CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon

Updated 10 January 2019
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CEO of Saudi Arabia’s newest technology investment fund STV shoots for the moon

  • Abdulrahman Tarabzouni typifies the new style investor who is transforming the economy of the Kingdom
  • Over the past eight months, STV has scanned around 500 investment opportunities across the tech spectrum

"We pursue the moonshots,” said Abdulrahman Tarabzouni, but he was not taking about the space industry.

Tarabzouni is the chief executive and managing director of Saudi Arabia’s newest technology investment fund, STV. It began operations just over a year ago, independently managed but backed by the Kingdom’s communications giant Saudi Telecom, aiming to exploit opportunities in the technology sector, which has been identified as core to the Vision 2030 economic development strategy.

STV is looking for world-changing investment opportunities. “As venture capitalists, we are seeking ideas that improve things by a factor of 100, not by a factor of 10. I think that’s the same spirit that we see nowadays in Saudi Arabia from the top down,” he explained.

Tarabzouni typifies the new generation of Saudi business leaders who are leading the top-down transformation of the country and its economy, and the journey away from oil dependency.

An early career stint at Saudi Aramco and education at the Massachusetts Institute of Technology led to specialization in that part of the global economy where finance meets technology. After seven years with Google in California, Tarabzouni returned to Saudi Arabia to lead the venture with Saudi Telecom.

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Bio
Education

Massachusetts institute of technology, bachelors and masters in electrical engineering and computer science

Career

Member, Innovation leadership advisory board, Saudi Aramco

Financial trading technology analyst, Morgan Stanley

Strategy consultant, Oracle

Board member, Microsoft Board of the Future

Co-founder, Syphir tech company

Regional head of emerging Arabia and other roles, Google

Member of investment committee, Middle East Venture Partners

Various advisory roles at public and technology institutions in KSA

Board of directors, careem

Ceo and MD, STV

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The Kingdom is the perfect environment for the next phase of the digital revolution, he believes. “Saudi Arabia’s incredible resources, demographics and untapped potential to leapfrog its peers in terms of digital share of GDP, and the strong top-down will in the country to see this happen are strong enablers for a thriving venture ecosystem.

“We need to capitalize on the economic and strategic weight Saudi Arabia carries regionally and its ability to influence technology and consumer trends across the region, due to its market size and growing tech-user base,” he said.

Tarabzouni thinks the venture capital industry has a vital role to play in this transformation. “It is a balanced way of multiplying the number of players, companies, and ‘shots’ the ecosystem is taking to create new economic opportunities. Startups are new bets to create new forms of value, and venture capital firms are engines that can do this at scale with portfolios. If a country does it right, it ends up with a portfolio of transformative bets that will surely have some positive spill-over effect.

“Entrepreneurs are the best agents for such a task. They not only do this at scale, they are also the best positioned to go down the long tail of opportunities and diversify against the bulk of a country’s economic curve,” he said.

Saudi Telecom was the perfect partner for the venture. The largest telecoms company in the Middle East, it has moved quickly away from being an old-fashioned phone company to becoming an engine for digitization and innovation across the Middle East. “Their capabilities, assets, and aspirations are, without doubt, a powerful enabler for our joint objectives. This a partnership we are very proud of,” he said.

Over the past eight months, STV — with a $500 million war chest in which Saudi Telecom is the lead investor — has scanned around 500 investment opportunities across the tech spectrum including medical, media and ride-sharing sectors, and has led or co-led investments worth close to $250 million. Tarabzouni describes it as “a step change in the regional scale of deployed venture capital investments in such a short space of time.”

One of the most high-profile investments has been in the UAE based ride-hailing business Careem, in which Saudi Telecom was an early investor and where Tarabzouni sits on the board. 

Everywhere we look we see new opportunities to create market leaders that didn’t exist before and that will take a lot of investment.

Abdulrahman Tarabzouni

STV’s arrival on the Kingdom’s investment scene comes as interest in the technology sector reaches unprecedented levels. The Public Investment Fund — from its own resources and via its involvement in the $100 billion Vision Fund set up by SoftBank of Japan — is also pursuing tech opportunities, in Saudi Arabia as well as globally.

How does STV’s approach differ from these bigger organizations? “We are probably similar in our long-term ambitions but operating largely on different orders of magnitwude and levels of capital deployment. I think we all believe that technology will shift economic centers of gravity and disrupt long standing industries, and I think all of us are pursuing this fundamental idea that value creation is shifting.

“We are embracing, each in his own way, new paradigms, experiments, and ventures in areas where we see upsides that can be amplified by our own assets and differentiated capital. STV is merely one player in a long global and interconnected funding chain that includes all these players,” Tarabzouni said.

The venture capital industry in the Middle East is a long way behind its counterparts in many parts of the world. By way of example, Tarabzouni cites figures showing that the MENA region has only 10 percent of the venture capital funding of the US, relative to GDP.

“The industry is only now starting to gain a critical mass and momentum. Everywhere we look we see new opportunities to create market leaders that didn’t exist before and that will take a lot of investment, as well as venture capital backing, experience and support,” he said.

But the international investing community, from Asia to the US, is waking up to the opportunities that exist in the Middle East. “They are looking to put a lot of capital to work here. It’s a really positive outlook and exciting time for the regional industry right now,” he said.

Some analysts point to two difficulties in the STV strategy: The high valuations of the global technology sector, and the comparatively high levels of geopolitical risk associated with the region, and the Kingdom, in the minds of some foreign investors.

On the first fear, Tarabzouni is sanguine. “That (overvaluation) may be true in other parts of the world, but we still see a lot of value and fundamental growth opportunity for technology investment in the MENA region. In our view, we still need multiple times more VC money in MENA to rival other advanced economies and meet this region’s capacity.

“The potential is especially clear when you consider the Middle East has, for example, some of the highest smartphone penetration and digital media adoption rates in the world, as well as compelling tech-centric demographics. So, we are looking to partner with entrepreneurs who are sharp, who are tenacious, and who want to take on the world and solve big problems,” he said.

On the second point, he recognizes that the Middle East has its own issues. “The region, like any natural system, has strong forces of gravity — either legacies in the system or forces that add friction to change or progress. You need strong counter forces to achieve lift off; to reach escape velocity for new ideas.

“That is exactly what is happening now with Vision 2030 in Saudi Arabia and why we are bullish about the future. We want to work with stakeholders to enable that kind of escape velocity to happen in every sector where technology and venture capital can have a positive impact,” he said.

The economic backdrop is benign, he believes. “The long-term fundamentals of the Saudi economy remain robust. In Vision 2030 we also have a blueprint to create a better, more prosperous and sustainable Saudi Arabia,” he said.

Tarabzouni declined to talk about the other big issue facing the technology communications sector — the increasing concerns by governments and regulators over the powers of “Big Data” companies such as Facebook and Twitter and their role in “fake news.”

But, returning to the space theme, he said: “Indeed the times have changed. We are living in a world when the global space race for example is not between two powerful nations anymore but between 2-3 private companies backed by strong founders.

“The economic power of a nation is now measured by how it empowers its non-public sector to create value, and that’s the core of Saudi’s new approach, and why it is worth pursuing.”


Saudi energy minister recommends driving down oil inventories, says supply plentiful

Updated 19 May 2019
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Saudi energy minister recommends driving down oil inventories, says supply plentiful

  • Oil supplies were sufficient and stockpiles were still rising despite massive output drops from Iran and Venezuela
  • Producer nations discussed how to stabilise a volatile oil market amid rising US-Iran tensions in the Gulf, which threaten to disrupt global supply

JEDDAH: Saudi Arabia’s Energy Minister Khalid Al-Falih said on Sunday he recommended “gently” driving oil inventories down at a time of plentiful global supplies and that OPEC would not make hasty decisions about output ahead of a June meeting.
“Overall, the market is in a delicate situation,” Falih told reporters before a ministerial panel meeting of top OPEC and non-OPEC oil producers, including Saudi Arabia and Russia.
While there is concern about supply disruptions, inventories are rising and the market should see a “comfortable supply situation in the weeks and months to come,” he said.
The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output, Falih said.
“It is critical that we don’t make hasty decisions – given the conflicting data, the complexity involved, and the evolving situation,” he said, describing the outlook as “quite foggy” due in part to a trade dispute between the United States and China.
“But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so,” he added.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.
Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year.
The energy minister of the United Arab Emirates, Suhail Al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision.”
Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance.
“As UAE we see that the job is not done yet, there is still a period of time to look at the supply and demand and we don’t see any need to alter the agreement in the meantime,” he said.
US crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, data from the government’s Energy Information Administration showed on Wednesday.
DELICATE BALANCE
Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, OPEC sources said, adding that Russia wants to increase supply after June.
The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.
Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.
Sunday’s meeting of the ministerial panel, known as the JMMC, comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the Druzhba pipeline — a key conduit for crude into Eastern Europe and Germany — in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.
Russia’s Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.
OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under US sanctions and exempt from the voluntary reductions under the OPEC-led deal.
REGIONAL TENSIONS
Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-US trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to US-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last week’s attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the Kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi militia claimed responsibility. 
Saudi Arabia’s minister of state for foreign affairs said on Sunday that the Kingdom wants to avert war in the region but stands ready to respond with “all strength” following the attacks.
“Although it has not affected our supplies, such acts of terrorism are deplorable,” Falih said. “They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk.”
The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased US military presence in the Gulf over perceived Iranian threats to US interests.