startups

Tech execs reconsider Saudi ties amid Khashoggi affair


The fate of a prominent critic of Saudi Arabia has put a spotlight on the Middle Eastern kingdom’s relationship with Silicon Valley — and the oceans of venture capital dollars flowing from its petroleum-borne fortune.

Saudi crown prince Mohammed bin Salman ordered an operation to detain Jamal Khashoggi, a Washington Post columnist who was critical of the Saudi government, the newspaper reported. Turkish officials say Khashoggi was killed, while the Saudi government maintains his fate is unknown. He was first reported missing after entering the Saudi consulate in Istanbul on Oct. 2.

In the most prominent public reaction, Virgin chief Richard Branson told the Guardian newspaper Thursday he had suspended business talks over space and tourism projects with the kingdom. But the reaction from tech chiefs who have taken hundreds of millions of dollars from Saudi Arabia has been mostly silence, aside from some who have distanced themselves from a planned development project.

Over the last few years, the Saudi government has announced a number of initiatives to lessen its economic dependence on oil. A key part of the plan is investing in tech, both in the kingdom and abroad.

Two Saudi funds have made investments of more than $100 million into U.S. startups dubbed “unicorns” — the industry term for privately held, venture capital-backed companies worth more than $1 billion — according to Crunchbase, which tracks such financings.

The Public Investment Fund of Saudi Arabia, one of the largest sovereign wealth funds, put $3.5 billion into San Francisco’s Uber in 2016; $1 billion into Menlo Park electric automaker Lucid Motors in September; and $461 million into Magic Leap, an augmented reality headset maker located in Florida, in March. In August, it bought approximately $2 billion in Tesla shares on the public market, and was involved in talks to take Tesla private before those fell apart. The fund announced in September that it had borrowed $11 billion from banks to finance more tech deals.

The fund’s direct investments don’t account for the looming presence of Japan’s SoftBank, which has raised a substantial amount of capital from the Public Investment Fund. The fund has committed $45 billion into a second SoftBank Vision Fund, two years after investing the same amount into the original $100 billion “mega-fund.” Through the Vision Fund, SoftBank has invested in Uber; San Jose chipmaker Nvidia; GM subsidiary Cruise, the San Francisco self-driving car startup; and delivery company Doordash, also of San Francisco.

In 2011, Prince Alwaleeed bin Talal’s international investment firm, Kingdom Holding, invested $300 million in Twitter. In San Francisco, it put $250 million in Los Angeles app maker Snap and $247 million in San Francisco’s Lyft. The company trades on a Saudi stock exchange and is worth $30 billion, according to Bloomberg.

Saudi Arabia is also seeking Silicon Valley’s advice.

Saudi money in Silicon Valley

Two funds from Saudia Arabia have made investments of more than $100 million in U.S. startups and tech companies. Here are the seven biggest deals:

Uber (ride hailing, San Francisco) $3.5 billion from Public Investment Fund, June 2016

Tesla (electric cars, Palo Alto) $2 billion shares purchased by Public Investment Fund, August

Lucid Motors (electric cars, Newark) $1 billion from Public Investment Fund, September

Magic Leap (augmented reality, Orlando) $461 million from Public Investment Fund, March

Twitter $300 million from Kingdom Holding Company, December 2011

Snap $250 million from Kingdom Holding Company, March 2015

Lyft $247 million from Kingdom Holding Company, December 2015

Source: Crunchbase

The government named more than a dozen business and technology leaders, including a senior executive from Alphabet and the former CEO of Uber, to a new advisory board for the Saudi government Tuesday. They are to offer input on Neom, a futuristic mega-city in the northwest of the country that could someday have self-driving cars and passenger drones transporting people across the zone. The project is expected to cost $500 billion.

Named as board members by a Saudi news outlet were Uber co-founder Travis Kalanick; venture capitalist and Facebook board member Marc Andreessen; Dan Doctoroff, CEO ofAlphabet’s urban planning unit Sidewalk Labs; Sam Altman, chief of the Y Combinator startup incubator; and Tim Brown, CEO of Palo Alto design agency Ideo.

Apple’s chief design officer Jony Ive appeared on an early version of the report naming board members. His name has since dropped off. On Wednesday, Apple told BuzzFeed News that Ive’s inclusion was a mistake. Dan Levitan, a spokesman for Sidewalk Labs, likewise said Doctoroff should not have been on the list.

Andreessen Horowitz declined to comment. Kalanick and Altman did not respond to requests for comment. A spokeswoman for Brown said he had decided not to participate in the advisory board.

In two weeks, a group of business and technology leaders will arrive at the Saudi capital for the third annual Future Investment Initiative. Known among attendees as “Davos in the Desert,” the business conference is put on by the Public Investment Fund.

Uber CEO Dara Khosrowshahi is scheduled to take part. The Saudi fund’s chief executive, Yasir Al-Rumayyan, is a member of Uber’s board. The ride-hailing company did not comment.

Silicon Valley investors Vinod Khosla and Jim Breyer, Android creator Andy Rubin, Viacom CEO Bob Bakish, MasterCard CEO Ajay Banga, and executives from HP, WeWork and Lucid Motors are among the scheduled speakers.

San Francisco Chronicle staff writer Carolyn Said contributed to this report.

Melia Russell and Sophia Kunthara are San Francisco Chronicle staff writers. Email: melia.russell@sfchronicle.com, sophia.kunthara@sfchronicle.com Twitter: @meliarobin, @sophiakunthara





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