An unexpected rain came without warning, drenching the land abruptly. As people left the venue, a pungent odor hit them head-on. With the sun about to set, a vast desert unfolded before their eyes. A Chinese colleague exclaimed excitedly, “Wow, it’s actually raining.”
This place is Riyadh, the capital of Saudi Arabia—a city known for its dryness, with annual rainfall only one-fourth that of Beijing. On the second day of the LEAP 2024 tech conference, “Dark Waves” made its first appearance in Riyadh. This summit, led by Saudi Arabia, attracted representatives and tech companies from over 180 countries. Due to poor traffic conditions, the venue was set 80 kilometers outside the city center in an expansive area. Saudis had constructed an event space spanning over 140,000 square meters. Official data showed that during the four days of LEAP, the total number of visitors reached 172,000, surpassing other events like the CES in the US (135,000 people) and MWC in Barcelona (100,000 people). Saudi Arabia met expectations once again: idiosyncratic, unconventional, and ambitious.
The country has been stirring global attention and discussion in the past two years. You may have heard stories about it, such as the plan to invest over 500 billion dollars in building the linear city “The Line”; having no less than 16 projects costing over 100 billion dollars each; and the latest plan to create a Dragon Ball-themed park spanning over 500,000 square meters—ten times the size of the Tokyo Dome. There is a common saying among the gold-diggers in Saudi: “Globally, all eyes look to the Middle East, and the Middle East looks up to Saudi.” This reflects the high hopes placed on opportunities in Saudi Arabia.
Over the past year, “Dark Waves” has frequently heard news of “hundreds of GPs” fundraising in the Middle East, with entrepreneurs from various industries flocking to the region. Compared to the well-known UAE and Qatar, heading to Saudi Arabia reflects a more adventurous spirit: a populous Gulf country with much room for development, where everything seems to just be getting started.
However, the exploration by Chinese entrepreneurs here is not always smooth sailing. It has been concluded that Chinese funds seeking financing are almost hopeless; startups looking to expand face significant challenges; and some enterprises that established earlier have already folded. People have started jokingly referring to investments here as similar to “attracting business investment.”
In this journey, Saudi Arabia emerges as a microcosm of global trends. In every corner of the global market, the “low-hanging fruit” is no longer present. And all those places imagined as “fairy-tale worlds” actually have their insurmountable challenges and hardships, even impossible obstacles. This also is the true portrayal of “Dark Waves” on this trip.
In March and April, “Dark Waves” visited Saudi Arabia twice, interacting with over a dozen people living and working there. Among them were entrepreneurs, small business owners, and those who came to Saudi due to various serendipitous events. Through these conversations, we caught a glimpse of a more nuanced “Middle East fever,” and a group of individuals striving to take root and blossom in the desert.
When you set foot in King Khalid International Airport, a strong sense of affection immediately fills your heart: Signposts in Chinese, English, and Arabic are visible everywhere, with Chinese standing out in particular. As you drive into the city, you are welcomed by the conspicuous “Welcome to Saudi Arabia” billboard by the highway. Around the streets and alleys, locals try to greet you in their not-so-fluent Chinese; they even proudly inform you that since 2023, Saudi Arabia has included Chinese as its second foreign language.
In this familiar yet strange atmosphere, the “Waves” event came to the LEAP conference. A highlight is about to occur: the CEO of TikTok, Zhou Shouzi, takes the stage for a discussion. He confidently states, “We look forward to investing more deeply and localizing more closely in this rapidly developing country.” Zhou’s appearance symbolizes TikTok’s upcoming massive entry into Saudi Arabia.
Over the past few years, international business elites have flocked here, with King Khalid International Airport witnessing their footsteps. Notably, last October, at the FII conference known as the “Desert Davos,” world-class financial giants such as BlackRock, JPMorgan Chase, and Blackstone made their appearances in Riyadh, including Neil Shen from Sequoia China.
Jerry Li, the founder and managing partner of Yida Capital, revealed: “More than 2,000 companies and institutions visited us, in an endless stream.” Yida Capital, one of the institutions that recognized Saudi Arabia’s potential early on, settled there five or six years ago and has received support from the Saudi government and its sovereign wealth funds.
A local Huawei Cloud employee gave us an example: after continuous business negotiations, she has already accumulated at least 138 such photos in her mobile phone from taking pictures with guests in just a few months.
Part of this keen interest is due to a meeting between the leaders of the two countries a year and a half ago, while another part stems from the “Vision 2030” plan. This plan aims to transform Saudi Arabia into the center of the Arab and Islamic worlds, an international investment powerhouse, a hub connecting Asia, Europe, and Africa, and to reduce dependency on oil, promoting economic diversification.
“Only Saudi Arabia has the belief and the ability to build.” So says a Chinese who has worked in Saudi Arabia for many years. Therefore, the demand for attracting investment is very urgent; they describe the place as being like Shenzhen in the early ’90s, in a stage waiting for development.
During a layover in Jeddah before heading to Riyadh, we encountered many Muslims on their way to Mecca. For today’s global entrepreneurs, Saudi Arabia has almost become their “new Mecca.”
However, within less than a year, the situation has suddenly reversed. An investor from a neighboring country’s sovereign wealth fund points out that compared to Chinese entrepreneurs in other regions, the “Middle East fever” was initially driven by funds, not entrepreneurial companies. He notes, “There seems to be an inexhaustible wealth here, just like their never-ending oil resources.” He says many Chinese GPs, upon arriving here, spare no effort to travel between several Gulf countries, with the sole purpose of raising funds.
Young people in their early 30s often feel perplexed while hosting Chinese fund partners, knowing that despite the apparent difficulty in raising funds here, the visitors keep coming. As reported last November, Saudi Arabia’s enthusiasm for funds is waning. Aside from a few large Chinese funds that have successfully attracted investments, most institutions, such as Yida Capital, have secured only minimal substantive investments.
At the same time, Chinese tech companies such as Alibaba, SenseTime, and Pony.ai have reached deals worth hundreds of millions of dollars with Saudi Arabia, but all came with steep conditions. Local entrepreneurs disclosed that the market requires technology in exchange. Without agreements, they must find other means to enter the market.
Geely’s electric vehicle brand, Zeekr, breaks through hardships to become the first domestic electric car brand listed in Saudi Arabia. In February this year, Zeekr entered the markets of the UAE, Saudi Arabia, Qatar, and Bahrain, adopting a sole agency model for cooperation. Through strict control of overall store standards, Zeekr left the post-investment construction and operations to agency dealers. Wang Hao, the head of Zeekr Middle East, mentioned that the low penetration of new energy vehicles and the inadequate charging infrastructure are major challenges in the Saudi market.
Behind the success of GCCPay, Zheng Jiaxin frankly states that in the Middle Eastern markets such as Saudi Arabia, risks of online fraud and money laundering are severe, demonstrating the difficulties of the market. They have collaborated with local regulatory bodies to upgrade the system for identifying suspicious transactions, which, in turn, has significantly increased the cost of payment services.
Even though the Middle East has its unique market characteristics, the enthusiasm of Chinese companies to go global remains unabated. Compared with the Southeast Asian market craze a few years ago, the uniqueness and challenges of the Middle Eastern market are equally significant. The “time machine” model fantasized about for Southeast Asia does not entirely apply to the Middle East. However, regardless of the environment, Chinese companies seem to be looking for new growth points and opportunities.
As an Islamic nation, Saudi Arabia enforces an alcohol prohibition, the extent of which can be seen—according to an e-commerce entrepreneur, even the wet wipes produced in the country do not contain alcohol. It goes without saying that places like bars would be non-existent here. Even by Middle Eastern standards, Saudi traditions are relatively conservative, though they have been somewhat relaxed in recent years. In the past, men and women could not sit at the same table to dine, and women had to wear strict abayas. In terms of entertainment, the lack of facilities such as KTV and nightclubs is evident, with the few available public gatherings and electronic festivals being quite captivating. Moreover, except for horse betting, all forms of gambling are also banned. Public entertainment activities are mostly limited to within the family, and watching football matches is one of the few public hobbies. Stepping into a café or restaurant at night, the television screens are invariably broadcasting soccer games, and even football star Cristiano Ronaldo has recently announced plans to open his own restaurant in Saudi Arabia.
Saudi Arabia is a vast and sparsely populated country, with 2.25 million square kilometers of land and a population of over 30 million. Walking on the streets of Riyadh, you will see scenes similar to urban villages in southern China, surrounded by high-walled villas. These buildings give the city a sense of isolation and a touch of solitude. However, there are also new sights that arouse curiosity. From the offices of King Abdullah Financial District, one can see scattered cranes and a cityscape with few high-rise buildings. In this nascent CBD area, Yida Capital occupies several floors of the building, providing office space for its strategically invested partners. Amidst the greenery of the city, the orange-red logo of Yida’s joint venture—AliCloud—is striking and has become a prominent landmark of the new district.
Yida Capital settled in Riyadh in 2018. As an early investor, arriving early brought Yida great advantages: almost every entrepreneur or local government official visiting Riyadh for the first time would prioritize visiting their office. However, Yida Capital’s head, Jerry Li, has mixed feelings about this. On the one hand, it reflects Saudi Arabia’s great allure; on the other, most visitors are just passing through. Jerry Li pointed out that many enterprises from China have two objectives: raising funds or selling products. But they often overlook the importance of long-term cooperation and hope to quickly “take something away,” which is undesirable. The Saudi market needs deep integration and solving problems from a local perspective.
Although the venture capital industry generally holds an optimistic view, believing that the combination of entrepreneurs and investors can quickly activate the market, Jerry Li thinks that at least for now, Saudi Arabia is still a desert for venture capital, without a mature ecosystem and investment targets. The focus of Yida Capital’s first-round investment was on technology and digital companies, but the second round involved financial technology, logistics, healthcare, entertainment, and other fields. These are the targets Yida sees as needed by the Saudi market and seeks in Asia, or for promoting joint ventures between well-known companies and local businesses, setting up collaborations. This has led to an interesting misconception: many think Yida is just an investment institution, but Jerry Li realized early on that they are not the typical venture capitalists or traditional financial investors.
While exploring the unique business model of Yida Company, its founder, Jerry Li, did not clearly define it. He is more focused on identifying gaps in the target market and formulating corresponding action strategies. For example, Saudi Arabia does indeed have inadequate infrastructure, hence needing strategic international corporations. Yida Company, noticing the lack of cloud services and data centers in Saudi Arabia and the barriers in logistics transportation, introduced the joint enterprise formed by AliCloud and Saudi Telecom, as well as J&T Express, a supplier of international-level logistics services.
In the process of corporate integration at Yida, cultural and managerial differences often arise, and Yida hopes to act as a “messenger” coordinating and planning between all parties. Additionally, Yida invested in a Kuwait-based e-commerce and warehousing logistics company, Raha. After the investment, Yida helped the founders of Raha visit Chinese robotics companies and eventually helped Raha establish a strategic partnership with Quicktron Technology, a Shanghai-based logistics robot company. Quicktron’s CEO Xie Xuan mentioned that even though they had received investment from a fund under Saudi Aramco, it still took them two to three years to find a way into the Middle East market. It was Yida’s involvement that opened up a new perspective for them to collaborate with Middle Eastern enterprises.
In a sense, Yida’s story is a typical Saudi entrepreneurship case, showcasing the wisdom of adapting strategies to local conditions instead of rigidly transplanting other models. For example, when Linear Capital’s founder, Wang Huai, visited Saudi Arabia, he learned that a Chinese entrepreneur had proactively collaborated with the local government to progressively digitize addresses upon discovering the lack of street numbers in Saudi Arabia. Likewise, when Yida introduced Jitu Express to Saudi Arabia, they faced a host of adaptation challenges. Jitu’s Middle East CEO, Lao Xiao, noted that due to the geographical features of Saudi Arabia, courier delivery relies heavily on automobiles and sometimes requires camels to complete the last mile in remote desert areas.
The national address systems in Saudi Arabia and the UAE are yet to be established, leading people to use landmark buildings as reference points for addresses when shopping, which poses a challenge to logistics. Moreover, with payment methods still not widely adopted, 60% of online shopping transactions still use cash on delivery, leading to higher rates of rejections and returns. These factors make the cost of logistics in Saudi Arabia extremely high, with the price of delivering each order close to $4-5. Lao Xiao believes that unless the cost of courier services is reduced to one-tenth of current levels, explosive growth in e-commerce in the country is unlikely to occur.
Looking to the future, Jitu plans to establish front-end warehouses in Saudi Arabia to optimize the logistics system. Recently, Yida Capital, in partnership with a Middle Eastern consortium, injected tens of millions of dollars into Jitu, aiming to improve the service level in the Middle Eastern and North African markets, including the UAE and Saudi Arabia.
With the involvement of the Middle Eastern consortium and Jitu’s plans for listing on the Saudi stock exchange, businesses are increasingly focusing on the Saudi market. Lao Huang, the head of Mico World’s Middle East region, emphasized the potential and depth of the Saudi market and pointed out that enterprises entering Saudi Arabia need to have sufficient patience and tolerance. In an interview, Lao Huang revealed that the business logic of cooperating with Saudi Arabia should be based on the principle of creating value for Saudi Arabia.
Lao Huang explained the characteristics of the Saudi market through an example: Saudis’ demand for YouTube video content far exceeds normal levels. This phenomenon indicates a huge demand gap for social entertainment products and traditional American-style social products do not entirely suit the preferences of Saudi consumers, who prefer dialogue-based social interactions.
An entrepreneur who has been starting businesses in Saudi Arabia for a long time shared several common traits of successful companies: firm decision-making, local presence and resource linkage advantages, and a simple and clear model. Jerry Li provided an optimistic forecast, stating that based on past experiences, businesses may face high expenses in the first two years in the Saudi market, but by the third year, performance is expected to increase significantly with tremendous potential.
The founder of Yida, as an early-stage Chinese investor with over 15 years of experience in multiple overseas markets, shifted their focus to the Saudi market in 2018. Jerry Li recalled an experience that highlighted the valuable potential of the Saudi market. In Saudi Arabia, Yida continually transformed their experience into broader regional strategies and realized the Saudi government’s determination in financial market reforms in 2020.
In a corner of the LEAP technology exhibition, the exhibit space named “Undercurrent Waves” met Zhang Ting. His skin was dark, just like those who had rooted here long ago. As the CEO of HuaSheng Securities, an internet-based brokerage firm, Zhang Ting jokingly referred to himself as “the eternal second,” constantly exploring business opportunities beyond the Chinese market. Despite this, he frankly admitted that previous attempts hadn’t been very successful. However, in 2021, during his first visit to Saudi Arabia, which was originally just a part of a global expansion survey, he realized within a mere four days that this might be the next market they would invest in heavily after the Greater China region.
His analysis was logical: among the more than thirty million residents of Saudi Arabia, although the truly wealthy were only a few hundred thousand, the majority still belonged to the middle class, and young people under the age of 35 accounted for nearly 70% of the population. Zhang Ting analyzed the consumer characteristics of this age group: “They are willing to spend, have little life burden, and begin to contact various investment products at an early age.” After two years of development and preparation, HuaSheng finally obtained a trading license and became the first internet-based brokerage firm in the Saudi internet finance field after market liberalization. They gave the local company a name full of regional charm: “Sahm,” meaning “stocks,” pronounced as “sah-ham” in Arabic. In the two months since its launch, Sahm’s trading volume had reached the total annual volume of Hong Kong in 2016, and the trading activity of local clients was double that of Hong Kong products.
On a leisurely weekend, the “Undercurrent Waves” team flew to Jeddah, Saudi Arabia’s second-largest city, and experienced the novelty of donning the local white robe. They immediately became a focus on the streets, passersby smiled, waved, and tried to communicate in simple Chinese. Portraits of two members of the royal family were seen everywhere on the streets of Saudi Arabia: the young Crown Prince Salman and his father, the King. Born in 1985, Crown Prince Salman is considered a key figure in transforming the land, with his reformist identity being the most critical aspect of his reputation, and there were even rumors that he compared himself to a great leader in Chinese history.
During our stay in Jeddah, we happened to encounter an F1 Grand Prix. On the breathtaking Red Sea coast, American artist Alicia Keys performed on stage for over an hour. Such a large-scale performance with full audio-visual effects had not been seen by the authors of “Undercurrent Waves” for a long time. The audience from all over the world cheered with the music, and the rarity of seeing men and women in traditional attire—the writers in their white robes stood out, providing a truly fantastic experience. Without mentioning the scene, one could hardly distinguish whether it was New York, Singapore, or Jeddah.
“It’s hard to imagine that in a country where women have just started to drive alone, people can already enjoy rock music so freely,” sighed a Chinese tourist we encountered after the concert. Indeed, against the backdrop of the global search for new growth points and fighting against economic downturn trends, this scene was incredibly unbelievable. On this land, it seems that all changes and imagination are just beginning.
In Saudi Arabia, making money is by no means an easy task; this is not a place of “money comes easily to the naive,” instead, it’s often accompanied by an unbearable sense of loneliness. The changes the country is going through are a microcosm of the current global trends: a market brimming with potential and opportunities, yet opportunities are not easily seized.
This scenario inevitably reminds one of the traffic conditions encountered on the way to the LEAP conference: the roads are congested to the extreme, a journey that should take 80 kilometers could end up taking as long as four hours. However, in that desert-covered place, you have no choice but to patiently follow this only path.
