Central to the Kingdom’s goals to diversify its economy and to transition from an investment-driven model to an innovation-driven approach to business by 2020 are its plans for its growing population of young people. The government envisages highly educated young Saudis pursuing private sector careers in Jeddah, Riyadh or one of the four economic cities that are being built in Rabigh, Hail, Medina and Jizan.
The government also acknowledges that to nurture Saudi businesses built on innovation, it must help to create a new generation of entrepreneurs.
OPPORTUNITY ENTREPRENEURS: According to the International Finance Corporation, 1.8m small and medium-sized entrepreneurs constitute 90% of Saudi Arabia’s private sector businesses, and the Saudi Council of Chambers estimates that 85% are sole trader companies. Also, 87% of people who work in the private sector in Saudi Arabia are expatriates. This suggests that the vast majority of small businesses in the Kingdom are run by expatriates who as “necessity entrepreneurs” are running a business to provide themselves with a job. However, government institutions fostering future business innovators are hoping young Saudis will follow the alternative model and aim to become “opportunity entrepreneurs” who will create start-ups built on invention, intelligence, and specialist knowledge of science and technology, and with the potential to grow into much bigger companies. The focus of the country’s ambition can be seen in the work done by the Badir Programme for Technology Incubators, which was created by the King Abdulaziz City for Science and Technology (KACST) in 2007.
Badir, which means “to initiate”, has three start-up incubator programmes covering ICT, bio-tech and advanced manufacturing. Badir works to identify people with business ideas who can demonstrate proof of concept and proof of market, and offers a small number of clients a well-equipped workspace and access to expert guidance. “Our approach is proactive and intensive, working with inventors, researchers, innovators and entrepreneurs who have technology ideas that have high-growth business potential,” said John Mercer, a consultant for Badir.
The biotechnology incubator was founded at King Fahd Medical City in Riyadh in 2009 and is currently working with six projects, which have 24-hour access to 14 fully equipped laboratories. Another 16 projects are included under the ICT incubator, which opened in Riyadh in 2008. The government hopes this can be Saudi Arabia’s answer to Silicon Valley.
The newest incubator, which opened in 2010, is an advanced manufacturing centre, where 11 projects are under way. It enables young entrepreneurs to work with advanced materials, and to test and develop innovative products. It is this incubator that helped to produce Badir’s most celebrated success story.
HOME-BREWED SUCCESS: The yatooq coffee pot was invented by a young Saudi who had studied business in the US. Lateefa Alwaalan was enrolled in the 2011 technology management MBA programme at the University of Washington’s Foster School of Business, and while she was there she was part of the entrepreneurship certificate programme offered by the Buerk Centre for Entrepreneurship.
The yatooq concept Alwaalan came up with while studying in Washington state offered a way to reduce the complicated 30-minute ritual of creating a perfect cup of Arabic coffee, which is suffused with spices and must be brewed and re-brewed several times before serving, to a simple automated process. The Badir programme enabled the young inventor to transform her concept into a working prototype and gave her the time to put the yatooq through a comprehensive testing process. Within a week of introducing her invention to the public on a TV programme in Saudi Arabia, Alwaalan had sold 2000 units. A demonstrations video she posted on YouTube received more than 650,000 views in nine months. Her business is growing and currently has 10 employees and 75 subcontractors. Alwaalan was also awarded Entrepreneur of the Year at Saudi Arabia’s Arab Woman Awards in 2014, won the Saudi Creative Business Cup in 2013 and beat 4000 other entrants to win an award for Saudi Arabia’s most innovative project, which was presented by Prince Khalid bin Bandar bin Abdulaziz, the governor of Riyadh at the time. “Entrepreneurship, business, or whatever you want to label it, is hard work,” Alwaalan told OBG. “Starting and maintaining a business requires perseverance, and the ability to handle uncertainty.”
ROLE MODEL: The yatooq’s inventor has shown that young Saudis can find technological solutions and commercialise them with help and guidance from programmes like Badir, and policymakers must hope that she will be a role model for her generation. It must also hope many bright young women aspire to follow in Alwaalan’s footsteps. In a working paper on female participation in the labour force published in 2013, the IMF noted that 80% of jobseekers are women and that female graduates account for 70% of unemployed women in Saudi Arabia. It also pointed out that of all the new jobs taken by women between 2009 and 2012, some 85% were in public sector roles such as health, education and administration. The IMF said, “With rising education levels among women, it will be important to consider additional ways of further expanding employment opportunities to utilise their human capital.” One source of funding for young female entrepreneurs is the Prince Sultan bin Abdulaziz Fund for Women’s Development, which has given a total of around SR9.24m ($2.46m) to 46 business started by women that are employing 165 people in recent years.
UTURN: According to Google, Saudis are the world’s biggest per capita users of YouTube and so it is perhaps not surprising that the Kingdom’s young entrepreneurs are turning to video-sharing for inspiration. The winner of Saudi Arabia’s first EY Entrepreneur of the Year in 2014 was Kaswara Al Khatib, chairman and CEO of UTURN Entertainment, a YouTube entertainment channel based in Jeddah. UTURN’s videos, which include satirical side-swipes and parodies, have received more than 286m views and the UTURN entertainment channel has just under 300,000 subscribers. The EY judges rated those entering the awards on criteria including financial performance, strategic direction, entrepreneurial spirit, social impact and influence. “This award is a testament to his innovation, personal effectiveness and integrity,” said Ahmed Reda, EY office managing partner, Jeddah. A graduate of Jeddah’s King Abdulaziz University, Al Khatib is a entrepreneur who worked as a brand manager for Procter & Gamble before founding a communications agency called Full Stop Advertising 12 years ago and subsequently the production house Made in Saudi Films, both of which are still operating. He joined UTURN four years ago as CEO and chairman. In March 2014 YouTube responded to its growing popularity in the Kingdom, and the way young business people and entertainment producers have embraced the platform by visiting Saudi Arabia for a roadshow. Experts from Google and YouTube offered to help content creators develop viable business models and to help them protect the copyright on their work. Google says there are 310m video views a day in the MENA region, with the average Saudi user watching three times as many videos per day as the average internet user in the US.
In January 2014 Al Khatib was included in a list created by Forbes Middle East to mark the achievements of self-starting business owners in Saudi Arabia.
The Leaders Inspiring a Kingdom In The Business World List celebrated a diverse range of self-made entrepreneurs from sectors as diverse as food, fitness, fashion, logistics, solar energy, advertising and multimedia content production. Forbes Middle East described the rationale for creating the list: “Whilst corporate powerhouses form a solid pillar of the Kingdom’s economic success, it is the visionary self-starters who have the power to initiate change and contribute to the Saudi Arabia of tomorrow.”
STATE AID: The King Abdullah Foreign Scholarship Programme is doing its part to ensure that students in Saudi Arabia can study abroad, as Alwaalan did, to take advantage of the best courses available for potential entrepreneurs. The programme provides SR9bn ($2.4bn) a year to pay for 125,000 people to study abroad, and in 2013 the government pledged to extend the scheme by another five years. The country’s own universities are also working to nurture budding business people. Founded in 2009, the King Abdullah University for Science and Technology (KAUST) has already had its first success story in Mustafa Nabulsi, whose Acadox platform aids online and mobile learning. His start-up company received funding from one of the country’s mobile phone operators, the Saudi Telecom Company. Students attending KAUST’s New Ventures programme are given encouragement, resources and financing to find solutions in areas such as desalination and renewable energy.
FORMING PARTNERSHIPS: Although there is no shortage of capital in the Kingdom, finding investors can be difficult for the owners of risky ventures, such as tech start-ups. However, efforts are being made to bring would-be innovators and potential investors together. In November 2013, 20 company representatives attended a Global Enterprise World seminar in Jeddah organised by development company Qotuf Al Riyadh and heard speakers from Saudi Arabia and other countries talking about entrepreneurship.
In the same month 150 young entrepreneurs also attended Jeddah TechNight where they met business leaders from the digital sector.
An angel network known as Sirb has been established with funding from KACST, allowing investors to meet and hear pitches from young entrepreneurs. Badir entrepreneurs are coached before attending these meetings and individual investors have agreed to back start-ups. In addition, KACST has also signed an agreement to support entrepreneurial projects in one of the four economic cities. A global centre for business incubators will be established at King Abdullah Economic City on the Red Sea coast at Rabigh.
Saudi Arabia also has its own venture capital company, Taqnia, which can be approached for investment.
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