Interviews

It's crucial to distinguish between SMEs and pure entrepreneurship. Entrepreneurial companies are typically innovative, disruptive, and high-growth, whereas SMEs might simply be small businesses, such as laundromats. At Endeavor, our focus is on empowering innovative, high-impact enterprises.

Historically, starting a business in Saudi Arabia was not an attractive endeavor. Graduates aspired to secure steady government jobs or positions at large corporations like SABIC and ARAMCO. The entrepreneurial movement in Saudi began modestly around 2005 with families encouraging their children to explore trade or business careers. At that time, around 70% of Saudis worked for the government. Today, the landscape has shifted significantly, aligning with Vision 2030's goal of diversifying away from oil and creating more non-government, non-oil-dependent jobs.

Previously, there was no dedicated authority like Monsha'at to support SMEs. The private sector and the Chamber of Commerce drove these initiatives, but the agenda often got lost in the Ministry of Commerce. The establishment of a dedicated entity with the sole purpose of nurturing, taking action, and creating regulations for SMEs has been a driving force behind the growth we see now.

The advent of Monsha'at and the movement towards supporting SMEs led to increased access to capital. Programs like “Kafalah” and “Saudi Venture Capital” have had a significant impact on providing capital to SMEs by facilitating and guaranteeing loans through banks. This program has also enabled more capital for female-led businesses, resulting in a dramatic increase in the number of businesses owned or co-owned by women.

The Misk Foundation and Monsha'at have successfully shifted mindsets by launching initiatives that empower the youth to start businesses in KSA.

Endeavor's mission, conceived a decade ago when the term "entrepreneur" was not widely known, is to develop an ecosystem that supports and scales high-impact entrepreneurs. Typically out of all registered SMEs, only 2% are high-growth, yet they account for 50-60% of the jobs created by SMEs. This is why high-impact entrepreneurship is so critical.

In Saudi Arabia, large contributors to the ecosystem are abundant. Our focus remains on identifying high-potential entities and directing support to ensure growth, with the vision that within 10-20 years, the ecosystem will be more self-sustained and self-dependent. Entrepreneurs will no longer require donations, government assistance, or help from large businesses to access capital, investment, talent, and mentorship.

At Endeavor, we champion the "Multiplier Effect," which emphasizes the exponential impact founders have when mentoring, investing in, and inspiring future entrepreneurs. Our CEO, Linda Rottenberg, famously said, "A unicorn that doesn't breed even more unicorns is an endangered species." Endeavor Insight's research shows that one entrepreneur can positively influence over 600 startups through mentorship, spin-offs, or angel investment.

By supporting early groups of entrepreneurs, driving them to pay it forward, and encouraging individuals who've shared in their growth to start their own businesses, we can effectively cultivate and expand the entrepreneurial ecosystem. We are beginning to see this impact unfold in Saudi Arabia.

Absolutely! Let me illustrate this with the tech sector as an example, as it's often considered the birthplace of innovation. We conducted a comprehensive mapping of the Saudi tech sector over the past 25 years, comparing data from 2000 and 2021. Our map highlights the density of companies along with the magnitude of their impact, represented as bubbles. This impact was calculated based on factors such as investments, former employees launching new ventures, mentorship, and more.

Our research uncovered a remarkable "hockey stick" growth pattern that emerged five years ago. In fact, nearly 50% of the tech companies in Saudi were established within the last five years alone. This surge in new businesses has resulted in 90% of job creation within the tech sector, driven by companies that have successfully scaled. Hence, it's not just about being innovative, but also possessing the ability to scale effectively. For our analysis, we defined scaling as the capacity to grow beyond 50 employees. This evolution demonstrates a significant shift in the business landscape of Saudi Arabia, driven by forward-thinking entrepreneurs and a thriving tech sector.

Definitely, we are witnessing a notable transformation in the Saudi corporate landscape, with an increasing number of skilled individuals gravitating towards startups and growing tech companies. Talented professionals are now leaving established corporations and international firms to contribute to the growth of dynamic and innovative enterprises.

Take, for example, Ebrahim Al-Jassim, who successfully scaled HungerStation, one of the largest food delivery apps, which was eventually acquired by DeliveryHero. His executive team comprised experienced individuals from major telecom companies like Mobily and STC. The fact that these professionals willingly transitioned from prominent corporations to a burgeoning startup is both astounding and revealing. Such a career move would have been unthinkable 15 years ago.
This shift aligns with the business models prevalent in the USA and Europe, moving away from traditional family-owned enterprises towards diverse groups of founders collaborating to grow businesses together. This progressive approach empowers the entire ecosystem, creating opportunities for everyone, regardless of their background or connections. All that truly matters is talent, ambition, and the drive to turn one's vision into reality.

Reflecting on my own experience when I launched "Yatooq" back in 2011-12, there were very few tech founders to learn from or relate to in the region. We had to rely on global success stories or local ones that managed to capture investors' interest.

However, the current landscape has shifted dramatically, with increased access to capital and a growing appetite for higher-risk investments, particularly in the tech sector. Prior to 2018, one could count the number of active VCs in Saudi or the region on their fingers. Yet, with the inception of initiatives like the Saudi Venture Capital Company, a ripple effect has been created, leading to over 20 flourishing VCs in a relatively short span of time.

The emergence of VCs in their second, third, or even fourth generation signals a maturing ecosystem, demonstrating that investing in these companies can yield tangible returns. Saudi-based funds are now closing their first cycles and initiating their second ones, making capital more accessible and enabling entrepreneurs to grow faster.

Interestingly, when one of our entrepreneurs sought to raise capital, international investors were hesitant to invest until a local investor showed faith in the venture. After two years of pitching to international investors, it was a local investor who finally wrote the check, subsequently attracting international investment as well. This highlights the increasing confidence in and support of the local entrepreneurial ecosystem.

The private sector undoubtedly has a crucial role to play in achieving Vision 2030's objectives, particularly through close collaboration with regulators to unlock potential in areas that may otherwise face restrictions. Innovative approaches can thrive in such an environment, as evidenced by the fintech sector and the sandbox initiative introduced by the Saudi central bank (SAMA). This collaboration between SAMA and the Saudi Capital Market Authority has enabled the growth of numerous fintech companies – from none to an impressive 150, with a goal of reaching 500 by 2025.

An interesting insight from our fintech and tech studies is that large corporations can act as breeding grounds for exceptional tech entrepreneurs, further emphasizing their role in Vision 2030. Major companies like Aramco and STC have already produced a number of successful tech entrepreneurs. By fostering innovation and supporting the growth of new ventures, the private sector can effectively contribute to the realization of Vision 2030's goals and help shape a more diverse and dynamic economy in Saudi Arabia.

It's true that the vast potential of the Saudi market often leads us to advise entrepreneurs to concentrate on capturing local opportunities first. However, as the ecosystem advances and more unicorns emerge, we expect to see the rise of what we call "global native companies." For instance, one of the entrepreneurs we're supporting from the very beginning is focused on building a global business – their mindset, solution design, and technology are all tailored for the international stage, as opposed to merely addressing local needs.

That being said, we are still in the early stages of this transition. As investors and VCs mature and accumulate experience, we anticipate increased capital flow and greater interconnectivity between markets. This evolution will undoubtedly pave the way for Saudi companies to expand their reach and compete effectively in Western markets, including the US.