Aramco Ventures leads $30m Spiritus investment

RIYADH: Saudi Arabia’s corporate venture capital arms are playing a pivotal role in driving innovation and advancing economic diversification by aligning their investment strategies with both national and corporate objectives.

Between 2020 and the third quarter of 2024, corporate investors accounted for 27 percent of the 1,361 unique investors in the Middle East and North Africa region, deploying approximately $380 million, according to a report by MAGNiTT.

Saudi Arabia saw the highest ratio, with CVC’s making up 30 percent of local unique investors.

Funds such as Aramco Ventures and stc’s tali ventures exemplify this dual-purpose approach. By leveraging their resources and expertise, these CVCs are fostering startups that align with the Kingdom’s Vision 2030 agenda while simultaneously advancing the strategic and operational goals of their parent companies.

According to Stephane Ulcakar, associate director and head of corporate and government financial services at Arthur D. Little, these funds stand out due to their scale and strategic scope.

“Aramco Ventures recently secured an additional $4 billion in funding, raising its total capital to $7 billion,” Ulcakar noted in an interview with Arab News, adding that stc has also collaborated with global players like SoftBank and the Saudi Public Investment Fund to broaden its reach.

This alignment extends to specific investment sectors. In an interview with Arab News, Arjun Singh, partner and global head of fintech at ADL, explained: “These arms — and their affiliated funds — are not just looking for the next big thing but also for startups that can integrate seamlessly into their parent companies’ operations.”

Stc’s tali ventures prioritizes fintech, artificial intelligence, and blockchain, reflecting both the nation’s and its parent company’s ambitions to champion Saudi Arabia’s digital economy.

Similarly, Aramco’s Wa’ed Ventures focuses on startups that advance the Kingdom’s digital transformation while complementing Aramco’s strategic objectives.

Beyond funding, Saudi CVCs bring a distinct set of advantages to startups by leveraging industry expertise, supply chain networks, and expansive ecosystems.

Ulcakar highlighted the role of national initiatives such as the PIF’s National Development Strategy in addressing supply chain gaps and reshaping logistics.

Startups backed by these CVCs gain access to infrastructure and pilot programs within large ecosystems, which help refine their offerings.

“Certain well-known national players have partnered with startups to integrate advanced technologies into their supply chain operations, testing solutions like automation and predictive analytics,” Ulcakar stated.

Singh emphasized how this approach accelerates innovation, particularly in regulated industries like fintech and healthcare.

“Startups backed by corporate investors show stronger performance, as these partnerships can significantly accelerate regulatory approval processes and market entry,” he said.

Saudi National Bank’s venture capital arm is an example of an organization enabling fintech startups to scale efficiently by offering regulatory navigation support and access to a large customer base, he added.

“The Saudi VC market is undoubtedly burgeoning, with abundant demand for bankable capital and distinct funding and technical advantages brought by various players on the supply side,” Ulcakar said.

The market’s maturation is evident, with funding reaching $987 million in 2022, and CVCs accounting for 32 percent of all deals — a significant rise from less than 15 percent in 2018.

This growth is not limited to Aramco and stc — banks including SNB Capital, Riyad Bank and SAB are emerging as key players, further diversifying the funding landscape.

Additionally, Saudi Venture Capital continues to act as a catalyst for the ecosystem, having deployed over SR3.4 billion ($905.7 million) through direct and indirect investments.

This has propelled Saudi Arabia to capture the highest share of total VC funding in the MENA region, reaching 54 percent in the first half of 2024, up from 38 percent during the same period in 2023.

The Kingdom’s VC ecosystem is marked by a collaborative dynamic between corporate and traditional VCs.

Singh highlighted that “87 percent of CVC-backed deals in 2022-23 included traditional VC participation.”

This high rate of co-investment reflects a complementary relationship, where both types of investors contribute to building a more sophisticated, institutionalized ecosystem.

Singh noted that this coordinated evolution spans multiple sectors and is essential to creating a sustainable innovation landscape aligned with Saudi Arabia’s Vision 2030.

Looking ahead, the key question is how this ecosystem will consolidate further, potentially positioning the Kingdom as a global private capital hub.

“The diversity of approaches — from direct CVC arms to partnerships with established VC firms — demonstrates the market’s growing maturity and suggests a sustainable growth trajectory,” Ulcakar stated.

This progress is a critical component of the Kingdom’s strategy to establish itself as a leader in technology and innovation.

In sectors such as energy and logistics, Saudi Arabia’s CVCs are playing a pivotal role in driving innovation.

Ulcakar explained that the Kingdom is leveraging its global footprint to balance present needs with future aspirations.

Investments in fossil fuel infrastructure, for example, are complemented by efforts to localize electric vehicle technologies and pioneer nuclear fusion projects. These investments often blend incremental improvements with disruptive technologies, creating a dual pathway for transformation.

CVC arms are distinctive in their dual mandate to achieve financial returns while pursuing strategic objectives for their parent companies.

This dual focus shapes their investment and risk management philosophies, setting them apart from independent venture capital firms.

Singh said: “Unlike traditional VCs, which prioritize financial exits and short-term gains, Saudi CVCs often adopt a longer-term, patient capital strategy.”

This approach allows them to align their investments with their parent companies’ strategic goals, even if such opportunities involve higher initial risks or extended timelines.

For instance, Aramco Ventures invests in clean energy and carbon capture technologies, aligning with the parent company’s energy transition and sustainability goals.

These investments represent long-term bets with strategic implications, demonstrating a willingness to prioritize alignment with corporate objectives over immediate financial returns.

Similarly, tali ventures focuses on digital innovation while reinforcing stc’s leadership in telecommunications and digital services.

By investing in startups, tali ventures not only targets financial returns but also strengthens stc’s digital payments ecosystem, creating synergies that benefit the parent company’s broader ambitions.

Singh highlighted this dual approach as a key differentiator, noting that these capabilities enable Saudi Arabia CVCs to pursue opportunities that might otherwise be deemed too risky by independent VCs.

Ulcakar emphasized the nuanced nature of this approach. “The ability to generate both financial and strategic returns represents a unique advantage and a complex challenge in this growth market. There is no one-size-fits-all answer,” he said.

Ulcakar also noted that Saudi Arabia is one of the few growth markets that has successfully financed its own development, with investor preferences gradually evolving.

“We observe a gradual shift toward prioritizing financial returns over strategic ones, aligning with the Kingdom’s evolving investment goals,” he added.

RIYADH: President Donald Trump assured that investors entering the US under the newly introduced $5 million “Gold Card” visa program will not be subject to taxes on their foreign assets.

This assurance comes as Trump and his administration seek to attract high-net-worth individuals from around the world by offering a direct pathway to US residency and citizenship.

Addressing Congress on March 4, Trump outlined the program’s structure. “They (investors) won’t have to pay tax from where they came, the money that they’ve made, you wouldn’t want to do that. But they have to pay tax (in the US) and create jobs,” he said.

His remarks came as a reassurance to prospective investors who may have been concerned about the Foreign Account Tax Compliance Act, which has deterred some wealthy individuals from seeking US residency due to global taxation concerns.

Arab News raised this concern in a previous article following Trump’s announcement of the new initiative.

Now that the president has cleared that doubt and reassured investors that their assets abroad won’t be taxed, Salman Al-Ansari, a geopolitical analyst and former US investor, emphasized that the Gold Card exemption is a game-changer.

“This move certainly removes a significant barrier for Saudi and Gulf investors who were previously wary of US residency due to FATCA’s global tax implications,” he told Arab News in an interview.

Al-Ansari added that this exemption “is a clear indication that his administration is responsive to global investor concerns.”

However, he noted that despite this strong incentive, long-term concerns about possible changes in US tax policy are likely to remain. “Investors in the region understand that tax policies can change with different administrations, so some may still approach with caution, opting for structures that offer flexibility in case future regulations become less favorable,” Al-Ansari added.

Read: Will Trump strike gold with wealthy Arabs through new residency program?

The new initiative will replace the existing EB-5 visa program, which was originally designed to grant permanent residency to investors who contributed at least $1 million to a US business that created or sustained at least 10 jobs for American workers.

Trump emphasized to Congress that the initiative would address talent retention by allowing investors to fund and support highly skilled graduates from top US universities, preventing them from being forced to leave the country.

The US faces stiff competition from other nations with established golden visa programs, particularly Gulf nations like Saudi Arabia, which have successfully attracted high-net-worth individuals through similar initiatives.

On whether Saudi investors will become more selective about US investments due to domestic taxation under the Gold Card visa, Al-Ansari noted: “The exemption of foreign assets is a strong incentive, but the fact that income generated within the US is still taxable means that Saudi investors will likely be more strategic in their choices.”

He added: “They may favor sectors that offer higher tax efficiencies, such as real estate, energy, or industries benefiting from tax incentives.”

However, Al-Ansari said that as long as the US provides a stable business environment and competitive opportunities, taxation within the country is a reasonable tradeoff.

“The key factor for Saudi investors will be the ease of doing business and whether the Gold Card visa comes with additional facilitations that make investments more attractive beyond the tax benefits,” he concluded.

By structuring the Gold Card visa to exempt foreign assets from US taxation, Trump’s administration is positioning the program as an attractive alternative to other golden visa schemes worldwide.

Investors from the Gulf, who have already benefited from similar residency programs in their home countries, may now see the US as an increasingly viable destination for expanding their businesses and securing long-term financial stability.

As highlighted in a previous report by Arab News, the initiative is being closely watched due to its potential to attract substantial foreign capital, especially from countries like Saudi Arabia, the UAE, and Qatar.

Despite global competition from established golden visa programs, the US remains an appealing destination for investors, due to its business environment, talent pool, and real estate opportunities.

With the added benefit of no taxation on foreign assets, the Gold Card program is seen as a highly attractive option for investors looking to expand their businesses and secure long-term financial stability in the US.