Many new businesses have been formed in the last two years. The pandemic unleashed a tidal wave of entrepreneurial activity in the healthtech, edtech, fintech, and agritech space, breaking the startup slump in the Middle East.
This will undoubtedly leave many with a case of the whys, especially why anyone would want to start a business in a time of economic uncertainty.
As with most big questions, there’s never just one answer. But as someone who closely follows startups in the region, I can say that there are certainly a few very specific reasons to explain what’s happening.
The first has to do with need. The second reason is the supportive entrepreneurial ecosystems in the region. There are many places to throw a hat in the ring for someone wanting to start a business.
“The pandemic was a great stimulus to show the quality of the entrepreneurs who stood up to the challenge to create solutions for the issues created by it,” says Hattan Ahmed, Head of the Entrepreneurship Center at King Abdullah University of Science and Technology (KAUST). “It was a major disruptor for many industries, such as education, healthcare, logistics, and hospitality.”
“Entrepreneurship is in the DNA of youth in the Middle East,” adds Ahmed, an advocate for innovation who works across the entrepreneurship ecosystem in Saudi Arabia, accelerating startups and contributing to the country’s transformation agenda.
PROVIDING A WIDE REACH TO STARTUP FOUNDERS
“In a recent study by the Entrepreneurship Center, which targeted more than 3,000 young people, 90% of the responses indicated their intent to start a new venture. At the same time, youth are keen to learn the fundamentals of entrepreneurship,” he adds.
In the Middle East, KAUST has been at the center of the flourishing and expanding entrepreneurial ecosystem. It has seen a significant rise in the number of startups and the amount of funding in recent years.
“The strong local presence, international connectivity, and diversity within KAUST provide a wide reach to a broad network of founders and a portfolio of companies that address global challenges to make a difference to humanity.”
From the UAE to Qatar to Saudi Arabia, a new business landscape is emerging in the region’s startup ecosystem that is changing the face of entrepreneurship.
Over the past few years, Ahmed says that the quality of the founder’s experience in different subject matters and their endeavors have been growing rapidly. “This is apparent in the quality of applications in our flagship program Taqadam, a startup accelerator program.”
“KAUST’s global reach to hot entrepreneurial nodes provides access to remarkable founders addressing significant global challenges,” he says, adding that the Destination Deep Tech program is “designed to soft-land” international startups interested in growing in the Saudi market.
TALENT IS SAUDI’S ASSET
According to him, building a connected community is the backbone of KAUST’s programming, whether virtual or in-person. “The community extends across the different cohorts and goes as wide as our network partners from the private sector, public sector, and investors. Those community-building activities aim to cross-learn from different cohorts and share knowledge and challenges.”
This is positively impacting the entrepreneurial ecosystem in the kingdom, accelerating innovation. The latest Saudi Venture Capital report shows that the venture capital deployment over the past five years has grown tenfold from $50 million a year to $500 million.
“The entrepreneurial ecosystem is moving rapidly in Saudi Arabia on multiple fronts,” says Ahmed.
In the first half of 2022, the investments already passed the $500 million mark. “The ecosystem has seen unprecedented transactions over the past few years. For instance, Jahez’s IPO is just paving the way for many more to come and increasing the appetite of the investor community. Lean is attracting Sequoia Capital India for their first transaction in Saudi. Tamara is attracting investment from Checkout.com. Red Sea is attracting corporate venture capital.”
“All those transactions are led by Saudi talent with global ambition. Talent is the country’s real asset, and the government is investing heavily in it,” adds Ahmed, who has a diverse background in industry, startups, and academia.
CREATING AN IMPACT
For innovation and entrepreneurship, impact, a generic word with multiple facets, is KAUST’s driver, Ahmed says. It tracks quantifiable factors to measure the economic impact created by the founders from its programs and activities, such as jobs created, capital raised, and valuation of our portfolio companies. The portfolio companies generated more than 1,463 direct jobs and 17,253 indirect jobs and managed to raise $159 million in funding with a valuation of $448 million.
“This is just the beginning, as the critically important fact is the growth rate of those companies and the impact they are creating,” he adds. “The intangible impact comes from the tacit knowledge acquired by the innovators who have gone through our programs.”
So far, 36,232 innovators have gone through KAUST’s in-person or virtual programs via its online course, Entrepreneurship Adventures.
“The impact of those innovators in their organizations is tough to measure. This is an important part of our mission to empower dreamers and create impact in their organizations in their way.”
Despite what we read about globalism and corporate monopolies, entrepreneurship is going strong in the region because the fundamental structure makes the dream still possible.
And few of these new startups will actually become the next big thing, he says. “A good number of startups that KAUST accelerated are focused on creating global impact.”
RedSea creates a sustainable desert agriculture system in water-scarce environments using 90% saline water—it developed a cooling system for greenhouses using saline water and salt-tolerant crops with high value. Polymeron converts date waste into degradable bioplastic. Whitehelmet is creating a digital twin for construction sites to have remote oversight for the project managers.
With global warming, climate tech and sustainability are gaining momentum in creating new markets and opening opportunities to solve those challenges. And COP27 highlighted this significantly, says Ahmed, as global leaders are placing resources and new regulations to address those problems.
“Saudi Arabia is leading in terms of new sustainability initiatives. Those fast-moving changes will open great opportunities for founders and investors to create solutions to adapt to the new world being formed.”