[Oil Money is Coming] Strengthening Cooperation with Saudi Arabia... Growing Expectations in the Venture Industry

Minister Lee Young of the Ministry of SMEs and Startups - Minister Al-Falih of Saudi Investment Ministry
"Reunion at Davos Forum in January Next Year"... Emphasizing Cooperation
Joint Fund and Investment Attraction Efforts with 'Post-Oil' Saudi Arabia

The visit of Crown Prince Mohammed bin Salman, the most powerful figure in Saudi Arabia, to South Korea is raising expectations in the domestic startup industry. On the 17th, the Crown Prince, visiting Korea for the first time in three years, is scheduled to meet consecutively with heads of major conglomerates. Earlier, the Saudi Minister of Investment, sovereign wealth fund officials, and representatives of the mother fund management institutions visited Korea, showing special interest in the venture and startup sectors, which in turn has energized the related industries.

Concerns over the recent economic downturn have caused the domestic venture investment market to freeze sharply, increasing anticipation for 'oil money.' The Ministry of SMEs and Startups, which plays a leading role in domestic venture and startup policies, paved the way for discussions on the development of startups between the two countries last month when its officials visited the Saudi government carrying a letter from Minister Lee Young. It was also at this time that Khalid Al-Falih, Saudi Minister of Investment, was invited to the startup festival 'COMEUP 2022' held in Seoul.

Minister Al-Falih is a close aide of Crown Prince bin Salman, having served as CEO and Chairman of the Board of Aramco, the world's largest oil producer, as well as Minister of Energy.

The Ministry of SMEs and Startups is focusing on cooperation with Middle Eastern countries to expand the 'Global Fund,' jointly established by the government's mother fund and overseas venture capital (VC). As of the end of last year, the Korean government had achieved a cumulative 4.9 trillion won in the Global Fund, with plans to increase this to over 8 trillion won by the end of next year. Saudi Arabia, the dominant power in the Middle East, is at the center of this effort.

Plans include not only the entry of individual startups into the Middle Eastern market but also direct domestic investment attraction. Saudi Arabia is also looking to partner with Korea, which has global competitiveness in cultural content industries such as gaming, entertainment, and IT, to foster and cooperate in high value-added industries in preparation for the post-oil era.

Minister Al-Falih has expressed repeated interest and affection for Korea, saying, "Korean culture, fashion, and cosmetics are very popular in Saudi Arabia," which is part of this context.

It is already known that in September, Saudi sovereign wealth fund PIF and others visited Seoul and met with representatives of several domestic unicorn companies (unlisted companies valued at over 1 trillion won) as well as fintech and e-commerce company leaders.

Lee Young, Minister of SMEs and Startups (right), is greeting Khalid Al-Falih, Minister of Investment of Saudi Arabia, on the 10th at Dongdaemun Design Plaza (DDP) in Jung-gu, Seoul.

Last week, Minister Lee Young held a meeting with Minister Al-Falih and his delegation and toured the COMEUP event held at Dongdaemun Design Plaza (DDP) in Seoul. Ministry officials explained that the Saudi government's interest in Korea was higher than expected. The meeting lasted over an hour, well beyond the scheduled time. Minister Al-Falih reportedly fired a barrage of questions about Korea's venture fund formation status and the gaming industry. Nabil Koshak, CEO of Saudi Venture Capital (SVC), the Saudi mother fund management institution, also attended the meeting.

Minister Lee told Asia Economy, "We promised to meet again with Minister Al-Falih at the World Economic Forum (Davos Forum) held in Davos, Switzerland, in January next year." He emphasized that meaningful results are difficult to achieve through one-off meetings, so frequent face-to-face meetings and building trust are necessary to create opportunities.

Minister Lee expressed his willingness to cooperate with Middle Eastern countries, saying, "I will expand activities throughout the Middle East by meeting not only with Saudi Arabia but also with government officials from the United Arab Emirates (UAE)." The plan is to produce visible results that will bring good news to the Korean economy by the first quarter of next year through attracting oil money.

On this day, Minister Al-Falih drew attention by making a direct 'love call' to Korean startups aiming to enter overseas markets. In his public remarks, he said, "Saudi Arabia's startup ecosystem has grown sixfold in four years," and added, "Korean companies that want to scale up and go global should use Saudi Arabia as a platform." He stated, "We want to actively support companies that want to expand into global markets by using Saudi Arabia as a stepping stone," and emphasized the need to broaden exchanges between people, companies, and investors. He also predicted, "Since Korean officials will remain and continue to observe, deeper exchanges in investment and other areas will take place."

Since 2016, Saudi Arabia has been promoting 'Vision 2030' led by Crown Prince bin Salman. Preparing for the post-oil era, it is transforming its oil-centered economy and investing in various industries such as artificial intelligence (AI), advanced technology, IT, and renewable energy. The Saudi Data and AI Authority announced plans to attract investments worth 22 trillion won domestically and internationally, nurture 20,000 AI experts, and create 300 AI startups. Korea, as an IT powerhouse with high technology and talent, has attracted Saudi Arabia's interest backed by oil money.

The government hopes that oil money will improve venture investment sentiment and serve as a catalyst to ease the funding crunch. Domestic venture investment has sharply contracted due to unstable internal and external economic conditions. Venture investment performance in the third quarter of this year fell by 838.8 billion won compared to the same period last year. Small and medium-sized VCs are finding it difficult to maintain a virtuous cycle of investment, recovery, and reinvestment, and they hope oil money will be a 'timely rain.'