RIYADH: Saudi Arabia’s burgeoning startup scene has forged a robust entrepreneurial connection with neighboring nations, drawing an increasing number of founders to the country.
This trend is especially evident among Egyptian tech entrepreneurs, who are attracted by the market potential, government initiatives, and ample funding opportunities in Saudi Arabia.
The Saudi market, with its substantial size and high consumer purchasing power, offers lucrative prospects for tech startups. Additionally, Vision 2030 and various entrepreneurship support programs have cultivated a conducive environment for innovation.
“Saudi Arabia’s government initiatives and funding opportunities are significant draws for Egyptian tech entrepreneurs,” said Motaz Abuonq, CEO and founder of Value Makers Studio, in an interview with Arab News.
VMS, a Saudi-based venture studio, supports Egyptian and regional startups by providing funding opportunities and consulting services to help them enter the Kingdom.
Abuonq highlighted that Egyptian entrepreneurs benefit from Saudi Arabia’s advanced infrastructure, streamlined regulations, and substantial financial support from entities like Saudi Venture Capital Co., which provide a solid foundation for startup growth.
“The regulatory environment is being streamlined to attract foreign investment, making it easier for businesses to establish and operate,” Abuonq added.
Extensive funding opportunities are available from both private and public sectors, with many investors favoring innovative tech solutions, according to Abuonq.
Saudi entrepreneurs are also drawn to Egypt due to its skilled workforce, cost efficiency, and strategic location. Egypt’s position as a gateway to African and Middle Eastern markets, along with its thriving entrepreneurial community in Cairo, enhances its appeal.
“Egypt offers a large pool of educated tech professionals and relatively lower operating costs, which are significant advantages for Saudi startups,” noted Abuonq.
Mohammed Al-Zubi, founder and managing partner of Saudi-based VC Nama Ventures, echoed Abuonq’s sentiments about Egypt’s large talent pool.
In an interview with Arab News, Al-Zubi explained that Nama Ventures is interested in investing in Egyptian startups due to the market size and the vast talent pool.
“Egypt is the largest country in the Arab world in terms of population, and Egyptians are leaders in terms of tech talent and their price per value factor,” he said.
Abuonq further explained that the advanced entrepreneurial community in Cairo, with numerous incubators and accelerators, supports startups and fosters a collaborative environment.
“Cultural and historical ties, including a shared language and similar customs, further ease business operations and collaboration between the two countries,” he added.
Despite many similarities, the two nations also share differences. “Saudi Arabia’s decision-making process tends to be more conservative and time-consuming due to multiple approval layers, while Egypt’s regulatory environment, although stable, includes bureaucratic challenges,” Abuonq stated.
“Saudi Arabia is reforming its business laws to attract foreign investment, but navigating these changes can be complex,” he added. Conversely, Egypt’s regulatory environment may be more stable, but it will also face bureaucratic hurdles.
Intellectual property protection is another differentiator, with Saudi Arabia enhancing its laws under Vision 2030, providing better safeguards for technological innovations compared to Egypt, Abuonq explained.
Nama Ventures has successfully navigated the cultural and regulatory differences between the two countries, facilitating seamless investments in Egyptian startups.
“In terms of Nama, we have been able to seamlessly invest in Egyptian startups just as we do with Saudi startups, in terms of investing using standard investment instruments at the holding level and then having these holding companies own the operating companies in Egypt almost 100 percent,” Al-Zubi said.
Success stories exemplify the potential for cross-border entrepreneurship. “Egyptian startup EYouth has become a notable educational partner for Saudi institutions, while Saudi companies like Mrsool and Foodics have successfully penetrated the Egyptian market, capturing significant market shares and becoming well-known brands,” Abuonq said.
These examples highlight the unique opportunities each market offers. In Saudi Arabia, large projects such as NEOM and Red Sea Global create avenues for AI, renewable energy, and smart city solutions, he added.
Egypt, with its youthful population and numerous innovation hubs, is a fertile ground for new technologies. “A large segment of young people in Egypt are ready to adopt new technologies, and numerous innovation centers and business incubators support startup growth,” Abuonq said.
Success stories, such as Egyptian last-mile company ShipBlu, demonstrate the potential for cross-border entrepreneurship. Al-Zubi highlighted ShipBlu as an example of a great bet by Nama Ventures, attributing its success to the complementary nature of its leadership team.
Several startups have announced plans to expand to the Saudi market this year, with the latest being Egypt’s e-commerce marketplace Kemitt.
In February, Egyptian fintech Khazna also announced its plans to enter the Saudi market through a partnership with Khwarizmi Ventures. Two months later, Egyptian group-buying startup Waffarha secured a seven-figure seed round from VMS, enabling it to initiate its plans to expand to the Saudi market.
Egypt’s artificial intelligence firm Intella has also seen significant growth in the Kingdom, enough to relocate its headquarters to Saudi Arabia.
In an interview with Arab News last year, Nour Taher, CEO of Intella, said that the Kingdom is becoming a hub for tech companies. “Saudi Arabia is currently our largest market with 70 percent of our business coming from there. We have just taken the decision to relocate our HQ there to better serve our existing clients and further expand our business. We are also inspired and aligned with Saudi Arabia’s Vision 2030,” she said.
To address expansion challenges, thorough market research, regulatory compliance, and cultural adaptation are essential. Abuonq emphasized the importance of building partnerships and hiring local consultants to navigate regulations.
“Understanding local consumer behavior and adapting business strategies to align with cultural differences are crucial for success,” he advised.
Building partnerships with local companies can facilitate market entry while hiring local legal and business consultants can help navigate regulations and ensure compliance with the law, he explained.
Enhancing partnerships between the Saudi and Egyptian tech ecosystems requires strategic initiatives such as bilateral trade agreements, transnational incubators, and joint ventures, as well as cultural exchange programs and joint innovation platforms.
“Governments and organizations should facilitate cross-border operations and create platforms for startups to collaborate and share technological advancements,” Abuonq suggested.
He added that joint ventures and partnerships between companies from both countries can leverage strengths and market insights, and cultural exchange programs can promote understanding and collaboration among entrepreneurs and tech professionals.
In his experience assisting Egyptian tech entrepreneurs in Saudi Arabia, Abuonq identified regulatory navigation, market adaptation, and cultural sensitivity as primary challenges.
Helping startups understand and comply with complex and evolving regulations in Saudi Arabia is crucial, as is assisting them in adapting their products and services to meet local market needs and consumer behavior.
“Ensuring startups are culturally sensitive and adaptable in their business practices is another significant challenge,” he noted.
For Al-Zubi, fostering stronger partnerships between the Saudi and Egyptian tech sector involves enhancing exposure to each country’s entrepreneurial landscape.
“Any effort that strengthens exposure to each ecosystem’s startups is a positive effort in our opinion,” he stated, aligning with the strategic initiatives suggested by Abuonq.
Addressing the challenges and opportunities in assisting Egyptian startups expanding into Saudi Arabia, Al-Zubi emphasized the importance of a strong foundation.
“I would highly encourage Egyptian startups to scale to Saudi from a position of strength, not weakness,” he advised.
He further stressed the need for these startups to demonstrate success in their native market and ensure that their business models are functioning in a healthy fashion before considering expansion into Saudi Arabia. “It should be a market expansion strategy and not a migration play,” Al-Zubi added.
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