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Two More Local Funds for Saudi Arabia

WRITTEN BY | 12 Mar 2024
Two More Local Funds for Saudi Arabia

This article is based on our Weekly News Digest #10 from 11.03.2024. If you want to receive such analyses first, subscribe to our weekly newsletter. There, we analyze the most significant deals, elaborating on the financials and strategy behind them, while also covering the smaller transactions of the week.

Saudi Arabia-based National Development Fund (NDF) and Social Development Bank (SDB) have announced a $120m agreement to establish two venture funds, with Merak Capital and IMPACT 46 overseeing their management.

This initiative is part of the Gaming and Esports Financing Program, which is aimed at supporting the development of local gaming and esports enterprises in collaboration with the Saudi Esports Federation. It also aligns with the broader objectives outlined in the National Gaming and Esports Strategy and the Digital Content Program (Ignite), with the goal of positioning Saudi Arabia as a global gaming hub by 2030.

Technology investment firm Merak Capital will manage the first $80m (SAR 300m) fund, creating a gaming accelerator and dealing with venture investments in the local gaming companies, facilitating their growth.

Asset management company IMPACT46 will manage the second $40m (SAR 150m) fund, focusing on the local gaming and esports industry and aiming to attract international companies to Saudi Arabia.

The two more funds confirm that the Saudi Arabian government treats gaming as one of the strategic industries for development. We have already heard a lot about the activity of the Saudi Arabian Public Investment Fund, which suddenly became one of the key investors in the global market. Since 2020, PIF and its subsidiaries Savvy Games Group and Scopely have allocated more than $17B throughout 19 deals. We’ve gathered all the deals in the picture below:

PIF disclosed investments

All the disclosed gaming investments by PIF. Source: InvestGame

Though most deals are about diversifying the investment portfolio and gaining market knowledge, the PIF’s activity has already seriously changed the esports scene. ESL and FACEIT acquisition, combined with heavy investment into the market, allowed Saudi Arabia to become the esports capital for some disciplines, especially Dota 2 — Riyadh Masters 2023 was the first time when some other tournament rather than The International had the largest prize pool of the year ($15m vs ~$3.3m of The International 2023). But this is just the beginning. In Oct’23, Saudi Arabia’s Crown Prince and Prime Minister Mohammed bin Salman bin Abdulaziz announced the Esports World Cup held by the country’s government. The future will show how this will influence the market. After all, esports uses a hard-to-execute business model, and even the governmental funds might not be enough.

From a VC financing perspective, Saudi Arabia was traditionally associated with large-cap M&A deals in the gaming industry. However, there has been a limited presence of Early-stage gaming-centric investment firms and little activity from global VCs in the region. The establishment of new funds holds the potential to boost Early-stage activity in Saudi Arabia and the MENA region. This could increase opportunities for local gaming companies, with local investors playing a pivotal role in providing additional support. If you’ve missed it, check the VC activity and the Private Investment market dynamic in our Global Gaming Deals Activity Report 2023.