Saudi Companies 'losing Out To Global Players', Says STV CEO

The Saudi Arabian investment opportunity is immense and untapped, according to Abdulrahman Tarabzouni, CEO of the kingdom’s $500 million VC fund, STV (Saudi Technology Ventures).

“The kingdom has massive demand and lagging supply, so the opportunity is going to global players,” Tarabzouni said, referring to US tech players who have entered the region, such as music service Spotify and e-commerce giant Amazon.

“Saudi Arabia needs about 30 times more local capital to meet the country’s consumer demand,” added Tarabzouni.

STV is an independent VC fund that is anchored by Saudi Arabian telecom operator STC, with access to its assets, such as network, channels and analytics to enable its portfolio companies to scale.

Some of the firm’s most high profile investments include taxi app Careem and cloud comms platform Unifonic.

STV spent close to $100m of its $500m fund in 2018, making it one of the largest investors in the region’s fast-growing start-up ecosystem.

Middle East transformation

Speaking at the Annual London Business School (LBS) Conference in London on Friday, Tarabzouni told a room of MBA students and investors he is confident that the Middle East is going through a ‘transformative’ time.

“The region is changing and I’m excited about it. Today every company is a tech company, the possibilities are boundless… now we just need find the talent,” the CEO said, referring to the regional and global dearth of trained AI experts.

However, Tarabzouni said investors must be ‘super focused’ when investing in “nascent” Saudi Arabia.

Faisal Rahman, partner at SoftBank Investment Advisors, speaking at the same event, said he believed the direction of the Middle East tech scene is positive.

“There is a tangible opportunity in the Middle East and it has evolved considerably in the last five years. The demographics are very conducive to growth,” said Rahman, who heads Middle East operations for Softbank’s $100 billion Vision Fund.

UAE government owned investment arm Mubadala is one of the largest investors in the fund – it pledged $15 billion to the technology fund last May as part of a strategy to increase investments in high-growth sectors, such as technology, to reduce dependence on oil revenues.

Disruptive

Saudi Arabia’s PIF, meanwhile, is the biggest single investor in the Vision Fund with a $45 billion stake. As part of its commitment it has invested in ride-hailing app Uber and others.

Rahman said the region’s surge of exits, such as the Amazon acquisition of local e-commerce site Souq.com, has “boosted investor confidence” in the Middle East.

The Softbank partner said the information age is changing the way products are delivered, marketed and consumed.

“It’s disruptive and we are fundamentally here to identify those disruptors,” he said.

As a part of its commitment to the region, Japanese-owned SoftBank opened offices in Abu Dhabi, UAE, and Riyadh, Saudi Arabia, last year.

Dana Shaheen, president of London Business School Middle East Club and organiser of the 17th Annual Middle East conference, said the Middle East is going through a massive wave of disruption.

She told Arabian Business: “Technology is changing the way that governments and businesses are doing things – and how consumers are interacting with them.

“London Business School works closely with Dubai and the Middle East. It is great for our speakers to have exposure to one of the most dynamic business schools in the world and it’s a unique opportunity to meet with peers and potential employees.”

Shaheen said that Western investors are increasingly choosing to diversify away from Europe and the US into the Middle East.

“It’s a high growth region with a lot of opportunity. We are definitely seeing more cross exposure across segments and across borders."