Saudi Arabia-based National Development Fund (NDF) and Social Development Bank (SDB) have announced a $120 million 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), to position Saudi Arabia as a global gaming hub by 2030.

Governor of NDF, Dr. Stephen Grove, stated: "The gaming and Esports industry has seen exponential growth globally, generating substantial revenue and job opportunities. With Saudi Arabia's young demographic and other attractive investment components, NDF and our partners are prioritizing innovative financing solutions for this industry. We aim to ensure its financial sustainability and contribute to the Kingdom's economic diversification and job creation efforts."

$120 Million Funds

The announcement was made during the LEAP 2024 technology conference in Riyadh. Merak Capital and IMPACT 46, the entities managing the two funds, will provide development financing for gaming and Esports companies through equity investments to accelerate growth, boost local content development, and amplify the industry's economic and social impact to achieve the objectives of the National Gaming and Esports Strategy and the Digital Content Program (Ignite).

Merak Capital is set to manage the first investment fund, which will be SAR300 million ($80 million). The fund will focus on establishing a gaming accelerator backed by venture investment to spur growth and cultivate local talent in the gaming industry. 

The second fund, managed by IMPACT 46 and with a total value of SAR150 million ($40 million), seeks to stimulate private sector investment in the local gaming and Esports industry. Additionally, it seeks to attract international firms and studios to establish a more substantial presence in the Kingdom, further enriching the sector's ecosystem.

CEO of SDB, Eng. Sultan Al-Humaidi emphasized SDB's commitment to supporting the gaming and e-sports industry, recognizing its potential for growth within the Kingdom, "Our objective is to cultivate the industry to self-sufficiency, positioning the Kingdom as a global hub. We provide the necessary support to ensure this venture succeeds, advancing the Saudi digital economy forward as a key component of the Kingdom's digital transformation goals aligned with Saudi Vision 2030."

This news comes as part of NDF's efforts to develop the promising Saudi sectors and bolster their contribution to the national economy. This goal can be accomplished through empowerment and financial development support to establish an environment that attracts local talent, delivers promising experiences, and targets top-tier game production and development projects.

Gaming and Esports in Saudi

Established in 2017, under the leadership of Prince Mohammed bin Salman Al-Saud, Crown Prince and Prime Minister, NDF aims to drive the Kingdom's economic transformation and sustainable development. Overseeing 12 development funds and banks, NDF strives to boost performance, foster coordination, and amplify economic and social impacts, focusing on promising investment sectors that support the objectives of Saudi Vision 2030.

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. 

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).

In October 2023, 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 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.