Andreessen Horowitz is now openly courting capital from Saudi Arabia, despite U.S. strains
Andreessen Horowitz is now openly courting capital from Saudi Arabia, despite U.S. strains.
According to Bloomberg, Marc Andreessen and Ben Horowitz appeared on stage with WeWork co-founder Adam Neumann to talk for at least the second time since November about their firm’s $350 million investment in Flow, which is Neumann’s new residential real estate company. Their choice of venue was intentional: the conference was organized by a nonprofit backed by one of Saudi Arabia’s largest sovereign funds, and Flow may launch in the Kingdom, says Bloomberg. Meanwhile, the three reportedly laid it on thick, with Horowitz praising Saudi Arabia as a “startup country” and saying that “Saudi has a founder; you don’t call him a founder, you call him his royal highness.”
Said Neumann separately: “It’s leaders like his royal highness that are actually going to lead us where we want to go.”
We’ve reached out to Andreessen Horowitz with related questions this morning and have yet to hear back.
That a firm of Andreessen Horowitz’s size and interests is looking to cement relationships in Saudi Arabia isn’t shocking. Though the 14-year-old outfit has never made public who its limited partners are, no one would grab at their pearls were it revealed that sovereign wealth funds from the region have helped boost the assets under management at the firm to $35 billion across its many funds. Back in October, Ben Horowitz spoke at the investment conference dubbed “Davos in the Desert” in Riyadh, which is usually a clue that someone is in the market for more money (or owes a backer a favor).
As for more explicit associations, in 2016, both Andreessen Horowitz and Founders Fund sold some of their share in the ride-share company Lyft to Saudi Arabia’s Prince al-Waleed bin Talal and his Kingdom Holding. In 2017, Marc Andreessen joined forces with the prince’s first cousin, Saudi Crown Prince Mohammed bin Salman (“MBS”), agreeing to join the advisory board of MBS’s ambitious project Neom, a group of futuristic tech-driven communities with its own laws across “an area the size of Massachusetts,” as the WSJ has described it.
If Andreessen stepped off that same board in 2018 after the CIA concluded that MBS ordered the gruesome murder of Washington Post columnist Jamal Khashoggi, he didn’t share it. In fairness, neither did Neom’s other high-profile advisory board members, including Travis Kalanick or Sam Altman. (Only then-Apple-design-chief Jony Ive disappeared from the list nearly as quickly as he was added, with Apple calling his inclusion “a mistake.”)
More broadly, not a single U.S. investor or startup founder with business interests tied to Saudi Arabia spoke out against MBS during that prolonged chapter in 2018, even as a Saudi-led military and economic war on Yemen was also garnering headlines for its brutality.
All the while, plenty of very big U.S. businesses have continued to conduct business in the region. KKR and Saudi Arabia’s Public Investment Fund work together routinely. JPMorgan just expanded its operations in Saudi Arabia late last year. Saudi Arabia’s sovereign wealth fund and BlackRock signed an agreement a few months ago to jointly explore infrastructure projects in the Middle East.
Still, venture firms, which tend to paint themselves as more virtuous than other asset providers in order to win over founders, have been a little quieter about their ties to the region. Which makes comments made yesterday by Ben Horowitz at the Miami event all the more notable. From Bloomberg’s story:
Onstage at the conference . . .Horowitz lamented that after Andreessen, the co-founder of their eponymous venture capital firm, had written a blog post in 2020 arguing it was “time to build,” it made waves, but not much changed in the U.S. “Probably 50 people in the U.S. government reached out to Marc to talk to him about it, and absolutely nothing happened,” Horowitz said.
But when Horowitz visited Saudi Arabia in October and ate lunch with Saudi Princess Reema bint Bandar Al Saud, and more recently, met with the governor of its sovereign wealth fund, Yasir Al-Rumayyan, they were enthusiastic.
Al-Rumayyan told him, “Let’s go,” and “within a week we had a half dozen really interesting meetings set up,” Horowitz said. “In April, we’re bringing our companies out to Saudi. And that’s what a startup feels like.”
In so openly praising its connections in Saudi Arabia, Andreessen Horowitz appears to be aligning itself with other global investment firms that are also unapologetic about their associations. If they can do it, so can we, may be the thinking.
Andreessen Horowitz may also be betting that the U.S. will be forced to reconsider its relationship with Saudi Arabia despite its repressive regime. Consider: After President Joe Biden reluctantly visited MBS last summer, asking him to lower gas prices, MBS instead hiked them during U.S. midterm elections in a show of power.
Empowering MBS further, in December, a U.S. federal court further said it was dismissing a lawsuit against the crown prince over Khashoggi’s murder, after he was named prime minister of Saudi Arabia by his father. (Though MBS was already the de facto ruler of the Kingdom, the move gave him immunity by the standards of the U.S. State Department.)
Whether other powerful venture firms follow Andreessen Horowitz’s lead here will be interesting to see. Though the firm has in many ways reshaped the way the wider venture industry operates today, publicly aligning itself with a country that the U.S. plainly distrusts is a much bigger gamble than, say, launching a standalone media property or jumping headlong into crypto.
MBS may be making progress on a global comeback, but U.S. concerns abound as Saudi Arabia draws nearer to China to develop a nuclear energy program that the U.S. doesn’t want it to build. That’s saying nothing of MBS’s friendly relationship with Vladimir Putin — whose war on Ukraine is believed to have already cost hundreds of thousands of people their lives — or the humanitarian crisis in Yemen it created, which the United Nations now says is the largest in the world.
It’s hard to forget, too, that business is done differently in Saudi Arabia, no matter how aggressively the region portrays its transformation.
In telling example, last summer, according to the WSJ, after their fans drove two game companies to cancel sponsorship deals with Neom over Saudi Arabia’s human rights record, its CEO reportedly called an emergency meeting to complain to his communications team and ask why he wasn’t warned of the game companies’ positions.
“If you don’t tell me who is responsible,” said the executive, “I’m going to take a gun from under my desk and shoot you.”
Tesla more than tripled its Austin gigafactory workforce in 2022
Tesla’s 2,500-acre manufacturing hub in Austin, Texas tripled its workforce last year, according to the company’s annual compliance report filed with county officials. Bloomberg first reported on the news.
The report filed with Travis County’s Economic Development Program shows that Tesla increased its Austin workforce from just 3,523 contingent and permanent employees in 2021 to 12,277 by the end of 2022. Bloomberg reports that just over half of Tesla’s workers reside in the county, with the average full-time employee earning a salary of at least $47,147. Outside of Tesla’s factory, the average salary of an Austin worker is $68,060, according to data from ZipRecruiter.
TechCrunch was unable to acquire a copy of the report, so it’s not clear if those workers are all full-time. If they are, Tesla has hired a far cry more full-time employees than it is contracted to do. According to the agreement between Tesla and Travis County, the company is obligated to create 5,001 new full-time jobs over the next four years.
The contract also states that Tesla must invest about $1.1 billion in the county over the next five years. Tesla’s compliance report shows that the automaker last year invested $5.81 billion in Gigafactory Texas, which officially launched a year ago at a “Cyber Rodeo” event. In January, Tesla notified regulators that it plans to invest another $770 million into an expansion of the factory to include a battery cell testing site and cathode and drive unit manufacturing site. With that investment will come more jobs.
Tesla’s choice to move its headquarters to Texas and build a gigafactory there has helped the state lead the nation in job growth. The automaker builds its Model Y crossover there and plans to build its Cybertruck in Texas, as well. Giga Texas will also be a model for sustainable manufacturing, CEO Elon Musk has said. Last year, Tesla completed the first phase of what will become “the largest rooftop solar installation in the world,” according to the report, per Bloomberg. Tesla has begun on the second phase of installation, but already there are reports of being able to see the rooftop from space. The goal is to generate 27 megawatts of power.
Musk has also promised to turn the site into an “ecological paradise,” complete with a boardwalk and a hiking/biking trail that will open to the public. There haven’t been many updates on that front, and locals have been concerned that the site is actually more of an environmental nightmare that has led to noise and water pollution. The site, located at the intersection of State Highway 130 and Harold Green Road, east of Austin, is along the Colorado River and could create a climate catastrophe if the river overflows.
The site of Tesla’s gigafactory has also historically been the home of low-income households and has a large population of Spanish-speaking residents. It’s not clear if the jobs at the factory reflect the demographic population of the community in which it resides.
Launch startup Stoke Space rolls out software tool for complex hardware development
Stoke Space, a company that’s developing a fully reusable rocket, has unveiled a new tool to let hardware companies track the design, testing and integration of parts. The new tool, Fusion, is targeting an unsexy but essential aspect of the hardware workflow.
It’s a solution born out of “ubiquitous pain in the industry,” Stoke CEO Andy Lapsa said in a recent interview. The current parts tracking status quo is marked by cumbersome, balkanized solutions built on piles of paperwork and spreadsheets. Many of the existing tools are not optimized “for boots on the ground,” but for finance or procurement teams, or even the C-suite, Lapsa explained.
In contrast, Fusion is designed to optimize simple inventory transactions and parts organization, and it will continue to track parts through their lifespan: as they are built into larger assemblies and go through testing. In an extreme example, such as hardware failures, Fusion will help teams connect anomalous data to the exact serial numbers of the parts involved.
“If you think about aerospace in general, there’s a need and a desire to be able to understand the part pedigree of every single part number and serial number that’s in an assembly,” Lapsa said. “So not only do you understand the configuration, you understand the history of all of those parts dating back to forever.”
While Lapsa clarified that Fusion is the result of an organic in-house need for better parts management – designing a fully reusable rocket is complicated, after all – turning it into a sell-able product was a decision that the Stoke team made early on. It’s a notable example of a rocket startup generating pathways for revenue while their vehicle is still under development.
Fusion offers particular relevance to startups. Many existing tools are designed for production runs – not the fast-moving research and development environment that many hardware startups find themselves, Lapsa added. In these environments, speed and accuracy are paramount.
Brent Bradbury, Stoke’s head of software, echoed these comments.
“The parts are changing, the people are changing, the processes are changing,” he said. “This lets us capture all that as it happens without a whole lot of extra work.”
Amid a boom in AI accelerators, a UC Berkeley-focused outfit, House Fund, swings open its doors
Companies at the forefront of AI would naturally like to stay at the forefront, so it’s no surprise they want to stay close to smaller startups that are putting some of their newest advancements to work.
Last month, for example, Neo, a startup accelerator founded by Silicon Valley investor Ali Partovi, announced that OpenAI and Microsoft have offered to provide free software and advice to companies in a new track focused on artificial intelligence.
Now, another Bay Area outfit — House Fund, which invests in startups with ties to UC Berkeley — says it is launching an AI accelerator and that, similarly, OpenAI, Microsoft, Databricks, and Google’s Gradient Ventures are offering participating startups free and early access to tech from their companies, along with mentorship from top AI founders and executives at these companies.
We talked with House Fund founder Jeremy Fiance over the weekend to get a bit more color about the program, which will replace a broader-based accelerator program House Fund has run and whose alums include an additive manufacturing software company, Dyndrite, and the managed app development platform Chowbotics, whose most recent round in January brought the company’s total funding to more than $60 million.
For founders interested in learning more, the new AI accelerator program runs for two months, kicking off in early July and ending in early September. Six or so companies will be accepted, with the early application deadline coming up next week on April 13th. (The final application deadline is on June 1.) As for the time commitment involved across those two months, every startup could have a different experience, says Fiance. “We’re there when you need us, and we’re good at staying out of the way.”
There will be the requisite kickoff retreat to spark the program and founders to get to know one another. Candidates who are accepted will also have access to some of UC Berkeley’s renowned AI professors, including Michael Jordan, Ion Stoica, and Trevor Darrell. And they can opt into dinners and events in collaboration with these various constituents.
As for some of the financial dynamics, every startup that goes through the program will receive a $1 million investment on a $10 million post-money SAFE note. Importantly, too, as with the House Fund’s venture dollars, its AI accelerator is seeking startups that have at least one Berkeley-affiliated founder on the co-founding team. That includes alumni, faculty, PhDs, postdocs, staff, students, dropouts, and other affiliates.
There is no demo day. Instead, says Fiance, founders will receive “directed, personal introductions” to the VCs who best fit with their startups.
Given the buzz over AI, the new program could supercharge House Fund, the venture organization, which is already growing fast. Fiance launched it in 2016 with just $6 million and it now manages $300 million in assets, including on behalf of Berkeley Endowment Management Company and the University of California.
At the same time, the competition out there is fierce and growing more so by the day.
Though OpenAI has offered to partner with House Fund, for example, the San Francisco-based company announced its own accelerator back in November. Called Converge, the cohort was to be made up of 10 or so founders who received $1 million each and admission to five weeks of office hours, workshops and other events that ended and that received their funding from the OpenAI Startup Fund.
Y Combinator, the biggest accelerator in the world, is also oozing with AI startups right now, all of them part of a winter class that will be talking directly with investors this week via demo days that are taking place tomorrow, April 5th, and on Thursday.
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