The Missing Role in Entrepreneurship – The Ecosystem

“You're bothering us” with entrepreneurship—a phrase recently said to me by a friend, where "Sajjah" is a Najdi word meaning annoyance. Indeed, anyone following media and social networks notices that the talk of the hour has become entrepreneurship and startups; entrepreneurs have even become celebrities on Snapchat and Twitter, to the point where we hardly read a news story or a tweet without being confronted with topics about entrepreneurship and its pioneers. Has entrepreneurship become the season's trend? Have we reached such a level of economic prosperity that we are preoccupied with a group of young men and women aspiring to launch and develop their projects?

If we talk about the importance of entrepreneurship and its impact on economic activity, it might be said, “Only those who profit from the market praise it.” You, Qusai, Manager of one of the most important funds in the region, Riyadh Technology Fund (RTF) for venture capital, and it is in your interest to maintain the momentum of entrepreneurship!!! This is indeed true, as the continued relevance of the topic drives more people to launch their startups, and sustained investor interest in the sector increases the volume of funds and the number of funds managed by venture capital investors. However, the economic impacts of entrepreneurship far exceed the returns of any single fund or company.

In Saudi Arabia and the Gulf countries, classified as rentier economies, the state has played a major role in the economy, which included the establishment of a number of prominent companies; for example, it was born SABIC from the Ministry of Electricity and Industry, led by His Excellency Dr. Ghazi Al-Gosaibi and His Excellency Engineer Abdulaziz Al-Zamil. The telecommunications facility (telegraph and telephone) was also corporatized and transformed into a Saudi joint-stock company named Saudi Telecom Company These companies became important drivers of the national economy.

Examples of state-founded companies in Saudi Arabia are numerous. While this model has served the Saudi economy for decades, we cannot burden the state with additional roles and divert it from its core function. In my view, the state's role is to provide a suitable environment for the private sector and fill gaps in the economy when necessary. The most appropriate example is the program Public Investment Fund to stimulate new sectors in the Saudi economy, such as entertainment, tourism, and military industries, which in turn create opportunities for large, medium, and small companies that either feed the fund-owned companies or even compete with them, if we are lucky. Some sectors require the provision of infrastructure that gives private sector companies better opportunities for launch and success.

We sometimes forget that the natural way to build companies in an efficient market originates from the private sector and is closest to the story of the founding of Al Rajhi Bank From a small stall in one of Riyadh's squares for currency exchange to one of the largest Islamic banks in the world, and to a group of financial, industrial, real estate, and agricultural companies.

I claim that Saudi Vision 2030 relies entirely on entrepreneurship to achieve its goals. For example, if we take a set of the Vision's main objectives such as: increasing the size of the Saudi economy and moving it to the top 15 globally, increasing non-oil government revenues, raising the private sector's contribution to GDP to 65%, and reducing the unemployment rate, we find that achieving these accomplishments is impossible without a thriving entrepreneurship ecosystem that allows for the launch of many companies and the growth of some to become future economic drivers, actively contributing to the achievement of the Vision's goals and indicators.

Some may be sensitive to linking the Kingdom's Vision to the topic, as some have taken to using the Vision like buzzwords to attract attention and give their talk more importance. However, my understanding of Saudi Vision 2030 is that it is a roadmap for our economy in the future. From an investment perspective, I see that opportunities intersecting with the Vision's goals will yield rewarding returns for investors.

Entrepreneurship and Entrepreneurs

Academics have discussed the definition of entrepreneurs since 1950 AD, with definitions varying according to the researcher's perspective. In addition to the academic view, the opinions of intellectuals and interested parties emerge, where some like to give the title of "entrepreneur" a sanctity that only those meeting specific criteria can attain, or treat it as an aristocratic title that should be cautiously granted to those who deserve it. But what matters to me as a practitioner in the field is to reflect the true image of those I believe are entrepreneurs.

In my opinion, the young man who launches his tech project with his partner, provides a distinguished solution in his field, and through the success of his project joins the ranks of the wealthy; the girl who starts her restaurant, creates a set of jobs and a well-known brand; the family that produces baked goods with an unbeatable homemade flavor; the artist who expresses his ideas through his art; the independent designer who provides his services to a group of companies; and the successful businessman who reinvests his financial resources and relationships to enter a new sector to establish a promising company—all of them are entrepreneurs who localize supply chains and maximize added value within the Saudi economy. They create jobs for themselves and others, contributing to reducing unemployment rates, increasing the economy's GDP, paying taxes that help reduce dependence on oil, and raising the quality of life and competition to provide distinctive experiences through their products and services. In my view, they are all entrepreneurs because they contribute to achieving a larger national economic goal.

Belief in the magnitude of the expected economic impacts of the entrepreneurship ecosystem is the reason for establishing the Small and Medium Enterprises General Authority (Monsha'at) in 2016, which aims to support and develop the sector and increase its contribution to the GDP from 20% to 35% by 2030. It also explains why Capital Market Authority the Ministry of Commerce continuously review their legislations and make ease of doing business one of their most important goals. This is also the driving force behind transforming the Saudi Arabian General Investment Authority (SAGIA) into Ministry of Investment to highlight the importance of the Saudi market and economy to the world, seek to attract foreign capital to benefit from promising opportunities, transfer and localize knowledge, attract major companies to be directly present in the Saudi market, and create jobs within a market from which they have long benefited remotely.

To drive development, it was necessary to provide investments for the entrepreneurship sector by establishing more than one investment arm to stimulate the market and use one of the most important tools for stimulation: private equity and venture capital investments. Thus, the fund-of-funds company “Jada” was established with a capital of 4 billion riyals, and Saudi Venture Capital Company with a capital of 2.8 billion riyals, aiming to invest in venture capital and private equity funds.

If we are late in understanding the entrepreneurship ecosystem and the importance of its role, it will cost us dearly and may delay the achievement of the Vision due to our lack of knowledge of its needs and failure to make the necessary decisions to stimulate it. Because these large components cannot be seen clearly except by viewing them as a system, namely the entrepreneurship ecosystem. So, what is this ecosystem?

The entrepreneurship ecosystem consists of the elements of the social and economic environment that affect entrepreneurship and act as incubators for creativity and innovation, transforming them into opportunities capable of success. The Babson College in the USA classifies the entrepreneurship ecosystem according to a framework containing 6 elements: Policies, Finance, Culture, Support, Human Capital, and Markets.

• Policies: Includes the government's role as legislator and enabler.
• FinancingFinance.
• : The set of financial services available to project owners.Culture.
• : Societal norms and success stories that help inspire.Support.
• : Non-governmental institutions, infrastructure, and support from professionals such as investment bankers, technical experts, and consultants.Human Capital.
• : The education system and the skill level of the workforce.Markets.

: Entrepreneurial networks and customers.

This ecosystem includes all key stakeholders, such as the government, universities, large companies, venture capitalists, and entrepreneurs. The main role of stakeholders is to develop the aforementioned elements of the entrepreneurship ecosystem with the aim of enabling creativity and the continued emergence and growth of startups, small, and medium enterprises. Any deficiency in the ecosystem's elements has a full impact on the performance of the ecosystem as a whole.

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