The fund is part of the new strategy of the King Abdullah University of Science and Technology (Kaust), the Saudi Press Agency reported on Sunday.
The strategy focuses on "increasing the likelihood of turning research into economically beneficial innovations", through three major drives, the report said.
The initiatives include the launch of the National Transformation Institute for Applied Research (NTI) to boost technology development and commercialisation; the restructuring of research centres to align with national priorities for research, development and innovation; and the creation of the new fund.
The fund "will enhance economic diversification and contribute to the creation of high-quality technical jobs", the report said.
"The new strategy builds on Kaust's scientific and academic achievements and represents a new era for the university to become a beacon of knowledge and a source of inspiration and innovation in line with Vision 2030 aspirations," Prince Mohammed said.
The kingdom is diversifying its economy from oil as part of its Vision 2030 strategy, with technology one of the key pillars of the plan.
Saudi Arabia has introduced several projects and is investing heavily to develop the sector.
The kingdom is projected to spend $34.6 billion on information and communications technology in 2023, making it the top-spending nation for the category in the Middle East, Turkey and Africa, the IDC said this year.
In February, Saudi announced more than $9 billion investments in its technology sector at the Leap conference.
The amount includes a $2.1 billion commitment from Microsoft, Oracle's plans to invest $1.5 billion to boost the kingdom's cloud-computing capacity and $400 million from China's Huawei to enhance Saudi Arabia's cloud infrastructure.
An additional $4.5 billion has also been invested in global and local assets across a number of technology sectors, officials at the event said.
As part of Kaust's new strategy, it will continue to collaborate with some of the largest domestic and global companies, including Aramco, Sabic, Acwa Power, IBM, Dow and Boeing, the SPA report said.
It will also team up with academic and commercial institutes in the Chinese city of Shenzhen to work on applied research across fields such as aerospace, robotics and microelectronics.
"One of the most prominent initiatives of the strategy is to strengthen international partnerships and develop co-operation frameworks with leading academic institutions and technology pioneers in the world," the report said.
"Through these initiatives and partnerships, Kaust will contribute to developing the higher education ecosystem, nurturing the future scientific research pioneers in the kingdom, promoting research and global innovation, and stimulating the growth of advanced technology start-ups. This will enhance the competitiveness of the kingdom's economy," it added.