Sequoia Expands Mideast Foray With Debut Saudi Arabia Deal
Sequoia is a venture capital firm that creates and invests in disruptive technology companies. Founded in 1972, the company has since invested in over 500 companies from various sectors and industries.
Sequoia has recently announced their first ever deal in Saudi Arabia, representing a significant expansion of their Middle Eastern investment operations. But, first, let’s look at Sequoia’s background and how they got to this point.
History of Sequoia
Sequoia Capital is one of the top venture capital firms in the world, with offices on five continents. Founded in 1971 by Don Valentine, Sequoia specialises in early-stage investments and has funded hundreds of industry-leading companies including Apple, Google, Skype and Instagram. Since its inception, the company has focused on providing strategic guidance and capital to help entrepreneurs build their businesses.
Sequoia’s mission is to help founders build iconic companies by providing them with operational support and venture capital. With more than $4 billion in assets under management across four distinct investment strategies –
- general venture capital funds;
- growth stage funds;
- international funds;
- and secondary funds
– Sequoia provides founders with access to unmatched operational expertise, a deep network of contacts and generous financial backing. In addition to its investments, Sequoia offers various services including business development assistance, coaching programs for entrepreneurs and executive leadership forums.
The firm has had a long history of successful investments throughout the Middle East including Rakuten Kobo Inc., PicsArt Inc., Jabong Inc., Careem Technologies Inc., Maktoob Group PLC and ArabianMills Syabas Technology Sdn Bhd (Malaysia).
The recent deal with Saudi Arabia’s largest shopping mall operator marks Sequoia’s first investment in a Saudi Arabian company. It is hoped that this will mark a new era of investment opportunities for startups and established businesses across the region.
Sequoia’s investments in the region
Sequoia, a prominent global venture capital firm, has recently made several investments throughout the Middle East. It announced its first investment in Saudi Arabia earlier this week, a $30 million Series A round led by it in Riyadh-based madar Farms.
Sequoia’s expansion into the region did not start with madar Farms – its portfolio includes dozens of startups from Egypt to the UAE. In 2019 alone, the firm invested in more than 20 companies throughout the region and plans to continue its activity into 2020. Its investments span many industries such as e-commerce, artificial intelligence, education technology and financial services. Companies from countries such as Jordan, Lebanon and Iraq have benefited from Sequoia’s activities – for instance, it led an investment round for Tirana-based call centre startup Voizy earlier in 2020.
Sequoia is well known within the venture capital world and is credited with backing some of tech’s biggest success stories such as Apple and Google. Therefore, its decision to enter Saudi Arabia will be welcomed by entrepreneurs looking to gain access to additional sources of capital and those wanting to see further diversification among tech ecosystems across MENA.
The Saudi Arabian Deal
Sequoia is entering the Saudi Arabia market with a new venture capital deal. This marks the first of many deals for the venture capital firm in the Middle Eastern country. The deal marks a milestone for Sequoia, the first time the firm has ventured into the Mideast region. It also speaks volumes to investors’ trust in the Sequoia brand, as their foray into Saudi Arabia will undoubtedly be successful.
Details of the deal
On February 26, 2019, Riyadh-based Arzan VC clinched a funding deal with the prominent American venture capital firm Sequoia Capital. This marks Sequoia Capital’s first venture in the Saudi Arabian market.
The five-year partnership involves a combination of investments and strategic advisory services for Arzan VC’s portfolio businesses. This agreement reflects Arzan VC’s commitment to creating longer term value for their companies and fostering international collaborations with leading financial investors worldwide.
This deal will provide capital infusion and expand Sequoia’s access to an emerging yet fast growing startup sector in Saudi Arabia, while enabling Arzan of high-quality mentorship both from the U.S. and Europe markets. Along with this, fuel the increasing number of entrepreneurs through its EEDB exposure to other networks and strategic data analytics support resources to existing portfolio companies of Arzan VC.
These investments would also help provide new business opportunities throughout Saudi Arabia, opening doors for entrepreneurs in early phases, which will benefit Saudi Arabia’s economy by providing more jobs and investors interested in growing profitable ventures that contribute to its overall diversification goals (Saudi Vision 2030).
Reasons for Sequoia’s expansion into Saudi Arabia
There are several major reasons why Sequoia, a leading venture capital firm, is expanding into the Saudi Arabian market. The most significant is the emerging tech start-up scene in the region, which recent research indicates is growing rapidly year on year.
The second factor is a favourable business environment in Saudi Arabia regarding government policies and institutional support for foreign investors. This has enabled Sequoia to confidently expand its operations into the country without fearing stringent bureaucratic delays or cultural hurdles that may be common to other regions.
Another major driver of Sequoia’s decision is their belief that there is untapped potential within Saudi Arabia’s young population who are tech savvy and highly creative in innovating new products and services. These factors combined make Saudi Arabia an attractive place for Sequoia to invest and represent a strong growth opportunity for their own business and the entrepreneurs they partner with in the region.
Impact of the Deal
The recent investment by Silicon Valley’s Sequoia in a Saudi Arabian startup marks the first of its kind. The deal accelerates Sequoia’s expansion in the Middle East and has a broader impact on the tech startup industry in the region.
Let’s take a closer look at the implications of this deal for both Sequoia and the Middle Eastern tech ecosystem:
Impact on Sequoia’s portfolio
In terms of the impact on Sequoia’s portfolio, the Saudi Arabian Deal will likely lead to a significant increase in its global presence and an expanded product offering. In addition, the firm is looking to establish its brand recognition in new markets, and the agreement could help them achieve this.
With a $500 million commitment from Saudi Arabia’s Public Investment Fund (PIF), Sequoia can extend its reach and work with more venture capital and private equity investments in MENA-focused companies. This deal enables them to access unique opportunities and capitalise on regional trends in tech entrepreneurship such as fintech and e-commerce.
Through this investment, Sequoia is now well-positioned to:
- Grow existing MENA relationships
- Form new ones, giving it a distinct edge over competitors
- Work with different organisations based in the MENA region to tap into talent pools found within these countries
All in all, this partnership is beneficial for both Sequoia’s portfolio performance as well as their reputation across the MENA region.
Impact on the Saudi Arabian economy
The Saudi Arabian Deal is the first investment made by Sequoia – a venture capital firm based in the U.S. – into the Saudi Arabian market. The deal will likely bring increased investments from abroad, potentially stimulating foreign-led growth for Saudi Arabia’s economy and bolstering the presence of global tech players in the home country.
The impact on the Saudi Arabian economy should be beneficial, given that Sequoia will be investing in companies that it believes to have strong potential and a high margin of return, thereby enabling local entrepreneurs to succeed and boosting domestic resources and technology which could, in turn, lead to greater job creation opportunities across Saudi Arabia.
Moreover, it is anticipated that Sequoia’s venture activities in Saudi Arabia may pave the way for other investors to make their investments into the country, showcasing a positive image of the region and providing more opportunities to link investors with local entrepreneurs who need extra funding and support. In broader terms, this could lead to:
- An exponential economic growth witnessed through the surge of more business start-ups.
- Offer fresh perspectives on developing a more diverse range of industries which could further boost exports and compete with international players.
- Provide direct job generation effect through an influx of internal foreign investments.
- Create high profile partnership activities or projects among your National Oil Company upstream sector enhancing downstream operations.
- Implement upskilling programs for localised employees within businesses seeking innovation or looking for ways to capitalise on new revenue channels.
- Together with accompanying Government development initiatives created from taxation measures used from such influxes considering impacts from such sizeable injections from Sequoia themselves or partner groups into defined sectors thereby amplifying Federal income coffers relative towards such investments creating additional social needs inputs occasions deemed desirable without additional financial strains placed upon society as a whole bringing indirect benefits not directly seen merely as monetary but due also by other real-time related interventions taking place.
Future of Sequoia in the Middle East
Sequoia Capital recently made its debut in the Saudi Arabian venture scene with a $3.3 million investment in local e-commerce startup Mawdoo3, marking the first direct investment for the Silicon Valley-based venture capital firm in the country. This is seen as the first step for Sequoia in its expansion into the Middle East.
In this article, we’ll discuss the future of venture capital firms in the region.
Potential investments in the region
With the promising success of the Saudi Arabian deal for Sequoia, there has been increasing anticipation among investors and other industry leaders on where and how the capital firm will make additional investments in the Middle East. The turning point in venture capital in this region marked a stepping stone that indicated potential collaborations ahead with start-ups, small businesses, and nonprofits.
According to comments made by Sequoia’s Middle East chief executive officer Ibrahim Ajami, potential investments may involve financial technology companies which are a priority of interest for them. Aside from fintech investments, they are also looking at health-tech and artificial intelligence firms. Potential investments would range from seed funding to late stage steps. They would be carried out in partnership with regional investors to ensure economic progress for those more susceptible to change – i.e., start-ups, small ventures and scale ups.
Through such collaborations and mutual support from regional partners, Sequoia is looking to build collaborations having each party synergizing relative advantages globally rather than operating locally despite advantages one has over another locally. This could display substantial growth for Sequoia with already closing several deals in Jordan, UAE and other regional countries this year only highlighting their focus there through aggregated investments into existing regional funds that have already closed or approaching closure like BECO Capital or Wamda Capital along with their direct investment made into end recipients like Careem’s mobility branch or Iran based Chatak Inc garnering much attention right now amongst financial circles globally.
Opportunities for other venture capital firms
With Sequoia being the first venture capital firm to operate in Saudi Arabia, it has opened the door for other venture capital firms to operate in the Middle East. The deal they have struck is one of the first attempts to further enhance the startup opportunities from within the country. This gives other venture capital firms an unprecedented opportunity to become a part of this untapped area.
The trend for technology and innovation is continually increasing; thus, allowing venture capitalists to capitalise on this region’s potential. The Middle East has continuously been known for its more traditional investment methods, yet with technological advancements, there are now unprecedented opportunities for fintech, healthcare, retail and edtech. Moreover, it simply illustrates that there are several opportunities for these venture capitalists due to growing trends such as an increase in e-commerce startups and a specific focus on technological ventures such as robotics and autonomous cars by numerous countries in the Middle East.
There will likely be more competition than ever before, allowing new investors within this region to gain a competitive advantage. Therefore, Sequoia’s entrance into Saudi Arabia may have become the first, but many expect numerous other funds and investors will follow suit shortly after them.
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Tech expert fresh from the Australian Coast. Been in the tech industry more than 9 years, as part of a Business Growth Group. His out of office days are 100% for freestyle surfing and waves chasing.
