Bloomberg article on Silicon Valley VCs frantically looking for investment from the Middle East
Bloomberg has a very interesting article on how Silicon Valley VCs are "frantically trying to get into parties held in the region by UAE and Saudi Arabian investors, without an invite"!
Read the full article below:
Tech VCs Resort to Party Crashing in Middle East During Downturn
An Abu Dhabi sovereign wealth fund and others have deep ties to Silicon Valley.
ByBiz Carson, Lizette Chapman and Mark Bergen
May 4, 2023 at 11:30 AM GMT+3:30
Silicon Valley has taken investment from moneyed state-run funds in the Middle East for years. Now that the technology industry is mired in a downturn, those relationships are becoming more desirable, and more visible.
In elite tech circles, connections to sovereign wealth funds are suddenly in-demand. Investors including Chamath Palihapitiya and Tribe Capital's Arjun Sethi have recently been spotted passing through the region. Ben Horowitz spoke at a major Saudi conference late last year. And one person who invests in VC funds said they'd seen multiple newer venture capitalists without an invite frantically trying to get into parties held in the region by United Arab Emirates and Saudi Arabian investors.
The VCs' desperation, this person said, was poorly perceived by the Mideast investors, who value long-term relationships and were shocked by the party crashers. The person asked not to be identified discussing private information.
Relationships between VCs and their backers are usually private, particularly with overseas funds that value discretion. Some of those ties were made unusually public this spring when the Saudi Arabia Public Investment Fund's venture arm, Sanabil, took the rare step of listing names of the firms it has backed on its website. The more-than-$600 billion fund disclosed ties to tech's most elite firms, including Andreessen Horowitz, Sequoia China, Founders Fund and Tiger Global. Tech news site the Information first reported some of the names.
But while Saudi Arabia has grabbed recent headlines, other players in the region have just as extensive exposure to venture capital, though they have so far been quieter about their relationships.
The Abu Dhabi Investment Authority, or ADIA, has backed tech and biotech-focused venture firms for decades, including early investments in Peter Thiel's Founders Fund and Flagship Pioneering, a Massachusetts-based firm known as the investor behind Covid vaccine maker Moderna Inc. The fund also put money into Joe Lonsdale's 8VC, Josh Kushner's Thrive Capital and Andreessen Horowitz, according to multiple people familiar with the investments.
Founders Fund, Flagship Pioneering, 8VC, Thrive Capital and Andreessen Horowitz declined to comment for this story. ADIA said it could not make investment leaders available for an interview.
Meanwhile, another Abu Dhabi-based firm, Al Nawwar Investments RSC Limited, is trying to grow its existing stake in Sequoia Capital by purchasing FTX's share for $45 million, bankruptcy court filings show.
"While the spotlight has recently been on the power of the Gulf region, we've been doing this for a while," Ibrahim Ajami, head of ventures for Mubadala Capital, tweeted in April. Mubadala, a UAE-based investment fund, is known as one of the major backers of SoftBank's giant startup investment vehicle, the Vision Fund. "This is as much about liquidity as it is about picking the right partner for the long term," Ajami wrote.
Diversification away from oil is one of the main mandates for resource-rich Middle Eastern sovereign wealth funds -- a mission that's driven massive amounts of capital toward the tech industry. Gulf investors are "preparing with urgency and with efficiency for the arrival of a post-oil economy," said Chicago-based blockchain investor Paul Hsu, who is pursuing startup deals in the region. Besides putting money into in VC firms, the sovereign wealth funds also invest directly in startups and often co-invest with firms they back. ADIA's private equity department, for example, made 40 direct investments in 2021, up from 25 in 2020, its annual report stated. That included 12 co-investments in early-stage startups with VC firms it supports.
Sethi, the Tribe Capital co-founder who recently made a trip to the region, said his investors include sovereign wealth funds and multi-family offices from Saudi Arabia, Oman and the United Arab Emirates. He said that Gulf investors are mindful of how the global tech industry can aid their own economies. "They want to see Alibaba, Tencent, Baidu, etc. in their region," Sethi said, adding that interest from family offices has surged in the past few years. "They want to have companies in AI, space and infrastructure to expand into their markets."
The Gulf's richest families have also made their own venture investments. The UAE's Al Nahyan family -- the world's richest with a $300 billion fortune as calculated by the Bloomberg Billionaires Index -- has invested in startups including Rihanna's Savage X Fenty and Elon Musk's Space Exploration Technologies Corp. Prince Alwaleed bin Talal Al Saud, of Saudi Arabia's $105 billion Al Saud family fortune, was also an early backer of Musk's bid to take Twitter private.
Mideast sovereign wealth funds have long had a keen eye for investing in venture capital, said Paul Rose, a law professor at Ohio State University who studies sovereign wealth funds. But for a long time, they didn't want to disclose it. "The Gulf funds have been less transparent than other funds," Rose said. "They've kept their own counsel more than, say, the Norwegians."
The recent public listing of names on the Sanabil website was a departure from that stance, as well as a branding exercise for Saudi Arabia, Rose said. It's also a way to generate deal flow. "It kind of sends out this signal, to say, 'If you're a GP, we'll talk to you,'" he said.
There's another part to the branding: Showing off connections to Silicon Valley luminaries like Thiel, Marc Andreessen and Ben Horowitz. In one photo showcasing the connections taken a few weeks before the slaying of Jamal Khashoggi, Saudi Arabia's Crown Prince Mohammed bin Salman was photographed with a who's-who list of top tech investors, including Thiel, Horowitz, Andreessen, Sequoia's Michael Moritz, Kleiner Perkins' John Doerr and billionaire Greylock partner Reid Hoffman.
Although the international reaction to Khashoggi's killing in 2018 prompted many American business leaders to distance themselves from Saudi Arabia, that reticence appears to have cooled. In the fall, Horowitz took the stage at Saudi Arabia's FII conference, nicknamed "Davos in the Desert," and last month appeared again at a conference in Miami Beach to praise Saudi Arabia as a "startup country."
"Saudi has a founder," Horowitz said. "You don't call him a founder, you call him his royal highness." Horowitz also announced he'd be returning to the country -- this time with portfolio companies in tow.#