Tech's elite gathered in San Francisco for 2 days of startup pitches, and it revealed the strange way Silicon Valley is grappling with its misgivings over Saudi money

Mohammed bin Salman Silicon Valley 00009

The tech startups that presented their products at this year’s Y
Combinator Demo Day event in San Francisco had clever solutions to
improve everything from healthcare to video games.

But one thorny problem that the crowd at the event has not
figured out how to deal with is Silicon Valley’s inconvenient
connection to Saudi Arabia. 

The oil-rich kingdom has been a major source of funding for tech
startups, both
directly
and through venture funds such as
SoftBank’s massive Vision Fund
. But after the brutal murder and
dismemberment of
Washington Post journalist Jamal Khashoggi
— according to
some reports at the behest of Crown Prince Mohammed bin-Salman
— the relationship has become problematic. 

No one would talk on the record about their Saudi ties or their
feelings about accepting Saudi capital. But in private discussions
with Business Insider on the sidelines of the event, several
investors opened up about the situation. 

One investor commented that, although they had never been
pitched by a Saudi-based startup, they would think twice about
investing their funds in one. Other investors BI spoke to echoed
that sentiment, and voiced concerns about investing in a country
they see as less than transparent.

The hushed responses were a bit odd, since the real issue isn’t
a problem with startups that hail from Saudi Arabia, but whether or
not to accept the money that the Saudi government is pumping into
tech. 

In fact, Saudi startups were nowhere to be seen at Demo Day,
despite the fact that the two-day event was in many ways a
testament to an increasingly global startup ecosystem. Among the
startups that got prime billing in the pitch presentation were
localized services like food delivery for underserved markets in
Iraq and Egypt. 

Also read:
Silicon Valley has become so money-obsessed, founders and venture
capitalists keep accepting money from horrible people, and it’s
ruining all of us

Y Combinator has stepped up its efforts to recruit founders from
outside the United States into its startup accelerator program. In
addition to the 27 teams from India and Latin America that
presented at the event, this summer’s batch of Y Combinator
startups included three teams from Northern Africa and the Middle
East. Those figures are only set to increase, as Y Combinator told
reporters at Demo Day of its plans to hold onsite interviews in Tel
Aviv next year.

Asked why no Saudi startups were present, Y Combinator said the
program “is accessible to everyone, regardless of their
location.”

While Saudi startups are a rarity in the tech big leagues, Saudi
money is easier to find. The Saudi government contributed $45
billion to SoftBank’s $100 billion Vision Fund, and the Saudi
Arabia’s Public Investment Fund is in talks with Softbank about
investing in Vision Fund 2,
according to the Wall Street Journal. 

With that kind of capital in play, it’s perhaps not surprising
that the crowd at Demo Day was still grappling for a coherent
response to the Saudi role in tech. The next Demo Day is in March
2020. Perhaps Silicon Valley’s best and brightest will have figured
it out by then.

SEE ALSO: Startup
founders need to distance themselves from big tech, according to
the CEO of famed startup accelerator Y Combinator


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Source: FS – All Tech News
Tech's elite gathered in San Francisco for 2 days of startup pitches, and it revealed the strange way Silicon Valley is grappling with its misgivings over Saudi money