[Oil Money is Coming] "Korea-Saudi Joint Fund Discussions"... SVC Meets Korea Venture Investment

Yu Woonghwan, CEO of Korea Venture Investment, Meets Nabil Koshak, CEO of SVC
Discuss Joint Venture Fund Formation Between Two Countries... Saudi Proposes MOU Extension
Opportunities Expected to Increase Including Overseas Expansion and Oil Money Investment Attraction

Last week, the sovereign wealth fund management institutions of South Korea and Saudi Arabia met to discuss the establishment of a joint venture fund between the two countries. The main players were Korea Venture Investment, an agency under the Ministry of SMEs and Startups, and Saudi Venture Capital (SVC) from Saudi Arabia. The active communication between the venture investment institutions of the two countries indicates growing interest in Korean startups, which are attracting attention from 'oil money.'

Yoo Woong-hwan, CEO of Korea Venture Investment, met with Nabil Koshak, CEO of SVC, on the morning of the 10th. CEO Koshak visited Korea Venture Investment before meeting with Lee Young, Minister of SMEs and Startups, in the afternoon alongside Khalid Al-Falih, Saudi Minister of Investment. They discussed ways to expand exchanges between the two countries for about 40 minutes and talked about extending the memorandum of understanding (MOU) signed last year between the two institutions. In particular, the idea of creating a jointly funded fund to nurture startups in both Korea and Saudi Arabia was raised.

◆ Oil Money Pushes for Joint Fund with Korea = Established in 2018, SVC is a government agency with a role similar to Korea Venture Investment. It is a direct affiliate of the Saudi Small and Medium Enterprises Authority and manages sovereign wealth funds supporting SMEs and startups. With a total size of $1.5 billion (approximately 2 trillion KRW), it has currently invested in 34 funds. Compared to Korea Venture Investment, which has managed sovereign wealth funds since 2005 with cumulative resources reaching 8 trillion KRW and has formed over 1,000 invested funds, SVC is still relatively small in scale.

Last year, Saudi Arabia requested an MOU to learn from and benchmark Korea Venture Investment’s sovereign wealth fund policies and know-how, and this time proposed extending the MOU. A Korea Venture Investment official said, "SVC proposed extending the MOU period signed last year," adding, "At the same time, there was talk about creating a joint fund between Korea and Saudi Arabia." He noted, "Nothing specific has been decided regarding the size and method of the joint fund," but added, "The Saudi side showed interest in Korea’s gaming industry."

If the two countries jointly invest to create a fund, it will facilitate overseas expansion for Korean and Saudi startups receiving direct investments from venture capital (VC) and generate synergy between them. As exchanges between the two countries become more active, Korea’s influence in the Middle East, an early-stage venture investment market, will grow, and Korean startups aiming to enter the Middle East will have more opportunities to receive 'oil money' investments.

◆ Startups with ICT Technology to Transform the Middle East Draw Attention = The common industry analysis is that the Korean startups attracting 'oil money' interest are those capable of driving changes in the local market based on ICT technology. A representative sector is the content industry, including gaming. According to the Korea International Trade Association, the Middle East market size was about $5.4 billion last year, and the mobile gaming industry grew approximately threefold over five years since 2016. This growth trend was a factor behind Saudi Arabia’s sovereign wealth fund PIF becoming the second-largest shareholder by purchasing shares in domestic game companies Nexon and NCSoft.

Not only gaming but also K-content is shaking up the local market. The Pinkfong Company, famous for 'Baby Shark,' is a prime example. In the Middle East and North Africa region, Pinkfong’s YouTube channel has seen an average annual cumulative view increase of 111% and cumulative watch time increase of 97% over the past five years. Saudi Arabia accounted for 1.2 billion cumulative views and 40 million cumulative watch hours. The Pinkfong Company is localizing its strategy by distributing over 500 pieces of content to 'Shahid,' known as the Netflix of the Middle East, with 100% Arabic dubbing.

The fact that Middle Eastern countries are continuously expanding national-level investments in building digital government systems and related IT infrastructure also provides opportunities for Korean startups. This year, the total IT-related budget of Middle Eastern countries is estimated at $13.3 billion, with increased spending particularly in IT services and software sectors. Cloud platform company Bespin Global’s expansion and relocation of its Middle East and Africa office to Abu Dhabi, the capital of the United Arab Emirates (UAE), and the establishment of a cloud operations center and education academy this year are related to this policy direction.

Farm tech startup N.SThing exported a $2.5 million smart farm 'Cube' to the United Arab Emirates last year.

Bespin Global first entered the Middle East market in 2019 and last year signed a partnership with the Abu Dhabi Investment Office (ADIO) aimed at accelerating digital transformation. Bespin Global’s cloud operations center, established this year, includes a security operations center and a network operations center that monitors server and application status. The education academy supports cloud technology learning for partners, educational institutions, and students.

There are also startups that have entered the Middle East market with IT-based technology enabling fresh vegetables to be consumed year-round without being affected by external climate. In May last year, farm tech startup N.Sing successfully exported its smart farm 'CUBE' worth $2.5 million (about 3.5 billion KRW) to the UAE’s Sarya Group. CUBE is a smart farm that grows crops inside containers using advanced technology. N.Sing recently participated in the 'Korea-Saudi Roadshow,' promoted by the Ministry of Land, Infrastructure and Transport to support Saudi contracts, to showcase its technology in the Saudi market.

A representative from a startup that has entered the Middle East explained, "In Saudi Arabia, about 70% of the population is under 30 years old, making the average age young, and internet usage rates are high," adding, "The Middle East is a market where Korean tech startups can play a significant role in promoting digital transformation across the region."