Middle East Money Takes a Round Trip

In the world of artificial intelligence, startups are raising heaps of cash from cloud and chip providers like Google and Nvidia. It’s a great deal for the big tech companies. The startups are also their customers, so much of that capital cycles back as revenue, a phenomenon some critics have dubbed “round-tripping.”

A similar dynamic is beginning to occur between sovereign wealth funds in the Middle East and U.S. private investment firms. Saudi Arabia’s $925 billion sovereign wealth fund, Public Investment Fund, has backed dozens of U.S. private equity and venture capital firms with the expectation that some of that capital will come back to the region in the form of investments in the country’s startups. That arrangement should help the Saudi capital of Riyadh shift its economy from oil to tech much more quickly.

This week I reported new evidence that PIF’s plan to stimulate more foreign investment in Saudi Arabia is gaining traction. Two prominent U.S. private equity firms, TPG and General Atlantic—both backed by Sanabil, a PIF subsidiary that invests in tech funds—are hunting for deals in the region. Recently, General Atlantic made an investment in Eyewa, an eyewear retailer based in Riyadh and Dubai, and TPG backed Riyadh-based point-of-sale software startup Hala.