KAUST Entrepreneurship Centre's Hattan Ahmed On Closing The Gap In Deep Tech Startup Investments In Saudi Arabia "The good news is that we are seeing a gradual evolution and shift, and we hope the next wave of VCs will fill these white spaces."

King Abdullah University of Science and Technology (KAUST) Innovation Ventures is a venture capital (VC) firm that oversees a portfolio of homegrown KAUST spinouts as well as international deep tech startup spin-ins. KAUST Innovation Ventures is the last stage in the innovation-to-commercialization continuum at KAUST Entrepreneurship Centre, where the product research is finally assessed to receive investment.

KAUST has invested in 40 startup companies since its inception in 2010 (up until 2022), with 27 of them, or 68%, being Saudi-born. The fund, like its name suggests, aims to grow an innovation and technology investment community, and attract international investors and venture capitalists to the emerging Saudi technology ecosystem. With 47% of its current active investments in the digital, information, communications, and technology sectors, KAUST has positioned itself as a VC focused on deep learning technology startups, or "deep tech."

Through seed to early-stage investments, KAUST serves as a long-term strategic partner of these ventures. Startup companies are curated through KAUST's entrepreneurial programs such as TAQADAM and Destination Deep Tech. Hattan Ahmed, Entrepreneurship Director at KAUST, spoke to Lucidity Insights about the importance of deep tech VCs and funds like the Innovation Venture Fund. "Deep tech fundraising has got a lot of white space in Saudi Arabia," he said. "There has been significant growth over the past few years in fintech, software-as-a-service, and e-commerce transactions, but there is still a significant gap in deep tech investments." When asked about the reason behind the gap, Ahmed explained, "When we're talking about startups specialized in quantum computing for energy management, or startups developing high-performance concrete with low carbon emissions, patient capital is required. Unfortunately, there isn't enough patient capital in the market today."

Patient capital is a long-term investment made by investors or organizations who have a high risk tolerance, and are willing to accept lower returns in exchange for a longer investment horizon. It is frequently used to support early-stage businesses or projects that require more time to produce returns, such as those in deep technology, renewable energy, and healthcare- all sectors that require baked-in research and development time. "The good news is that we are seeing a gradual evolution and shift, and we hope the next wave of VCs will fill these white spaces," Ahmed adds. "We've already seen local corporate VCs like Savola take an interest in deep tech agtech companies, and a number of international VCs with a deep tech focus take interest in various startups in the market as well. That's the beauty of international investors coming to the market- they bring specialized people to add value to the ecosystem, and bring global aspirations to local startups."

Learn more about the most prominent venture capitalists in the KSA startup ecosystem by checking out the report, The Evolution of Saudi Arabia's Startup Ecosystem 2010-2022.

This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa's tech and entrepreneurial ecosystems.