The controversy over the death of Saudi Arabian journalist Jamal Khashoggi has shined a harsh light on the growing financial ties between Silicon Valley and the world's largest oil exporter.
As Saudi Arabia's annual investment forum in Riyadh — dubbed "Davos in the Desert" — continues, representatives from many of the kingdom's highest-profile overseas tech investments are not attending, joining other international business leaders in shunning a conference amid lingering questions over what role the Saudi government played in the killing of a journalist inside their consulate in Turkey.
Tech leaders such as Steve Case, the co-founder of AOL, and Dara Khosrowshahi, the chief executive of Uber, declined to attend this week's annual investment forum in Riyadh. Even the CEO of Softbank, which has received billions of dollars from Saudi Arabia to back technology companies, reportedly has canceled his planned speech at the event.
But the Saudi controversy is focusing more scrutiny on the ethics of taking money from an investor who is accused of wrongdoing or whose track record is questionable.
Fueling the tech race
In the tech startup world, Saudi investment has played a key role in allowing firms to delay going public for years while they pursue a high-growth strategy without worrying about profitability. Those ties have only grown with the ascendancy of Crown Prince Mohammed bin Salman, the son of the Saudi king.
The kingdom's Public Investment Fund has put $3.5 billion into Uber and has a seat on Uber's 12-member board. Saudi Arabia also has invested more than $1 billion into Lucid Motors, a California electric car startup, and $400 million in Magic Leap, an augmented reality startup based in Florida.
Almost half of the Japanese Softbank's $93 billion Vision Fund came from the Saudi government. The Vision Fund has invested in a Who's Who list of tech startups, including WeWork, Wag, DoorDash and Slack.
Now there are reports that as the cloud hangs over the crown prince, Softbank's plan for a second Vision fund may be on hold. And Saudi money might have trouble finding a home in the future in Silicon Valley, where companies are competing for talented workers, as well as customers.
The tech industry is not alone in questioning its relationship with the Saudi government in the wake of Khashoggi's death or appearing to rethink its Saudi investments. Museums, universities and other business sectors that have benefited financially from their connections to the Saudis also are taking a harder look at those relationships.
Who are my investors?
Saudi money plays a large role in Silicon Valley, touching everything from ride-hailing firms to business-messaging startups, but it is not the only foreign investment in the region.
More than 20 Silicon Valley venture companies have ties to Chinese government funding, according to Reuters, with the cash fueling tech startups. The Beijing-backed funds have raised concerns that strategically important technology, such as artificial intelligence, is being transferred to China.
And Kremlin money has backed a prominent Russian venture capitalist in the Valley who has invested in Twitter and Facebook.
The Saudi controversy has prompted some in the Valley to question their investors about where those investors are getting their funding. Fred Wilson, a prominent tech venture capitalist, received just such an inquiry.
"I expect to get more emails like this in the coming weeks as the start-up and venture community comes to grip with the flood of money from bad actors that has found its way into the start-up/tech sector over the last decade," he wrote in a blog post titled "Who Are My Investors?"
"Bad actors' doesn't simply mean money from rulers in the gulf who turn out to be cold blooded killers," Wilson wrote. "It also means money from regions where dictators rule viciously and restrict freedom."
This may be a defining ethical moment in Silicon Valley, as it moves away from its libertarian roots to seeing the world in its complexity, said Ann Skeet, senior director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University.
"Corporate leaders are moving more quickly and decisively than the administration, and they realize they have a couple of hats here — one, they are the chief strategist of their organization, and they also play the role of the responsible person who creates space for the right conversations to happen," she said.
Tech's evolving ethics
Responding to demands from their employees and customers, Silicon Valley firms are looking more seriously at business ethics and taking moral stands.
In the case of Google, it meant discontinuing a U.S. Defense Department contract involving artificial intelligence. In the case of WeWork, the firm now forbids the consumption of meat at the office or purchased with company expenses, on environmental grounds.
The Vision Fund will "undoubtedly find itself in a more challenging environment in convincing startups to take its money," Amir Anvarzadeh, a senior strategist at Asymmetric Advisors in Singapore, recently told Bloomberg.