In MBS’s Saudi Arabia, tech, not oil, is the hot new thing

There’s a change afoot in the cafés of Riyadh. Once a space where men would idly scroll through their phones on lunch breaks, the coffee shops that line the main avenues of Saudi Arabia’s capital city are buzzing with anxious conversation. Young men and women crowd around any space with a working Wi-Fi connection, staring at the cold blue of their laptop screens into the early hours of the night, all in the pursuit of the hot new thing in the kingdom: startups. 

“There is a sociological shift here,” said Mohammad Alshahrani, an advisor for a Saudi fintech firm with a startup of his own. “Tech has changed the way that young people are thinking about money,” he told Rest of World. “It’s not just about making money anymore — it’s about making money in a way that people perceive as impactful and smart.” Alshahrani said Saudi’s cafés are brimming with young and often wealthy founders. “You can see it from their cars; they’re driving to the cafés in [a] Porsche,” he said. For young Saudis with money, the appeal is less about the fabled and lucrative exit: there is a new respectability to “tech.” “It’s hip, it’s young, it’s the cool thing to do,” said Alshahrani. 

In the last five years, Saudi Arabia’s tech scene has seen a dramatic transformation. The Saudi government is pumping huge amounts of capital into the industry and luring foreign investors in a bid to become the new economic hub of the Middle East. Crown Prince Muhammed bin Salman, MBS for short, a controversial reformist and son of the country’s leader, King Salman, is aiming to spend over $7 trillion dollars within the next 10 years across the public and private sector to diversify its economy away from oil. And his plan seems to be working: in the last year, Google signed a $10 billion agreement with oil giant Aramco; Amazon — despite the tense relationship between CEO Jeff Bezos and the Crown Prince — committed to adding 1,500 new Saudi employees and 11 new buildings in the country; and Huawei is set to open its largest flagship outside of China in Riyadh. While the number or startup deals dropped across the Middle East and North Africa in the midst of COVID-19, funding for Saudi ventures grew by 102%. 

The growing social cachet attached to the tech industry is a trend that can be attributed, in part, to Crown Prince Muhammed’s own fascination with Silicon Valley. In 2016, shortly after the crown prince rose to power, the Saudi Arabian government wire transferred $3.5 billion dollars to Uber, making it the largest investment from a foreign government to a venture-backed startup to date. In 2018, MBS made an extended pit stop in Silicon Valley during his U.S. tour, a high-stakes trip for a country intent on demonstrating to the world that the once conservative kingdom is being successfully refashioned into a modern, forward-looking nation. Photos of MBS laughing with Mark Zuckerburg were plastered on every newspaper in Saudi Arabia, as were scenes of his tour of the Apple Park with Tim Cook. 

“When MBS went on and invested in Uber and SoftBank Vision Fund publicly, these were big moves; they were visionary moves,” said Mohammed Aldhalaan, CEO and founder of a Saudi edtech company called Noon Academy. “They were telling everyone Look, the highest authority in the country believes in startups, believes in technological transformation — and that had a huge impact on the country,” he said. “There’s no doubt about it.”

Since the crown prince’s historic trip to Big Tech’s capital, the government has pumped billions into stimulating a tech ecosystem in the country: earlier this year, Saudi Arabia announced that its sovereign wealth fund would double in size, to exceed $1.1 trillion dollars in assets under management by 2025.

The top-down encouragement has changed the fates of Saudi founders like Aldhalaan. For three years, he and his co-founder Aziz Alsaeed worked nights to launch their test-prep site, funneling the entirety of their savings into it. In 2016, when Aldhalaan quit his day job and began working on Noon Academy full time, his friends and family had one question: “Why don’t you look for a real job?”

Today, Noon Academy is the fastest growing edtech company in the Middle East and North Africa and has become the archetype for homegrown Saudi startups. With over 7 million registered students from Egypt, Jordan, Kuwait, India, and Pakistan, Noon Academy has become a high-profile player in the Kingdom’s nascent tech scene. Last year, the edtech venture secured $13 million in a bridge funding round, one of the highest of any Saudi startup.

Aldhalaan observed the sudden change in attitudes in his own family too. “Typically, the fathers would always say become doctors or engineers,” he explained. “Now, my father is pushing my brothers — and even my sisters as well — to join startups.”

But Noon Academy was only able to get its first significant investors, including Careem co-founder Abdulla Elyas, after 2017. “If you compare today against five years ago, it’s a whole other world,” said Ammar Alkhouli, an investment analyst at Saudi Technology Ventures, the largest technology VC fund in the Middle East. “The development was extremely rapid, extremely quick; so what you’re seeing today is a large influx of capital in the market, meaning there’s also a lot more startups than when we first started.” In 2020 alone, the country raised a record of $152 million in VC funding, with a 55% increase in total funding from the Middle East and North Africa deployed to Saudi startups. 

Alongside government initiatives to boost the startup scene, Saudi Arabia has rolled out a suite of digital apps in response to the Covid-19 pandemic. Government-run apps like the live location-tracking app Tawakkalna, which acts as a health passport for Saudis entering public spaces, is mandatory for every person living in the country. “Everyone can feel it; it’s a huge transformation,” Aldhalaan reflected. “Tech companies are now in every house.” 

But the shift in perceptions isn’t all top-down. Nearly two-thirds of Saudi Arabia’s population is under the age of 35; they’re the first generation of Saudis who aren’t promised the subsidiaries of a state funded by oil revenue. In his bid to diversify the economy away from oil, MBS’s obsession with technology is second only to his push to get young Saudi’s into offices working white-collar jobs.

In a country where much of the population lives on state pensions, job creation has been a big challenge for the Saudi government. The pandemic has brought record unemployment in the country, hitting a high of 15% in 2020. Last month, the hashtag #UnemployedAndWeWontStaySilent began trending in Saudi Arabia as a way for Saudis to complain about their abysmal job prospects; users recorded videos, testimonials to showcase their plight.

So while the idea of a Silicon Valley–esque career may be appealing on the surface, in light of high youth unemployment and a less-than-certain state pension, the sudden interest in a lucrative industry separate from oil could be a reflection of a new anxiety for young Saudis, one the crown prince speaks of publicly. “We have developed a case of oil addiction in Saudi Arabia,” he told reporters in 2016. In MBS’s Saudi, tech startups might be the cure.