Hernán Fernández
Managing Partner
Angel Ventures
/
Expert Contributor

Saudi Poised to Become a Thriving Entrepreneurial Ecosystem

By Hernan Fernandez | Tue, 04/26/2022 - 16:00

Let’s call a spade a spade. In our part of the world, to mention Saudi Arabia evokes thoughts of deserts, camels, strict Muslim observance and lavish luxury fueled by an oil-based economy. It is similar to the image of Mexico being a playground for drug dealers and some beautiful beaches, courtesy of one of our most recent and popular cultural exports: Narcos Mexico.

This is where cultural and economic bridges play a key role.

Since 2018, I have had the privilege of visiting the Kingdom of Saudi Arabia three times, and each visit was very different from the other.

As a reference, Vision Saudi 2030 was established in 2016 as the boldest initiative to invigorate the Saudi economy beyond oil, led by Crown Prince Mohamed Bin Salman, locally referred to as MBS and a driving force toward modernization in Saudi Arabia. 

My first trip to Saudi in 2018 was about the unknown and fighting off cliches. Women were certainly an important part of the economy but you could still smell an air of segregation happening, starting from the dress code, adding to the exoticness of the country. I was pointed toward a few food places that were more Western-friendly in terms of food and I had the chance to meet a few Saudi entrepreneurs and VCs who were US/European trained, but local funding rounds were still scarce and most VC activity was done in companies that expanded from Egypt or the United Arab Emirates into Saudi, tapping into their US$1 trillion economy and population of nearly 35 million. The one thing that I was genuinely always impressed with, and that has not changed a bit, was the great Saudi hospitality that always made me want to return and meet old and new friends.

My second trip to Saudi in 2020, just a few weeks before the world was shut down over COVID-19, was dramatically different from the previous one. You could now see that women were more active and integrated into everyday jobs, and dress code was a bit more relaxed. I recall going to a Sushi place that had amazing fresh cuts of fish (yes, a bit pricey) but very comparable to some of the best offerings in any other metro city. Compared to my first trip, I could see men and women mingling more freely in these kinds of settings. I attended an Endeavor event in Saudi that brought together entrepreneurs from all over the world, as well as regional funds that were starting to expand operations into Saudi or even appoint a regional head from there. You could see that the perception was changing, from “Let’s fundraise from Saudi Investors” to “Let’s explore Saudi as part of our investment mandate.” Saudi hospitality remained the constant, with more people greeting me as “Habibi” or “Sadiqi.

Finally, my latest trip just a few weeks ago brought the most dramatic change. I had the chance to attend Formula 1 and an event in Jeddah with my friends from Jada Fund of Funds. The energy that you can feel from the crowds was electric and only matched by the loud roars of the cars. But most impressive, was that this time, women were fully integrated and the dress code was relaxed, although still conservative to western standards. Now, attending a Black Eyed Peas concert, it was easy for me to believe that I was in Mexico City, Jakarta or Cape Town.

The fast pace of change was uncanny and it really seems that Saudi Arabia is preparing for a massive thrust into the future. Back in Riyadh, the 500 Global Party was held on an amazing terrace that rivals the best in Mexico City with the added bonus of a wide assortment of Hookah flavors. And the entrepreneurial scene? 1 BN invested in Saudi Arabian startups and VC funds over the past couple of years, with 20 new VC funds created. Unifonic is now a Unicorn and regional leaders like SWVL are ever more present in Saudi, knowing that its growing and fast-paced population will soon be even more demanding of a wide array of goods and services that entrepreneurs will be ready to provide. To no one’s surprise, women are playing a key role in driving this transformation, many of whom are entrepreneurs and thought leaders. I was very impressed by a few of them I was able to meet during my last trip, such as Loulwa and Sofana, who have amazing personal stories about resilience, humility and courage in making the voice of women heard.

And again, Saudi hospitality played a key role. Now my Saudi friends have grown even closer and I am hopeful to host them in Mexico City later this year.

There is no way to doubt that something exciting is happening in the Kingdom of Saudi Arabia. The regional sleeping giant is waking up in full force in terms of entrepreneurship, with hungry entrepreneurs catering to a young, demanding, conscious consumer base that is increasingly globally savvy. As a testament to this growth, four years ago, a typical seed round was around $1 million Saudi Arabian riyals (US$280,000 approximately). Today, several founders are raising over US$1 million at the pre-seed stage, and it is not uncommon today to see seed rounds go north of US$4 million.

I have done my part of the bridge. But this is a two-sided bridge and my fellow Latin American entrepreneurs would do well to start thinking about a faraway region in the Middle East that shares many of our cultural and economic traits and that will soon be skyrocketing in terms of entrepreneurial activity. The future is bright in Saudi Arabia, and I cannot wait to visit old and new friends for a fourth time and start planting more local seeds and continue building the bridge.

Photo by:   Hernán Fernández