Source: GEM entrepreneurship report 2020
Saudi Arabia has an ambitious goal of becoming a world-leading entrepreneurial nation by 2030. A key part of the plan includes a commitment to bolster the initiation and development of startups as well as enhancing their performance. To ease the process of establishing businesses in the Kingdom, government entities and angel investors’ funding is becoming widely available. Last year, startup funding increased by 55%, reaching a high record of $152M.
Following the declaration of the COVID-19 pandemic and during the lockdown, the business environment in Saudi Arabia changed dramatically. Main cities witnessed an increase in the entrepreneurship rate. In 2020, total startup activity rose to 17% from 14% of Saudi Arabia's population in 2019. As a result of COVID-19 pandemic, consumers' demands were transformed, which significantly increased the demand for new products and services. This led to rapid advancements of digitalization, increase of the creation of consumer-oriented business and e-commerce development.
As shown in the chart, Dammam ranked highest among all cities in the Kingdom and has a 21% rate of entrepreneurship. The high unemployment in Eastern Province (56% increase in 2020 compared to 2019) could have contributed to the entrepreneurship growth. Riyadh ranked second highest with a 20% rate of entrepreneurship. The collaborative efforts between the public and private sector in our capital have led to a creation of an ecosystem where start-ups are thriving.
The shift in business demand allowed the market to gain new entrepreneurs who were willing to take advantage of the disruption caused by COVID-19 pandemic. Building wealth and increasing income have been named as top reasons to start a business in the Kingdom in 2020. Additionally, due to the economic uncertainty that the world faced in 2020, people were able to invest more time in their entrepreneurial projects. The second most popular reason for entrepreneurs was to earn a living due to job scarcity. This motive is presumably associated with job dismissals of employees and fresh graduates finding difficulties landing jobs.
While the COVID-19 pandemic and lockdown restrictions impacted negatively many businesses around the world, those who are agile found an opportunity to create disruptive business models and create new ventures.
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