Dubai
Gulf’s sovereign wealth funds (SWFs) are moving mountains to invest into tech with a dizzying line-up across numerous industries such as hospitality, retail, and diabetes, according to Sam Blatteis, CEO of regional public policy advisory and research firm The Mena Catalysts.
Blatteis said the SWFs are also backing those investments up with a physical presence on the ground, in part to expand their deal flow and access the latest start-ups.
The Gulf is home to four of the ten most active SWFs in technology, which are Mubadala, Kuwait Investment Authority, Saudi’s Public Investment Fund, Qatar Investment Authority and Kuwait Investment Authority.
“SWFs investing in knowledge industries can turbo-charge their countries’ economic blueprint such as Saudi Vision 2030 or the UAE 2071 Plan, for instance, both of which’s purpose is, arguably, ultimately to develop a knowledge economy to drive economic development,” said Blatteis, who is also the former head of government affairs and public policy for Gulf Countries at Google.
Amid high unemployment high and low local GDP growth, he said that tech stands out as a stunning bright spot.
At the end of 2016, he said that six of the top 10 world’s revenue-generating companies were tech companies — compared with just one at the end of 2006. Apple’s $873 billion (Dh3,204 billion) market cap? Over triple that of ExxonMobil. Alphabet’s $718 billion market cap? Over triple that of Chevron’s.
Blatteis said that SWFs are making strategic moves into Silicon Valley by opening offices there and setting up strategic agreements with Silicon Valley venture capital heavyweights.
These include Qatar Investment Authority, Mubadala and even Dewa (not a SWF, but still a state-backed entity of Dubai). Mubadala and Kuwait have also set up venture capital divisions.
He said that Mubadala, in a strategic tie-up with Japanese telecom and internet giant Softbank, already has 15 to 16 technology investments in artificial intelligence, biotech and others, mostly in Silicon Valley.
Mubadala launched a $400 million early growth VC fund investing in exceptional founder-led early-stage tech companies; a $200 million ventures ‘Fund of Funds’ to invest in both established and emerging VC fund managers, while committing $15 billion to Softbank’s $94 billion tech fund.
The Fund has allocated $50 billion since 2016, into investments abroad, focused on global AI, robotics, and the mobile economy, committing another $45 billion to partner with SoftBank in its $94 billion vehicle to invest in global technology.
In the region, Saudi’s PIF has made e-Commerce plays in Mohammad Al Abaar’s e-commerce company Noon, a company with ambitions to build its own DHL and its own PayPal. It is also the largest foreign investor in Uber by investing $3.5 billion.
Bahrain’s SWF, Mumtalakat, used its 2016 investment in Envirogen Technologies to help serve the country’s growing domestic demand for effective water treatment solutions.
“These might seem like baby steps but they are hard to dismiss because their sheer scale of capital can move markets. Abu Dhabi alone has 1/3rd currency of China, but only 1/1000th of its population,” Blatteis said.
The strategic context is interesting, he said, because old oil is conservative. Sovereign wealth funds are known for focusing on mature industries such as health care, consumer, retail, energy, and financial services.
“SWFs, counter-intuitively, are on a shopping spree through the world of ‘new oil’ of data — a branch of finance perhaps least expected to get behind the business of tech, but that is what is happening,” he said.
