Last month, MSA Capital, through its emerging markets investment arm MSA Novo had signed a memorandum of understanding (MoU) with the Ministry of Investment of Saudi Arabia (MISA) to foster innovation in fintech, robotics, core-technology, ecommerce, and healthcare. The strategic partnership has been aimed to support the kingdom’s companies with strategic global investments, from Asian investors, and also explore cross-border opportunities in the capital markets.
The MoU also aims to develop the region’s venture capital ecosystem, with a focus towards joint ventures across sectors. In an exclusive conversation with edge/, Jenny Zeng, Founder and Managing Partner, MSA Capital talks about the firm’s plan for Saudi Arabia and the overall MENA region.
edge/: What are the kind of developments you are looking at with the current MOUs?
Jenny Zeng: The main purpose of these partnerships is to bring Asian companies, technologies and business models into the region. With our local partner entities in Saudi Arabia such as Ministry of Investment of Saudi Arabia (MISA) and National Technology Development Program (NTDP), our efforts are also focused on supporting Saudi’s sector leading companies in accessing these across border opportunities and also promoting the RHQ program with Invest Saudi for investors and companies to relocate to Saudi Arabia.
In parallel when it comes to the Middle East as a region, investing in technology-focused companies and contributing to the development and adoption of advanced technologies, has always been our goal to drive innovation, economic growth, and job creation.
edge/: What are the kind of innovations you are looking at in Saudi Arabia, MENA, and Middle East in – Fintech, Core technology, and Robotics?
Jenny Zeng: The Middle East is going through a significant digital transformation but there is still a lot to be done in terms of innovations. This makes the role of MSA all the more valuable, as we can help transfer the latest global technologies and models into the market. We support national initiatives, regulatory approvals and catalyse access to global leading tech companies.
We’ve seen significant funding injected into fintech in 2023 in Saudi Arabia and the UAE, especially as harmonised regulatory policies and integrated payment systems are being built by the government creating a conducive environment for fintech scalability.
The GCC has also been very bullish on the digital economy introducing e-government initiatives and digitalizing entire sectors towards a path of transforming into smart cities in parallel with major developments in transportation infrastructure and supply chain solutions.
Robotics has also been a major focus in Saudi Arabia’s vision 2030 with major developments in industrial automation within manufacturing, construction, and energy as well as robotic applications in healthcare.
edge/: What are the key trends in AI and in technology you foresee in Saudi Arabia and the overall MENA region this year?
Jenny Zeng: The region is definitely on the path to becoming an AI-first economy with an advantage over other markets given its conductive regulatory environment and AI-based government strategies similar to how China had an advantage with scaling mobile-first models.
We believe that the GCC led by the UAE and Saudi Arabia will bring in the third pillar of the AI revolution alongside China and the US.
The GCC is heavily funding and investing in computer power and concentrated data sets so we emphasise again that Chinese LLM and other innovations will be hugely important to the region. With our China lens, we were also able to identify this emerging trend and we’re behind China’s leading AI big data company in expanding into Saudi Arabia five years ago.
edge/: How is MSA leveraging the understanding and the developments in the China market to provide an edge?
Jenny Zeng: MSA Capital has invested in the top sectoral companies in China across food delivery, micro mobility, ride hailing, gene sequencing, electric vehicles, rocket launch, commercialised nuclear reactors, and 3D vision.
We have also invested in and studied South Asia and Southeast Asia very closely so we understand different models from a global lens and how different models have been iterated on. We aim to leverage this knowledge by being a vital gateway to facilitate global connections between China and Saudi Arabia and the broader region.
As staunch advocates for the Middle East, particularly recognizing the promising global market in Saudi Arabia, we were able to identify the shift of global interest into the Middle East years ago and have been one of the first global institutional funds to actively set foot in the region.
edge/: Tell us about the kind of technological growth and development you have seen in Saudi Arabia and the overall MENA region?
Jenny Zeng: In contrast to the traditional trend where Southeast Asia was the primary destination for Chinese venture capitalists expanding overseas, there has been a significant shift. The Middle East has emerged as the most economically resilient region during recent economic downturns with consistent growth specifically in Saudi Arabia.
The unit economics and digital economy fundamentals in Saudi Arabia are particularly exciting: The market boasts the highest ARPU for gaming globally, the largest basket sizes in e-commerce, and a very digitally focused government launching transformative initiatives.
A main industrial focus we’ve seen is Saudi Arabia’s thrive towards fostering local high-quality production across various energy and technology sectors, specifically robotics, logistics, and ecommerce. The region has also taken huge strides in its investment in connectivity, financial technologies and logistics.
edge/: How is this growth and development compared to what you have seen in China? What are the similarities in tech developments you see between Saudi Arabia, MENA and China?
Jenny Zeng: The GCC is a few years behind China technologically and very much following in its evolutionary footsteps. As a result, the China playbook is highly relevant to the region and similar emerging markets. We have seen significant migration of trends and technologies from China to the Middle East, especially in the region’s readiness in adopting mobile-first models popularised or pioneered in China.
For instance, the success of Careem has come from replicating Chinese e-service super apps rather than siloed app models popular in the West. Therefore, our thesis since entering the Middle East in 2018 through our emerging markets arm, MSA Novo, is that the region is a prime opportunity to apply the Chinese playbook through building companies that follow Chinese models by leveraging pre-built, proprietary, world class technologies.
We also invest using a China lens, evaluating GCC companies based on how these models fared in China over the last decade. Through this thesis, MSA has invested in a majority of the top-5 most valuable companies to emerge from the region over the last five years, including three unicorns. MSA is the most active global institutional venture capital fund in the GCC and one of the most active investors overall in Saudi Arabia.
For the upcoming year, MSA is focused on expanding into new asset classes and bringing in more companies from its network to support in building a more formal technology infrastructure in Saudi Arabia to facilitate the transfer of innovation to local companies.
