Saudi Arabia’s Investment Shift: European Startups Must Relocate for Funding
Saudi Arabia’s $925 billion Public Investment Fund (PIF) is tightening its investment strategy, pushing European startups to establish a local presence in order to secure funding. This shift aligns with the Kingdom’s ambitious Vision 2030, which aims to diversify the economy beyond oil and create a global technology hub within Saudi Arabia.
Over the past decade, Saudi Arabia has become an increasingly attractive player in the global startup ecosystem, investing billions into international tech companies, including Lucid Motors, Uber, and Magic Leap. However, the tide is turning. PIF is now focusing on domestic opportunities, favoring companies that contribute directly to the local economy.
Saudi Arabia’s New Investment Focus
According to industry insiders, Saudi’s sovereign wealth fund and other major investors, such as Saudi Aramco’s venture arm Wa’ed Ventures, have started making it clear: if European startups want access to their capital, they need to set up operations within the Kingdom.
This strategic change was reinforced in late 2024 when Saudi authorities announced that they would be reducing overseas investments in favor of boosting local tech and industrial sectors.
“The government wants the capital it deploys to bring tangible benefits to Saudi Arabia,” says Rachel Ziemba, founder of Ziemba Insights. “Investors are looking at projects with clear local growth potential.”
This means that sectors like venture capital, AI, and quantum computing are now subject to localization requirements. While real estate and infrastructure projects may still receive overseas funding, startups in technology and innovation must now demonstrate a commitment to Saudi Arabia’s development.
How Startups Are Adapting to the New Rules
Some European startups have already responded to Saudi Arabia’s new investment conditions by establishing local offices.
- Pasqal, a French quantum computing company, secured €100 million in funding in 2023, with a significant portion coming from Wa’ed. Shortly afterward, the company set up a presence in Saudi Arabia.
- Ori, a London-based AI compute provider, also attracted funding from Wa’ed and announced plans to launch a subsidiary in Riyadh. According to its founder Mahdi Yahya, Ori already had a small presence in Saudi Arabia before the investment, making the expansion easier.
This trend suggests that Saudi investors are not completely closing doors to foreign companies—they are simply demanding a greater commitment to the local economy.
Why Is Saudi Arabia Pushing for Localization?
Saudi Arabia’s decision to prioritize domestic investment is part of a broader effort to position itself as a global technology hub.
The Kingdom has already announced major projects like Neom, a $500 billion futuristic city that aims to integrate cutting-edge AI, robotics, and green technology. To make these projects successful, the country needs startups, entrepreneurs, and engineers on the ground.
By insisting that startups open local offices, hire Saudi talent, and contribute to the domestic economy, Saudi Arabia ensures that its investments create long-term economic benefits.
According to business expansion expert Riley Gonta from AstroLabs, this shift is part of a well-thought-out strategy:
“Saudi Arabia is no longer just throwing money at global startups and waiting for returns. They want companies to actively participate in their ecosystem.”
Opportunities and Challenges for European Startups
For European startups, this shift presents both opportunities and challenges.
Opportunities:
✔ Access to Large-Scale Capital – Saudi Arabia has some of the deepest pockets in the world, with PIF managing nearly $1 trillion in assets.
✔ Entry into the Middle East Market – Startups relocating to Saudi Arabia can expand into the Gulf region, which has a rapidly growing tech industry.
✔ Government Support – The Saudi government is actively backing tech initiatives, offering grants, tax breaks, and regulatory incentives for companies that set up locally.
Challenges:
❌ Regulatory Hurdles – Setting up a company in Saudi Arabia involves navigating strict business laws and licensing requirements.
❌ Cultural and Business Adaptation – European startups may struggle to adapt to Saudi Arabia’s business culture and workforce dynamics.
❌ Relocation Costs – Moving operations to the Middle East can be expensive, especially for small and mid-sized startups.
Despite these challenges, Saudi Arabia’s aggressive investment policies and tax incentives may outweigh the downsides for many European founders.
What This Means for the Future of Startup Investment
Saudi Arabia’s investment shift could set a precedent for other sovereign wealth funds. As countries look to secure their economic futures in a shifting global landscape, we may see more nations demanding localization from foreign startups in exchange for funding.
For European tech companies, this means that securing Middle Eastern investment will no longer be a passive process—it requires a long-term commitment.
The big question now is: Will European startups follow the money and relocate, or will they look elsewhere for funding?
Conclusion
Saudi Arabia’s PIF and other major investors are no longer funding startups without strings attached. Instead, they are making a clear statement: if you want their money, you must be willing to build, hire, and operate in Saudi Arabia.
For many startups, this presents a tough decision—accept Saudi investment and relocate, or miss out on a huge funding opportunity in one of the world’s fastest-growing economies.
Do follow gulf magazine on Instagram
for more information click here
