(2023-05-01) How Saudi Money Returned To Silicon Valley

How Saudi money returned to Silicon Valley. It was in late March that Silicon Valley decided that it’s no longer shameful to accept massive investment dollars from Saudi Arabia.

Venture capitalists Ben Horowitz and Marc Andreessen were pumped up, too.
“Saudi has a founder. You don’t call him a founder, you call him, ‘His Royal Highness,’ but he’s creating a new culture, he’s creating a new vision for the country, he’s got a very exciting plan to execute, and the people in the country are fired up to do it,” said Horowitz.

In October 2018, Prince Mohammed bin Salman bin Abdulaziz al-Saud, or MBS as he’s often called, was determined by the CIA to have ordered the killing of journalist Jamal Khashoggi. Though Saudi Arabia had been a financial supporter of Silicon Valley, the killing led some American investors to speak out against MBS.

But five years later, the ppFuture Investment Initiative Institute]], which is essentially MBS’s private think tank, is hosting investors, CEOs, and former government officials at events in Saudi Arabia and the United States.

A few days after the Miami event, Saudi Arabia published the names of dozens of venture capital firms, buyout funds, real estate investors, and startups that it’s funding in the US and internationally

It has direct investments in Bird scooters and AI startups Vectra and Atomwise.

Plus there’s indirect money going through other venture funds into companies including Credit Karma, GitLab, Reddit, and Postmates, as well as the popular running shoes brand On or the military-tech darling and Pentagon contractor Anduril.

Among the previously undisclosed firms that had received Saudi funds: Andreessen Horowitz, whose portfolio companies include Instacart and SpaceX.

Vox reached out to the 60 venture capital and buyout firms and 19 startups that Sanabil has said it’s invested in to ask a simple question: How does this investment align with your company or firm’s values? None of them wanted to provide a comment.

Back before 2018, it seemed like everyone in Silicon Valley was taking Saudi investments.

Though the kingdom was long understood as authoritarian, Silicon Valley was excited about the prospect of the young deputy crown prince known as MBS.

MBS’s hyped-up reputation earned him a rousing welcome to the West Coast in June 2016 and April 2018.

During those two years, MBS poured at least $11 billion into US startups, making it the industry’s largest single investor. Uber received $3.5 billion from Saudi Arabia’s Public Investment Fund in 2016, after board member and former Obama adviser David Plouffe traveled to the kingdom. Electric car company Lucid received $1 billion and Magic Leap, the VR headset company, got $461 million through the fund.

Dozens of others received massive dollars through the SoftBank Vision Fund, which was funded through about $45 billion from Saudi’s Public Investment Fund.

In September 2018, Open AI co-chair Sam Altman, Marc Andreessen, Apple designer Jony Ive, and former Uber CEO Travis Kalanick all joined Neom’s board.

The Khashoggi killing happened the following month

A combination of factors has brought Saudi Arabia back into the fold.

Candidate Joe Biden on the campaign trail pledged to make MBS a pariah, but as high oil prices tested his global policies, the president traveled to Riyadh and gave the prince a first-bump in July 2022.

the US has largely continued to approve major sales of military technologies and weapons to Saudi Arabia.

Given the vicious policies that MBS has pursued, including domestic crackdowns and a disastrous war in Yemen, there are real perils.

Meanwhile, the credit crunch and lack of liquidity in markets in the US and Europe have made investments from Saudi Arabia welcome.

The structure of such investing, wherein venture firms in practice don’t disclose their limited partners — that is, where the money comes from — gives firms like Andreessen Horowitz, 500 Global, and General Atlantic some plausible deniability, or at least distance from, their Saudi sovereign wealth investments. And that gives their portfolio companies even further distance

Another important factor is that China is investing heavily in advanced technologies, and in response, Washington has centered much of its hawkish rhetoric on countering China’s influence worldwide.

In an indication of how comfortable Saudi Arabia has become for investors, Goldman Sachs president of global affairs Jared Cohen visited the kingdom in February

The art, film, and media industries have also followed this trend line on Saudi Arabia. The money is so ubiquitous that even Vox is touched by it. Penske Media Corporation received in 2018 a $200 million investment from the Saudi Research and Media Group, which is closely linked to MBS.

Iconiq, the family office for many ultra-rich tech people, including Mark Zuckerberg, Sheryl Sandberg, and Jack Dorsey, was also on the list.

So was the Peter Thiel-backed Valar capital investing group and Silverlake, a private equity firm whose portfolio of companies includes name brands Airbnb, Dell, and Waymo.

an early-stage venture firm that Jeff Bezos backs, Village Global, is one of the recently revealed recipients of Saudi venture dollars.

Though Silicon Valley once wrestled with the moral implications of Saudi dollars after the killing of Khashoggi, tech investors have clearly moved on. Horowitz, for instance, has been taking founders from its portfolio companies back and forth to what Ben Horowitz described as a “startup country.”

Executions have doubled under MBS, and many political prisoners remain incarcerated without due process.