Saudi cash issue has tech firms squirming
Billions of dollars continue to flow into the tech sector from Saudi Arabia.
What Silicon Valley remains short on are answers to questions about the ethics of taking money from the kingdom, which has been linked to the killing of a prominent regime critic in the country’s consulate in Istanbul last month.
Even as Saudi officials offered a new account Thursday of writer Jamal Khashoggi’s death last month, with government operatives officially charged with killing him, leaders of companies that have taken Saudi money have remained mum.
Uber CEO Dara Khosrowshahi said Tuesday at a Wall Street Journal conference that he would wait to get the facts before deciding the company’s reaction. Contacted Thursday, Uber declined to expand on Khosrowshahi’s remarks. A Saudi official sits on Uber’s board, and the company has raised billions of dollars from Saudi investment vehicles.
Over the past few years, the Saudi government has shoveled billions of dollars into Bay Area companies in an effort to reduce its economic dependence on oil and create holdings in a fastgrowing business sector. Besides Uber, recipients include Lyft, Tesla, DoorDash, Slack and Opendoor.
A Saudi prosecutor said Thursday that Khashoggi was murdered by lethal injection in an opera-
tion ordered by an intelligence officer, a change from previous accounts in which government officials claimed Khashoggi was killed in a struggle after resisting attempts to persuade him to return to the country.
Saudi Arabia’s petroleum-infused fortune has made its way through vehicles like the country’s Public Investment Fund, one of the largest sovereign wealth funds in the world. Additionally, firms have accepted Saudi money to invest in startups.
For example, Saudi Arabia is the biggest investor in the $100 billion Vision Fund, which is operated by Japan’s SoftBank and has invested in more than 50 companies. Uber has taken investments directly from the Public Investment Fund as well as the Vision Fund, while most of the other Bay Area companies that have benefited from Saudi money have received it via SoftBank.
In an interview with the Recode news website this month, Tesla CEO Elon Musk described Khashoggi’s murder as “really bad” and said Tesla “probably would not” voluntarily accept more funds from the Saudis.
Managers of Saudi Arabia’s sovereign wealth fund previously approached Musk about the possibility of taking Tesla private. Saudi’s public investment fund had also bought Tesla’s shares on the open market, a transaction that did not require the publicly traded company’s consent. A Tesla spokeswoman said the company had “nothing to add” to Musk’s comments.
Some entrepreneurs say it would be difficult to turn down the money if offered — particularly from SoftBank, which has pursued a strategy of anointing winners in a sector with mountains of cash, and threatening to fund rivals if its money is refused.
Henrique Dubugras, head of Brex, a San Francisco firm that issues corporate credit cards, said the issue for him is less complex: “We don’t know them well at all and would not raise (cash) from people we don’t know well.”
Daniel Singer, another San Francisco startup founder, said that while entrepreneurs may criticize the Saudi government’s role in the killing of Khashoggi in tweets and in conversation, most “won’t go as far to say, unequivocally ‘no’ ” to SoftBank.
The fund’s hardball tactics, he said, were a consideration.
“They’ll fund your competition, and you’ve dug your own grave,” he said.
The Public Investment Fund has agreed to put $45 billion into the second SoftBank Vision Fund, two years after giving the same amount to the original fund.
WeWork, the shared office space provider based in New York with extensive real-estate operations in the Bay Area, took $3 billion from SoftBank this week. Notably, the money came from SoftBank itself, not the Vision Fund, which previously invested in the company. WeWork declined to comment.
Not all Saudi money is the same.
In 2015, Kingdom Holding, an investment firm run by Prince Alwaleed bin Talal, invested $247 million in San Francisco’s Lyft. Talal, one of the world’s richest men, was arrested late last year as part of a Saudi effort, critics said, to consolidate power in the hands of Saudi Arabia’s crown prince, Mohammed bin Salman, who has been linked in some reports to the operation against Khashoggi. Lyft declined to comment. Uber in 2016 raised $3.5 billion from the Saudi sovereign wealth fund, which is controlled by the crown prince, and completed a $9.3 billion investment from the Vision Fund in January.
Other Bay Area companies with ties to Saudi money, including Slack, maker of a work messaging app; food-delivery startup DoorDash; and robotpizza maker Zume — also did not respond to requests for comment Thursday.
Singer’s startup, Panda, makes a video chat app and has only raised $850,000. At its stage, it is far from considering investments from the likes of SoftBank or the Saudi Public Investment Fund. But as the company grows, so will the list of shareholders it is accountable to, Singer said. And the decision about whom to raise capital from becomes “bigger than your beliefs.”
For Khosrowshahi, there is a way out: The company is expected to go public next year. Once its stock is publicly traded, it will no longer have any say over whether Saudi Arabia or other countries buy, hold or sell its shares. Chronicle staff writers Carolyn Said, Sophia Kunthara, Roland Li and J.D.
Morris contributed to this report.
Melia Russell is a San Francisco Chronicle staff writer. Email: melia.russell@sfchronicle.com Twitter: @meliarobin