Normal & Tech

Normal & Tech
By: Salem Washeely
Different articles have been published and many different talks have been going on about when is the world going to go back to normal. All of us are so eager for the day to come where the economy opens up and we interact with other human without having to worry about a life threat from getting exposed to & being in contact with a virus. the effect of the COVID 19 on our daily lives and economical landscape is so immense that we would like to see it go back to levels seen prior to the pandemic. As shown in the chart below, foot traffic for major retail stores and different industries have been heavily impacted.

Source: SAFEGRAPH, U.S. Consumer Activity During COVID-19 Pandemic[/caption]
This pandemic has been so severe on us as humanity and on our economy. Therefore, it is only reasonable that we want to go back to our normal lives ASAP.
All this is understandable, but I would like to shed some light on this “normal” that most of us are so eager to go back to from the perspective of a VC. I do not want to narrow down the pandemic to only address a small minority while neglecting the benefit of the society as a whole, but being a VC means walking away from normal and betting on the abnormal. So it is in my DNA to not like normal a lot especially if it does not paint a rosy picture.
So far, the VC asset class has been treated as a fad by most here in our MENA region and saw it as something that is prone to disappear very fast. Even some of became part of it treated it the same and wanted to turn some quick fat profits and was not there for the long term.
However, an unpredictable event called COVID-19 came all of a sudden affecting the whole globe and causing the global economy to come to almost a complete shut. Most of us were not ready to accept such a reality and deal with such an event. Technology as is apparent to everyone today came to the rescue and made it possible for governments, businesses and individuals to function, deliver value and keep things intact. With this, all of us realized how we underestimated the effect of tech and the proper positioning it should have in the market.
Let’s look at how Venture Capital has been looked it prior to the current pandemic:
• In Saudi and according to MAGNITT, $67M was the total startup funding in 2019 while new equity listing in the main market was $923M in first half of 2019.
• In 2019, total trading volume in Tadawul reached more than $117B while total allocation to VC funds since 2015 is an insignificant percentage of this.
• The problem is global, as, according to NVCA yearbook, the AUM of all VC firms in the US do not even match the AUM of one PE firm. This is all while VC backed IPOs made up 42% of all IPOs in the US from 1974 to 2014.
• VC backed IPOs in the US created value surplus of $188B in 2019 from investments of $35M.
• Although the global norm does not treat VC fairly, in Saudi the situation is even more so as Saudi is the 18th biggest economy but contributed only about 0.02% of the global activity.
I can still go on and on with numerical proof that we are still lagging behind in terms of treating VC fairly as an asset class. Not trying to be pessimistic here and complain about the situation prior to COVID-19, but here to draw attention into the part being a gloomy “normal” that we should not get back to. I believe we need a new normal where we contribute more to the VC investment here in Saudi and grap the humongous opportunity presented to us as VC investments becoming global more and more every single year as shown in the chart below.

Very optimistic of the future of an asset class that is going to play a crucial part of driving the Saudi vision 2030 forward exponentially and going to be the main fuel behind innovation for a better future