Apple CEO Tim Cook gives Crown Prince of Saudi Arabia Mohammed bin Salman a tour of Apple's HQ
- At Y Combinator's annual pitch competition Demo Day, hundreds of investors come to San Francisco to hear from the accelerator's latest group of founders.
- Three teams from Northern Africa or the Middle East presented to investors, pitching localized services like food delivery for underserved markets like Iraq and Egypt.
- Many investors, however, expressed concern investing in companies from another country in the region, Saudi Arabia, as concern mounts over the government's human rights abuses.
- The country's sovereign wealth fund has been an active backer of Silicon Valley tech companies through investment funds like SoftBank's Vision Fund.
- Many investors, however, said they hadn't met with any companies from Saudi Arabia.
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The tech startups that presented their products at this year's Y Combinator Demo Day event in San Francisco had clever solutions to improve everything from healthcare to video games.
But one thorny problem that the crowd at the event has not figured out how to deal with is Silicon Valley's inconvenient connection to Saudi Arabia.
The oil-rich kingdom has been a major source of funding for tech startups, both directly and through venture funds such as SoftBank's massive Vision Fund. But after the brutal murder and dismemberment of Washington Post journalist Jamal Khashoggi - according to some reports at the behest of Crown Prince Mohammed bin-Salman - the relationship has become problematic.
No one would talk on the record about their Saudi ties or their feelings about accepting Saudi capital. But in private discussions with Business Insider on the sidelines of the event, several investors opened up about the situation.
One investor commented that, although they had never been pitched by a Saudi-based startup, they would think twice about investing their funds in one. Other investors BI spoke to echoed that sentiment, and voiced concerns about investing in a country they see as less than transparent.
The hushed responses were a bit odd, since the real issue isn't a problem with startups that hail from Saudi Arabia, but whether or not to accept the money that the Saudi government is pumping into tech.
In fact, Saudi startups were nowhere to be seen at Demo Day, despite the fact that the two-day event was in many ways a testament to an increasingly global startup ecosystem. Among the startups that got
Y Combinator has stepped up its efforts to recruit founders from outside the United States into its startup accelerator program. In addition to the 27 teams from India and Latin America that presented at the event, this summer's batch of Y Combinator startups included three teams from Northern Africa and the Middle East. Those figures are only set to increase, as Y Combinator told reporters at Demo Day of its plans to hold onsite interviews in Tel Aviv next year.
Asked why no Saudi startups were present, Y Combinator said the program "is accessible to everyone, regardless of their location."
While Saudi startups are a rarity in the tech big leagues, Saudi money is easier to find. The Saudi government contributed $45 billion to SoftBank's $100 billion Vision Fund, and the Saudi Arabia's Public Investment Fund is in talks with Softbank about investing in Vision Fund 2, according to the Wall Street Journal.
With that kind of capital in play, it's perhaps not surprising that the crowd at Demo Day was still grappling for a coherent response to the Saudi role in tech. The next Demo Day is in March 2020. Perhaps Silicon Valley's best and brightest will have figured it out by then.