purchase of physical goods online is adopt modern technologies which will
after in the Saudi market. their procedures to accommodate the
considered to be a significant operational increase the cargo handling capacity of
warehouses. generated in the field. For most tech entrepreneurial solutions that have been
challenge and a barrier to higher e-commerce
adoption.
56
Paul, Katie “High Noon.com: Battle for Saudi e-commerce market begins”, October 58
Paul,“Payfort Releases Comprehensive Online Payment Report for the Arab World,
15,2017, Reuters (https://www.reuters.com/article/uk-saudi-retail-ecommerce/high- 03 June 2014, Arabnet (http://news.arabnet.me/payfort-releases-comprehensive-on-
noon-com-battle-for-saudi-e-commerce-market-begins-idUKKBN1CK0DN
line-payment-report-arab-world/)
57
Saudi Arabia eCommerce Insights, eshopworld https://www.eshopworld.com/
blog-articles/saudi-arabia-ecommerce-insights-2018/
59
The Little Data Book on Financial Inclusion 2015, Worldbank

64 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 65
 startups the preconditions to apply for
procurement programs or tenders are too Policy playbook designed to strengthen the
high, such as having a bank warranty as
collateral in tender procedures. tech entrepreneurship ecosystem
• The SMEA is working with large established
corporations to develop B2B market
opportunities for tech startup and scale-
ups.
- The authority has signed an agreement Insights into the KSA tech entrepreneurship ecosystem and suggestions by ecosystem
with the country’s leading telecom participants led to the articulation of a series of policy recommendations that can be
operator STC to allocate 15% of considered to address gaps and foster a strong ecosystem. These recommendations can be
their procurement to SMEs.23 grouped under four main headings:
- Saudi Aramco is currently working on
“The in-Kingdom Total Value Add”
FIGURE 26. POLICY RECOMMENDATIONS DESIGNED TO STRENGTHEN THE KSA TECH ENTREPRENEURSHIP
program which plans to enhance ECOSYSTEM
procurement from Saudis.
Saudi tech entrepreneurs are mainly focused
INCREASE SECTOR ATTRACTIVENESS ALIGN REGULATIONS AND INVEST IN BUILDING TECHNICAL POPULATE THE NUMBER OF
on capitalizing on local market potential. FOR SKILLED TALENT, INVESTORS DIGITAL POLICIES GOVERNING AND ENTREPRENEURIAL SKILLS SUPPORT NETWORKS TO MAKE
Plans to expand beyond boarders are scarce AND COMPANIES BOTH TECH E-SHIP WITH GLOBAL BEST OF YOUTH TECH ENTREPRENEURSHIP
DOMESTIC AND FOREIGN PRACTICE FLOURISH
and the focus is mostly regional.

• Having the largest, low penetrated market

within the GCC, Saudi entrepreneurs are Transform available financial Harmonize commercial Emphasize upgrading Streamline and coordinate
inward focused and trying to localize power to professional codes and digital STEM skills at primary and all public support programs
"smart money" by adopting policies with under a single secretariat
globally successful businesses at home. best venture capital practices well-accepted global
secondary schools
to better guide the effort
• Once proven successful in Saudi, Egypt is benchmarks
considered the most natural destination to
extend businesses. But, experts warn about Incentivize high net worth
individuals and local sizable Synchronize business Introduce coding and Create linkages with other
the fundamental demographic differences businesses to take part procedures and other technology classes ecosystems that offer best
of the two countries and caution that the in developing tech requirements of multiple to education curricula practice applications and
authorities proven programs
business model might require significant entrepreneurship
alterations.
• The inward focus is sometimes criticized Establish clear paths Expedite implementation Work with educational Increase number of
to wealth creation for and enforcement of institutions to prepare and incubators/accelerators
because it is seen as an indication that decrees and policies to launch extracurricular
entrepreurs and entrepreneurial and to provide training
local tech entrepreneurs are not ready to investors build momentum in personel development opportunities
compete in global markets. the ecosystem programs

Cultivate a diverse skill Ease establishment of

Train civil servants physical clusters/ co-working
talent pool to boost tech Promote early success
who are entrusted with the stories to create visible spaces to facilitate informal
entrepreneurship activity
implementation of the new role models for youth knowledge and expertise
and bring in new solutions
laws and rules sharing
to the market

Provide investment
incentives in strategic,
technology driven
industries to entince global
blue-chip companies

Legend

FINANCIAL CAPITAL SKILLED TALENT NETWORKS CULTURE REGULATIONS ICT INFRASTRUCTURE MARKET POTENTIAL

66 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 67
Increase sector attractiveness for skilled An inability to conduct modus operandi is a Establish clear paths to wealth creation for Allowing academia to participate in
talent, investors and companies both roadblock for international VCs that could entrepreneurs and investors entrepreneurship would increase the number
domestic and foreign collaborate with the Saudi national funds to of deep science-based endeavors in the
bring knowhow, international linkages and Interest in tech entrepreneurship is spurred country. This will provide an opportunity to
Transform available financial power to versatility to the Saudi tech entrepreneurship by the availability of later stage investors create a more sophisticated, high-growth-
professional “smart money” by adapting ecosystem. and the availability of successful exit options, potential tech entrepreneurship profile in the
best venture capital practices be it strategic acquisitions by established country.
Incentivize high-net-worth individuals and businesses or other sizable technology
In order to create an ecosystem that can local sizable businesses to take part in companies either domestic or foreign. Also Tech entrepreneurship feeds on diversity,
generate competitive tech entrepreneurship developing tech entrepreneurship successful public offerings generate wealth as is demonstrated by the success of more
in Saudi Arabia there is a need to form for the founder and investors and signal cosmopolitan hubs around the world. Diverse
structures that can productively funnel The Kingdom has a large number of high- opportunities to the wider community. cities offering desirable lifestyles draw in
available capital resources to startups. The net-worth individuals and families who look skilled talent, different uses of technology and
existing tech entrepreneurship system is into alternative investment vehicles. However, The creation of a secondary market in KSA approaches used in other places around the
currently supported by a number of mainly these prospective investors are accustomed suitable for smaller scale companies is a very world. The recently enacted entrepreneurship
local VCs that focus on seed and early-stage to quick investment returns at a foreseeable, positive development in this area. Increasing visa has been very well received by ecosystem
investments. The small numbers of LPs that are steady rate such as real estate, which they can the number of VCs that are serving the latter participants. While the details of the visa
investing in these VCs are often the venture rely on as an income stream. The nature of stages of growth for tech startups is an program were not clear during the preparation
arm of a large corporation or a state-owned tech entrepreneurship investment is foreign important bridge to build in order to bring of this report, easing work and residential
enterprise managing an allocated fund for to most of this community and different to tech business to growth that will render them permits for high value skilled foreign labor
their general partner. Internationally accepted other alternatives. They need to be educated suitable for this capital market. Moreover, will help growing local tech companies,
on becoming angel investors to tech Saudi authorities could form linkages with allowing them to attain global experience and
VC operating and investor rights protection
startups and to align their wealth creation international capital markets to provide knowhow.
practices are mostly not applicable in KSA.
expectations. Angel networks are the best access for their promising tech scale-ups to
For instance, Saudi entities that consider The Saudi authorities might refer to programs
venue for this training and also for deal flow tap into more mature capital markets that are
foreign investment – tech startups or VCs initiated by other governments to boost their
generation and assessment. The novelty of accustomed to investing in tech businesses.
– mainly incorporate as Limited Liability local tech entrepreneurship ecosystems such
the investment field will necessitate guidance Provision of legal and procedural support
Companies (LLCs). LLCs are not widely as “Start-up Chile”, “French Tech Ticket” and
and also de-risking measures for motivation. services for those companies that would
preferred entity structures by international VCs Singapore’s “EntrePass” in their efforts to
Public authorities could allocate a proportion like to expand beyond borders would also
due to their flow-through-tax status that might further develop Saudi visa policies.
of the “fund-of-funds” dedicated to tech indicate clearer paths to create wealth in the
affect the tax exemption status of their LPs ecosystem.
and the inability to issue certain types of stock entrepreneurship and match committed funds Provide investment incentives in strategic,
options. of angel networks to a certain extent. It will Cultivate a diverse skill talent pool to boost technology-driven industries to entice global
be important not to overburden the matching tech entrepreneurship activity and bring new blue-chip companies
Another example is that call capital structures procedure to avoid discouragement. The solutions to the market
are not allowed, so VCs have to commit their continuity of the matching support could be Success in cultivating a productive tech
funds. There are no share class provisions. determined by the investment performance of One of the most crucial challenges in the entrepreneurship ecosystem relies heavily
Shareholders’ agreements are permitted and the networks. Saudi market is to entice talented people to on harboring large technology corporations
enforceable only if the terms follow Shari’a consider employment in newly establishing and innovative companies that serve the
and Companies Law. This creates uncertainties Sizable domestic businesses can also tech endeavors. In mature markets the community in multiple ways.5 Technology
for dispute resolution and the protection be incentivized to partner with tech immediate salary gap, especially at early corporations’ initial role as employers
of investors’ rights in case of bankruptcy or entrepreneurs to provide tech-enabled stages of development is compensated by provides training opportunities for the nation’s
dissolution solutions to their business challenges. This making key officers in the company equity workforce. Employees gain exposure and
approach would initially help to expand the holders. Therefore, enabling employment experience in using and commercializing
Receiving a license from the Saudi Arabian market demand for tech businesses but as stock options would serve as an important technology as well as developing
General Investment Authority (SAGIA) for a traditional business become acquainted tool to motivate talent to move to startups management skills. Secondly, these companies
foreign jurisdiction registered Saudi company with tech entrepreneurs their investment from well-paid corporate and public jobs. serve as a source of new tech entrepreneurs,
or a company with foreign investors is also appetite could also grow leading to increased as some of the experienced employees
a long, cumbersome process that deters corporate investment activity to support tech Reconfiguring the application of ‘Saudization’ identifying market opportunities leave to set
international investors. entrepreneurship in the ecosystem. requirements to sponsor employee up their own ventures. Third, they become
compensations in tech startups and scale- customers of tech entrepreneurs’ goods and
ups rather than in one’s own firm would allow services. Finally, large technology companies
corporates to support private employment often engage in outreach activities to promote
in the country while maintaining employee the use of tech in their communities. They offer
efficiency. training programs to promising new startup
candidates, collaborate with universities
to promote technology and sponsor joint
68 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 69
programs. International corporations also run agencies. skilled individuals could be employed on in the past, current youth in the workforce
structured training programs for entrepreneurs a contractual basis to become a part of the would need to build certain soft skills that
which they launch in the countries that they The one-stop-shop initiative “Miras” created authorities and steer the change programs. are required to become successful such as
operate in. by the Ministry of Commerce in an effort to These PMOs could also form task forces within being comfortable with ambiguity, becoming
assemble representatives of all responsible the organizations that both execute change assertive, people management, and building
The Saudi rulers’ vision for the future entails parties under one roof in Riyadh and a and also train the broader civil servant pool. resilience to failure. Becoming equipped
excelling in strategic sectors. For these sectors, website is at its infancy. Ecosystem participants with personal skills will help those with
the decision makers can take deliberate steps hope the system will continuously improve to Invest in building the technical and entrepreneurship instincts to become more
and provide the necessary circumstances to integrate multitude of requirements into one serious contenders in the marketplace.
attract international tech companies to set up single streamlined interface that will satisfy entrepreneurial skills of the youth
full-fledged operations in KSA. all agencies. Making this process available to Put emphasis on upgrading STEM skills at These training programs could be designed
be completed online with minimum offline primary and secondary schools with accelerators and entrepreneurship
Align regulations and digital policies requirements is the desired end stage. centers and could also be integrated into
governing tech entrepreneurship with In order to remain relevant and competitive in extracurricular activities of the school
Expedite implementation and enforcement of the digitalized global economy, KSA should generation.
international best practices
decrees and policies to build momentum in recalibrate its education policies to ensure the
Harmonize commercial codes and digital the ecosystem economic relevance of its labor force for the Promote early success stories to create visible
policies with well-accepted global future. Strengthening STEM-related curricula role models for the youth
Parties involved in tech entrepreneurship in
benchmarks at schools is the most critical lever in order
Saudi Arabia point out that while decisions are Recognizing successful Saudi tech
to expand the proportion of qualified human
Taking on the challenge of starting off a taken to introduce, amend, or alter policies entrepreneurs with prizes, grants, or subsidies
capital within the workforce.
personal venture is a stressful task, especially affecting the way the business will be run, the and using their stories to create a buzz in
for Saudis who are used to working at large changes take a long time to go into force. This Introduce coding and technology classes to the KSA business community and among
establishments where regulatory obligations creates a prolonged time of uncertainty when education curricula the young generation can help to build
and compliance are handled by experienced parties refrain from taking a next step before aspirations and the appetite to get involved in
divisions. Therefore, having clear and easy the rules are established and begin to be Including coding as a mandatory subject in entrepreneurship.
to follow commercial rules and regulations practiced. As a result, the sense of urgency is primary and secondary school education will
lost at all related parties to adapt according to familiarize students with the skills required in Providing roadshow opportunities for Saudi
with entrusted enforcements would ease
the new regulations and businesses go back to tech entrepreneurship, give an opportunity success cases in the regional venues could
the concerns of aspiring entrepreneurs
being conducted as usual. to experiment, and build interest in digital lead to making connections with international
considering establishing a business.
professions. Prerequisites for the successful talent and investors and broaden the founder’s
Participants in the Saudi tech entrepreneurship This drawback is usually linked to a mismatch implementation of this initiative will be vision on how to expand the business.
ecosystem believe that many of the in the knowledgeability, qualification and developing literate teaching staff in school
mature ecosystems already put in place readiness of the public agency middle systems, and providing free or cheap access Populate the number of support networks
accommodate commercial laws and digital management, who are responsible for making to computers and the internet to the younger to make tech entrepreneurship flourish
policies based on their experiences from the changes in the systems. Accordingly, there generation.
needs to be a systemized effort to prepare Streamline and coordinate all public support
years of operation in this field. Under the
implementation plans and induce a project Post-secondary school options to strengthen programs under a single secretariat to better
assumption that eventually Saudi tech
management approach to the implementation software development capabilities would guide the efforts
entrepreneurship sector will become an
integrated part of the global market, the best phases of decrees and policies. include increasing the number of high-
Various ministries and authorities have
course of action could be to review evolved quality vocational schools on coding to
Train civil servants who are entrusted with developed separate initiatives to cultivate
regulatory systems and assess their suitability accommodate the market need for coding
implementing the new laws and rules technology, innovation, and entrepreneurship.
for the Saudi market, followed by a gradual skills and provide access to skill building
The pace of change is fast and several of
adaptation plan of best fitting regulatory outside of the university system. By including
In order to address the qualification and the initiatives are launching simultaneously,
frameworks. technical universities, tech companies
knowledge gaps at the executor level of making it difficult for the ecosystem to stay
and representatives of entrepreneurship
government institutions a comprehensive abreast and use these programs. Pacing
Synchronize business procedures and ecosystem, the Ministry of Education can take
training program should be considered the initiatives to monitor their development
requirements of multiple authorities the lead in designing an upgraded vocation
by each agency to speed up the learning with periodic feedback from stakeholders
program to match Vision 2030 ambitions.
A common hurdle voiced by the tech curve of their officers where the trainers could enable timely intervention to modify
entrepreneurs in the ecosystem is the fact can proactively address some of the issues Work with education institutions to prepare and the programs to better fit the needs in the
that, even though much has been improved that could come up during regulation launch extracurricular entrepreneurial and ecosystem.
in the last two years, there are still several implementations. personal development programs
In addition, some interventions cut across
operational steps and circular processes that
Also, to reinforce the capabilities of the Since the embedded culture in the Kingdom ministerial jurisdictions or could necessitate
involve multiple authorities and sometimes
executive levels during the transition has not been supportive of entrepreneurship joint involvement of different bodies to design
conflicting requirements by local and federal
period, qualified project management
70 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 71
comprehensive implementation plans. A single corporates leveraging their experienced The networking opportunities in co-working
body – perhaps the SMEA - could be tasked professionals as mentors, access to resources, spaces may also work to improve one cultural
as the coordinator, much like Singapore’s and existing customer relationships. Run setback i.e. a lack of willingness to collaborate
Economic Development Board, to oversee independently or as partnerships with and share experiences.
the progress of the programs serving the tech university accelerator programs, private-sector
entrepreneurship ecosystem. companies can contribute coaching and Also starting off from a co-working space
resource access as well as funding support. should allow the tech entrepreneur to
A single point of contact in the form of an manage his costs, as he would be growing his
office with the authority to interact with both Rating agencies could track program office as his business grows. The interviewees
public and private ecosystem stakeholders performances that would serve as eligibility for indicated that prior inhibitions on having
could enhance the effectiveness and further public support and also signal program multiple entities registered under one address
timeliness of public policy interventions. attractiveness to the ecosystem. were alleviated, thus creating the legal
Moreover, it would create a market information backdrop for the establishment of co-working
channel enabling government bodies to Ease the establishment of physical clusters/ spaces.
remain attuned to developments in the tech co-working spaces to facilitate informal
entrepreneurship ecosystem and assess policy knowledge and expertise sharing
effectiveness.
The accelerator and incubator programs
The center could disseminate information provide much needed training to get
on policies, incentives, and programs, and a acquainted with becoming an effective tech
portal could become the go-to address for entrepreneur and building one’s idea into a
entrepreneurship enquiries. validated business proposal.

Create linkages with other ecosystems that However,the entrepreneurs’ need for
offer best-practice applications and proven guidance, support, knowledge-sharing,
programs and networking to create collaboration
opportunities continues beyond these training
Accessing foreign markets, understanding programs. Especially in an ecosystem where
how to operate in more advanced ecosystems, the number of tech startups is just beginning
establishing contacts with international to build up, clustering and working in
mentors, and presenting to reputable communities will help provide these functions
international VCs are the next level of in an informal voluntary manner. According
opportunities the Saudi entrepreneurs will to research published in the Harvard Business
want to have as their businesses scale up. Review, people who belong to co-working
spaces thrived more on average than people
The government can task a quasi -government working in regular offices.60 Among the
agency to engage in outreach initiatives such reasons identified were that working close
as partnerships with international accelerator to people doing different kinds of work can
programs to upskill Saudi entrepreneurs and also make one’s own work identity stronger
expose them to global entrepreneurship and workers in these spaces have unique skill
practices to expand globally. sets that they can provide to other community
members. Also, these spaces offer flexible
As local promising tech scale-ups want to hours, allowing the user to have more control
expand beyond borders, assisting them to over their work schedule. But this flexibility
navigate internationalization bureaucracies does not lead to a lack of productivity.
would expedite their reach to international
audiences. On the contrary, for entrepreneurs having
a community to work in helps them create
Increase the number of incubators/ structures and provides a work discipline that
accelerators to provide training opportunities motivates them.
for a greater number of aspiring tech
entrepreneurs

The need for a higher number and quality of

incubators and accelerators can be fulfilled 60
“Gretchen Spreitzer et al. “Why People Thrive in Coworking Spaces”, September
by programs designed and run by private 2015, Harvard Business Review (https://hbr.org/2015/05/why-people-thrive-in-cowork-
ing-spaces)

72 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 73
 Conclusion Acknowledgments
The Kingdom of Saudi Arabia has
embarked on a courageous national change
We are grateful to Google for the invitation to write this paper. We wish to acknowledge and express our
management program with the announcement
appreciation to our collaborator the Wamda, particularly their Principal Walid Faza, for his contributions
of Vision 2030 by the Crown Prince and support throughout this project.
Mohammed bin Salman. The aim is to calibrate
the country’s economic model to carry its We also wish to thank all the participants in our interviews for their contributions and valuable insights.
growing young population into the future. It All of the interviews were conducted in English, all quotes have been approved by their owners as
calls for increased private-sector involvement, presented. The usual disclaimer applies.
especially fostering entrepreneurship, and
developing top-notch technology and
In alphabetical order,
innovation-driven industries. Championing
tech entrepreneurship in the country is a Abdullah A. Alsaleh - Managing Partner, Alsaleh & Alsahli Law Firm
perfect lever that can be used to meet change Abdulmohsen Aleisa - Director of Business Development, Badir Program
ambitions.
Ahmed Alrasheed - Founder, Shoghol
Saudi public authorities have dedicated Alanoud Alqahtani - Founder, FIXTAG
significant financial resources to meet their
Amal Dokhan - Director, Babson Global Center for Entrepreneurial Leadership, MBSC
targets. The government’s current task is to
modify the established structures and mode Anfal AlOmar - Development Manager, Ecommerce Sea
of operation on multiple fronts in order to Eamomn Mahdi Almutaw - Head of Foreign Investments Unit, Capital Market Authority
maximize the effects of committed resources
and deliver the expected results. Farah Al Tahlawi - Consultant, Eradah
Faris AlRashed Alhumaid - Founder, OQAL
In order to cultivate a prosperous tech
Haitham Al Zahrani - Founder, Rozani
entrepreneurship ecosystem, the regulatory
framework needs to be aligned with the Hanouf Al-Ajmi - Entrepreneur Select and Growth Manager, Endeavor
requirements of the sector and with global Hashim Alawadi - General Manager, Technology Investments Company
practices. It is necessary to put increased
emphasis on meticulous and timely execution, Hattan Ahmed - Entrepreneurship Collaboration Manager, KAUST
with continuous monitoring and updates. Ivo Detelinov - Head of Private Equity Funds, Riyad Capital
Creating formal and informal linkages with Kemal Farid - Managing Director, Bluevine Ventures
best-practice ecosystems and experienced,
international talent will expedite the learning Maha Taibah - Founder and CEO, Eradah
process for Saudi ecosystem participants. Mansour Al-Misfer - Managing Director, Bluevine Ventures
There is a need to populate a variety of
Mazin Alshanbari - Director, TakaMol Holding
support networks to draw more aspiring
tech entrepreneurs into private ventures. Muhammad Arrabi - CEO, Ecommerce Sea
Most important of all, the government and Nabil A. Issa - Partner, King & Spalding
its officers should continue to spearhead
Noura Alluhaidan - Founder, Threadin
the cultural mindset shift necessary to
create more scope and acceptance for tech Omar A. Almajdouie - Founding Partner, Raed Ventures
entrepreneurship in the Saudi community. Redha Alhaidar - General Director, GCAM
With these efforts, the Kingdom’s ample Sami Al Hussayen - Vice Governor, SMEA
resources and inherent market dynamics, the Shahad Osama Almufti - Corporate Project Consultant, Business Incubators & Accelerators Company
burgeoning tech entrepreneurship ecosystem
is poised to become a regional powerhouse. Trey Goede - Head of Portfolio and Investment Management, Aramco Entrepreneurship Ventures
(Wa'ed)
Wael Kabli - Founder, Cura

74 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 75
Appendix FIGURE I. THE MAIN INDICATOR OF AN ENTREPRENEURIAL ENTERPRISE IS ACHIEVING YEAR ON YEAR HIGH
GROWTH IN REVENUES OR EMPLOYEE BASE

Definitions – Tech entrepreneurship

“Entrepreneurial domain”
frame of reference
Revenue

Growth
For the purposes of this paper, entrepreneurs
are distinguished from self- employed
individuals with regard to their motivation
Workforce
to create a rapidly scalable business venture
with the aim of innovating, improving or
transforming the given way of doing things.61, 4
Time
“Start –up” “Scale –up” “Expansion to exit”
The entrepreneurship domain includes startup
and scale-up phases of the business cycle • to create a business by • to scale up the business to • to expand and capture greater
where companies are experiencing high introducing an innovation to address a wider customer base share of wallet and grow market
growth in revenues and employees’ numbers Entrepreneur’s the way a product or service is and to repeat it in different share with new products / services
motive designed, produced, delivered markets • to grow along the value chain or
while validating their value proposition and or performs that is preferred over customer experience

ATTRIBUTES
building up. existing alternatives

Technology-driven entrepreneurship bases

its business proposition on the use of new • organizing, managing, and • improving the value proposition • continuing the entrepreneurial
assuming the risks of an enterprise through employment of activity within the corporate by
technologies as an enabler and focuses to generate commercial benefit technological advancements utilizing organizational resources
on hyper connectivity among of networks, Entrepreneur’s out of the innovative idea or introduction of new goods, to carry out innovative activities
• services and processes utilizing
people, businesses, things, and hardware role validating value proposition,
these advancements
setting strategic direction
that’s internet-enabled. Technological • engaging external resources
applications in conventional sectors and new
businesses in emerging sectors fall under its
definition. • establishing product – market fit • sustaining high growth – at least • increasing profitability while
• achieving fast ramp up ( at least 20% CAGR1 and generating maintaining growth
20% annually) by establishing a profits • achieving operational excellence
new value proposition • scaling up workforce and and organizational efficiency
Business
• attracting professionals to build building an effective organization • growing inorganically
goal
skills and capabilities • strengthening equity base by • optimizing debt to equity levels
agents of change who create new value propositions by additional venture funding
• bringing in seed and initial rounds • preparing for initial or secondary
means of new products, services, innovative processes,
of equity investment • raising capital by using financial public offering
and organizational innovations that lead to evolution or
leverage
obsolescence of current way of things

business owners who seek to generate value, through

the creation or expansion of economic activity, by
identifying and exploiting new products, processes or
markets
1
High-growth Enterprises and Gazelles –Sensitivity Analysis, Ditte Rude Petersen and Nadim Ahmad, OECD 2007
Source: Global Entrepreneurship Monitor (GEM) Global Report 2016/17, Global Entrepreneurship Research
… different from self-employed individuals who seek to Association 2017
generate income by using existing products, processes or
markets

initiators whose business ventures result in the

development, growth and well-being of their societies
through job creation and level of innovation2

61
Schumpeter, J. 1942. Capitalism, Socialism, and Democracy. New York: Harper &
Bros.

76 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 77
 FIGURE II. “TECHNOLOGY ENTREPRENEURSHIP” CAN BE DISTINGUISHED FROM OTHER FORMS OF Disclaimer
ENTREPRENEURIAL ACTIVITY
This report was prepared independently by OC&C Strategy Consultants in collaboration with
Wamda who have both been commissioned by Google to research the tech entrepreneurship
Mostly new technology is used to transform an innovative idea to a ecosystem in KSA (in addition to other developing countries in the GCC, East Europe and Africa
scalable and repeatable business proposition – i.e. web, mobile, hardware region) to identify policy recommendations to improve tech entrepreneurship. Information
provided herein, including policy recommendations are prepared and intended for use as
Business is based on hyperconnectivity : web of networks, people, businesses, things, machines, and discussion materials on the ways to support the growth of tech entrepreneurship.
computers enabling intelligent operations using advanced data analytics to redefine the landscape for
individuals and businesses The report is based on a variety of inputs from multiple sources including official data sources
such as various public institutes and foundations focusing on entrepreneurship, and other
privately published data sources such as news articles, sector reports and interviews with tech
entrepreneurship ecosystem actors. Recommendations are based on statements of ecosystem
TECH ENTREPRENEURSHIP UNIVERSE actors. Accuracy of analysis and recommendations are dependent on the detail and accuracy
of declared data. Parties do not guarantee and are not responsible for the currency, propriety,
TECHNOLOGICAL APPLICATION IN
EMERGING SECTORS
CONVENTIONAL SECTORS
accuracy or reasonableness of any statements, information or conclusions contained in the
source documentation used.
• On Demand • Internet of • e-Commerce • HealthTech
• Big Data Things (IoT) • Marketplace, • Real Estate Tech The information given herein is for informal guidance only and neither Google nor OC&C
Classifieds
/ Data & • Smart Home • RegTech Strategy Consultants nor any company stated within this paper makes any expressed or implied
Analytics • AdTech • Space Tech
• Cybersecurity warranty, or assumes any legal liability or responsibility for the accuracy, completeness, or
• Virtual /
• AgTech • Marketing Tech
• Blockchain • AutoTech (Loyalty apps) usefulness of any information, product, or process disclosed, or represents that its use would
Augmented
Reality • Robotics and • CleanTech • Transportation not infringe privately owned rights. Parties are not responsible for any use that may be made of
drones • EdTech • Travel & Tourism
• Gaming
• FinTech Tech this document.
OC&C Strategy Consultants have assumed responsibility for the final form and content of this
document, subject to the limitations noted above. Should you have any inquiries about the
Definitions- Tech entrepreneurship success outputs analysis within the document or related matters, please contact OC&C Strategy Consultants
Istanbul Office.
Output Indicator Definition Source Date

Tech start up prevalence in the Number of active tech start-ups founded after 2010 per million urban
Crunchbase 2017
country1 population

Tech startup longevity Survival rate of tech startups that were founded after 2010 Crunchbase 2017

Number of exits over USD Number of acquisitions and IPOs between 2012-2016 that had a valuation
Crunchbase 2017
100m over USD 100 million

A scoring based on percentage of entrepreneurs with a sophisticated

Economic Entrepreneur’s growth
growth strategy aspiring to grow at least 50% in the next 5 years and attract GEDI 2016
Contribution aspiration score
VC funding

Percentage of those involved in Total Entrepreneurial Activity2 who expect to

High job creation expectation GEM 2016
create 6 or more jobs in 5 years

Ability to create globally Number of unicorns is used an indicator of global reach since they operate
CB Insights 2017
recognized “Unicorns”3 beyond their local markets and are highly international and large in scale
An index to approximate the value of global flows that are linked to
knowledge economy:

• ICT exports4,
World Bank,
Contribution of knowledge • high tech exports5, McKinsey,
2015,
sectors to economy 2016
• international data flow connections INSEAD
• intellectual property receipts of a country (excluding domestic
receipts)

Innovation An index on the abundance of knowledge creation (patents, publications

Innovative output density
Creation etc.) and intangible assets (density of trademark applications, industrial INSEAD 2016
designs, creation enabled by ICT)
Percentage of those involved in entrepreneurial activity who indicates that
Entrepreneurial innovation
their product or service is new to at least some customers AND that few/no GEM 2016
creation
businesses offer the same product

1. The urban population of China and India were normalized using the city populations of tech entrepreneurship activity
2. Total Early-Stage Entrepreneurial Activity measures the percentage of working age population (18-64) both about to set up their businesses and have set up at
most 42 months ago
3. Unicorns are startup companies that are valued over USD 1 billion
4. ICT service exports include computer and communication services and information services including computer data transactions
5. High tech exports are R&D-intensive products, which can be found in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery

78 Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia Tech entrepreneurship ecosystem in Kingdom of Saudi Arabia 79
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