AI drawing a major share of new investments; Saudi Arabia leads in VC activities in MENA region, forum hears
Entrepreneurs looking to fund their tech offerings were presented at an international forum in Hong Kong a slew of ideas on how they can best strategize their approach, and how AI is attracting a lion’s share of investment funds.
Abdulrahman Alolayan, founder and managing partner at Saudi venture capital fund Beta Lab, told a session at the Asian Financial Forum (AFF) on Jan 13 — the first day of the two-day annual event — that more than $100 billion, or a third of global investment, went into AI in 2024.
“Clearly, it tells you the appetite… When we look to Saudi in particular, Saudi’s national strategies (on) AI, these are the north star,” Alolayan told the audience at a session titled “Global Spectrum – Funding the Future of Emerging Technologies”.
He noted how the Saudi Arabian government had been “investing and deploying heavily in AI” within the Gulf nation and globally as part of its Vision 2030 economic diversification strategy that was introduced in 2016 by Crown Prince Mohammed bin Salman.
In October last year, the Hong Kong Science and Technology Parks Corporation and Beta Lab signed a partnership that aims to support fintech startups by granting access to a $300 million investment fund.
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Aysar Tayeb, executive managing director at Prosperity7 Ventures, the venture capital fund of Aramco ventures, noted that though fundraising had declined, when one looks at the regional trend, the fastest-growing ecosystem was in Saudi Arabia, with 40 percent of the venture capital funding of the Middle East and North Africa (MENA) region happening in that nation.
A report published on the MAGNiTT startups data platform, titled "2024 Emerging Markets Venture Capital Report", shows that Saudi Arabia maintained its first rank across MENA in terms of Venture Capital (VC) funding in 2024, witnessing a total VC deployment of $750 million, or 2.8 billion Saudi riyals.
Prosperity7 Ventures, which officially launched in 2022, began with a fund size at $1 billion. In January 2024, this grew to $3 billion.
“What makes us different …is how we invest and why we invest. We take the long perspective,” said Tayeb.
His firm is “not eager for quick returns”, Tayeb said, adding that it seeks to partner with entrepreneurs as a ‘patient” fund. There are “good colleagues and friends in China we collaborate with”, he said.
Prosperity7 Ventures has offices in Dhahran, Palo Alto, New York, Beijing and Shanghai.
“We look in general for developing conviction,” said Tayeb, adding that they took “quite some time” before making their investment in AI because they wanted to understand the new tech and what the end game is, as the tech “is evolving and continues to evolve”.
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“What is interesting for us we are not sector-specific. We explore. But we are not far away from venture capital trends, and now 30 percent of that is AI,” said Tayeb.
He said stem cell technology was something they are interested in. He said there is also robotics in their portfolio.
AI, he said, will make big leaps and improvements. Having made investments in the sector, the firm is “mapping the ones we will back and continue to back”, Tayeb said.
Ronald S. Simorangkir, chief executive officer at Mandiri Capital Indonesia (MCI), the corporate venture capital arm of Indonesia’s state-owned Bank Mandiri, told the forum that when they invest, they not only do so in the people but they “need to talk with the parent company”, as at the end of the day, the question would be “are you going to kill tech?”
He said if it would “kill tech”, they would steer clear of investing. He also said his firm’s investments were still concentrated in Indonesia because “the growth and market are still there”.
Decisions are based on whether the investment would bring growth to the company, because “that is the driver”.
“You play along national agenda, (it is) important not only to grow but to survive,” said Simorangkir.
“How to democratize investments? It is quite challenging with our investment committee because there is a lot of due diligence, tech diligence, commercial diligence, etc. The key is to bring value, also to look at synergy,” said the CEO.
“Part of the diligence is the pipeline. We need to see if revenue is not coming in both ways. If at end of the accelerator we cannot find synergies, we do not put them in the pipeline,” he added.
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He mentioned that in 2023, his firm invested in a data compressions solution that compressed streaming from security cameras put at ATMs for safety and security. He also said that as Indonesia is an archipelago with “lots of Island (and) ferry boats” where there are not “lots of signals”, one solution was to compress streaming from ferries that can help the security and maritime departments monitor borders to “uncover a lot of things”.
Responding to a question from Beta Lab’s Alolayan as to how vibrant is the startup sector in Indonesia, Simorangkir said the industry is “now getting more diverse”. He shared that a startup “darling” was a peer-to-peer platform in 2016. But now there were challenges “coming up to the surface” because of risk management and how they manage quality.
“It is now getting more diverse, more on payments, how to enable e-payments, etc. We have more fintech, more on what the big company needs,” said Simorangkir, adding that the investment landscape is becoming “more and more mature”.
Anna Fang, founding partner and chief executive officer at ZhenFund, a venture capital firm founded over a decade ago and which invests in startups, said when they invest, they “do not go by themes”, but invest in people.
With this strategy, the firm has seen 60 percent more deals in 2024 and 20 percent more deals in 2023, Fang said.
She said they categorize founders in four ways: the “genius young talent”; the “tech people”; serial entrepreneurs; and “young ones”, with 29 to 30 as the average age.
Contact the writer at jan@chinadailyapac.com
