Saudi Fransi Capital and MIS to launch $40m tech-focused venture capital fund

The fund will be launched by the beginning of the third quarter and focus on the kingdom

Kingdom Holding will acquire a 16.2 per cent stake in Banque Saudi Fransi following an agreement with Credit Agricole. Banque Saudi Fransi

Riyadh-listed Al Moammar Information Systems Company (MIS) and Saudi Fransi Capital have signed an initial pact to establish a venture capital fund, to invest in early-stage technology start-ups in Saudi Arabia as the kingdom diversifies its economy away from oil.

The initial required size of the fund is expected to reach 150 million Saudi riyals ($40m), focusing on areas of the tech sector such as software, digital services, systems, security, consumer services, healthcare technology, and financial technology, MIS said in statement to the Tadawul stock exchange on Wednesday.

"The fund will target investments in concepts and ideas that promise significant technological innovation, whether it is the strength of its transformer in traditional industries or meets the new requirements and needs of the digital economy," MIS said.

The Arab world's largest economy is in the midst of a major diversification programme, aimed at reducing its reliance on oil revenue. One priority sector is technology, with Riyadh encouraging start-ups and attracting investments from both local and foreign funds.

Saudi Arabia aims to increase the contribution of small and medium-sized enterprises to its gross domestic product to 35 per cent by 2030, from 21 per cent currently, as part of its Vision 2030 economic diversification plan. Last year, the Ministry of Investment launched the National Investment Strategy to unlock the investment potential on offer in the kingdom for both domestic and international investors.

Venture capital funding to Mena start-ups has surged to $2.6 billion in 2021, data platform Magnitt reported. The region’s most active markets – the UAE, Saudi Arabia and Egypt – each had a deal worth more than $100m.

MIS aims to set up, either as an internal division of the company or as a separate subsidiary, a business incubator, accelerator and innovation lab, known as MIS Lab. This will enable it to screen, identify and develop technology start-ups focused on "disruptive [regenerative] and innovative technologies", it said.

MIS Lab will develop and leverage technology start-ups in-house from MIS, as well as provide a platform to encourage independent entrepreneurs from across Saudi Arabia and the surrounding region, the company said. It will be appointed as the fund's exclusive investment adviser and innovation partner, with a mandate to advise on the acquisition of stakes in companies that align with the fund’s investment objectives.

The fund is expected to launch by the beginning of the third quarter, the bourse filing showed.