Last week I had the pleasure of being invited to Rasameel Investment Company شركة رساميل للاستثمار’s Ramadan Ghabga by their CEO Dakhil Al Dakhil, CFA.

First of all I was really surprised with what went down!
This was not your usual Ramadan evening social, but rather a 30+ roundtable discussion with Kuwaiti VCs, Family Offices, PE Funds and startups. The level of openness was unparalleled to anything I have ever seen with the investor network in Asia Pacific.

The topic up for discussion was: ‘The Saudi Arabian Market Model’.
All participants shared their experience working in the Kingdom of Saudi Arabia (KSA) and what it meant for a Kuwaiti businesses expanding in the Gulf Cooperation Council (GCC).

💡 Here are my takeaways from that discussion:

🤝 KSA is less cut-throat and competitive and more welcoming to newcomers than in Kuwait.

🌙 The KSA market despite having the same dialect and culture is different than the Kuwaiti market. Especially consumer purchasing power and needs. KSA in general is a less premium market than Kuwait and other GCC countries, an example of this is that KSA customers tend to avoid subscription fees.

💰 Despite KSA having lower unit economics, higher volumes than Kuwait balance this out. Keeping in mind that the biggest city in KSA is Riyadh, contributing 40% of the market share. In Kuwait’s favour, KSA customers aspire to Kuwaiti cultural tastes, which are seen as more premium.

💴 Unlike Kuwait VAT is applied in KSA (15% VAT) and the UAE (12% VAT). VAT is not deducted on net income as it is usually passed onto the customer, thus EBIDITA should be unaffected, however COGS within KSA and UAE will be. Businesses need to plan and have overhead for VAT management and make sure to take no shortcuts on taxes.

🏛 There are indications that the Kuwaiti market is not the ideal gateway for KSA due to consumer demographics and business operations. For instance KSA supply chains are more fragmented than in Kuwait, you need a KSA partner, who is connected to government, and a hiring Saudis strategy as part of government policies to encourage Saudisation.

🥩 The KSA regulatory framework is fast evolving and business owners need to stay up to date, for instance it is expected that many KSA commercial kitchens will ban raw meat processing. Even within the GCC food regulations differ in KSA versus Kuwait, UAE and Qatar. Therefore businesses need to study all regulations across the region to benefit.

⚡ e-services are more advanced and coding literacy is higher in KSA than Kuwait.

💹 Kuwaiti companies should aspire to having first mover advantage in KSA rather than a sharp J curve.

🔦 Kuwait currently provides more innovation than KSA, however this is quickly changing due to added support and infrastructure in KSA supporting early-stage startups. In Kuwait, innovation and entrepreneurship ecosystems need to be ramped up to keep up and support entrepreneurs even more.

GCC #VC #growth #ksa

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