Why the Middle East needs to bet big on deep tech
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In January, a Chinese startup stunned the world by launching the AI reasoning model DeepSeek AI -R1, which it said was trained with less advanced chips, is massively cheaper, and yet outperforms many Western rivals. Reports say Deepseek is now accelerating the launch of its R2, a successor model that will feature enhanced capabilities, in a month or two.
What about the Middle East’s AI efforts? There are big plans. Good intentions. And challenges.
Whatever you think about the region’s AI future prospects, it is evident that what it needs is a deep tech ecosystem. It needs to hunker down and find a way to energize its deep tech ecosystem. The knowledge base must figure out what to build and where to apply.
“One reason why a deep tech ecosystem is important for regional development is that it can facilitate changes in industrial composition away from traditional industries, which rely heavily on natural resources, to more advanced, higher value-added activities,” says Timothy DeStefano , Associate Research Professor at the Georgetown University McDonough School of Business .
ADDRESSING PRESSING CHALLENGES
Deep tech has the potential to address some of the most pressing challenges facing the region and the world, including sustainable energy solutions, agritech, and biotech.
“Deep tech is driving the development of AI, robotics, and advanced computing, which are essential for the region’s digital transformation.
A strong deep tech ecosystem fosters collaboration between researchers, entrepreneurs, investors, and industry, creating a virtuous cycle of innovation and economic development,” says Haitham Al Humsi , Head of Entrepreneurship at KAUST (King Abdullah University of Science and Technology) .
Countries with a growth agenda, such as Saudi Arabia, the UAE, the US, and China, invest in AI, autonomous mobility, tourism, and industrialization, he says, and all these growth avenues drive higher demand for water, energy, food, housing, and logistics.
“Moving Saudi Arabia from 33 million residents and 100 million visitors in 2024 to 50 million residents and 150 million visitors by 2030 will stress test the country’s infrastructure and require smarter solutions and better management of resources and utilities,” says Al Humsi. “Deep tech promises to scale these services innovatively and sustainably.”
Building a robust deep tech ecosystem, DeStefano adds, can drive job creation for highly skilled workers, enhance productivity, stimulate GDP growth, and make the region more attractive to international investors.
However, not many companies have chosen to focus on deep tech.
You can blame this on many things—a lack of investor appetite, outcome obsession, and talent bottlenecks.
Deep tech startups—ones focused on the kind of technically challenging ideas that were once the bedrock of VC investment—haven’t been very successful at attracting investments. They are seen as high-risk.
A deep tech report compiled by KAUST in partnership with the Ministry of Communications and Information Technology (MCIT) in Saudi Arabia and in cooperation with Hello Tomorrow has recently identified about 1,000 active startups in the kingdom and the wider region.
However, Al Humsi says, “Many of these startups haven’t reached significant scale and impact yet. In fact, many deep tech startups remain pre-commercial for a very long period as they fine-tune their technology before they can go to market.”
CHALLENGES FACED BY DEEP TECH COMPANIES
The key challenges deep tech companies face, adds Al Humsi, are the availability of capital willing to fund long-term projects and the willingness of larger corporates and the industry to test new technology solutions.
A deep tech startup requires a lot of work. It isn’t just about money; there’s something deeper at play here.
“Deep tech startups in water, energy, and healthcare typically need to deliver their service in partnership with existing actors in those verticals, and any reluctance from those stakeholders or customers to test new technologies becomes a challenge for progress,” he says.
Although many deep tech companies align with national mandates regarding climate, sustainability, and food security, they “fail to penetrate the market if the societal impact case is stronger than the short-term financial business case for adoption,” Al Humsi says.
He adds that governments can intervene with regulations or subsidies that augment the business case and make the investment more favorable with a lower barrier to entry or accelerated returns.
Finally, Al Humsi adds that many deep tech companies work on the advanced edge of technology. “Acquiring hardware, resources, and new materials on a small scale to prove a technology is much easier than setting up a new global supply chain to scale manufacturing and deployment.”
“Transitioning from lab-scale production to industrial-scale manufacturing and production is challenging for many deep-tech companies, especially first-time founders.”
This has ramifications for the region. However, gradually, the technology ecosystem and the culture are changing, and most importantly, some are trying.
Ashwin Joshi , Director at startAD , says the UAE is positioned to become a leading global hub for deep tech innovation, especially Abu Dhabi with world-class research universities, which is attracting top-tier talent and fostering innovation. These institutions provide a foundation for deep tech ventures, which are essential for scaling solutions across the life sciences and AI sectors.
“The country’s deep tech ecosystem is experiencing rapid growth,” Joshi says. “The UAE’s regulatory framework, characterized by its agility and forward-thinking policies, accelerates the adoption of emerging technologies, providing an environment where deep-tech companies can thrive.”
MEANINGFUL COLLABORATION
Regionally, that ecosystem is nascent, and to grow enough, people must try their hands at building. For meaningful collaboration, a multidisciplinary approach, bringing together experts from different fields, is essential.
Collaborations between countries, universities, industry, startups, large corporates, and governments can facilitate the exchange of knowledge, expertise, and resources, create supportive regulatory environments, provide funding for deep tech initiatives, and scale capabilities and market access.
“Because deep tech startups have the potential to solve regional and global challenges, they tend to have global ambitions from Day 1,” says Al Humsi. “It is very common for a deep tech startup like Pasqal to be created in France, to be soft-landed in Saudi by KAUST, to be invested in by Wa’ed, and to deploy the first quantum computer in the kingdom at Aramco.”
Joshi, citing the life sciences sector as an example, says collaborations are critical for deep tech ventures to validate, de-risk, and scale solutions. “Partnerships between hospitals, startups, and research universities for piloting and validating new diagnostic solutions and novel treatment approaches are becoming standard practice.”
He adds regulatory agencies like the Department of Health are actively shaping innovation through forward-looking research grant programs and startup incubation initiatives such as HealthX.
In the UAE, Joshi says, this proactive and collaborative approach extends beyond life sciences “to advanced manufacturing and AI, where government, corporations, academia, and talent are deeply intertwined and actively engaged.”
While collaboration will be important to continue enhancing regional innovation, DeStefano says, access to human capital and specialized knowledge is essential for deep tech innovation. “Engaging with external partners creates valuable knowledge externalities that can benefit emerging deep tech ecosystems in the Middle East.”
In the region, entrepreneurs, investors, academia, and governments must continue pushing, collaborating, and thinking long-term to address real-world problems and establish their presence on the global innovation map.
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