Tech ecosystem: Challenge to turn Saudi Arabia into region’s Silicon Valley
Is Saudi Arabia really going to become the Silicon Valley of the Middle East? It is clear that developing the Kingdom’s digital economy is central to the National Transformation Program, aimed at diversifying the country away from its dependence on crude oil.
On the plus side, Saudi Arabia has a young, tech-savvy population, with almost 70 percent of its citizens aged under 35.
There is also the fact that last year the nation saw a record $152 million invested in local tech startups, up 55 percent on the previous year and bucking a wider Middle East and North Africa region trend, according to MAGNiTT.
The cash investment was across a record number of deals, 88 transactions, a 35 percent increase from a year earlier, again in stark contrast to the wider MENA picture, where deals were down.
And it should not be forgotten that in 2015 local tech investment was a meagre $7 million.
Programs such as Launch, and the work of the government’s General Authority for Small and Medium Enterprises — which has supported the development of the kind of co-working spaces and hubs beloved of tech startups — are helping nurture a burgeoning tech culture in the Kingdom.
There is no shortage of government ambition or funding to tap into the human capital and ambition of young Saudis who want to be part of what is often called the flat white economy.
There is also no question that the Kingdom will attract a good share of venture capital investment in the coming year.
The latest Venture Monitor report from data provider PitchBook, and the National Venture Capital Association, suggested that more than $220 billion was available for investment globally this year. Just under half of that was destined for Europe, but valuations in Europe are rapidly rising and against that backdrop, the Kingdom offers value for money.
Higher valuations, partly due to the fact that so much money is suddenly chasing investment, have led to concerns that the market is on the verge of a 1999-like tech bubble. On the other hand, others attribute the increase in valuations to the huge expansion in the use of digital services during the coronavirus pandemic, which has transformed everything from how people order food to the way healthcare is delivered.
Either way, the upward curve of investment in Saudi Arabia’s tech sector is set to continue, but it will also continue in the UAE, where regional startups have been encouraged to hang their shingle following the success of music streaming platform and digital distribution firm Anghami, and vehicle for hire company Careem.
That said, one could argue that Saudi Arabia is well placed to tap into its links with Silicon Valley, and access its skill sets, courtesy of the Kingdom’s huge investments there in recent years.
But the biggest obstacle to the country becoming the region’s Silicon Valley may be its ability to establish a self-sustaining tech ecosystem of the kind that exists not just in sunny California, but in rainy London, New York, and in Mumbai, or Bangalore.
London’s tech sector attracted more venture capital money last year than any other tech hubs globally outside the US. London, of course, offers relatively easy access to capital, but its tech businesses also thrive on diversity.
Around 30 percent of the people working in the sector are non-British, according to Douglas McWilliams, founder of the Center for Economic and Business Research and author of “The Flat White Economy,” a groundbreaking book chronicling the expansion and economic impact of the digital sector in London.
For McWilliams, having lots of people from different backgrounds working together is a key ingredient for startups as it leads to more creative thinking.
Developing talented young techies is one thing, but retaining talent depends on a range of factors when the lure of a vibrant cosmopolitan edgy urban work environment is only a plane ride away.
To that end, turning the Kingdom into the region’s Silicon Valley will also depend on attracting back Saudi tech talent that is currently working overseas. As Arab News reports on a daily basis, Saudi Arabia is changing, economically and socially.
The continuing success of all the reforms initiated in the Kingdom in recent years are likely to be the most significant factor in determining whether Saudi Arabia can be the Silicon Valley of the Middle East.
• Michael Glackin is an award winning UK-based journalist who specializes in UK, European, and US finance and economics, and Middle East politics and economics.