Andreessen Horowitz is now openly seeking capital from Saudi Arabia, despite tensions in the US.
According to BloombergMarc Andreessen and Ben Horowitz appeared on stage with WeWork co-founder Adam Neumann to at least the second time about their company since November $350 million investment in Flow, Neumann’s new residential real estate company. Their choice of location was intentional: The conference was hosted by a nonprofit backed by one of Saudi Arabia’s largest sovereign wealth funds, and Flow could be launched in the Kingdom, Bloomberg says. Meanwhile, the three reportedly laid it on thick, with Horowitz praising Saudi Arabia as a “start-up country” and saying that “Saudi has a founder; you don’t call him founder, you call him His Royal Highness.”
Said Neumann separately, “It’s leaders like His Royal Highness who are actually going to lead us where we want to go.”
We contacted Andreessen Horowitz this morning with related questions and have not heard back yet.
That a company of the size and interests of Andreessen Horowitz wants to strengthen relations in Saudi Arabia is not shocking. While the 14-year-old outfit has never made public who its limited partners are, no one would reach for them pearls where it was revealed that sovereign wealth funds from the region have helped increase assets under management at the company $35 billion about the many funds. In October, Ben Horowitz spoke at the “Davos in the Desert” investment conference in Riyadh, which is usually an indication that someone is in the market for more money (or owes a financier a favor).
As for more explicit associations, in 2016 both Andreessen Horowitz and Founders Fund sold part of their stake in the ride-share company Lyft to Saudi Prince al-Waleed bin Talal and his Kingdom Holding. In 2017, Marc Andreessen joined forces with the prince’s cousin, Saudi Crown Prince Mohammed bin Salman (“MBS”), and agreed to join the advisory board of MBS’s ambitious project Neoma group of futuristic, technology-driven communities with their own laws in “an area that is the size of Massachusetts”, as the WSJ described it.
If Andreessen left that same board in 2018 after the CIA closed that MBS ordered the gruesome murder of Washington Post columnist Jamal Khashoggi, he did not share. In fairness, neither did Neom’s other high-profile advisory board members, including Travis Kalanick or Sam Altman. (Only then-Apple design chief Jony Ive disappeared from the list almost as quickly as he was added, and Apple called his inclusion “an error.”)
More broadly, not a single U.S. investor or startup founder with business interests tied to Saudi Arabia spoke out against MBS during that long chapter in 2018, even as a Saudi-led military and economic war against Yemen was also underway. used to be. grab headlines because of his brutality.
All the while, numerous very large US companies have continued to do business in the region. KKR and the Public Investment Fund of Saudi Arabia work regularly together. Just JPMorgan expanded its activities late last year in Saudi Arabia. The sovereign wealth fund of Saudi Arabia and BlackRock signed an agreement several months ago to jointly explore infrastructure projects in the Middle East.
Yet venture firms, which tend to paint themselves as more virtuous than other lenders to win over founders, are more quiet about their ties to the region. That makes yesterday’s comments by Ben Horowitz at the Miami event all the more remarkable. From the Bloomberg story:
On stage at the conference. . .Horowitz complained that after Andreessen, the co-founder of their eponymous venture capital firm, wrote a blog post in 2020 claiming it was “time to build,” it made waves but didn’t change much in the US. “Probably 50 people in the US government contacted Marc to talk to him about it, and absolutely nothing happened,” Horowitz said.
But when Horowitz visited Saudi Arabia in October and had lunch with Saudi Princess Reema bint Bandar Al Saud, and more recently met with Sovereign Wealth Fund Governor Yasir Al-Rumayyan, they were thrilled.
Al-Rumayyan told him, “Let’s go,” and “within a week we had organized half a dozen really interesting meetings,” Horowitz said. “In April we will bring our companies to Saudi Arabia. And that’s how a startup feels.”
In so openly praising his connections in Saudi Arabia, Andreessen Horowitz appears to be joining other global investment firms who are also unapologetic about their associations. If they can do it, so can we, is the thought.
Andreessen Horowitz may also be betting that despite its repressive regime, the US will be forced to rethink its relationship with Saudi Arabia. Consider: After President Joe Biden hesitant visited MBS last summer and asked him to lower gas prices.
To further bolster MBS, a US federal court in December further said it was dismissing a lawsuit against the crown prince over Khashoggi’s murder after he was appointed Prime Minister of Saudi Arabia by his father. (Although MBS was already de facto ruler of the kingdom, the move gave him immunity by US State Department standards.)
Whether other powerful venture firms follow Andreessen Horowitz’s example here will be interesting to see. While the company has in many ways changed the way the wider risk industry operates today, publicly aligning with a country that outright distrusts the US is a much bigger gamble than, say, launching a independent media property or jump headlong into crypto.
MBS may be making headway in a global comeback, but the US is deeply concerned as Saudi Arabia moves closer to China developing a nuclear power program that the US is unwilling to build. That says nothing about MBSs friendly relationship with Vladimir Putin – whose war against Ukraine has reportedly already happened hundreds of thousands of people’s lives – or the humanitarian crisis in Yemen it caused, which the United Nations now says is the largest in the world.
It’s also hard to forget that doing business in Saudi Arabia is done differently, no matter how aggressively the region portrays the transformation.
In telling example, last summer, said the WSJafter their fans pushed two game companies to cancel sponsorship deals with Neom over Saudi Arabia’s human rights record, the CEO reportedly called an emergency meeting to complain to his communications team and ask why he had not been warned about the positions of the game companies.
“If you don’t tell me who’s responsible,” said the director, “I’ll get a gun from under my desk and shoot you.”