Saudi Arabia’s Sovereign Wealth Fund is Homeward Bound

Be it ever so oil-rich, there’s no place like home.

Saudi Arabia’s Public Investment Fund (PIF), the nation’s enormous sovereign wealth fund, signaled on Tuesday that it’s dialing down its investments outside the kingdom’s borders, focusing instead on domestic investments. The news is sure to send a ripple of worry through Silicon Valley startup founders, as the PIF has been a money hose for US tech startups at a time when VC money has been harder to come by.

Domestic Bliss

The PIF started as a way for Saudi Arabia to reinvest money made from its natural oil reserves, but in the past decade or so has become a major part of the startup funding landscape. It teamed up with mega investor SoftBank, pouring $45 billion into the company’s Vision Fund. Through that fund, Saudi Arabia backed Silicon Valley darlings, including Uber, DoorDash, Slack, and the ill-fated WeWork. This was all part of Saudi Crown Prince Mohammed bin Salman’s campaign to present himself as a reformer set on overhauling and modernizing the Gulf nation’s economy and culture. 

Silicon Valley grew briefly skittish about accepting Saudi Arabia’s money following the 2018 murder of journalist Jamal Khashoggi, which the CIA said Bin Salman likely ordered, but the PIF has remained a major player in US VC investment. Now, however, overseas startups are going to have to look elsewhere for their funding:

• PIF governor Yasir Al-Rumayyan told the Future Investment Initiative Institute (a.k.a. Davos in the Desert) in Riyadh that the proportion of the PIF’s investments that go overseas stands at 30%. “Now our target is to bring it down to a range between 18 to 20%,” he said.
• Saudi Arabia has been trying to nurture a homegrown tech industry. In February, the Financial Times reported it was writing terms into deals with Chinese tech companies to strong-arm them into sharing technical know-how and training. It’s also trying to jumpstart a domestic video game industry.

It’s Saudi Arabia’s way of saying it can’t count on its prized commodity powering the PIF and the economy forever. The country gave up last month on trying to drive up the price of oil, and now question marks loom over just how sharply demand might start to ebb as the world turns to electrification. BP added to that fossil fuel gloom on Tuesday when its third-quarter profit hit a four-year low.

Still Besties: Despite its inward gaze, Saudi Arabia’s link with SoftBank still appears to be going strong. On Tuesday SoftBank CEO Masayoshi Son offered a few scraps of information about a $150 million robot factory he plans to open in Saudi Arabia this December. Son said a future robot workforce will be a boon for humanity because “we are born crying and die crying […] In between, we should be happy. We should let the robots do the work.” And when the robots get into palliative care…?