In the dynamic world of startup funding, HRH Prince Khaled bin Alwaleed bin Talal Al Saud’s KBW Ventures stands out for its sector-agnostic investment approach. In an exclusive interview with Finance Middle East, Prince Khaled highlighted the pivotal factors that guide his investment decisions.
KBW Ventures views its portfolio companies as investments and strategic partners, Prince Khaled emphasised. Central to this partnership is a mutual fit between the startup and his VC firm, ensuring shared objectives and a cohesive growth trajectory. This emphasis on alignment extends to the founding team, with Prince Khaled placing significant value on their vision and market acumen.
“Internally, we always see portcos [portfolio companies] as ‘partners’; that’s one of the first things I look at before committing to a round. Are we the right fit for them? Are they the right fit for us? Do we have chemistry in terms of where we want to see the company go/grow?” Prince Khaled explained. “The founding team is incredibly important; a powerful connection with the founder’s vision sometimes even leads to me committing a bigger ticket.”
“What inspires a lot of confidence in me is founders that know their market, their competition, their numbers,” he added. Prince Khaled stressed the significance of a robust understanding of the market, competition and financial metrics. Founders who demonstrate a deep knowledge of these aspects inspire confidence and are more likely to secure KBW Ventures’ backing.
One company that impressed Prince Khaled was —A Dozen Cousins, a natural food brand specialising in authentic Creole, Caribbean and Latino-inspired dishes, founded by CEO Ibraheem Basir. The company’s brand narrative is influenced by Basir’s childhood spent in the culinary melting pot of Brooklyn and is named after his daughter and her 11 cousins.
Basir met Prince Khaled at InFlavour, a leading B2B food event hosted by Tahaluf in partnership with the Saudi Ministry of Environment, Water and Agriculture (MEWA). A Dozen Cousins won in the conference’s startup competition, with Prince Khaled participating as a judge.
The Prince said he was thoroughly impressed by Basir’s pitch and the value he brings to the table. “He has extensive food sector experience, has worked with several relevant market players, and knows where the gaps are.”
He says he “was drawn” to the company’s potential for scalability and ability to effectively fill a niche in the market.
“The first thing that struck me was its wider value proposition; this company has real potential to scale, and that’s one of the key metrics most investors would agree is necessary before you back a round,” said Prince Khaled.
“There’s almost nothing better than being able to develop a product that fits snugly into that gap and own a niche—you can gain ground quickly if you’ve done your differentiating factors right.”
“Good investors tend to focus on the same questions about your business,” said Basir. “They want to understand the consumer needs you are meeting, the size of the market you are going after, and the things that make your product and brand different and better than your competitors.”
“Thankfully, those are all topics that we spend a lot of time discussing internally, and they are areas that I am always excited to discuss with potential partners,” he added.
Breaking boundaries
Prince Khaled’s investment philosophy has evolved, he says, involving “more flexibility,” as evidenced by his willingness to explore non-vegan opportunities. While he has a number of investments in vegan alternative proteins, he views the diversification of investment portfolios as essential, emphasising the importance of meeting diverse consumer needs.
“I have had a few changes in opinion,” he said. “First off, it’s as simple as one size does not fit all, and different nutritional needs require different options. If a cell-cultivated product can meet that demand, then all the better.”
“I am an investor in food technologies that produce real meat, chicken, seafood and more, and many people don’t consider that vegan,” he added. “If it is resting on a technicality then this isn’t my first investment that includes some type of animal product. I’ve been talking recently about a ‘broader approach’ in our investment direction so expect more of this from KBW Ventures.”
The Prince said he wants to work from within the industry and back all parts of the nutrition ecosystem. For him, it’s no coincidence that some of the most prominent investors in food technology are traditional meat producers. “Three of A Dozen Cousins’ four product lines are vegan, and they expect that future innovation will be vegan-friendly as well,” he explained. “Why A Dozen Cousins in particular? Founder capability, product quality, growth potential, partnerships, pipeline, and more.”
KBW Ventures, established in 2014, is a venture capital firm headquartered in the GCC, between Riyadh and Dubai. The firm specialises in making venture and growth investments in a wide array of sectors, most recently spanning disciplines including fintech, agtech, food tech, B2B SaaS, aviation and transportation technologies, energy technology, biotechnology, entertainment and broadcast technologies and more.
Two notable investments by KBW Ventures include BlueNalu and Kueski. BlueNalu aims to lead the global market in cell-cultured seafood, offering consumers safe, healthy, and sustainable products. Recently, the firm secured a significant investment from the Neom Investment Fund alongside a strategic partnership with NEOM, signifying a pivotal moment for the company’s growth trajectory.
“The critical factor contributing to BlueNalu’s success is Lou’s [Cooperhouse] strategic approach to the future of food and the extensive industry experience he draws on,” explained the Prince, “He’s not coming from outside the sector trying to revolutionise it; he’s armed with industry intel and hands-on experience and trying to disrupt it from the inside.”
Kueski, on the other hand, is Mexico’s largest online consumer lender, catering to individuals excluded from traditional banking systems. Prince Khaled highlighted Kueski’s success in offering diverse financial products and proactive adoption of AI technologies for risk assessment, positioning them ahead of industry trends.
According to Bloomberg, Amazon Mexico teamed up with Kueski in January to introduce personal loans and Buy Now Pay Later (BNPL) options to its customers in the country, marking Amazon’s debut in the Mexican BNPL market.
Under the agreement, Amazon will introduce bi-weekly installment payments, enabling customers to utilise this feature for up to 12 transactions. Kueski will handle the financing for these purchases and assess credit limits for individual users.
Risk management
When asked how VCs can assess and manage risks when making investment decisions, Prince Khaled said he maintains a pragmatic outlook.
“This industry by nature is not for the risk averse,” he stated. “If you are in venture capital, by definition you are taking risks as a lot of the money that you are committing is put into moonshot ideas.”
However, he remains steadfast in his commitment to identifying resilient startups with the potential for long-term growth.
Talking about sourcing deal flow and risk assessment, the Prince said, “Many of the investments that I do come from my network VCs, including PROOF, which is an expansion-stage venture capital that funds big rounds of advanced companies. They have access to highly-competitive, oversubscribed financing rounds led by top-tier VCs,” he elaborated.
He explained the landscape of early-stage and mission-driven startups in which KBW Ventures has invested income from several sources; the ones that approach them directly go through a few rounds of DD [due diligence]. “We don’t lead rounds, so others do a lot of the bookwork DD. On our side, we’re looking for things like staying power and scalability,” Prince Khaled stated.
Economic uncertainties
“Market downturns are actually not such a bad thing for investors, as valuations often become more reasonable. You will hear many investors refer to downturns as market corrections,” he explained. “Further, it sometimes serves to weed out the weaker businesses, the Prince explained on navigating economic uncertainties.
He said that there was a boom—it was a period of cheap money—and with what came inflated valuations. This was followed by a correction, as is often the cycle. It became harder to raise, and that’s because investors were forced to be more prudent and evaluate more rigorously.
“There were many reports of investment slowdowns, but KBW Ventures did not slow down,” stated Prince Khaled. “Looking at ticket size, we invested more in 2019-2020, but if you look at number of companies we did more in 2021-2022. Across all of those years we had sector diversity, with most falling into some type of technology category.”
When asked how geopolitical trends impact the venture capital landscape, Prince Khaled explained, “I think political instability is influencing capital deployment. A lot of the funds are sitting on the sidelines as the political climate is unsafe and unstable. There’s a lot of unease around conflicts globally, and that doesn’t make people confident or ready to part with big cheques.”
Market trends
Looking ahead, Prince Khaled anticipates a surge in innovation, particularly in artificial intelligence (AI). “AI is clearly the biggest trend now, and I know you know that a lot of VCs are putting a lot of money into AI right? This is crucial juncture in the history of technology, the next few years in AI development are going to really define so many different industries”
In his opinion, any AI company working on something narrow will get duplicated or replicated by prominent market players. They are already honed in on making their AI proficiencies broad and far-reaching and are now fine-tuning the different capabilities.
“If your AI works on pharmaceuticals, you will either have a quick acquisition or a quick duplication,” he explained. “The acquisition rates by the bigger players are not high relative to the number of companies on the market—this isn’t as big as it should be. It’s not piquing my interest because of that.”
While AI presents lucrative opportunities, Prince Khaled is very passionate about green sectors, including carbon capture technologies and fusion energy.
“To be clear, AI will have a major role to play here, but I am talking about specific methods and technologies,” he clarified.
“Firstly, carbon capture technologies—we previously invested in one startup [Carbix]—I’ve been keen on the sector for years, but it’s still costly to capture and store carbon emissions, so this hasn’t quite turned the corner yet,” Prince Khaled explained. “It’ll get there, and like many ventures, it’s a ‘big’ idea that is attainable with the right amount of money fuelling the exploration of innovative approaches.”
KBW Ventures recently invested in a round for a fusion energy company out of California; the round has yet to close, so the details are awaited. “There are various predictions on fusion energy being market-ready in 20, 30, 50 years, it depends on who you talk to, and politics comes into play,” the Prince told Finance Middle East in an exclusive interview.
“Some think it was the best indicator of success coming soon, others think it was nothing but a tiny blip on the long road to commercialisation. I’m the former, of course, but like all my venture investments I’m in it for the long haul.”
Future of VC
Regarding the future of venture capital, the Prince expects the pace of innovation to continue to increase exponentially. “We’ll see innovations come at us more furiously than we have in the last 10 or even 20 years,” he said.
“I think we’re going through a fundamental change when it comes to computers and technology. The 80s were about computers and hardware; the 90s were about the web; 2000s were about mobile; the last decade was about moving everything from the data centre to the cloud. I think AI is the next wave.”
“This means you’re going to see not only AI platform companies, but it being infused into every company and technology out there,” he added.
Plans for 2024
As KBW Ventures continues to chart its course in the venture capital landscape, Prince Khaled remains optimistic about the future. With a focus on sector-agnostic and geographically diverse investments, KBW Ventures is poised to capitalise on emerging opportunities and drive meaningful impact in the global startup ecosystem.
“Our investment plans are aggressive for the next 12 months. KBW Ventures started the year with a few new signed deals and we’ll be discussing that as the rounds are finalised and the companies themselves are ready to release the information,” he said. “All of the investments are in different sectors.”
“I’m keen on green energy, and we’ve got something in the pipeline. I want to continue with technology; a while back, we did a fintech with various verticals, and there’s still room for more.”
Saudi investment scene
Talking about the shift in investment trends in Saudi Arabia, the Prince said that the investment landscape is transforming, with increased capital availability and a burgeoning startup ecosystem. He believes the Kingdom’s proactive approach to venture investing will further accelerate its growth trajectory, attracting high-calibre startups and investors.
According to Magnitt’s Mena Venture Investment Summary for 2023, Saudi Arabia became the top market for venture capital funding in the Middle East and North Africa for the first time.
The Kingdom attracted over $1.38 billion in investments, marking the second consecutive year it has surpassed the billion-dollar mark. The surge in venture capital investments, which increased by a third compared to the previous year, was fueled by significant deals in the financial technology and e-commerce sectors.
Ten years ago, it was fair to say that real venture investing didn’t exist here as everyone was risk averse. Now, the VC landscape is active, agile and ready to move on the right deals
HRH Prince Khaled bin Alwaleed bin Talal Al Saud
“Even our startup competitions are well capitalised. This is why we’re seeing such high calibre deal flow increasingly making the rounds in both Saudi and the UAE; they know there are investors who are ready to go, from seed to even D rounds,”
“Saudi and UAE have the fund of funds framework that is ready to deploy, but I think that still needs refining in terms of cascading the investments down to VCs that can then reach the startups,” he explained. “The two investments I have made in Saudi ended up being founders from abroad, but the deal flow was on ground in Riyadh. KBW Ventures is always open to the right business model, we’re geographically agnostic and sector agnostic.”