The Significance Of Saudi Arabia’s New Venture Capital Fund

While the world’s media is focused on either Ukraine or OPEC+ developments, Saudi Arabia is quietly but aggressively pursuing Vision 2030. During one of the world’s largest technology conferences LEAP, which is held in Riyadh, Aramco unveiled the launch of a US$1-1.4 billion venture capital fund, Prosperity7Ventures. The new fund, which was introduced by Aramco Chief Technology Officer Ahmad Al-Khowaite, will focus on the development of next-generation technologies and business models. Officially, the main function of the new fund, which in reality has already been operational for around a year, is to support exceptional entrepreneurs in building transformative companies striving to solve some of the world’s most pressing challenges. Whether the fund will be focused exclusively on none oil and gas opportunities remains unclear, with Saudi Arabia’s main investment fund PIF having always focused on a mix of conventional and unconventional opportunities. During LEAP, more than $6.4 billion in technology and start-up investments were presented. In addition to Aramco’s Prosperity7, the Saudi gigaproject NEOM launched its own $1 billion investment from Neom Tech and Digital Company in future technologies. Both those entities are focused on digital transformation, aiming to boost the Kingdom’s digital economy. The main question at present with regard to the new Aramco venture capital fund is where it will be focusing in the next couple of years. Al Khowaiter’s statement to the press highlighted the fund’s intentions as developing next-generation technologies and business models. He also made it clear that Aramco will be using its international network and ecosystem to set up the right projects. “Through the breadth of the Saudi Aramco ecosystem, its vast resources and its far-reaching footprint across geographies and sectors, Prosperity7 can present unparalleled opportunities for scalability and impact,” Al Khowaiter said. He also emphasized that the fund would aim to “to strengthen the foundations for success for its (Aramco) portfolio companies”. Considering previous Aramco venture capital strategies, it is very likely that the strength of the world’s largest oil company will be of paramount importance.

LEAP is a clear example of Saudi Arabia’s Vision 2030 drive. During the event, Singapore-based logistics and supply chain company J&T Express Group announced an investment of $2 billion with venture capital fund eWTP Arabia Capital and other partners. According to the parties, the investment will allow J&T to establish its Mena headquarters in Riyadh and set up a network of smart logistics and distribution facilities that will extend the kingdom’s reach as the regional center for advanced logistics. Logistics is a major part of Vision 2030 and will also benefit Saudi Arabia’s largest companies such as Aramco, SABIC, Bahri (National Shipping Company of Saudi Arabia).

While the link has not yet been made officially, a recent acquisition by Aramco has likely been influenced by both LEAP and its new fund. Aramco has taken a 7.4% stake in Norwegian industrial software group Cognite from oil firm Aker BP. According to Cognite, the stake’s value is set at “around 1 billion Norwegian crowns,” or about US$113 million. That means that the total market value of Cognite is more than US$1.5 billion. The new acquisition will strengthen the partnership between Aramco and Cognite to provide digitalization services in Saudi Arabia and the wider Middle East region. Aramco’s SVP Ahmad Al Sa’adi stated that “Cognite has proven that their technology delivers complex real-time insights seamlessly and is optimizing how energy is being supplied to the world”. Both Cognite and Aker BP are part of Norwegian billionaire Kjell Inge Roekke’s group of companies, whose investment firm Aker ASA has a 50.5% stake in Cognite. The new deal is also a sign of the growing interest of Norwegian-based companies to take part in the developments on the Arabian Peninsula, especially in the Kingdom. Saudi investors and the PIF have had their eyes set on possible new acquisitions in Scandinavia for a while now. For Norwegian companies, the ongoing energy transition drive of the Norwegian government means new investors are needed.

In recent days, Aramco has also signed a major chip manufacturing deal with Japanese conglomerate Yokogawa. On January 28, both parties agreed that Aramco will seed and localize semiconductor chip manufacturing in Saudi Arabia and boost growth in the industrial digital business domain. According to the deal, the Saudi oil giant will explore the possibility of utilizing Minimal Fab technology for semiconductor manufacturing. The technology entails a production system that enables high-mix, low-volume manufacturing of semiconductors and microelectromechanical systems without the need for a cleanroom. Saudi Arabia, and especially Aramco, have been confronted by the ongoing logistical challenges of the global market due to a shortage of chips. According to the US government, this shortage is sure to continue for longer. Localization of manufacturing of critical products and semi-conductors is high on the list of priorities for the Kingdom as it aims to counter possible delays to its Vision 2030 projects. These developments will have a secondary effect of making Saudi Arabia a central player in the region when it comes to high-tech programs. Aramco’s overall pivotal position in all of this, as a customer, user, developer, and now financial supporter is clearly critical. 

A combination of the venture capital powers of the Saudi sovereign wealth fund Public Investment Fund (PIF) and Aramco, the Kingdom’s main income generator for the next decade or longer, is a powerful one. It also shows the determination of Saudi Arabia to pursue its Vision 2030. Aramco’s business intelligence, international ecosystem, and political powers on the global scene will make this new investment fund a formidable one. 

By Cyril Widdershoven for Oilprice.com

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