Time: November 04, 2018
Prince Khaled bin Alwaleed bin Talal turned 40 this year, but the man who’s steadily making a name for himself as the Middle East’s most prominent impact investor didn’t take too much time out to celebrate.
“I was asleep at 10.30pm,” he laughs, as he invites CEO Middle East to take a seat in his corner office with outstanding views of Dubai Creek.
The four-decade mark is a milestone in anyone’s life but over the course of an hour-long chat with the prince it’s clear that he also sees this as a time of tremendous opportunity.
Our conversation veers from Silicon Valley to Petra, and from the Middle East’s start-up ecosystem to the prospects for Saudi Arabia.
Prince Khaled’s interests can effectively be split into two distinct areas. There’s KBW Investments, the Dubai-headquartered holding company that counts Raimondi Cranes and other construction-related entities in its portfolio. Arada, the developer that has been making headlines across the Gulf for its eye-catching projects in Sharjah, falls into this category.
But it’s the second portfolio, KBW Ventures that is gradually also coming more to the fore, thanks to a series of investments into companies that are gaining traction in a number of different sectors around the planet.
“We’ve seen really, really good returns,” says Prince Khaled, of KBW Ventures, which has now grown to a team of seven executives.
Prince Khaled explains the Aljada Central Hub project to Dubai Crown Prince Sheikh Hamdan
“Granted this doesn’t happen all the time, but one of the companies we invested in, we got about a five-and-a-half or six times return, which is decent for the venture world. But we’re in the early stages right now, and we’re just planting the seeds of where the company will be.”
At first glance, there appears to be little rhyme or reason to the bewildering array of firms within the KBW Ventures portfolio.
There’s Geltor, a California-based start-up that makes plant-based collagen. Prolacta, a life sciences company that is developing human breast milk formula for premature babies, is already present in “20 percent of the hospitals in the US now,” Prince Khaled points out.
Then there’s Zipline, a drone delivery service that is currently flying medical supplies to rural parts of Rwanda.
Throw in cryptocurrency outfits, a lengthy list of plant-based and lab-grown food manufacturers, LED and electric vehicle projects in Jordan and a fast-growing partnership with National Geographic’s Ocean Odyssey, and it seems tough to draw the threads of this diverse investment strategy together.
For Prince Khaled, however, the strategy is clear.
“One of our criteria is you have to be profitable, you have to have an actual product that people can get behind,” he says. “I usually don’t invest in seed, I invest in Series A [rounds], B, maybe C and D is a little late.”
In addition, each investment is in a company that KBW Ventures believes has the capacity to impact the planet positively in the future, while Prince Khaled also says that bringing the very best that Silicon Valley has to offer to the Middle East is also a prime consideration.
“Right now, every company that I’ve worked with, we’ve set out plans for them to come into the region,” he says. “Why? Not because of how promising the region is, but I believe the region can benefit from amazing companies, amazing technology, amazing thinkers and driven entrepreneurs. Our economy and our people need new ideas and fresh blood. Sure, we’re getting some ideas organically from the region, but to get some influence internationally is something I’m a very big proponent of.
Virtual reality: Prince Khaled at the Ocean Odyssey event
“By default, a lot of these companies are going to want to expand in the US first – that’s natural. They’re also naturally going to want to go into Europe. The regulations there are pretty tough, so you have to jump through a lot of hoops, and then maybe Asia. I’m here as an investor to educate these companies, these CEOs. I explain to them what the Middle East has to offer, the purchasing power here. So we open the door for them and really educate them about the fact that this is a market they need to focus on.”
Future of food
Bringing a Silicon Valley mindset to the Middle East is no easy task, but Prince Khaled seems determined to accomplish the task step by step. A clear area of focus is the future of food, which is perhaps no surprise given his well-known agenda with regard to veganism, animal rights and the effect the livestock industry has on the environment.
Among the investments and partnerships that KBW Ventures is linked to is Beyond Meat, a Los Angeles-headquartered plant-based food manufacturer whose ‘Beyond Burger’ recently became available in the Gulf. JUST, another Californian producer, makes plant-based mayonnaise and a vegan egg alternative that has already been picked up by a number of America’s biggest retailers. Memphis Meats, based in San Francisco, is developing lab-grown (or ‘clean’) meat and has also seen interest not only from the likes of Tyson Foods and Cargill from the conventional meat industry but also from Bill Gates and Richard Branson as well.
Not only that, but Prince Khaled has also teamed up with Plant Power Fast Food, a San Diego outfit out that is presenting itself as the vegan alternative to McDonald’s, and plans to open an outlet in Dubai by the beginning of 2020.
“I’m in talks with a company right now that will import all these products to the region on a wholesale basis,” Prince Khaled says. “For me, this is something that I need to do, because I need to educate people that other alternatives are out there. And they can’t just be available in just one or two small chains – they need to be available in Carrefour, in Spinneys and in LuLu, so people can see they are readily available.
“Take JUST Egg for example – it’s new to the market and they can’t make enough of it as it’s just flying off the shelves in the US. We’re trying to get an allocation for that here in the Middle East. Beyond Meat is absolutely killing it in the US – it’s clear they have a market they need to fulfil there and expanding internationally isn’t necessarily on their radar. But they do have a supplier in Europe that we’re working with so we can get supplies here in the Middle East.”
In addition, KBW Ventures has also tied up with US celebrity chef Matthew Kenney to create Folia, a plant-based menu that was launched earlier this year at the Four Seasons Hotel Los Angeles at Beverly Hills, while Prince Khaled’s own Plant Café is already open in Bahrain. While a further 10 Plant Cafes had been earmarked, that number has grown considerably.
Nurturing entrepreneurship: Prince Khaled attends the Startup Evenings in Bahrain
“The 10 restaurants that I’m thinking of opening right now have grown to about 25 or 30,” the prince says. “How’s that going to work? KBW Ventures is already in talks with Four Seasons so we can have our brand in their properties in the Middle East – that automatically opens up six or seven locations in the region. And it’s an indirect way of me getting these [plant-based, clean] products into restaurants.”
Elsewhere in the KBW Ventures portfolio lies Zipline, the drone delivery company that is saving lives in Rwanda by flying blood to rural areas to prevent women from dying during childbirth. While the investment is certainly laudable, it’s also clear that the potential for Zipline around the world is colossal. As tech giants and e-commerce players around the globe have already found, solving the ‘last mile’ of delivery has proved one of the industry’s thorniest problems.
“If you really think about it, this company has been doing this for five years now, so we’ve got a backlog and a history of delivery,” Prince Khaled explains. “There’s an accuracy of about 10 square metres, even though you’re releasing the drone from a few thousand feet up. The idea behind it is that when the Western world opens up to drone delivery, we’ll already have the history. We’ve already done our homework, we have case studies and we’ve already been successful.”
Geltor – the plant-based collagen manufacturer – also looks to have incredible prospects. Given that conventional collagen comes from pigs and features in a huge percentage of cosmetic products, many of which are sold in the Muslim world.
“We’re heavily into that company and I 100 percent trust the CEO, Alex [Lorestani],” the prince says. “They have literally just received halal certification from a board of scholars in the US, and we’re working with them to get similar certification in Saudi Arabia, Pakistan, Malaysia and Egypt.”
Also experiencing sold take-up in the US is Prolacta Bioscience, a Los Angeles-based firm that collects human breast milk through donations or purchases, and then uses a bioreactor to concentrate the milk, double the protein and quadruple the fat in it.
“This then becomes a superfood for super-premature babies,” Prince Khaled says. “Sadly the medical industry refers to these children as the ‘million-dollar babies’ as it costs families and insurance companies so much to maintain babies in neonatal intensive care units.”
Use of the Prolacta formula reduces the amount of time premature babies spend in these units from up to 14 weeks to between two and four weeks.
“Right now we’re working with regulatory bodies at ministries of health in the region to introduce Prolacta to hospitals, because healthcare is subsidised heavily in the Arab world and it’s costing the government a lot of money,” Prince Khaled reveals.
Prince Khaled has met a number of high-profile leaders including King Abdullah II of Jordan
“In fact, there’s a growing number of premature births in the region, because of the increase of other factors. So we’re seeing a huge opportunity for healthy babies to live a beautiful and normal life and saving the government hundreds of millions of dollars in the process.
“We’re working with these government bodies and we’re working to bring Prolacta into the region. They’re already in about 20% of hospitals in the US now. So the underlying message for me is that I will always invest in companies that have positive impact on the world other than just being profitable.”
Saudi Arabia, in particular, is a key area of focus for Prince Khaled in the near term, as the kingdom seeks to diversify its economy away from oil as part of the Vision 2030 plan. Not only will Arada, the developer that forms part of the KBW Investments portfolio, be launching projects in Saudi Arabia in the not-too-distant future, but KBW Ventures will be making a sizeable play in the entertainment space, a new multi-billion-dollar industry for the country.
A recent experience in New York at Ocean Odyssey, a ‘virtual aquarium’ that is run in conjunction with National Geographic, has resulted in Prince Khaled deciding to launch the concept regionally, alongside Saudi Arabia’s new General Entertainment Authority (GEA).
“I said this has to be in Saudi, but it has to be bigger, it has to be geared for the Saudi population,” he says. “They’re really interested in partnering with us and entertainment is what I’m really interested in driving towards with regard to 2030. For me, within the next five to seven years, there won’t be a need for any zoos in Saudi Arabia, you’ll have Ocean Odyssey, and [we’re also considering] this idea of having an experiential indoor theme park that can also be a virtual zoo.”
Prince Khaled is also quick to praise the architect of the 2030 Vision, Prince Mohammed bin Salman, Saudi Arabia’s crown prince and a man he had previously referred to as a friend.
“We are friends; but obviously our relationship is very much on a professional level: he’s the Crown Prince and I treat him as such,” Prince Khaled says. “I look up to King Salman and to Prince Mohammed bin Salman so much. King Salman, or Prince Salman as he was when he was the Governor of Riyadh, has been a huge influence on my life. The way he conducted himself and the way he transformed Riyadh into what it is today is something I’m in awe of.
“Prince Mohammed bin Salman was always with His Majesty when he was Governor of Riyadh, so I got to know him during that time. He’s been a very positive influence for the country and the region. He’s a man of high moral grounds and integrity, very humble and demanding. Demanding for results that is.
“This country has seen dramatic positive shifts in the past few years and that’s all because of His Highness’ vision and courage to make these visions into a reality. I do know him personally, and we do interact. I respect his privacy and I respect his enormous responsibilities. I will always be behind His Highness and by His Majesty’s side, and by Saudi Arabia’s side; especially if there’s anything I can do to help.”
Prince Khaled’s unique exposure to Silicon Valley puts him in a solid position to appraise the local start-up environment, for which he has been a voluble proponent in recent years.
“The ecosystem here is lacking, and that’s the reality of it,” he says. “We’ve heard about these coming changes for SMEs, but they haven’t really happened yet, apart from some small changes here and there. Judicial systems need to change, the ecosystem for start-ups needs to change, it needs to be more inviting.”
Noble undertaking Prince Khaled and the Petra Development and Tourism Region Authority (PDTRA) have signed an agreement that will aim to bolster the historic site’s tourism sector
Of particular concern is the region’s intolerance of failure, the prince warns. In addition, he also points out that venture investing is still relatively low key in the Gulf, with investors more interested in deploying capital elsewhere.
“A lot of people aren’t investing in ventures, they’re investing in real estate and fixed assets that are generating revenue as rent,” Prince Khaled says. “That has to change. You do have tech investors here in the region, but they are investing in companies that are already pre-IPO, when they’ve already made it. When a bank pitches a private company to you – and I have to be careful here because I’m close to a lot of bankers and I don’t want to annoy them – you know it’s already too late. My focus is definitely on companies that haven’t got to that stage, so before they’ve made it.”
Prince Khaled’s businesses and interests may have branched out in a different direction to his father’s, but he says he is still learning from a man who is widely regarded as the region’s most celebrated businessman.
“I listen to him a lot,” the prince says. “I listen to everything he says, and I watch everything he does very carefully to really analyse and understand him. It’s like when I grew up – you’re always evolving and learning thanks to people like him. I consider myself a listener and I like to take in how people like him react, how people like him conduct themselves when it comes to business. So yes, it’s really a father-son relationship as opposed to anything else.”
It’s not too much of a stretch to imagine that many of these companies will be household names in the near future if their strategies pay off. Reports in the US are already stating that Beyond Meat is in touch with investment bankers about a potential IPO.
In the nearer term, Prince Khaled is keeping things ticking over with an aggressive timeline for investments and partnerships. Of the eight planned for 2018, five have been completed already, and the potential for growth in each of them is substantial.
“At the end of the day, I’m investing in these companies for the long haul,” Prince Khaled says. “I’m with them because I believe in the company, I absolutely believe in the management and I believe in the impact they can make in the future – so it’s about a lot more than just financial reward.
“That being said, I’m not a charity, so we’re definitely there to make money. But I’m their partner, they’re my partner and that’s how we communicate with each other. The future is absolutely a blank slate and I’m really excited about the investments we have and the partnerships we’re building right now.”
Prince Khaled on…cryptocurrencies
“I love the crypto market, and to me it’s a lot more about really educating yourself on what the crypto market is, what it has to offer and what the technology has to offer. People have really made a mistake on how they’ve categorised this asset class. It is not a currency – it’s very misleading, the word cryptocurrency. It should be classified as a new asset class.
“You have a lot of people in the SEC (The US Securities and Exchange Commission) who really need to educate themselves on what cryptocurrency is. We’ve seen a lot of haphazard announcements made here and there that have affected cryptocurrency quite negatively and [I’m not sure] whether that’s a ploy to get the market to ‘more realistic’ prices. At the end of the day, I believe it will soon be a regulated asset class and I think it will be really attractive for the likes of the heavy hitters on Wall Street to come in.”
Prince Khaled on…going public
“It’s not a plan for KBW Ventures, but it’s definitely on the table for KBW Investments, and it’s definitely on the table for part of our companies, also. I can’t say which ones yet, because we’re still in the early stages, but it’s definitely a possibility.
“We’re changing cities, we’re adding value to cities and we’ve got a big real estate portfolio right now, we’ve got a very big construction portfolio right now. I like to call it the hard hat division of KBW Investments. It’s definitely a possibility. I think it’s too early right now, but I could think of something maybe in the next three or four years. We’ll see Nasma Residences come into play, Dubai and Saudi Arabia come into play, and then we’ll have some really good assets to offer to the market.”
Prince Khaled on…change in Saudi Arabia
“My sister was one of the first to drive, she’s driving all over the place. But life in general is different, it’s much more open, it’s much more what Saudi Arabia really is, and how the Saudi people really are. Open, no restrictions on abayas or clothes – sure enough you have to be modest, but the abayas don’t have to be there. There’s a real change in Saudi Arabia right now. Some people want to wear the abaya, they have a culture that they want to hold on to, which they love, and some people don’t, but there’s no wagging the finger. It’s a really open environment right now, it has transformed so much.”