Silicon Valley is flooded with Saudi money — but Jamal Khashoggi's death may change that
'I think they're taking a wait-and-see approach'
Some of Silicon Valley's biggest companies are backed by deep-pocketed Saudi investors, but since the death of journalist Jamal Khashoggi, the source of those funds is being scrutinized.
Saudi Arabia, led by Crown Prince Mohammed bin Salman, has diversified its investment portfolio over the past decade, looking increasingly to tech firms.
"This is the oil of the future," said Michael Coren, a journalist for Quartz who investigated the source of capital investments behind some of the valley's best-known firms.
Those investments have ballooned in the past five years since bin Salman took power in the country.
There are ethical lines that the Saudis and bin Salman have crossed that essentially make that money toxic.- Michael Coren, Quartz
While some companies are pushing back against money they see as unethical, Coren says that others are turning a blind eye.
Khashoggi, a critic of the Saudi regime and columnist for the Washington Post, was killed inside the Saudi Consulate in Istanbul. A Turkish prosecutor says he was strangled.
"It's possible that this killing and this awareness on the part of both founders and investors will make Saudi money too toxic for many — but not all — to handle," Coren told Day 6 host Brent Bambury.
Betting on tech
By investing in technology and beyond, Saudi Arabia is looking ahead to a world beyond oil. In the past, Saudi investments have focused on industrial manufacturing and chemicals, Coren says.
Now, they're making bets on aerospace, ride-sharing platforms and virtual reality.
"The returns that you can see on a company like Uber or Lyft or some of the startups that are emerging today can't be matched by most sectors of the economy," he added.
It's difficult to pinpoint exactly how much Saudi Arabia has invested in U.S.-based tech companies, but public filings point to $6.5 billion US dispersed across a handful of companies including Uber, Lyft and Magic Leap.
It can be tricky to link money back to Saudi Arabia. In some cases, money might be siphoned through a shell fund. In others, it comes from a larger venture capital fund like Japanese company Softbank's Vision Fund.
With $45 billion in Saudi investments, "that has made 26 investments including Slack, WeWork, GM Cruise and others, and the Saudis are planning to make another $45-billion cheque," Coren said.
"So, you can bet that if there is a large cheque being written in the valley, there's a good chance it has touched Saudi money before."
In the wake of the Khashoggi killing, however, Saudi money may be less desirable.
In early October, English billionaire Richard Branson stepped away from two tourism projects in Saudi Arabia. He also announced that he would suspend talks with Saudi Arabia about funding for his space projects.
Others have backed away from Saudi money in other ways.
Uber Technologies CEO Dara Khosrowshahi withdrew from the Saudi-run Davos in the Desert conference, while Bill Gates, through his philanthropic foundation, stopped a $5 million payment to bin Salman's not-for-profit.
"The message is that there are ethical lines that the Saudis and bin Salman have crossed that essentially make that money toxic," Coren said.
But whether or not these discussions were happening before the killing of Khashoggi remains unclear.
"I don't think this is going away anytime soon," he said.
"Most [venture capitalists] were unwilling to speak on the record and I think they're taking a wait-and-see approach."
With files from Associated Press.
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