Saudi Arabia's Investment In US-Based Startups On Rise

Earlier this month, March Capital and Sanabil Investments, two Saudi Arabian sovereign wealth funds, made a significant $175 million Series C investment in US-based startup Nile.

Saudi Arabia's Investment In US-Based Startups On Rise

Earlier this month, March Capital and Sanabil Investments, two Saudi Arabian sovereign wealth funds, made a significant $175 million Series C investment in the US-based startup Nile.

This was followed this week by Houston-based Axiom Space locking up a $350 million round headed by Saudi Arabia’s Aljazira Capital and Korean health care business Boryung Pharmaceutical. This was Aljazira Capital’s first investment in a U.S.-based startup, according to Crunchbase statistics.

Although it may not appear that the two rounds have much in common, they do: they demonstrate the increased interest that investors located in Saudi Arabia have in American entrepreneurs.

Saudi sovereign wealth funds, corporate venture arms, and other businesses are exploring more deals, worth more money, involving U.S.-based startups than ever before, according to Crunchbase data, despite the country’s investments in energy and even sports (think LIV Golf merging with the PGA Tour), which have been widely publicized.

As of 2019, Saudi Arabia-based companies have progressively grown the number of fundraising agreements they participate in, as well as the number of rounds they lead or co-lead. This includes a rise in 2022 figures from 2021, when the majority of major VC and growth companies were decreasing their market participation.

Only nine fundraising rounds were participated in by companies located in Saudi Arabia in 2019, according to a cursory study of Crunchbase data. The next year, it increased to 16, and in 2021, when the venture market peaked, it increased to 23.

This figure increased to 32 capital agreements in 2022, an almost 40% increase despite the venture market having already begun to significantly slow down. Only 13 agreements involving these businesses have been completed so far in 2023, which indicates that the investment tempo has slowed.

Between 2019 and 2021, just 14 agreements were led or co-led by companies located in Saudi Arabia. However, those businesses alone led or co-led 12 deals last year, and they have done the same for six agreements so far this year.

Since 2016, more than thirty various types of funds with headquarters in Saudi Arabia have invested in American businesses, with several of them taking the lead or co-leading some of them.

Since 2016, Saudi Arabia’s Public Investment Fund has either led or co-led the most transactions worth the greatest money, however the majority of those transactions are older. The company oversaw a $3.5 billion investment in Uber in 2016, as well as a $1 billion funding round for Lucid Motors in 2018.

For U.S.-based firms, the fund has ultimately led or co-led four rounds totalling more than $5.3 billion.

On the list of companies from the area that have led or co-led the most deals with American companies, Sanabil is listed second. Over $600 million in acquisitions have been led or co-led by Sanabil. Along with co-leading the $123 million Series E for another California business, Redwood City-based data analytics platform Alation in November, the investment company also co-led the Series C for San Jose-based Nile.

Prosperity7, the venture capital fund of Saudi Arabia-based Aramco Ventures, which recently opened an office in Silicon Valley, has also been a very active venture fund.

With almost $490 million raised, the venture arm has either led or co-led 11 rounds in the United States.

Leading a $56.7 million Series A in San Mateo, California-based automated data orchestration firm Hammerspace in July is one of the most recent deals. It co-led a $150 million round in April for the medical robotics start-up Noah Medical in San Carlos, California.

Prosperity7 participated in the most recent Nile Series C as well. The company has participated in 17 fundraising rounds totalling close to $900 million for American entrepreneurs.

Since 2016, no company has been busier than Saudi Aramco Energy Ventures. In the past seven or more years, the company has participated in 34 separate rounds totalling more than $900 million, and has led or co-led 12 of them totaling $157 million.

But, like the Public Investment Fund, the majority of rounds date back more than a year. Most recently, in 2021, the business co-led a $44 million Series C investment in San Diego-based AttackIQ, a cybersecurity startup.

It is not unexpected that companies with headquarters in Saudi Arabia have invested more money in the U.S. startup sector. One of the most developed startup ecosystems in the world is in the United States, and venture capital is a global industry.

However, as seen by the two rounds this month, Saudi Arabian companies are continuing to be active even in a waning venture market. If previous patterns are any indication, there is no reason to believe that Saudi Arabian investment will slow down any time soon.