S.F. Startups’ Dirty Oil Money

The dirty little secret of many Silicon Valley startups is that they’re taking billions in venture capital from a ruthless Saudi Arabian regime.

(Loco Steve | Flickr)

The obscenely wealthy Kingdom of Saudi Arabia was already notorious for supporting terrorism, oppressing women, and torturing political activists, even before the grisly October murder and dismemberment of Washington Post journalist Jamal Khashoggi. But that brutal regime has managed to keep a lower profile as one of the biggest venture capital donors of successful San Francisco startups like Uber, Lyft, Slack, DoorDash, and many others.

Uber was the first big tech company to take that Saudi money, accepting a $3.5 billion investment in 2016 from the Saudi Public Investment Fund (PIF), whose chairperson Crown Prince Mohammad bin Salman is suspected of ordering Khashoggi’s killing. The Saudi royal family now owns about 14 percent of Uber, and bin Salman personally is expected to reap $16 billion from Uber’s planned IPO.

The company’s new CEO Dara Khosrowshahi made a big deal out of declining his invite to the PIF’s fancy-ass “Davos in the Desert” Future Investment Initiative forum shortly after Khashoggi’s murder. But Uber has not returned any of the Saudi money; in fact, they’ve taken billions more since.

The #DeleteUber crowd might be surprised to learn that Lyft has taken similar Saudi investments. Saudi prince Al-Waleed bin Talal, bin Salman’s cousin, has a $250 million investment in Lyft.

The oil-rich monarchy of Saudi Arabia is investing in tech startups like mad, in an attempt to diversify into renewable energies and electric vehicles. Ironically, the current Saudi government is more interested in moving beyond fossil fuels than the current United States government.

To that end, the Saudi royal family sunk nearly $50 billion into Japanese conglomerate SoftBank with the specific intent of funding tech startups. That Saudi money has funded San Francisco startups like the workspace company WeWork ($4.4 billion), food delivery firm DoorDash ($535 million), and messaging platform Slack ($250 million).

But the biggest Bay Area funding deal with the Saudis may be one that didn’t happen. In August, electric car company Tesla was nearly sold outright to the Saudis.

In another of his eccentric Twitter episodes, Tesla CEO Elon Musk tweeted, “Am considering taking Tesla private at $420 [per stock share]. Funding secured.” Within a week, Musk acknowledged that funding was a $72 billion offer from the PIF. The deal would have essentially given ownership of the Palo Alto company, and its Fremont manufacturing plant, to the Saudi Arabian royal family.

That deal quickly went sour, as the Securities and Exchange Commission fined Musk and Tesla $40 million for wildly exaggerating the offer. They also determined that Musk used the numerical marijuana reference “420” just to impress his girlfriend, pop artist Grimes. Musk was forced to step down as chairman of the Tesla board as company stock shares plummeted by 35 percent.

The mood swings and market swings of tech companies, and their erratic CEOs, underscore the risk of Silicon Valley startups happily handing control over to one of the most brutal regimes on earth. These startups also have terrifying amounts of our personal data, which could be for sale to any oil tycoon who greases their palms.

View Comments