As some US VCs crash parties in the Middle East to find funding, some view their desperation poorly because the region's investors value long-term relationships
Bloomberg : Tweets: @matthew_petti and @jeffnolan Tweets: Matthew Petti / @matthew_petti : Now that Silicon Valley's American gravy train is grinding to a halt, tech executives are increasingly looking to Arab monarchies for investment. Can't wait to see what new and innovative dystopias they come up with. https://www.bloomberg.com/... Jeff Nolan / @jeffnolan : it would be pretty ironic if these same investors were pitching their expertise in climate investing and ESG. https://twitter.com/...
Context & Ripple Effects
The debate over Gulf money is old — VCs were already divided in 2016 over whether to accept Saudi funding as tech deals grew inside sovereign-wealth portfolios. What changed by spring 2023 was direction: with the domestic fundraising window shut, firms including a16z, Tiger Global, and IVP began touring Saudi Arabia, the UAE, and Qatar to court the same funds. The Bloomberg piece captures the friction in that reversal — Gulf investors read fly-in fundraising as desperation and screen for long-term relationships, while critics like Jeff Nolan note the irony of VCs pitching ESG expertise to monarchies they once avoided.
First-order effects
- VCs making crunch-time pilgrimages to Gulf sovereign wealth funds must now demonstrate multi-year commitment — regional investors who prioritize relationships are positioned to reject transactional pitches from firms that arrive only when US capital is scarce.
- Firms that show up during the downturn compete directly with peers like a16z, Tiger Global, and IVP who began building ties months earlier, turning relationship-building into a race the latecomers lose.
Second-order effects
- Gulf funds gain pricing and governance leverage over US venture firms that once dictated terms, since scarce domestic LP capital shifts bargaining power toward the sovereign side of the table.
- Founders taking Gulf-backed VC money inherit the optics problem — the ESG contradiction Jeff Nolan flags becomes a diligence question for downstream investors and employees, much as Chinese-tied capital became a hard sell in Silicon Valley.
Third-order effects
- If the pattern holds from the 2016 debate through the current crunch to the 2024 wave of founders and VCs quietly pilgrimaging to the Gulf, sovereign wealth funds become a structural counter-cyclical pillar of US venture funding — the region's capital sets the terms precisely when domestic LPs retreat.
The trend: US venture capital's funding base is rotating toward Gulf sovereign wealth, with relationship-first regional investors gaining structural leverage each time the domestic LP cycle tightens.