Middle East, land of opportunity for Korean startups

South Korean startups are accelerating their foray into the Middle East, where oil-rich countries are keen to nurture startups with innovative and disruptive ideas and technologies to diversify national revenue sources and reduce their reliance on oil.

Such efforts have already paid off as some startups have started offering their services with local staff and set up local offices to expand their businesses, raising expectations about their successful landing in their targeted land of opportunity.

Korean digital hotel management platform operator H2O Hospitality on Tuesday opened a branch office in Saudi Arabia, about 10 months after it set up an entity in the oil-rich kingdom.

This was the startup’s third overseas branch after it set up local offices in Japan and Singapore.

In October, it started offering its hotel platform’s services to Grand Millennium Al Wahda, a luxury hotel in Abu Dhabi, the United Arab Emirates.

The hotel business is a booming sector in the Middle East as oil-rich countries have chosen tourism as one of their new growth-driving industries.

H2O Hospitality will run its business in Saudi Arabia and UAE with five local staff members, the company said.

Microsoft Corp.’s Korean generative AI partner Wrtn Technologies is also actively seeking to enter the region, with its regional base in Dubai, where foreign residents account for about 90% of the city’s total population.  

The Korean AI startup renowned for its AI tool builder and chatbot has been developing a generative AI-powered internet portal service for the city residents, a project commissioned by the UAE’s state-run Dubai Future Foundation, since September.

Its four employees, including two executives, are stationed in the local office for the project.

FEASIBLE BUSINESS IDEAS BEAR FRUIT

Their recent moves have eased earlier concerns about Korean startups’ hasty advance into the Middle East with a heap of nonbinding business memorandum of understanding agreements.

To facilitate their business setups in the region, Global Business Center (GBC) Riyadh officially opened on Oct. 24.  

The center will offer shared spaces for Korean startups and small and medium-sized enterprises (SMEs), in which they can share information, as well as expand networking and partnerships.

Currently, 15 employees of 10 companies work in the center, including agitech startup Nexton, which won a $400 million export deal to build plant and crop cultivation infrastructure in the Middle East in the first half of this year.  

Angelswing, a Korean developer of a drone data platform for construction projects, is also a resident of the center.

It scooped up the top prize at the grand finale of the sideline Draper Aladdin Startup Competition of Biban 2023, Saudi Arabia’s largest annual startup exhibition held in early March.

The idea of GBC Riyadh started from discussions between Korea’s Ministry of SMEs and Startups and Saudi Arabia’s Ministry of Investment Saudi Arabia (MISA) in January 2023.

The two countries have also formed a joint $160 million fund to support startups and SMEs.

As the Saudi Venture Capital and Jada-backed fund must invest in Korean companies, expectations are growing for Korean startups’ fast venture into the country. Jada is a subsidiary of Saudi Arabia’s sovereign wealth fund Public Investment Fund.

Saudi Arabia is especially enthusiastic about wooing promising foreign startups as part of its efforts to reform its economy with less reliance on oil under the Vision 2030 initiative.

Korean companies hope the kingdom’s ambitious economic reform push opens new opportunities for them, like the oil boom in the 1970s when Korean construction and engineering companies flocked to Saudi Arabia to build plants and oil drilling and storage facilities and sent the oil money home.

SELF-DRIVING AND METAVERSE TECHNOLOGIES 

Pinning high hopes on new business opportunities in the Middle East, Korean autonomous driving technology startup VEStellaLab is seeking to hire local staff to expand its business in Saudi Arabia.

The company is partnering with a local company, which is in charge of the parking control system of King Abdulaziz International Airport and the King Abdullah Financial District, in the country’s capital city.

In August, urban automation solution startup Neubility dispatched its employees to the northwestern Saudi province of Tabuk, where the world’s largest floating structure Oxagon is being built.

Neubility operates three of its Neubie self-driving robots on the Oxagon construction site that deliver foods and goods.

Its employees will upgrade Neubie’s ordering platform during their stay.

Galaxy Corporation, the producer of the global hit reality series “Physical: 100,” is also discussing producing the show’s Season 3 in Saudi Arabia and the UAE.

The Netflix series was especially popular in the Middle East.

Write to See-Eun Lee at see@hankyung.com

Sookyung Seo edited this article.