Saudi Arabia is one of the most promising internet and mobile banking markets in the Middle East region. Mobile phone use for people aged 12 to 65 years of age has consistently been around the 99% mark since 2018. As the Saudi government has strategically positioned the economy to move away from its dependence on oil as the main economic driver, it is increasing its reach in multiple sectors, and investing heavily in technology and real estate development.
Both these sectors are touted to become major players in the economy and together they make the market ripe for Proptech in Saudi Arabia. One of the biggest names in the country’s Proptech market is Watheeq Proptech Venture which launched in 2021 with a $26.7 million (SAR 100 million) fund. The mandate is to invest in global and regional, scalable startups which are leveraging technology in the real estate sector. The fund has invested in startups in the MENA region as well as become the first to put Saudi Arabia on the VC map in Europe.
Watheeq Proptech Venture has led funding for Holo Mortgage Consultants, Spaceti, Darent, Rize, Munjz, and recently signed a cooperation agreement within the National Industrial Development and Logistics Program alongside TRAI Investment Finance.
Khaled Zaidan, Managing Partner of the firm sat down with Built Environment to discuss investment strategy, Saudi Arabia’s market outlook as well as his philosophy on catering to the MENA market. He has previously committed, “At least 50% of the portfolio companies chosen by the fund operate in the KSA market as we consider PropTech to be the ultimate solution to fulfilling the Kingdom’s Vision 2030 through diversification of income and job creation.”
Q: What challenges of real estate is technology looking to solve in Saudi Arabia?
Watheeq Proptech Venture is the first venture capital (VC) service in the MENA region that has its core focus as the PropTech sector. We positioned ourselves as people who can speak multiple languages – the technology and venture capital language as well as understanding the language of the real estate stakeholders. In my previous life I used to be a real estate fund manager so when I shifted to venture capital, I brought that experience with me. The rest of the team at Watheeq Proptech are also people who bring with them immense experience from the real estate business – real estate developers, founder for a couple of startups globally, architects, CEOs of real estate companies. All of us here have a vision to support and assist the future portfolio of the company.
As of date, we have invested in five different companies, with one based out of Europe. We were the first venture capital to lead an investment in Europe with Spaceti. It is a Czech company that has presence across Europe and has been in the region recently. We have also invested in a startup called Rize which is rent now and pay later. Our strategy is to invest in three ways – invest locally, regionally, globally and our proposition is that we are the gateway to the proptech startup market to enter the MENA region market.
The challenges that we now understand when one looks at the real estate market in Saudi Arabia and the larger MENA regions is the need and the culture that differs from one location to another location. The need and the approach is different from city to city and even more different when we are looking at the countries in the MENA grouping. The strength is the residential real estate market and have started investing in products that are helping solves challenges within this segment.
Our strategy for Europe is – quality, sustainability, and occupancy. And that is why we choose Spaceti as our first investment in Europe.
Q: What is your message to ProPtech investors and creators who are looking to the MENA region and who are also looking at Saudi Arabia as market disruptors?
My advice to startups who are looking at Saudi Arabia as a potential market is to customise their platform for the end-user. While one platform might be a good solution that works in Singapore that does not mean it will work within the Saudi market or it does not mean it will work for the UAE market. And be careful when you talk about the MENA as a region. While language can act as a common binder, regulations, and market needs make each country different. I would also urge founders to look at hiring team members of partners from target countries because this would then bring in local knowledge and expertise. I integrated this into my outlook as we travelled to the U.S. and realised that startups are drilling down the U.S. market in such a way that they look at each state as a different market need. Hence, they evaluate their offering and cater to the strengths.
Q: As a VC, your products are being targeted to the youth of Saudi Arabia but have you thought about the older generations who are not very good with technology but do have a lot of purchasing power?
Some of the products fit generation Z because they are open to new experiences. However, if you look at the stakeholders and investors in real estate assets, it is a mix between both generations. If we talk about Airbnb and the users of this app are the younger population, people who don’t mind staying in a room within a city or booking an apartment in a city. But older generations prefer the traditional hotel reservation model. While some Proptech products do cater to the youth, I believe it’s the messaging and the education that will ensure adoption.
I can give you the example of one of our platforms Darent that helps in properties getting listed and bringing residential property owners and customers together. Our messaging to owners was we make listing and getting tenants a 1-2-3 step. We onboarded property owners - some from what you would categorise as Generation X and Boomers - and we did the backend for them – in terms of uploading photos, KYC, getting their cheques on time. The same messaging is different for a young user where we can tell them that these are the detailed steps that you need to do to list your property. And we don’t try doing the tasks for this segment because they are quite comfortable with managing the details.
For startups, they need to analyse and focus on SaaS (software-as-a-service) and simplify it to ensure mass adoption.
Q: How has Vision 2030 of Saudi Arabia impacted the real estate sector, the Proptech sector and how has it changed the market for you?
When His Excellency Prince Mohammed bin Salman announced Vision 2030, he announced different aspects and different verticals for various industries. A huge focus was given to the real estate sector and development of the real estate industry. After this we were introduced to the Giga projects such as NEOM, the Line, and more which will see billions of dollars in terms of investment and value. This Vision 2030 also included announcements that supported the Small & Medium Enterprises. And such initiatives resulted in the launch of funds such as SVC. If you look back to 2017, what was the number of startups or venture funds active in the market? Five years later in 2023, we are the second largest country in the number of VC and the number of deals in the whole MENA region. So that's a huge increase and overall growth in the sector. Market analysis has shown that this new growth can be linked back to the Vision 2030 policy.
When it comes to the interpretation of Giga projects, the way the built industry is integrating technology, it can actually be called Proptech at scale. Looking at the pace of growth for the Proptech sector in Saudi Arabia, I as a market player can predict that we will be the hub of prop tech in the MENA region in the coming years.SaaS (software-as-a-service) Proptech sector Saudi Arabia SEDCO Capital REIT MENA Holo Mortgage Consultants Spaceti Spiders Mobility Watheeq Capital Venture Capital Darent Rize