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How Saudi Arabia and UAE can create the next Silicon Valley

New York - The UAE is so dominant that it represented 56 per cent of all start-up capital invested in MENA.

If there’s an emerging crown jewel in the tech start-up ecosystem in the Middle East, it’s the Kingdom of Saudi Arabia. The country is a significant contributor to developing the Silicon Valley of the region as the government paves the way for accelerated growth for start-up technology. In Saudi Arabia today, the environment offers tremendous opportunities because of its focus on investing in public sectors such as health, education, infrastructure, recreation and tourism as part of Vision 2030, young demographic with a majority of the population under 40 and a sophisticated technological user base.

The Saudi government is also making rapid strides in helping international businesses grow into the country, making visas instantly accessible, and focusing resources towards skill training which will benefit start-ups.

The numbers speak for themselves. In 2020, Saudi Arabia start-ups raised a record $152 million in venture capital funding, compared to $7 million in 2015, and consummated start-up deals rose 35 per cent from 2019 to 2020. Last year’s investments focused on industries that saw increased demand during the Covid-19 pandemic, including e-commerce, fintech and education.

The telecommunication technology 5G is an area of growth for the kingdom, as it represents a $14 trillion global opportunity in technological implementation, and it brings benefits to healthcare, digital health, artificial intelligence and smart cities. Saudi Arabia, specifically, spends more per capita on 5G for the country, users and its population than any other nation in the world.

Another sector with tremendous potential in the kingdom is gaming, which is estimated to be a $5 billion business.

Today, 14 per cent of the world’s gamers are from the Middle East, totaling 300 million. Many of the games played, however, are from international developers. Given the high adoption of gaming technology in the region, there’s a significant opportunity for creating gaming start-ups that are local to Saudi Arabia.

If Saudi Arabia marks the fastest-growing start-up technology market in the Middle East, the UAE leads in start-up deals closed and amounts funded. The UAE is so dominant that it represented 56 per cent of all start-up capital invested in the Middle East and North Africa (Mena) region at $577 million last year.

Three of the five largest deals that closed last year were based in the UAE. For example, EMPG, Kitopi and sellanycar.com were the three top investments in the UAE. EMPG, a property portal, closed a $150 million Series E round last year.

There is great excitement within tech start-ups in the UAE, not only based on the achievements made so far, but also for what the vibrant environment promises for the future.

The UAE has had some of the largest regional exits: Careem by Uber and souq.com by Amazon. The government is also doing its part in demonstrating its dedication to entrepreneurship.

The Dubai Future District has granted $1 billion to support start-up companies in the District. The Nasdaq Dubai Growth Market is helping companies achieve a more streamlined process for listing on the exchange. Initiatives such as Area 2071 and Dubai Future Accelerators will further bolster the tremendous growth of the start-up and technology ecosystem. The most significant challenge the UAE faces is the lack of local deep technology players. The climate, however, appears to be changing.

With the signing of the Abraham Accords on September 15, 2020, both Israel and the UAE will benefit: Israel from the UAE’s commerce hub and access to capital and the UAE from access to Israeli technology and technical skills. It will serve to bolster the growth of the start-up community in the region.

When you assess the tech start-up market opportunities in the UAE and Saudi Arabia, one can see how they are poised to create the next Silicon Valley. The UAE is the dominant hub for start-ups in the Middle East and Saudi Arabia, because of its powerful economy and large youth population, offers a lucrative market.

Start-ups have become a fundamental pillar of economies. They will bring not only greater innovation to the Middle East, but job creation, too.

Matthew Salloway is Co-Founder and Managing Partner of the global venture capital fund SIP Global Partners (sipgp.com)