Saudi Arabia to invest $133M to pump up Arab ICT startups

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Saudi Arabia has formally launched a new ICT startup ventures fund worth 500 million SAR, or about $133 million. Known as Riyadh Taqnia Capital, the fund was announced personally by Prince Dr. Turki bin Saud bin Muhammad of KACST, the King Abdulaziz City for Science and Technology. Partners will include Riyadh Financial Capital and several other Saudi holding companies: the General Investment Fund, the General Pension Fund, and the Human Resources Development Fund.

The fund will maintain its headquarters in the Saudi capital but will open an international arm at 3000 Sandhill Road in Menlo Park, California. Besides ICT, the fund will focus on energy, sustainability, and advanced materials.

Taqnia’s website says that the fund is hoping to build up a nascent industry and implies it expects many of its seed investments to fail. With that in mind, it will rely on its international arm not only to attract foreign capital to Saudi ventures, but also to find foreign portfolio companies to keep Taqnia profitable as it looks for golden eggs in Riyadh.

“Taqnia’s domestic investment strategy is designed with the nascent nature of the Saudi venture capital industry in mind. Because the Kingdom’s innovation ecosystem is yet to be developed, a small minority of domestic portfolio companies will be seed stage,” the company’s website states.

It is a mature description for a state-run technology fund, especially considering many see healthy tech investors developing from experience. The Saudi fund seems to accept the premise that tech investments require high risk and a lot of patience that traditional investors typically don’t have. They want to focus on SMEs who are growing slowly but need capital because “local commercial banks hesitate to fund asset-light commercial operations under which most technology companies are categorized.”

Riyadh conference just the first

The announcement came at the ArabNet Riyadh 2015 tech conference in mid-December. ArabNet runs several events a year for Arab entrepreneurs, with another conference heading for Beirut in March 2016 and Kuwait in September.

Sessions focused on startup branding, crowdfunding, IoT, and adapting apps to Amazon Web Services and Microsoft Azure. It was also an opportunity for the Saudi government to promote its Vision 2030 program and other regional developments like ArabNet’s annual investment report on the MENA region (Middle East and North Africa) and the “Islamic digital economy.”

Several region-focused VCs were represented, including Careem, Leap Ventures, BECO Capital, and Alkhabeer Capital. Competitions included a startup demo, an “ideathon” of pitches, and a “Battle of the Games.”

Taqnia’s board includes Abdullah bin Ibrahim Al-Iyadi, Mohammad bin Abdulaziz Al-Ohali (Public Investment Fund), Ibrahim bin Abdulaziz Al-Hinaishill (Saudi Credit and Savings Bank) and Abdullah bin Hassan Al-Abdulqadir, among others.

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