[Infographic] Why Start-Ups Don’t Get Funding in Saudi Arabia

If you have ever wondered why it’s so difficult for Saudi start-ups to find funding, this infographic is about to open your eyes. Based on one of my more controversial blog posts, Why Start-Ups Don’t Get Funding in Saudi Arabia, this infographic includes extra information on some of topics covered in that earlier article, all presented in a fun visual format.

The full text of the infographic is also available on this page for those who prefer text.

Why Start-ups Don’t Get Funding in Saudi Arabia

There is a lot of money in Saudi Arabia… but most scalable start-ups still can’t get seed funding.

Why not?

1. Government and non-government business initiatives are aimed at micro-businesses, not start-ups.

Microbusiness characteristics:

• 5 employees or fewer
• Needs no more than about 40,000 to 50,000 USD (~150,000 to 188,000 SAR) in seed funding
• No scalable business model

Scalable business model:

• A design for the operation of a business that allows revenues to grow significantly faster than costs

Microbusinesses are a safe bet for creating self-employed people, such as your local:

• Carpenter
• Barber
• Driver

But businesses with scalable models, while riskier, can create game-changing entrepreneurs, such as:

• Mark Zuckerberg
• Richard Branson
• Steve Jobs

That’s why most efforts by government and non-government business initiatives go toward helping non-scalable small businesses: they create self-sufficient workers without stirring up the larger business world or requiring real risks from investors.

2. Banks help traditional midsize companies, leaving start-ups out.

Midsize business characteristics:

• Up to 300 employees
• Revenues between about 27 million to 133 million USD (~100 million to 500 million SAR)*
• In a traditional Saudi area of business

*This revenue-based definition varies a lot depending on who you ask and what country you are in.

Traditional Saudi areas of business:

• Real estate
• Oil and gas
• Construction
• Other intensive, low-cost, manpower-based businesses

Banks see midsize companies in traditional areas as safe investments because they can meet strict loan requirements.

To receive a bank loan of about 5 million to 20 million USD (~19 million to 75 million SAR), you typically only need to do the following:
☑ Show audited financial statements from your company
☑ Provide valuable physical assets (like equipment) as collateral
☑ Agree to assign proceeds from your contracts to the bank

However, if you are launching a new start-up, you probably:

☒ Don’t have financial statements yet
☒ Don’t have valuable assets (especially if you sell virtual products)
☒ Don’t have any contracts that the bank can take a cut from yet

3. Very few groups are serving new companies that need between 50,000 and 3.9 million USD (~188,000 to 15 million SAR), like the typical start-up… and not all of them are truly helpful.

The Kafala Program
⬆ Lets you request a bank loan with the government backing you at 50%
⬇ Requires you to be in business for 3 years first
⬇ Requires financial statements
⬇ Requires proof of ongoing contracts
⬇ Requires substantial personal or business assets to back up your loan
⬇ Rate of the loan is high (12.5% with fees and expenses)

CONCLUSION: Not helpful for the average entrepreneur.

Wa’ed
⬆ Offers an interest-free loan with small administrative fees
⬆ Offers funding as an equity partner (as a loan alternative)
⬆ Continuously evolving
⬆ Run by highly competent people
⬇ Requires time-consuming training and paperwork

CONCLUSION: Helpful for entrepreneurs who need practice before making a big investment move, as long as they have enough free time.

Sirb
⬆ Links entrepreneurs with angel investors while drawing attention to entrepreneurship
⬆ 4 out of 5 companies involved in first pitching event received letter of interest
⬆ Offers a funding prize of ~66,000 USD (~250,000 SAR) to winner of the Sirb Award
⬇ Has not funded many entrepreneurs yet

CONCLUSION: Worth a try, but only time will tell if this program can scale up to the level Saudi Arabia needs.

Oqal
⬆ Links entrepreneurs to angel investors (mostly tech-friendly)
⬆ Growing and meeting with more entrepreneurs on a more frequent basis
⬇ Losing strong positioning due to poser investors (involved just for prestige)
⬇ Has not funded many entrepreneurs yet

CONCLUSION: Worth a try if you pitch at a city where you know members are serious angel investors, not socialites.

3. When will this situation change?

Since most angel investing is still done by the same big, conservative old families that control the commercial wealth in Saudi Arabia, the situation will only change when one of them invests in a start-up.

93% of Saudi investors prefer not to invest outside of the real estate sector.

4. What can entrepreneurs do?

We entrepreneurs must keep busy creating the knowledge economy that will support future innovation. Each one of our small successes will encourage the creation of new entrepreneurs.

Eventually, these small successes will become big successes, bringing one of the major Saudi businessmen to offer us funding. And one is all we need to begin changing our country.

Grading the Saudi Entrepreneurial Ecosystem: A Report Card by ICT Veteran Barig Siraj

The following article is based on a speech given by Barig Siraj, who is not only an accomplished businessman with extensive experience in the public sector, private sector, and investment funding world, but also a caring friend who changed my life in 2008 with a single, incredibly educational office visit.

Barig Siraj is the Director of the Information Technology department serving Zahid Group, one of the most powerful business houses in Saudi Arabia, with interests in construction, mining, industry equipment, logistics, energy, tourism, hospitality, and real estate. Previously, Siraj was CEO of ICT Ventures, an investment firm focusing on growth-stage businesses from the MENA region in the information communication and technology sector.

The speech on which this article is based was delivered by Siraj at KAUST’s Seed Fund Gala lunch and award ceremony on December 18, 2013. It does not necessarily reflect my own opinions.

The 7 Critical Components of a Healthy Entrepreneurial Ecosystem

A healthy entrepreneurial ecosystem is an environment that allows entrepreneurs, meaning people who introduce innovative business ideas to the world, to thrive.

According to the World Economic Forum, an entrepreneurial ecosystem can be assessed by looking at the following 7 factors:

1. Education and culture

2. Regulatory framework

3. Infrastructure

4. Workforce

5. Support mechanisms

6. Funding

7. Market

Siraj has graded each facet of the entrepreneurial ecosystem we have in Saudi Arabia, with green being the best category and red being the most in need of improvement.

1. Education and Culture: Yellow

A country’s educational institutions are the source of a lot of research and innovative ideas that support entrepreneurship. Naturally, entrepreneurs don’t look into research for the sake of research, but for the purpose of developing commercializable ideas.

Those in the private sector look to universities to foster commercializable inventions and the entrepreneurs that produce them. However, Siraj warns that while Saudi universities, especially KAUST, are facilitating the commercialization of ideas in the Kingdom, not enough commercializable ideas are coming up.

Siraj’s Solution

Siraj argues that the education provided to Saudi students must be aligned with the needs of the business world. This will help the number of commercializable ideas fall into proportion with the size of Saudi Arabia’s economy and the amount of funding provided for education.

2. Regulatory Framework: Red

Commercial law in Saudi Arabia has not changed in about 30 years, although commercial law updates have been debated for the past 9 years. Three Ministers have passed since then, and not one them was able to make commercial law reforms.

Likewise, the regulations passed down by the Capital Market Authority have been anti-venture capital (the importance of venture capital will be further discussed in the “Funding” section of this article). Mutual fund regulations are also in need of reform.

Here are just a few of the issues that Siraj warns these outdated business laws create for entrepreneurs:

a. Security Class Limitations

Saudi commercial law only supports common shares, not preferred shares.

Preferred shares are stocks that represent a higher claim on assets than common stock. They allow anyone taking bigger investment risks, such as a venture capital firm investing in a company, to get a bigger reward than those who buy common stock. Basically, this “A, B, and C” share structure lets people with money invest in people with ideas, and is also compatible with Islamic finance.

Joint stock companies have another class of preferred stock, but to be acknowledged as a joint-stock company, the Ministry of Commerce and Industry has to declare your operation a joint-stock company.

b. No Bankruptcy

There is not much to say here, as Saudi Arabia hardly has any laws regarding bankruptcy.

c. No Stock Options

Stock options are a tool that allows entrepreneurs to attract talent and reward existing employees based on their performance and seniority.

Saudi commercial law does not allow stock options.

These and other issues, including custody of securities, potential fast-track solutions for start-ups, and portfolio valuation have been discussed in the proposed commercial law update, but have not become a reality.

Siraj’s Solution

According to Siraj, Saudis can only try to encourage reform and hope that the nearly 10-year-old proposed commercial law update makes it out of the Shura Council, graduates to the Council of Ministers, and is approved. This will give businessmen and women the tools needed to help the entrepreneurial ecosystem grow.

3. Infrastructure: Green

Infrastructure refers to everyday structures that help a society operate, like paved roads and fiber optic cabling. Siraj says that we are doing well in terms of infrastructure, particularly telecom infrastructure.

Saudi Arabia boasts 53 million mobile subscribers, with each person practically having two sims. Fixed broadband penetration at the household level has reached 40%.

And those are just the official statistics for 2012; the 2013 figures would show even more growth.

4. Workforce: Yellow

The Saudi workforce has grown 69% over the past 13 years. Now, a McKinsey study has predicted that the number of people who reach working age and enter the employment market will hit 7.5 million in 2020, reflecting growth of 97%. So, from now until 2020, the Kingdom will see a huge number people entering the workforce.

Unfortunately, in Siraj’s opinion, these individuals will not be ready for the modern business environment. He warns that the education young people are receiving does not line up with the opportunities being created.

Siraj’s Solution

Again, Siraj promotes aligned education as the key to success. If the next crop of 7.5 million youths enjoy an education aligned with entrepreneurship, Saudi Arabia’s entrepreneurial ecosystem will flourish.

5. Support Mechanisms: Green

A support mechanism is a formal method or system designed to provide assistance to people who need it. The Saudi government, not oblivious to the needs of the business world, has launched initiatives aimed at supporting entrepreneurs—as has the private sector.

One of the Ministry of Labor’s initiatives, to give an example cited by Siraj, is an accelerator program where applicants are selected on the basis of the ideas they present when applying. The type of idea they present determines which program they are placed into. By the time each participant graduates, they have a registered company, assigned mentors, and a seed ambassador.

Other support mechanisms include Sirb (an angel investment network launched under KACST), Wa’ed (a venture capital fund sponsored by Aramco), and various providers of private sector funding. An interesting example of the latter is Endeavor, a New York-based non-profit that focuses on supporting high-impact, growth-stage companies and linking them with other entrepreneurs around the world. Endeavor now has a Saudi office dedicated to local companies. “Super angel” Dave McClure, founder of the venture fund 500 Startups, visited Saudi Arabia in late 2013 and expressed serious interest in one of the companies the local Endeavor office was working with.

Another private sector example is Wamda, an entrepreneurship support platform serving the MENA region. Wamda’s Mix N’ Mentor program brings people with ideas together with established mentors for networking and discussion.

As for future programs, the Chamber of Commerce is planning to establish an angel investment network that will encourage entrepreneurs, as well as existing companies that either want to grow or are struggling, to meet investors and make deals.

So, Siraj is happy with the number of mechanisms available, many of which are hosted in Jeddah, that can aid entrepreneurs.

6. Funding: Red

Funding can come either in the form of debt or equity, with Saudi Arabia having a lot of debt instruments, but few equity opportunities.

Debt

Debt-based financing mechanisms include secured loans, unsecured loans, asset financing, project financing, and crowdfunding (as seen on Kickstarter). An Islamic finance version of crowdfunding has also been developed in which the investor asks the entrepreneur to manufacture something for them according to a set of specs in exchange for a promise of funds.

Examples of debt-based funding providers include:

• Saudi Credit and Savings Bank

• The Centennial Fund

• Kafala

But Siraj warns that “the issue with debt is it’s a burden, if you have to actually pay it back.”

So, what do we have on the equity side?

Equity

Informally, equity-based financing comes from what Siraj calls “the triple F”: family, friends, and fools. The formal channels are investment companies, venture capital firms, fundraisers, angel investors, and a new class of angels called super angels. While angels may invest in one, two, or three start-ups per year, super angels like Dave McClure have a portfolio of 15 to 20 start-ups per year.

Each of the equity shareholders described above looks at entrepreneurs in a different way. Siraj describes himself as a “strategic investor,” meaning he works with investment companies and is interested in dividends. There are also patient capital investors, who have their eye on long-term returns, and philanthropic investors, who are interested in making a positive social or environmental impact.

Venture capital firms, like STC Ventures, tend to provide private sector funding to earlier-stage start-ups, while private equity providers are geared toward later-stage start-ups. According to Siraj, this creates a “valley of death,” with many companies failing to pass through from earlier-stage funding to later-stage funding during their period of negative revenue.

So, while KAUST’s Seed Fund is helping start-ups make it over this hurdle, Siraj argues there’s still a lack of public sector equity programs in Saudi Arabia.

Meanwhile, the United States has been exercising equity-based influence since the Cold War era. When the Soviet Union launched Sputnik, Congress said, as paraphrased by Siraj, “Wait a minute, we need innovators!” So, the government launched the Small Business Innovation Research program, which put 6 dollars toward funding entrepreneurs for each dollar that the private sector invested. This created a domino effect, building up to the flourishing venture capital industry we see in the United States today, which provides a lot of funding to entrepreneurs.

So, while Saudi Arabia offers debt instruments, these are a burden, and Siraj warns that there is no real equity funding path available as an alternative.

Siraj’s Solution

The Saudi government needs to create initiatives that encourage equity funding, says Siraj. For example, the government could help by removing some of the risk that comes with investment. Businessmen and women have seen this work around the world, even as nearby as Egypt and Jordan.

7. Market: Green

With the Kingdom’s pyramid-shaped population, Saudis are enjoying a huge, and growing, consumer market. These consumers are searching for energy, desalinated water, places to live, and services. The growth of the telecom market, as discussed in the “Infrastructure” section of this article, also reflects this trend.

So, for an entrepreneur, Siraj says that the Saudi market represents an excellent opportunity.

Siraj’s Outlook

Overall, Siraj argues that Saudi Arabia holds a lot of promise for entrepreneurs. It’s evolving in way that will eventually allow an entrepreneurial ecosystem to flourish, and thus, entrepreneurs who are active now will have room to grow in the future.

According to Siraj, we can help these entrepreneurs grow by celebrating them and their successes. He says that one of his friends, for example, created a popular website and was able to sell it to a Turkish gaming company for 10 million riyals. Likewise, an entrepreneurial KAUST student named Abdullah Asif told the Chamber of Commerce in December that his 2013 revenue equaled 8 million riyals. These are among the stories that Siraj says must be heard.

The other stories that Siraj encourages Saudis to focus on are the failures. Entrepreneurs must understand that, as Siraj says, “what doesn’t break you makes you stronger”. As an example, Siraj brought up an entrepreneur who he works with named Wahid, who used to be part of the Arabia.com team. The original Arabia.com failed, but out of that company, 10 successful companies emerged, all created by entrepreneurs who learned from that company’s failure.

Siraj says that sharing these stories and spreading the word about the importance of an entrepreneurial ecosystem will help us create an environment that will spur better alignment between higher education and the business world, as well as encourage the government to modernize our commercial law and create initiatives that help entrepreneurs obtain the equity funding they need.

According to Siraj, when these goals are achieved, we will finally see venture capital firms created, commercializable ideas flowing from universities to boardrooms, and a thriving entrepreneurial ecosystem flourishing all around us.

Why Start-Ups Don’t Get Funding in Saudi Arabia

While there is a lot of money in Saudi Arabia, most scalable start-ups still can’t get seed funding. The money is there, but not to benefit us, the true entrepreneurs.

On the other hand, if you have a micro-business, usually one that requires you to personally run it, many government and non-government organizations will provide the funding you need to get started. Likewise, if you have a medium-sized company in a traditional industry, like manufacturing, banks will lend you millions of riyals.

Despite this, few organizations or groups provide funding to start-ups. Out of these few, fewer still actually help start-ups succeed.

What’s going on here? Why don’t most organizations that offer funding to newer businesses offer it to start-ups? Why are many of the organizations that do offer this funding not really helping? When will this situation change? And what can entrepreneurs like you and I do about it?

I’m glad you asked. In this article, I’m going to provide a simplified explanation of what is really going on in language that entrepreneurs like you and I can relate to. For the sake of simplicity, I’m not going to write much in terms of technical or financial details—if you are interested in that kind of in-depth information, you are welcome to book an appointment with me. But please read this article first to make sure you understand the basics.

Let’s start with the first question: why are more investors interested in micro-businesses than start-ups?

Saudi organizations like funding micro-businesses because they see it as charity work.

Micro-businesses are different from start-ups because they are usually not scalable. These are small businesses with few employees, usually no more than 5, that require small amounts of seed funding, usually no more than 40,000 USD (about 150,000 SAR).

Now, what does scalable mean? Having a scalable business model means your company’s revenues can grow significantly faster than the cost of running your business. Examples of costs include covering day-to-day expenses, buying necessary supplies, and hiring more team members.

So, for example, providing services is usually not scalable, since you have to keep hiring more team members to grow, which means your company costs more money to run. On the other hand, a business model that revolves around selling apps is scalable, because after your team makes a batch of apps, the cost of selling them is low, and you don’t need to keep hiring people to make sure these apps reach customers. Of course, creating a set of new apps tends to be riskier than offering a reliable service that you already know people will buy.

Do you see why it’s natural for most efforts by government and non-government business initiatives to go toward helping non-scalable small businesses? Micro-businesses create self-employed workers who don’t need outside support, but also don’t require big risks from investors.

And all these micro-businesses need is micro-financing, grants, and loans up to 50,000 USD, so that’s what these organizations provide. They see helping micro-enterprises as social work or charity, not really business.

Meanwhile, banks like helping medium-sized companies in traditional areas because they are safe bets.

Medium-sized businesses are usually defined as those with a few hundred employees. In Saudi Arabia, most medium-sized businesses are in traditional fields, like construction or manufacturing.

Saudi banks provide financing of about 5 to 20 million USD (approximately 20 to 75 million SAR) each to these midsize companies. Banks see these companies as safe investments because they make loan requirements so tough that only established businesses in traditional areas can hope to meet them.

For example, let’s say you have a construction business and are seeking bank financing. You only have to do 3 things to receive it. First, you have to show audited financial statements from your company. You also have to provide assets, such as equipment, as collateral. That way, if you fail, the bank can at least sell your equipment. Finally, you have to agree to assign proceeds from your contracts to the bank. If you do this, you will get funding.

However, if you are trying to launch a start-up, you probably won’t be able to do any of these things. A new company doesn’t have any financial statements yet. And if your company is based on something like developing online content, you won’t have valuable assets, either. Your assets will just be made up of hard drives and other computer equipment, which probably won’t be valued at more than 50,000 USD. Likewise, if you are trying to launch a new social media website or app, you might not have contracts that the bank can take a cut from.

So, banks prefer traditional businesses because they are a safer investment than start-ups.

Very few groups are helping companies that need between $50,000 and $3.9 million.

Today, Saudi Arabia has hardly any institutions that finance companies needing between $50,000 and $3.9 million in investment. Thousands of entrepreneurs in Saudi Arabia, including me, have fallen through this gap and struggled to find funding.

Banks don’t want to help us because we’re too small for them. It takes a lot of headaches to help us, and our failure rate is higher than the companies they already work with. Government and non-governmental organizations don’t want to help us because any one of us may end up as the next Steve Jobs or Mark Zuckerberg and start making the business world riskier for everyone. They prefer to focus on small businesses, creating self-employed people that don’t need their support, but also don’t challenge them.

Very few people in Saudi Arabia are actually willing to take the risks involved in creating the next big entrepreneurial superstar. They may say they are, but their actions don’t reflect it.

Now, a few programs aimed at this neglected segment are finally appearing—but not all of them are truly helping entrepreneurs.

In the past 5 years, new programs have stepped forward to provide seed funding, including Kafala, Wa’ed, and even some angel investment networks. But are they helping create an entrepreneurial ecosystem?

Let’s talk about each one:

The Kafala Program

Under the Kafala program, you can apply for a bank loan and the government will back it for you, guaranteeing it at 50%. My friends encouraged me to go into this program, but after spending months preparing all of the needed paperwork, I decided not to continue with Kafala. If you look at the details of this program, it’s not something that will help the typical entrepreneur.

First of all, you have to be in business for at least 3 years to qualify. You must show financial statements, proof of ongoing contracts and ongoing accounts receivable, and prove that you have substantial personal or business assets to back up your loan. On top of that, the rate of the loan is very expensive. Kafala says it is 9%, but when you add up all the fees and related expenses, the real rate is 12.5%!

Once I realized these things, I pulled out of the program. But, my friends went ahead and received financing from Kafala. They have since had issues with the program, with one friend actually closing down his company. So, while Kafala makes loans available, I don’t think their program is really helping entrepreneurs.

Wa’ed

Wa’ed is a venture capital fund that offers different financing options. You can either get a no-interest loan, which comes with small administrative fees of just a few percentages, or have Wa’ed fund you as an equity partner.

Personally, when I went into the Wa’ed program, I found it very tedious. At that time, you had to go through enough training to basically make you an MBA graduate without the degree. Many entrepreneurs just don’t have time to fill in that much paperwork and attend that much training.

Since then, Wa’ed has gone through a transition, including restructuring their funding process. I don’t think they have made their program easier yet, but they are continuously evolving, and I see a bright future ahead of them.

So, if you have the time, I actually highly recommend this program. It’s one of the best training programs I have seen, and it’s run by very competent people. If you are getting ready to make a big investment move, participating in the Wa’ed program is a safe way to practice first.

SIRB

The newest development is an angel investment network called SIRB, established under BADIR, a technology incubator program launched by King Abdulaziz City for Science and Technology (KACST). Five companies participated in their first pitching event, and 4 of these received a letter of interest from angel investors.

This past March, SIRB also launched a program called Sirb Award, a new type of competition offering about 66,000 USD (about 250,000 SAR) in start-up funding as a prize for the winner. The contestants are filtered through different rounds of the competition, with the second round requiring each entrepreneur to participate in detailed workshops to develop their business model.

Since then, SIRB has completed a full award cycle in a flashy event attended by the who’s who of Jeddah. Seven finalists made their presentations, and the winners received funding. We have yet to see, however, how SIRB will move from an organizer of award and pitching events to a real player in Saudi Arabia’s business ecosystem.

Oqal

Oqal is an unlicensed, private network of angel investors who first started coming together as friends about once a week to meet with entrepreneurs seeking seed funding. At first, this group mostly made small investments in technology projects. Lately, Oqal has been growing, and has begun meeting with more and more entrepreneurs on a frequent basis.

Unfortunately, Oqal has begun losing its strong name and positioning along the way. The chapters established in new cities have not maintained the same quality of members as in the original Oqal network. I have seen Oqal members who are far from investment and entrepreneurship, and I personally know that some of them do not have the kind of money for these investments. Maybe they see Oqal membership as a prestigious social status symbol, but that’s not what it is meant to be.

I hope that Oqal will go back to their original plan and focus on serious members so it can maintain its brand image and strong positioning for a long time.

How did the situation get this way, and why isn’t anything changing?

While new organizations aimed at entrepreneurs are appearing, most angel investing is still done by the big old families controlling the commercial wealth in Saudi Arabia, and these families are very conservative. This means they will only invest in what they know, which is mainly real estate. An unpublished survey showed that 93% of investors preferred not to make investments outside of this area. That leaves only 7% willing to invest in IT, medicine, and every other field. When an entrepreneur presents them with a nice new business idea and model outside of their traditional areas, they generally say no to it.

I know because I was that entrepreneur, pitching to the biggest investors in Saudi Arabia. Big investors love me and they love my business plans. They even invite me into their homes—I have literary discussed investment plans on their kitchen tables!

But when it comes time to put down 5 to 10 million riyals, they always say they better stick with what they know best: real estate. I sat with one of these angel investors recently and he said, “look, I am not going to put my money in a company until I’m guaranteed that I will get it back.” This cautious way of thinking only leads to traditional investments.

In other countries, businesspeople invest in new companies as a way of testing ideas and seeing what works in the market. The goal is hitting the big time. In Saudi Arabia, businesspeople won’t invest unless they see a proven business model and customers already in the pipeline. The goal is staying safe. But when no one takes risks, nothing changes.

I found funding in spite of this environment, but I had to take my own route.

After realizing the traditional path was closed off to me, I used “the three Fs” to get funding: family, friends, and fools. That’s how I put together enough money to fund the businesses I first created.

I have also gotten funding and even interest-free loans from customers. I was able to finance the business that my team and I are starting now through a combination of our own funds and advance payments from customers. We started pre-selling 6 or 7 months before launch, and through the goodwill of our trusting customers, we were able to finance a significant part of the operation. For other projects, I have actually gone to customers who I was on good terms with and asked them for financing. They were nice enough to loan me money interest-free.

Now, for that same business, I approached 7 or 8 different financial institutions for funding, including Kafala and Wa’ed, but I couldn’t make any progress with them. And that’s with money in the bank, customers in the pipeline, and the business ready to go. The fact that my new company sells mobile applications is scary to cautious investors, who aren’t used to betting on a product they can’t see or touch.

In short, I had to find different paths to financing. The money is there, but the people sitting on it are not aware of new market dynamics, knowledge-based economies, or intellectual property businesses that don’t need physical assets.

Saudi Arabia will eventually embrace riskier investments—but someone has to get the ball rolling.

Changes are coming, but gradually. Two years ago, no one would have thought that there would be two angel investment networks in Saudi Arabia. Today, we have one in Riyadh and one in Jeddah. The one is Riyadh has already made a few investments. The one in Jeddah hasn’t yet, at least at the time this article was published, but they are seeing entrepreneurs and attending pitching events.

Since part of my mission is to build an entrepreneurial ecosystem in Saudi Arabia, I will make sure that I work with programs like these, or at least make recommendations on how to provide something that we really need in this economy.

I think that once the ball gets rolling on innovative investing in Saudi Arabia, it will progress very quickly. Saudis like to copy each other, so all it will really take is for one big, traditional businessman to invest outside of traditional industries. Others will follow.

What can we, the entrepreneurs, do until then?

Until the rich investors catch up to us, we entrepreneurs must keep busy creating the knowledge economy that will support future innovation. Every small success in this creative economy, from launching a profitable mobile app to starting a popular Arabic blog, brings us one step closer to showing everyone that we really are shaping the future. Every small success encourages the creation of new entrepreneurs.

Eventually, these small successes will become big successes, bringing one of the big Saudi businessmen to offer us funding. And one is all we need.

If you need help launching your start-up, book an appointment with me.

My team and I have worked hard to create new start-ups, launching one new business every 18 months on average—and that average is now being reduced to just over 1 year. I have also been meeting about 2 to 3 young entrepreneurs per week, offering guidance to help them succeed.

Please submit your idea or plan through one of the forms on OsamaNatto.com/contact today so we can get started as soon as possible.