Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.
Savvy Gaming Group will struggle to fulfill its goal of establishing Saudi Arabia as a hub for innovation and gaming
There was a 40% decline in gaming venture capital funding from 2021 to 2022 (CB Insights). Activity in the public markets and M&A followed a similar slowdown. While we will be digging into the trends within the Q4 gaming industry in next week’s newsletter, there is one region, and one investment group in particular, that has accelerated investment momentum in gaming: the Kingdom of Saudi Arabia (KSA).
This week, we are analyzing KSA’s innovation strategy and ambitions within gaming. In light of this, does Saudi Arabia have potential as a hub for development and creation in gaming?
In 2016, Crown Prince Mohammad bin Salman announced Vision 2030, a national socio-political and economic reform to reduce Saudi Arabia’s reliance on crude oil by diversifying its economy and developing public services. The vision is built around three primary (and extremely open-ended) themes: a vibrant society, a thriving economy, and an ambitious nation (Saudi Embassy). Saudi Arabia has set up a Public Investment Fund (PIF) to make this a reality.
Other MENA countries have also seen rapid socio-economic reform. Two in particular have established themselves as strong hubs of innovation over the last 10 years: Israel and the United Arab Emirates (UAE). Their startup environments are a key indicator of this progress. Israel and the UAE had a combined ~$10b of venture funding in 2022 (relatively, venture funding in the US was ~$170b and Europe was ~$65b) (CB Insights).
When looking at each of their individual histories in innovation, Israel is a regional powerhouse in the startup ecosystem and has 4 primary strengths:
UAE has more recently begun to establish itself as an innovation-friendly environment through two primary strengths:
Gaming is part of PIF’s 2021-2025 strategy to drive innovation in strategic sectors including entertainment, leisure, and sports. Other areas that have been highlighted publically are golf (LIV Golf Investments), theme parks (Six Flags Qiddiya), and film. PIF has also made minority investments in entertainment conglomerates such as Amazon, Google, Microsoft, and Disney.
In January 2022, PIF launched the Savvy Gaming Group (SGG), which is the investment and operational entity focused on gaming and esports. The goal of SGG is to build gaming and esports organizations and position them for a worldwide audience (Axios). Through this initiative, the government hopes to create 39,000 jobs, establish 250 game developers, release 30 games, and build a strong domestic talent pool that will raise the sector’s contribution to the Kingdom’s economy to $13.3 billion by 2030 (Arab News).
Breaking Down the Gaming Budget
Upon launch, SGG announced a $1.05b acquisition of ESL and FACEIT to form the ESL FACEIT Group. In September, SGG announced they have a budget of $37.8b to invest with the goal of making the country a hub for gaming. The group intends to split the funds up across four key areas (Esports Insider):
The KSA Gaming Population
CEO Brian Ward has said that SGG received the largest startup capital allocation ever provided by the PIF (Axios). The PIF is one of the largest sovereign wealth funds in the world, with ~$600b in assets. This means that gaming and esports will make up ~6% of their assets (Sovereign Wealth Fund Institute). This is a large amount, given that KSA’s population is only ~35m people and the MENA gaming market in 2021 was $1.76b (estimated to reach $3.14b in 2025) (Business Wire).
However, when taking a closer look at the gaming population of KSA, there are a few regional strengths that can serve as domestic tailwinds for their early gaming market growth:
Despite the significant capital being invested in gaming and esports, there are four reasons why we believe Saudi Arabia will struggle to become a gaming hub.
Takeaway: While MENA is a valuable and rapidly growing market in gaming (that we are excited to continue to invest in), SGG will struggle to fulfill its goal of establishing Saudi Arabia as a hub for innovation and gaming. Their prioritization of late-stage foreign companies and lack of focus on cultivating a gaming ecosystem from the ground up is short sighted. Socio-political and religious barriers will prevent KSA from attracting international talent and the region will struggle to build sustainable domestic momentum in gaming.
Savvy Gaming Group will struggle to fulfill its goal of establishing Saudi Arabia as a hub for innovation and gaming
There was a 40% decline in gaming venture capital funding from 2021 to 2022 (CB Insights). Activity in the public markets and M&A followed a similar slowdown. While we will be digging into the trends within the Q4 gaming industry in next week’s newsletter, there is one region, and one investment group in particular, that has accelerated investment momentum in gaming: the Kingdom of Saudi Arabia (KSA).
This week, we are analyzing KSA’s innovation strategy and ambitions within gaming. In light of this, does Saudi Arabia have potential as a hub for development and creation in gaming?
In 2016, Crown Prince Mohammad bin Salman announced Vision 2030, a national socio-political and economic reform to reduce Saudi Arabia’s reliance on crude oil by diversifying its economy and developing public services. The vision is built around three primary (and extremely open-ended) themes: a vibrant society, a thriving economy, and an ambitious nation (Saudi Embassy). Saudi Arabia has set up a Public Investment Fund (PIF) to make this a reality.
Other MENA countries have also seen rapid socio-economic reform. Two in particular have established themselves as strong hubs of innovation over the last 10 years: Israel and the United Arab Emirates (UAE). Their startup environments are a key indicator of this progress. Israel and the UAE had a combined ~$10b of venture funding in 2022 (relatively, venture funding in the US was ~$170b and Europe was ~$65b) (CB Insights).
When looking at each of their individual histories in innovation, Israel is a regional powerhouse in the startup ecosystem and has 4 primary strengths:
UAE has more recently begun to establish itself as an innovation-friendly environment through two primary strengths:
Gaming is part of PIF’s 2021-2025 strategy to drive innovation in strategic sectors including entertainment, leisure, and sports. Other areas that have been highlighted publically are golf (LIV Golf Investments), theme parks (Six Flags Qiddiya), and film. PIF has also made minority investments in entertainment conglomerates such as Amazon, Google, Microsoft, and Disney.
In January 2022, PIF launched the Savvy Gaming Group (SGG), which is the investment and operational entity focused on gaming and esports. The goal of SGG is to build gaming and esports organizations and position them for a worldwide audience (Axios). Through this initiative, the government hopes to create 39,000 jobs, establish 250 game developers, release 30 games, and build a strong domestic talent pool that will raise the sector’s contribution to the Kingdom’s economy to $13.3 billion by 2030 (Arab News).
Breaking Down the Gaming Budget
Upon launch, SGG announced a $1.05b acquisition of ESL and FACEIT to form the ESL FACEIT Group. In September, SGG announced they have a budget of $37.8b to invest with the goal of making the country a hub for gaming. The group intends to split the funds up across four key areas (Esports Insider):
The KSA Gaming Population
CEO Brian Ward has said that SGG received the largest startup capital allocation ever provided by the PIF (Axios). The PIF is one of the largest sovereign wealth funds in the world, with ~$600b in assets. This means that gaming and esports will make up ~6% of their assets (Sovereign Wealth Fund Institute). This is a large amount, given that KSA’s population is only ~35m people and the MENA gaming market in 2021 was $1.76b (estimated to reach $3.14b in 2025) (Business Wire).
However, when taking a closer look at the gaming population of KSA, there are a few regional strengths that can serve as domestic tailwinds for their early gaming market growth:
Despite the significant capital being invested in gaming and esports, there are four reasons why we believe Saudi Arabia will struggle to become a gaming hub.
Takeaway: While MENA is a valuable and rapidly growing market in gaming (that we are excited to continue to invest in), SGG will struggle to fulfill its goal of establishing Saudi Arabia as a hub for innovation and gaming. Their prioritization of late-stage foreign companies and lack of focus on cultivating a gaming ecosystem from the ground up is short sighted. Socio-political and religious barriers will prevent KSA from attracting international talent and the region will struggle to build sustainable domestic momentum in gaming.
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